Stocks rise for a second day
Stocks in the US and Asia gained for the second day in a row on optimism that government measures will loosen credit worldwide. The benchmark Standard & Poor’s 500 Index rose 1.09 per cent in New York yesterday and in Asia there were more gains, with the MSCI Asia Pacific Index adding a further 0.6 per cent. Japan’s Nikkei 225 Stock Average climbed 0.6 per cent and the South Korean Kospi Index rose 4.9 per cent, re-opening after a two-day holiday. In London the FTSE 100 Index opened up over one per cent.
UK under pressure on car rescue
Government ministers were under “intensifying pressure” on Tuesday to “increase and extend” yesterday's £2.5bn auto industry rescue plan, reported the Financial Times. Busiiness and unions warned that thousands of manufacturing jobs could be lost as things stand, after business secretary Lord Mandelson announced the deal earlier in the day. He said that the package would help create a “cleaner and greener” manufacturing base, but emphasised that the government’s first direct support for the beleaguered industry did not set a precedent for others.
World economy to shrink
The world economy is set to shrink for the first time since the Second World War this year, reported the Daily Telegraph. In the “gloomiest forecast yet” from a major international body, the Institute of International Finance, the umbrella organisation for major banks, forecast an “unprecedented” collapse in economic growth. It is the first global institute to forecast a “full-scale global contraction” in 2009, predicting a decline of 1.1 per cent. IIF chief economist Philip Suttle said he expected “rich economies” to contract 2.1 per cent.
Standard Life closes property door
Standard Life yesterday closed the doors of its commercial property funds to withdrawals, forcing customers to wait on redeeming their investment, reported the Independent. The funds’ 200,000 investors will now have to wait up to six months to get their hands on their money after the Scottish insurer implemented the “emergency measures”. Liquidity in six of its life and pension funds had fallen to “very low levels” and the move comes less than a week after Norwich Union imposed similar measures.
Santander offers Madoff payment
Spanish bank Santander yesterday became the first institution to offer to repay the Madoff victims’ losses in an attempt to “stave off” lawsuits, reported the Financial Times. The banks’ customers lost €2.33bn over the alleged fraud and it said it would repay 100 per cent of the investments made in the Optimal Strategic US Equity fund, which was “wholly invested” with Madoff. The proposed compensation covers individual private banking clients but not institutional investors, and in exchange they would have to agree “not to sue”.
FDIC to run US bad bank
The Federal Deposit Insurance Corp. is likely to manage the “bad bank” that US President Barack Obama is set to create, reported Bloomberg.com. FDIC Chairman Sheila Blair is “pushing” to run the operation, which would be designed to own the “toxic assets” which are currently inhibiting the banks from lending. She is believed to feel that her agency has the “expertise” to oversee the task and could finance the effort by issuing bonds itself. The new administration may announce its bail-out plans as soon as next week.
...in brief..................
US House set to approve Obama plan and Citigroup cancels jet order
The US House is set to approve President Obama’s $816bn economic stimulus package today, reported Bloomberg.com. The combination of tax cuts and spending plans will face a “tougher” passage through the Senate, however, with Republicans saying it contains “too much” spending…………
The chief executive of Iceland’s biggest remaining listed bank is looking at moving its stock exchange listing to London, reported the Financial Times. William Fall said the group’s shares don’t trade at “their value” and a move to London would underline its increasing “international focus”…………
Japanese investment bank Nomura has revealed a record Y343bn quarterly loss, after it “crowed” about the lack of damage it had received from the financial crisis, said the Financial Times. It was hit by exposure to Iceland, Bernard Madoff and costs related to its Lehman Brothers purchase…………
British Airways has suffered more bad news after a warning from credit agency Standard & Poor’s that there is a “high risk” it will downgrade the airline’s rating, said the Daily Telegraph. S&P said it might move the carrier’s debt rating to “junk status” a day after it said it was expecting a £150m operating loss…………
The recession has reached the Queen’s grocer it appears, after Fortnum & Mason said it was “cutting jobs”, reported the Times. It is thought that about 55 staff, or 10 per cent of the store’s workforce, are to be made redundant as the retailer battles “tough trading conditions”…………
Embattled bank Citigroup has cancelled its purchase of a $50m corporate jet after a “political outcry”, reported the Guardian. After initially defending its plans to buy a Dassault Falcon 7X it then made an “abrupt u-turn” after Barack Obama’s spokesman said it was not the “best use of money”…………
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