Stocks continued to rally around the world as investors looked to the Obama administration to drive a recovery. In New York the closely-watched Standard & Poor’s 500 Index rose 3.4 per cent on hopes of an announcement next week of a “bad bank” plan. In Asia shares gained for a third day, led by financials and commodity companies. The MSCI Asia Pacific Index was up 1.5 per cent, with HSBC Holdings adding 8.6 per cent and Westpac Banking Corp, the second-biggest bank in New Zealand, rising 6.3 per cent. In London the FTSE 100 Index opened 0.81 per cent lower on profit-taking. The UK is likely to experience the “deepest recession” of any of the larger industrialised economies according to the International Monetary Fund, reported the Financial Times. It said that the British economy would undergo its “worst performance for more than 60 years” in 2009, with its economy shrinking by 2.8 per cent. The IMF also said that world output will fall, after revising their previous forecast down by 1.5 per cent, even after including government fiscal stimulus packages in their estimates “for the first time”. George Soros, who famously broke the Bank of England selling the pound in 1992, has admitted to selling short again in the current slide, reported the Daily Telegraph. He said he “foresaw” the recent plunge in the pound, which has slid by the most since the ending of the gold standard in 1931. Speaking at the World Economic Forum in Davos Soros indicated that he has closed most of his shorts in a sign that he “no longer expects it to fall much further”. However he did say that he expects sterling to “fluctuate” at current levels. The US House passed President Obama’s $819bn stimulus plan “without any Republican votes”, reported Bloomberg.com. The 244 to 188 vote ensured that the package will be passed to the Senate, where Republicans are more powerful. They want more tax cuts and less spending and are likely to begin their analysis of the measures on February 2nd. The package, which is a separate entity to the banking rescue plan, is equal to a quarter of the entire federal budget and would give individuals a $500 tax cut as well as funding other benefits and infrastructure projects. The US Federal Reserve kept interest rates on hold, leading to a sharp sell-off in the Treasury bond market, reported the Financial Times. As it “failed to move significantly closer” to the purchase of government securities, investors sold bonds. Instead, the Fed suggested it was aiming its fire at “targeted lending programmes” to securitised credit markets and increasing its purchase of mortgage-backed securities issued by lenders Fannie Mae and Freddie Mac. The decision “split the committee”, with some members preferring to buy treasuries directly. Mining giant Xstrata confirmed that it is to launch a rights issue, hoping to raise £4.1bn in order to pay down some of its “huge debt mountain”, reported the Times. It would cut the company’s borrowings to $12.6bn by offering current investors two shares for every one they own, at a price of 210p. Xstrata is thought to be just the first of many miners to raise funds this year, with rival Rio Tinto currently involved in talks with investors and sovereign wealth funds on injections of capital. If these fail, it too may be “forced into a rights issue”. European Central Bank President Jean-Claude Trichet indicated there will be no cut in interest rates next week as some are expecting, reportedBloomberg.com. He said the next “important” meeting would be in March, suggesting investors may have to wait for further reductions………… Bank shares continued their “astounding recovery” on Wednesday with their biggest one-day move in four months, reported the Daily Telegraph.Lloyds shares jumped 50 per cent after an upgrade and RBS put on 36 per cent, with Barclays gaining another 19 per cent, in moves which “caught out” short sellers………… Starbucks, the world’s biggest chain of coffee bars, is to cut 6,700 jobs and close a further 300 stores, said the Times. The announcement came as it revealed a 69 per cent plunge in group profits in the first quarter. It had already signalled it would close 600 branches in the US………… Royal Bank of Scotland is facing a class-action lawsuit in the US as investors accuse the bank of “misleading investors”, reported theIndependent. They allege that the sale of $10bn of American depositary shares in June 2007 was done without the disclosure of the problems with its debt securities………… Bank of America is planning to “defer” 2008 bonus payments to investment banking staff until 2010 and beyond, reported the Financial Times. The move is “certain to inflame tensions” between Merrill Lynchand BoA as the acceleration of $4bn in Merrill bonuses is investigated………… BSkyB has “shrugged off the economic gloom” after signing up 171,000 new customers over the Christmas period and announcing recruitment plans, said the Guardian. The satellite broadcaster indicated it would hire 1,000 engineers and call centre staff as it gears up for high definition TV…………
.the main headlines..........
Markets continue global rally
IMF: UK recession to be worst
Soros shorts sterling
House passes $819bn stimulus
Fed keeps rates unchanged
Xstrata to raise £4.1bn
...in brief..................
ECB chief indicates delay in rate cut and BSkyB on recruitment drive
Thursday, 29 January 2009
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