January 30, 2009
Pound gains value on Euro
Story link: Pound gains value on Euro
That is two positive press releases in the last couple of days, with mortgage approvals up slightly and now an increased value attached to the pound, this could finally mean that the credit crunch has reached its lifespan and we could see some stability in the near future.
The pound snapped a seven-day decline against the euro and rose versus the dollar as concern eased about the amount of money needed to bail out U.K. banks.
The pound rebounded from a three-week low against the euro as U.K. bank stocks gained and the cost of protecting their bonds from default fell. Barclays Plc said yesterday it won’t need funding from the government because revenue increased last year.
Consumer confidence at all time low
Story link: Consumer confidence at all time low
It is hardly surprising that consumer confidence has hit an all time low, after all, there is not much going on in the UK economy on a day to day basis that provides any UK resident with a sense of security.
Consumer confidence at all time low
U.K. consumer confidence fell close to a record low in January as the nation’s recession deepened, afflicting more Britons with unemployment, Gfk NOP said.
An index of sentiment from a survey of 2,000 people fell four points from the previous month to minus 37. That’s close to the reading of minus 39 reached in July, the lowest level since the data began in 1974. GfK NOP conducted the survey between Jan. 9 and Jan. 18.
Bank bailout won’t help property companies
Story link: Bank bailout won’t help property companies
The banks are just looking out for themselves and nobody else, which would be fair enough if the bailouts were from their own reserves, but put in a nutshell, they are not, and they are from public reserves. We help them, they should help us.
Bank bailout won’t help property companies
Commercial-property companies in the U.K. are unlikely to get new financing from banks bailed out by the government when lending resumes because the banks will probably favor industries that win electoral votes.
Banks that sold stakes to the government are “running scared” of commercial-property lending, said Mark Jenkins, head of commercial lending at Nationwide Building Society.
Worst is to come!
Story link: Worst is to come!
Ever since the Lehman Brothers collapsed back in September things in the financial industry and the worldwide economy for that matter have not been the same. The financial sector has received negative blow after negative blow and I can’t see it getting any better very soon.
36 hours in September changed the world. When investment bank Lehman Brothers collapsed, the credit crunch became a global financial crisis.
But how bad is that crisis? Was it wrong to let Lehman fail? Or was Lehman just a symptom not the cause of the chaos in the global economy?
S&P face slump
Story link: S&P face slump
The financial sector of the worldwide economy is in a terrible state, and is likely to stay that way for quite some time to come, so I wouldn’t expect any positive figures for a while yet.
Even though last year proved disastrous, most US strategists are undaunted. The average forecast in a Bloomberg survey last week foresees a 27% rise in the S&P 500 by the end of the year. But the index has made a shaky start. It has slid by around 6% amid turmoil in the banking sector, the deteriorating economic outlook – America looks set for the worst recession since the war – and constant earnings disappointments.
Investors were hoping that fourth-quarter results would bring at least “a glimmer of light at the end of the tunnel”, says Eric Savitz in Barron’s. “It turns out that no one can even find the damned tunnel.” Last March, analysts were expecting a 55% rise in S&P 500 profits for the fourth quarter. About a fifth of the results are in, and so far earnings are down by 47%, undershooting the 32% fall currently expected.
What is quantitative easing?
Story link: What is quantitative easing?
In a nut shell, quantitative easing is explained below, but it is not as simple as just injecting £billions into banks.
Quantitative easing includes central banks collaborating with the private banks and taking over some of their assets for a cash sum, allowing the private banks to have some day to day cash flow.
What is quantitative easing?
It is a way of pouring money into a cash-starved banking system. The central bank buys assets, typically government bonds, from private banks in the financial markets. They get cash in exchange, helping them to build up their reserves – and the hope is that they then lend some of it out to families and businesses.
At the same time, driving up the price of bonds reduces their yield, and in effect the interest rate. And as interest rates across the economy are set in relation to gilt yields, quantitative easing acts as an extra lever pushing down borrowing costs.
So is that what Mervyn King is going to do now?
No. This is not quite traditional quantitative easing – what King recently called “conventional unconventional measures” – for two reasons. One, instead of buying plain old government bonds, the Bank is targeting its fire on particular markets where it thinks there is a shortage of buyers. By acting as a willing buyer, it hopes to drive up the price of these assets, and get credit moving again.
Secondly, the Treasury has said it will pay for this first £50bn buying spree by selling new government bonds. It will therefore be taking as much cash out of the market as it is pouring in, so there should be little risk of inflation.
Also, the Bank of England hasn’t yet run out of ammunition – rates are still at 1.5%. But we’re in uncharted territory, so officials in Threadneedle Street and No 11 have been in close contact.
January 28, 2009
Federal Deposit Insurance Corp steps in
Story link: Federal Deposit Insurance Corp steps in
So it looks like the The Federal Deposit Insurance Corp will be heading the fund which will hopefully bring America out of their credit crisis, which in turn will hopefully have some positive affects on the UK economy.
Federal Deposit Insurance Corp steps in
The Federal Deposit Insurance Corp. may manage the so-called bad bank that the Obama administration is likely to set up as it tries to break the back of the credit crisis, two people familiar with the matter said.
U.S. stocks gained, extending a global rally, on optimism the bad-bank plan will help shore up the economy. The Standard & Poor’s 500 Stock Index rose 1.9 percent to 861.63 as of 9:54 a.m. in New York. Bank of America Corp., down 54 percent this year before today, rose 87 cents, or 13 percent, to $7.37. Citigroup Inc., which had fallen 47 percent this year, climbed 18 percent.
Lloyds employees want a pay rise
Story link: Lloyds employees want a pay rise
Bailed out by the taxpayer, won’t lend any money to the taxpayer, but now they want the tax payers to foot the bill for pay rises, I don’t think so!
If they can’t afford to fund themselves then they certainly shouldn’t be increasing wages!
Lloyds employees want a pay rise
Lloyds Banking Group has sounded out shareholders about a change in its executive remuneration plans that could generate pay rises for its directors despite being bailed out by the taxpayer.
The bank, in which the government holds a 44% stake, is understood to have approached big City investors between a month and six weeks ago with outline proposals for a modified pay package for the executive team of the bank .
Hefty deposit for first time buyers
Story link: Hefty deposit for first time buyers
If the government does not start to force banks to lend, you will see banks tightening their lending criteria for first time buyers even further. I have already heard of many mortgage deals being tied in to a 30%+ deposit upon completion, which is a huge amount, especially for a first time buyer.
Hefty deposit for first time buyers
Some 38% of those already saving towards a deposit say they are looking to increase the rate at which they put their money away in 2009.
Meanwhile, 40% of those without any form of deposit stated that they had now decided to start saving this year.
Legal action against bankers
Story link: Legal action against bankers
I do not think that a single party caused the collapse of the UK economy, although various operations that are operating within the banking sector are questionable.
If investigations have not been taken seriously now, then when will they be, after all, the UK economy is in its worst state now for nearly 20 years.
He compared the vigorous nature of inquiries in America to the lack of action among the City authorities. It is the furthest the Conservative leader has gone in demanding closer examination of any potential illegal behaviour by bankers.
He also claimed that Britain was now “the most indebted nation on earth”.