FTSE 100	5088.47, -108.55	Dow	11143.13, +121.07
FTSE 250	8274.44, -160.21	Nasdaq	2183.34, -3.23
FTSE All Share	2581.97, -54.34	S&P 500	1213.27, +4.09
Nikkei	11743.61, -149.55	Hang Seng	17815.26, -865.55
Oil (Crude)	$106.89	Gold	$888.50
Base Rate	5%	10 Yr Gilt	4.466%
£/$	1.8398	£/€	1.2609

 

Markets

London - UK stocks ended lower on Friday as stressed money markets and lingering uncertainty on a $700bn US rescue plan further rattled investors, sending banks and commodity stocks lower. Washington Mutual was closed by the US government on Thursday, and its banking assets were sold to JPMorgan Chase for $1.9bn, further weighing on financial stocks. The FTSE100 closed 108.5 points lower at 5088.5, erasing all the gains made the previous session on hopes that the bailout package would be approved by congress soon. Talks on the rescue plan broke down amid accusations that Republican John McCain scuppered the deal. Banks were hit hard by the ongoing uncertainty and nervousness was exacerbated as Fortis pledged to speed up assets sales as it became the latest focus for investor concern. The stock fell for the fifth straight day. HSBC, Barclays, RBS, Lloyds TSB, HBOS and Standard Chartered were down 0.2 and 8.1 percent. Bradford and Bingley slid 5.9 percent as a cost cutting programme unveiled on Thursday failed to dispel concerns over its funding position.

Insurers also suffered, with Aviva falling 4.1 percent and Prudential losing 6 percent. Old Mutual fell 9.7 percent making it the biggest faller in the FTSE100. LSE fell 0.6 percent. The exchange said volatile markets boosted trading volumes in the first five months of its financial year, but also led to a steep drop in IPO’s.
In a bid to ease market concerns, central banks across the world scrambled to meet a desperate demand for cash, both in their own currencies and the US Dollar.

Energy stocks were the biggest losers as uncertainty about the bailout package hit demand, causing crude to fall around $3 to $105 per barrel. BP, Royal Dutch Shell, BG Group, Cairn Energy and Tullow Oil fell 1.5 to 3.4 percent.

Miners were also lower as metals prices slid on fears that a global slowdown would hit demand.

In economic news, figures from the Land Registry showed the UK economy is suffering as a result of credit crisis and house prices fell 4.6 percent on the year, their biggest falls since the series began. Taylor Wimpey, Barratt Developments, Persimmon and Bovis Homes were down 4.5 and 7.4 percent.

New York - US stocks rallied at the end of a tough session, as investors boosted banks and other stocks on optimism that a compromise on the proposed $700bn bank rescue plan will be announced shortly. Also helping the late session rally, a New York Times report that Citigroup is in early talks to buy Wachovia. After the close the Wall Street Journal reported that Wachovia is also talking with Banco Santander and Wells Fargo.

Credit markets remained nearly frozen, but eased slightly from Thursday’s levels. The DJIA closed 121.07 points higher at 11143.13, the Nasdaq closed 3.23 points lower at 2183.34 and the S&P500 added 4.09 points to close at 1213.27. Stocks fell through the afternoon on worries about the $700bn bank bailout plan amid opposition from House Republicans. Also dragging on the market, news that JPMorgan Chase bought Washington Mutual after it was seized by federal regulators in the biggest bank failure in US history. Stock declines eased up as the day progressed and bailout talks were restarted. Late Friday afternoon, Senator Barney Frank said an agreement on the bill will be in place by Sunday.

In company news, Federal Regulators seized Washington Mutual Thursday night and sold its banking assets to JPMorgan Chase in a $1.9bn deal. The deal also includes JPMorgan raising $10bn in stock, $2bn more than initially announced. Late Friday, S&P said Washington Mutual was being removed from the S&P500 after the close of trade Monday, and will be replaced by Flowerserve, a maker of pumps and valves used by the oil and gas and utility industries. The collapse was the biggest bank failure in history and marks the second Wall Street firm bought by JPMorgan this year, following Bear Stearns in March. Washington Mutual shares fell 91 percent, while JPMorgan rallied 11 percent. Wachovia ended 27 percent lower, despite the late session merger talk. Both Wachovia and National City had slumped during the session on worries that they could be the next to collapse. Morgan Stanley also fell. A number of banks rallied, including American Express, Citigroup and Bank of America. A small California bank holding company called Capital Corp of the West jumped 262 percent mostly in the last 20 minutes of trade, on rumours that it was about to be bought, traders said.

In economic news, second quarter GDP growth was revised lower, to an increase of 2.8 percent from an initial reading of 3.3 percent a month ago. However, second quarter growth was still better than the previous two quarters.

Credit markets remained tight on Friday, with a key measure of bank uncertainty hitting an all time high. The Libor-OIS spread, a gauge that banks use to determine lending rates, rose to a record 2.08 percent.

The three month Treasury bill rose to 0.86 percent from 0.75 percent late Thursday. Last week, the three month bill fell to a 68 year low around 0 percent as panic gripped financial markets.

The TED spread, a measure of financial market jitters, dipped to 2.91 percent after touching a more than 22 year high on Thursday of 3.37 percent. The TED spread is the difference between what banks charge each other to borrow for three months and what the Treasury pays. If banks are charging each other a bigger premium than the US government, that is a sign of fear.

Long term Treasury prices rose, lowering the yield on the 10 year note to 3.82 percent from 3.85 percent.

In an attempt to keep liquidity, the Federal Reserve expanded its deal with the ECB and the Swiss National Bank to make an additional $13bn in funds available to banks overseas. And some economists think that the central banks could announce an emergency interest rate cut sometime in the next few days.
US light crude for November delivery closed $1.13 lower at $106.89 a barrel on NYMEX.

Oil prices had plummeted over $55 after peaking at $147.27 a barrel on July 11, as investors bet that sluggish global growth will diminish oil demand. But prices have soared in the last few weeks as the financial crisis has intensified and investors sought to put their money into hard assets.

COMEX gold for December delivery rose $6.50 to close at $888.50 an ounce.

In currency trading, the dollar fell against the euro and the yen.

Tokyo - The Nikkei average fell 1.3 percent today, down for a third day as investor caution about the implementing of a US bailout plan for the financial sector outweighed initial relief that a deal was being done. Major banks shed much of their gains or sank into negative territory while blue chip exporters such as Toyota Motor Corp fell sharply on worries about the global economic outlook. Shippers extended last week’s losses after a key freight index, tumbled, and energy stocks also fell on a decline in oil prices. Congressional leaders from both parties said they had a tentative agreement on Sunday, and lawmakers prepared to vote today on a $700bn US government fund to buy bad debt. The market nervousness was also fuelled by the spread of the banking system troubles to Europe. Fortis was nationalised and Bradford and Bingley faced the same fate. The Nikkei closed 149.55 points lower at 11743.61.

Economics

UK Mortgage Approvals (Aug) 09.30 bst

Mortgage approvals reached a new record low in August according to the British Bankers Association. The total mortgage approvals data from the Bank of England adds the building societies and specialist lenders. Given that banks have been gaining market share from the building societies and specialist lenders in the past few months, it looks likely that total mortgage approvals will fall by at least the same rate as that indicated by the BBA figures. Consumer credit has not slowed significantly. It seems that households are turning to unsecured credit options as the downturn in the housing market is making lenders more reluctant to lend on a secured basis.

Corporate

ICAP said today it expected annual profits to rise after a 20 percent increase in first half revenues, with market volatility offsetting adverse effects of the credit crunch. The firm said "Current conditions make forecasting market activity during the balance of the year much more difficult than usual. However, after investing significantly in the future growth of the business, profit before tax, amortisation and impairment of intangibles arising on consolidation and exceptional items for the financial year ending 31 March 2009 is anticipated to be ahead of the year to March 2008. If market developments and exchange rates are favourable, then the increase in profit could be well ahead of this figure". ICAP made an underlying profit of £330m in the year ended March 2008. Analysts currently expect ICAP to make an underlying profit of £369.5m in the year ending March 2009. The company said electronic broking revenues were particularly strong in the first half of its financial year, especially in foreign exchange. However, credit markets and mortgage backed securities market had been subdued in the credit crunch.

Man Group said today, sales for the six months to Sept 30 were estimated to be up 25 percent at $10bn, and said it was "strongly positioned". Net inflows for the period were $4.1bn, up 14 percent, it said, but funds under management fell by $5bn to about $70.3bnm reflecting negative investment movement in turbulent markets. Net management fee income would be in line with the same period a year earlier, while net performance fee income would be down about 40 percent, mainly as a result of a lower contribution from AHL, it said.

Close Brothers Group reported a drop in annual profit below market expectations today and said CE Colin Keogh was to step down. Operating profit before tax was £127.5m in the year to July 31, down from £190.2m the year before. That compared with a consensus of £133.9m and a range of £130-£138.2m.

Bradford and Bingley’s branch network and deposit business will be sold to Santander and the remainder of the group would be nationalised, the UK government said. B&B’s branch network and deposit business will be combined with Abbey, the UK Treasury said in a statement today.

The above details are provided for information only and are not intended to be construed a solicitation for the sale or purchase of any particular investment nor as specific investment advice.

 

 

Posted: September 29th, 2008 under Asset Management.
Comments: none

 Print this post