...the main headlines..........
Gloom in Asia as markets slide
Stocks in Asia fell for the fourth day in a row this morning, leading to a five per cent fall in the FTSE 100 in early trading. Worst affected were the Philippines, where the benchmark index fell 14 per cent, triggering a trading halt. In Japan the Nikkei 225 slumped another five per cent as investors sold off shares in Mitsubishi UFJ Financial on funding worries, and Singapore’s Straits Times index fell eight per cent. Investors ran scared as Ukraine became the latest country to go to the IMF for emergency funding. The region’s MSCI Asia Pacific Index slid 3.5 per cent.
IMF bails out Ukraine
The International Monetary Fund last night greed to give Ukraine up to $16.5bn in emergency loans, said the Independent. The country has been “one of the worst hit” by the financial crisis, with its stock market suspended three times last week after steep falls. The IMF said that the package would help Ukraine’s balance of payments as steel prices collapse and global credit lines recede. The loan is offered on condition that the government adopts certain budget criteria and introduces reforms to support its banks.
Fresh round of rate cuts expected
There is “mounting speculation” that there is to be a new round of co-ordinated international interest rate cuts led by the US Federal Reserve, said the Guardian. The need for further moves has been emphasised by “fresh signs of strain” in the banking industry worldwide, resulting in more steep drops in stock markets. While the Fed is expected to cut rates by half a point to one per cent, strategists now expect a cut of up to one per cent in the UK in an unprecedented effort to stem declines and stimulate growth.
Sterling slides in currency ‘tsunami’
Sterling fell another two cents versus the dollar on Monday as investors bet on the Bank of England making an emergency cut in interest rates, said the Daily Telegraph. The pound fell to nearly $1.56 in early trading in what one expert called a “currency market tsunami”. After Friday’s news that the UK economy contracted by 0.5 per cent in the quarter ending in September, there are growing expectations from all quarters that more cuts will be needed to prevent the economy from deteriorating further.
Profit warnings set to increase
European companies are expected to issue a “wave” of profit earnings in the coming months, reported the Financial Times. Corporate earnings are set to fall by 40 per cent by the end of the year according to equity strategists in the region. In the wake of recent profit warnings from the likes of Daimler, Renault and Air France-KLM, Citigroup sees a fall of 10 per cent in profits this year, accelerating to a 30 per cent drop next year. Chief executives at insurer Prudential and drug company GlaxoSmithKline expect a “deep and prolonged downturn”.
World’s biggest hedge fund takes restructuring measures
Highbridge Capital Management, with $25bn under management, is sacking 10 per cent of its staff in New York and plans cuts in Europe and Asia, said the Daily Telegraph. The fund will also set up a new European operation to buy into over-sold companies on the continent. Stock market volatility has “savaged” performance at some of the world’s best known hedge funds, leading to predictions that thousands of operations are “on the brink of failure”. Highbridge was sold to US bank JP Morgan Chase in 2004.
...in brief..................
Korea cuts interest rates and John Lewis sales slump
The Bank of Korea cut interest rates by a record three quarters of a point today to leave them at 4.25 per cent. The action came as the country desperately tried to support economic activity in the region and it is thought there will be another cut as soon as next week………….
Kuwait suspended trading in the country’s second-largest bank on Sunday, reported the Financial Times. Gulf Bank made losses on derivatives, estimated by a banker in the region to be as high as $800m. It is the “first such action” to be taken in the Middle East since the financial crisis…………
Two of the biggest lenders in troubled retailer Woolworths have called in the corporate restructuring arm of Deloitte. Experts from the firm met the company’s accountant, KPMG, last week and further meetings are planned as the company undergoes restructuring…………
The Centre for Economics and Business Research has issued a gloomy set of predictions on the UK housing market. It believes that house prices will “continue to fall” for another 12 months, with an average fall of 25 per cent, and will not regain last year’s levels until “at least” 2013…………
After the UK revealed a drop in GDP “all eyes will now turn” to the US, as government figures are expected to reveal that the it has joined the UK “on the cusp of recession”, said the Guardian. After a short-lived boost brought about by a tax rebate, the economy is thought to have turned down sharply…………
Retailer John Lewis announced that business levels declined 7.6 per cent in the seven days to October 18th, the week when the government bailed out three UK banks. It is the fifth week in a row of declining sales for the department store seen as a bellweather for the industry…………
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