Markets advance on stimulus plans
Stocks worldwide gained for a second day as investors assessed the effects of global government stimulus measures. In New York the Standard & Poor’s 500 Index added 1.6 per cent on efforts by the authorities to fight the recession and in Asia the MSCI Asia Pacific Index rose 1.8 per cent in response. Tokyo’s Nikkei 225 Stock Average was particularly strong, rising 3.2 per cent. Elpida Memory rose 6.1 per cent after saying it may request public money and China Mobile gained 3.1 per cent in Hong Kong. In London the FTSE 100 opened 0.60 per cent ahead.
Darling revives bad bank idea
Alistair Darling made an admission that British taxpayers might have to buy “toxic assets” from the UK’s banks to “help stimulate” lending, said the Financial Times. This would take the form of a “bad bank” plan in addition to the government’s current plans to insure the banking system against further losses. The chancellor said that the new approach might be necessary with “one or two institutions” in order to remove “problematic” loans from their balance sheets to allow them to start lending again.
Lenders borrow £185bn from BoE
UK banks and building societies have borrowed £185bn from the Bank of England, “nearly four times the amount that was originally planned”, reported the Independent. The borrowing comes from the BoE’s Special Liquidity Scheme, which closed to new withdrawals on 30 January, and was used by 32 banks and societies which account for around 80 per cent of the banking sector. They pledged £287bn of mortgage-backed securities and other unmarketable assets in exchange for government treasury bills.
EU threatens US over car bail-out
The EU threatened legal action today and “retaliatory measures” against the US if the Obama administration puts a “Buy American” clause in its economic stimulus package, reported the Guardian. Officials in Brussels are concerned about protectionism and said they could take countries like the US to the World Trade Organisation for “breaching treaty rules” on government procurement. Figures such as German chancellor Merkel and the EU ambassador in Washington have expressed similar concerns over recent days.
Spain in downward spiral
Spain lost nearly 200,000 jobs in January in the “worst one-month rise” since records began, reported the Daily Telegraph. The unemployment rate has now risen to 14.4 per cent and the Spanish government’s credibility is in question, leading to the assertion by the opposition leader that it is a “national emergency”. The depth and speed of the downturn has led to a credit downgrade for the country and Tuesday’s treasury bond auction saw foreigners “conspicuously absent”, leaving Spanish banks as the buyers.
Obama to limit executive pay
President Barack Obama is set to announce later today that he is looking to apply a cap of $500,000 on the pay of management at companies receiving state aid, reported Bloomberg.com. He is reacting to “public outcry” over Wall Street compensation in stipulating that any further payments above the cap will be in “restricted stock” that will not vest until taxpayers have been refunded first. According to an official, the rules will also impose more transparency on corporate jets, office refurbishment and payment to executives on their departure.
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Aviva backtracks on pay-outs and Pontin's thrives in recession
Aviva, Britain’s biggest insurer, is to cut a promised £1bn payment to more than 1m policyholders after the falls in global stock markets, said the Financial Times. In July last year it said policyholders would each get around £1,000 of “surplus capital” but now the offer is no longer “tenable”…………
The UK economy will contract by 2.7 per cent this year and make only a “feeble” recovery in 2010, the National Institute of Economic and Social Research warned yesterday. It is the latest body to warn that official forecasts for a shorter decline and stronger recovery are unlikely…………
Creditors of Woolworths have called for an enquiry into whether directors of the failed retailer “traded the company while it was insolvent”, said the Times. Suppliers have asked Deloitte why Woolworths was not placed in administration earlier when creditors could see there were problems…………
Walt Disney finally succumbed to the recession after “defying” the slowdown for most of 2008, reported the Financial Times. It announced that first-quarter profits fell by nearly a third after “steep declines” at its television network, theme parks and film studio. Its shares fell 10 per cent…………
The Kazakhstan central bank has followed Russia, Ukraine and Belarus in devaluing its currency, reported Bloomberg.com. The country, which holds 3.2 per cent of the world’s oil reserves according to BP, has devalued the tenge 18 per cent and abandoned its preservation of its currency reserves…………
Holiday group Pontin’s is to take on 2,000 workers as the recession means that Britain’s holidaymakers are choosing to take their vacations at home, reported the Guardian. The holiday camp is “flourishing again”, with bookings already ahead this year by up to 30 per cent…………
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