FTSE 100	4818.77, -269.70	Dow	10356.56, -777.68
FTSE 250	7792.93, -481.51	Nasdaq	1983.73, -199.61
FTSE All Share	2444.58, -137.39	S&P 500	1107.06, -106.21
Nikkei	11259.86, -483.75	Hang Seng	17590.81, -285.53
Oil (Crude)	$95.79	Gold	$898
Base Rate	5%	10 Yr Gilt	4.39%
£/$	1.8088	£/€	1.2572

 

Markets

London - UK stocks plummeted on Monday to a three year closing low, part of a global equities slide triggered by struggling banks and ahead of a vote by US lawmakers on a $700bn rescue plan. The FTSE100 closed 269.7 points lower at 4818.8. Banking stocks accounted for a quarter of the index’s slump, with RBS, Barclays, HBOS, HSBC, Lloyds TSB, Alliance and Leicester and Standard Chartered falling between 1.6 and 18 percent. Major central banks threw more resources at a deepening credit crisis, announcing a $330bn expansion of reciprocal currency swap arrangements to boost US dollar liquidity. The moves came as the bailout plan for US financial firms faced a vote by the House of Representatives and Citigroup said it would buy the bulk of Wachovia Corp.

Banks continued to struggle across the globe. In the biggest European bank bailout since the credit crisis began, the Belgian, Dutch and Luxembourg governments took a large stake in Fortis with a E11.2bn injection. Morgan Stanley agreed to sell a 21 percent equity stake to Mitsubishi UFJ Financial Group for $9bn, bolstering its capital base and improving its chances for surviving the credit crisis.

Miners were the second biggest loser, tracking a sharp decline in key base metals prices. Copper hit nine month lows, aluminium fell more than 2 percent and nickel slipped 3 percent. Rio Tinto, Anglo American, Vedanta Resources, Xstrata, BHP Billiton, Kazakhmys, Antofagasta and Eurasian Natural Resources fell between 9.8 and 17.5 percent.

Energy stocks slipped with crude prices, which sank nearly 6 percent to close to $100 a barrel. BP, Royal Dutch Shell, BG Group, Cairn Energy and Tullow Oil shed between 4.2 and 7.9 percent.

ICAP topped the list of blue chip losers, falling 23.6 percent even as it said it expected full year profits to be ahead of last year. Analysts said the prospect of its customer base being whittled down by bank consolidation and its caution on profit growth has weighed on the stock.

New York - US stocks plummeted Monday afternoon, with the Dow’s nearly 778 points drop being the worst single day point loss ever, after the House of Representatives rejected the government’s $700bn bank bailout plan. Stocks tumbled ahead of the vote and the selling accelerated on fears that Congress would not be able to come up with a fix for nearly frozen credit markets. Although another version of the plan will likely go before Congress, investors are concerned that passing the bill could be a more drawn out process. In addition to the bailout fears, there was also news that Wachovia had to sell its banking assets to Citigroup. The DJIA closed 777.68 points lower at 10365.56, beating the 684.81 loss on September 17 2001, the first trading day after the September 11 attacks. The 7 percent decline however, does not rank among the top 10 percentage declines. The S&P500 closed 106.21 points lower at 1107.06 and the Nasdaq fell 199.61 points to close at 1983.73.

It was thought that Congress had reached a compromise on the $700bn bank bailout plan Sunday, but the House voted against the bill Monday. The bill is based around Treasury Secretary Henry Paulson’s initial plan to buy up bad mortgage debt from banks as a means of getting them to lend to each other again. However, Congressional lawmakers added provisions to protect taxpayers and enable them to benefit if the companies do as well. President Bush and Ben Bernanke both praised the bill and urged Congress to pass it quickly.

In company news, Citigroup is buying Wachovia’s bank assets in a $2.2bn all stock deal that will see the company hold onto the brokerage business and remain afloat, albeit in a smaller form. The deal calls for Citigroup to absorb up to $42bn in losses and the Federal Deposit Insurance Corp to be responsible beyond that. Citigroup will give the FDIC $12bn in preferred stock and warrants in exchange. Wachovia fell 80 percent and Citigroup fell 3 percent.

Regional bank National City slumped 61 percent on worries that it might be next. Other regional banks also fell. Bank of New York fell 24 percent, Fifth Third Bancorp fell 38 percent and Regions Financial fell 38 percent.

The Libor-OIS spread, one gauge that banks use to determine lending rates, rose to a record 2.2 percent. The TED spread rose to 3.322 percent, but was short of the 3.48 percent level it hit in the morning. That 3.48 percent level was the highest point since at least 1982. The TED spread is the difference between what banks charge each other to borrow for three months and what the Treasury pays.

The three month Treasury bill, seen as the safest place to put money in the short term, fell to 0.71 percent from 0.83 percent late Friday. It had been lower in the morning. Earlier this month, the three month bill fell to a 68 year low around 0 percent as panic gripped financial markets.

Fear was deep and widespread, as investors dumped stocks for the relative safety of US government bonds. The Chicago Board Options Exchange Volatility Index, Wall Street’s main barometer of investor fear, jumped 39 percent to 48.40, a nearly six year high, and was at 46.72 at the close.

Long term treasury prices rose, lowering the yield on the 10 year note to 3.58 percent from 3.82 percent.

US light crude for November delivery fell $11.10 to $95.79 as investors bet that a slowing global economy means oil demand will keep dropping.

COMEX gold for December delivery rallied $9.50 to $898 an ounce.

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

Tokyo - The Nikkei average slid 4.1 percent to hit a three year closing low today after US lawmakers rejected a $700bn bailout plan for the financial system. Exporters such as Sony Corp and bank shares tumbled although the Nikkei trimmed earlier losses as investors weighed the risk of a rebound on new moves from authorities. The Nikkei closed 483.75 points lower at 11259.86, the lowest close since June 2005.

Economics

UK Gfk consumer spending (Sept) 00.01 bst

Consumer confidence is expected to continue edging down as falling house prices and worsening employment prospects offset any positive impact from the small decline in petrol prices.

UK GDP (Q2, final) 09.30 bst

The final figure for Q2 GDP will be released alongside the Blue Book, which might contain substantial revisions to the history of UK GDP. In addition, the ONS is altering the way it accounts for financial services activity within GDP. Because of this, it is thought that Q2 GDP could be revised down to show a small quarterly contraction.

US S&P/Case-Shiller home prices index (July) 14.00 bst

The OFHEO house price index fell 0.6 percent in July, with lower prices in all nine census divisions. Assuming a 0.7 percent drop for the Case-Shiller index for 20 metropolitan areas, the year on year rate would fall to -16.2 percent, from 15.9 percent in June.

Corporate

Scottish and Southern Energy said it remains on track to increase annual profits. The company said it still expects to deliver a "modest increase" in adjusted pre-tax profit in the year to March 31 2009, in line with its interim management statement on July 24. The group said it expects its half year results to account for just under one quarter of its full year adjusted pre-tax profit. Scottish and Southern Energy is due to report results for the six months to September 30 on November 12.

Enterprise Inns said today it had put on hold plans to convert into a low tax property company because of the current turmoil in the financial markets. The company said "The board does not consider it appropriate to seek the consent of bondholders at this time". Enterprise Inns said it was "adopting a cautious approach to the costs and processes" of conversion to REIT status, which would have enabled it to slash its tax bill. The group said it is continuing to "explore the options and to develop a solution which is demonstrably in the best long term interest of all stakeholders", but said it wasn’t working to a particular timetable in relation to converting. The group said it anticipated earnings and dividends would be in line with market expectations for the current year. Trading conditions have remained difficult in the second half, the company said, and it anticipates second half like for like earnings before interest, tax, depreciation and amortisation will decline by 5 percent.

Babcock International reported strong trading to be in line with its hopes and said it expected further business wins soon. The company said "Trading for the group remains strong and is in line with our expectations that this will be another year of excellent progress for Babcock". Babcock said it had signed a number of contracts since the start of the financial year, increasing its order book to a record of more than £5bn. They added "Our pipeline remains strong and we expect further significant contracts to be signed in the near future".

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 30th, 2008 under Asset Management.
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