Stocks staged record gains after governments in Europe pledged €1.873 trillion to rebuilding their financial sector and the US prepared to commit funds to its banks. The FTSE 100 was up nearly five per cent in early trade, after an 11.6 per cent gain in the US S&P 500 overnight, its biggest since 1933, and a 13 per cent increase in the Nikkei 225. Yesterday Germany reached an agreement, similar to the UK bank recapitalisation, and France said it too would provide new capital to the banking system. The US was expected to announce that it would commit $250bn of its $700bn package to a recapitalisation programme. Prime minister Gordon Brown called Monday's £37bn cash injection intoRoyal Bank of Scotland, HBOS and Lloyds TSB "unprecedented but essential", reported the Financial Times. Saying the measure was likely only to be "temporary" he indicated that it did not amount to a classic nationalisation, since the government was not planning to be a permanent investor. It will have three directors on the board of RBS and two on the board of the merged HBOS/Lloyds TSB entity. Other conditions include no cash bonuses for the banks' directors in 2008. UK home sales in September fell to their lowest level in three decades, led down by London property, reported Bloomberg.com. The Royal Institute of Chartered Surveyors report showed price declines across the country in the wake of the financial crisis, with an average of 11.5 homes sold last month by estate agents and 8.3 in London. The number of estate agents and surveyors saying prices fell surpassed those reporting gains by 84, compared to 82 in August. The report also forecast "further price falls in the near term". "Massive state regulation" is to reduce the banking industry to "little more than a utility" said the Daily Telegraph. Restrictions on lending coming as a result of government intervention will "restrain" both growth and shareholder returns, in a wholesale change of the country's financial system. At the heart of the matter is funding via the money markets. Now this method of funding accounts for 40 per cent of loans, while ten years ago, loans were entirely supported by customer deposits. FSA chief executive Hector Sants said of the plan "today signals the end of easy money". Nationwide Building Society, the country's second-biggest lender, plans to raise £500m from institutional investors to increase its capital base, said the Daily Telegraph. It emphasised that it is "robust and strongly capitalised", and said that it was taking the action in "support" of the government's bail-out scheme, aimed at stabilising the markets. Since the company is mutually-owned it is raising funds through the issuance of Permanent Interest Bearing Shares, or PIBS, which can be traded on the stock market. A "torrent of grim data" on the health of the UK consumer yesterday, showed that the UK is "hurtling towards a full-blown recession", said theIndependent. The British Retail Consortium said underlying sales growth in Britain fell by a half to 1.5 per cent in September versus last year, while market researcher Gfk said that two thirds of UK shoppers will "spend less this Christmas than last year". Evidence of softening prices also emerged, with output prices down 0.3 per cent in September, after dropping a record 0.7 per cent in August. Iceland and Britain came to an agreement last night in principle on a deal over the collapse of Icesave. The two sides claimed to have made "significant progress" over the diplomatic fall-out, involving a more speedy return of funds to investors............ Billionaire Sir Philip Green said last night that he was "waiting to hear back" from the Icelandic government on his offer for the debt of retail group Baugur. A decision is expected within 24 hours in order to save the investment company............ Clinton Cards saw its shares collapse 19 per cent to 28p, as full year results showed a swing from £15.1m pre-tax profits to a loss of £13.1m. As a result it announced it would close 15 shops this year and focus on the profitable outlets............ JJB Sports is reviewing the sale of "non-core assets", a week after reports that bailiffs had visited its outlets after unpaid rents, said the Daily Telegraph. The company, which is bankrolled by Icelandic finance, denied it had problems with its landlords............ Shares in TUI Travel, owner of Thompson and First Choice, leapt 21 per cent yesterday after its parent TUI said it was considering taking the group private. Analysts expect the deal to be done at around 260p per share............ Auction houses are guaranteeing prices of a number of pieces in this week's art sales, posing "additional risks to the industry", saidBloomberg.com. Sotheby's has more than half its total lot value guaranteed, while at Christie's the figure is 38 per cent...............the main headlines..........
World markets stage historic rally
People: RBS's Fred gets shredded 
Bail-outs are a threat to democracy Brown outlines bail-out
Financial mess is of Brown's own creation
HBOS: Lloyds rides to the rescue UK home sales lowest since 1978
The next sub-prime mortgage crisis Rescue to make banks utilities
The Mole: Labour believe they have a chance Nationwide to tap investors
The danger of a banker with a power complex Consumers suffer economic woes
...in brief..................
UK and Iceland seek agreement and auction houses guarantee prices
Tuesday, 14 October 2008
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