Stocks slump as Obama sworn in
The Dow Jones Industrial Average dropped four per cent yesterday as Barack Obama was sworn in. It was the index’s steepest ever Inauguration Day decline and illustrates the extent of the task facing the new president. Worries over the condition of banks around the globe led the falls, with State Street shares falling 59 per cent and Bank of America dropping more than 23 per cent. Asian markets followed suit, with the MSCI Asia Pacific Index down 1.6 per cent. In London the FTSE 100 Index opened 0.60 per cent lower.
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New US regime in race against time
New US President Obama’s economic team is “pushing to complete” a bank-rescue plan that can be added to the $825bn stimulus package currently being negotiated with Congress, reported Bloomberg.com. As the economic crisis deepens “rapidly”, it is thought that the new package is likely to include a programme of more than $50bn to ease repossessions, and more injections of capital to shore up the banking system. Measures to guarantee the “toxic assets” preventing the banks from lending also need to be taken.
Opinion Digest: What the commentators said about Obama's inauguration
Sterling continues collapse
The pound “continued to tumble” on Tuesday on investor concerns over the “dismal state” of the UK’s banking system, reported the Financial Times. The 2.7 per cent drop in sterling on a trade-weighted measure came as investors digested the government’s “creeping nationalisation” of the sector. Analysts said that the pound’s trading has “strong correlation” with British banking stocks and as the government prepares to buy more assets, speculation has increased that its value will be “progressively eroded”.
The end of the bargain European break
Bankruptcy beckons for not-so-Great Britain
2m in sight for unemployment
Unemployment figures today are expected to reveal nearly two million people out of work, as one report warns that 44 per cent of companies are laying off staff, said the Daily Telegraph. Half of employers are also “freezing recruitment”, according to the Chartered Institute of Personnel and Development and KPMG. After reaching 1.86m in October it is thought that unemployment for November will be as high as two million, with the number of people claiming benefits expected to have risen in December.
Expect riots before this crisis is over
UK banks shunned by competitors
As the UK banks experience continuing funding difficulties, their position is being made worse by a “sharp reduction” in lending by overseas institutions, said the Financial Times. Outstanding loans to British banks by overseas lenders fell “about 20 per cent” in the four months to November, according to Bank of England data, illustrating the extent of the “challenge” being faced. Alistair Darling has given warnings the problem has led to restrictions in the banks’ lending potential, and it is a phenomenon that has been worst in the case of EU institutions.
Billionaire bails out NY Times
The New York Times, the iconic US newspaper title, has been the beneficiary of a $250m bail-out from Mexico’s “richest tycoon”, reported the Independent. Telecoms billionaire Carlos Slim, currently the second-wealthiest man in the world, has increased his stake in the newspaper considerably as part of its recovery plan. Slim will receive a “hefty” annual dividend of 14.1 per cent in return and warrants allowing him to buy more, as part of Monday’s rescue-plan. If exercised he would own 18 per cent of the company.
The People Page: Carlos Slim buys into the New York Times
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Lebedev buys Evening Standard
Ex-KGB spy Alexander Lebedev is to buy the London Evening Standard for a nominal sum, according to the current owner, Daily Mail & General Trust. It is thought Lebedev will take a 76 per cent stake in the newspaper while DMGT will maintain a 24 per cent minority holding. The billionaire will take possession of the Standard via a new company, Evening Press, owned by Lebedev Holdings. Lebedev is the first Russian oligarch to own a British newspaper, but he insists he will not interfere editorially with the Standard.
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...in brief..................
Singapore sees historic contraction and Primark hits top spot
Singapore said its economy is set to shrink an “unprecedented” five per cent this year, increasing the likelihood of “record spending” by its government, reported Bloomberg.com. It is thought the state may have to tap into its reserves “for the first time”…………
BHP Billiton, the world’s biggest mining group is to axe 6,000 staff and contractors from its global operations, reported the Financial Times. The group said it would make sharp reductions in its Nickel-mining operations in Australia and incur a one-off cost of $500m…………
City broker Icap revealed yesterday that its chief executive Michael Spencer has pledged “more than 90 per cent” of his shareholding in the company as security for a loan, reported the Independent. It is unlikely to be the last such revelation as an FSA disclosure deadline approaches…………
The chief executive of JJB Sports was suspended yesterday, as the troubled sports retailer led an investigation into how his stake in the business had been “seized” by collapsed Icelandic bank Kaupthing, reported the Guardian. Chris Ronnie was “sent home” after a board meeting…………
American investment guru Jim Rogers “added vinegar” to Britain’s economic wounds yesterday, urging investors to “sell any sterling you might have”, reported the Times. He said the currency was “finished” and also indicated that he “would not put any money in the UK”…………
Fashion retailer Primark has overtaken Asda as the UK’s biggest low-price clothing seller, said the Daily Telegraph. According to Verdict Research Primark, owned by Associated British Foods, increased its market share from 16.5 per cent to 17.7 per cent, while Asda increased its to 16.94 per cent…………
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