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September 30, 2008

Across the Spectrum - September update

The financial markets will have to wait until later this week for further news on the US bailout of financial institutions after the House of Representatives voted against the USD700 billion rescue plan for the financial industry announced by US politicians over the weekend.

It is anticipated that the US Senate will try to salvage the plan perhaps as early as tomorrow. Some changes are expected to the legislation to pacify Republicans who are pushing for a mandatory insurance programme. They may also push for the Securities and Exchange Commission to suspend mark-to-market accounting and require banking regulators to assess the real value of troubled assets.

Even as a potential solution to the crisis is being sought in the US the credit crunch has claimed several more casualties, both in the US and Europe. Bradford and Bingley, the UK's biggest lender to landlords, has become the second bank after Northern Rock to be nationalised by the British Government. Spain's largest bank, Banco Santander, will pay USD1.1 billion for the failed bank's branches and deposit base while the Government takes over the bank's mortgage and loan books. The fourth largest bank in the US, Wachovia Corp, came under increasing pressure after its shares plunged 47 percent last week and has been forced to accept an offer by Citigroup to buy its banking operations. In Europe, the Dutch, Belgian and Luxembourg governments have given a USD16.4 billion lifeline to the Dutch-Belgian bank Fortis. Meanwhile, there has been a USD9.2 billion state bailout by the Belgian and French governments of Dexia.

Money market rates may climb after the bailout of Fortis and Dexia together with nationalisation of Bradford and Bingley deepened concerns that more financial institutions may collapse, prompting banks to retain cash. Rising money market rates would suggest that central bank attempts to breathe life back into frozen money markets haven't yielded the degree of success that they would like.

Property prices in Spain have fallen by 26.3% in the year to July and mortgage lending fell 33.2% to USD14.9 billion (10.2 billion euro). The property market has been the main driver of economic growth in Spain over the last decade, but analysts say house prices are still up to 30% overvalued.

The euro and pound have weakened against the dollar after reduced investor confidence in the region's financial institutions while the dollar has been boosted by news of the US bailout plan. The pound has slid to USD1.8036, the biggest intraday decline since 1993, and the euro fallen to USD1.4362.

Commodities have fallen, led by oil, copper and lead, fuelled by concerns that the bailout of US banks will not be enough to avert an economic slowdown. Brent crude has fallen to USD99.51 a barrel for November delivery.

US fuel demand averaged 19.5 million barrels a day during the past four weeks, the lowest since October 2003. New home sales in the US fell in August to a 17-year low and orders for durable goods dropped more than forecast, US Government reports showed last week.

The information set out herein has been obtained from various public sources and is published by way of information only. The Spectrum IFA Group can accept no liability of any sort in relation there to and readers should obtain their own verification of any statement before making any decision which may have any financial or other impact.

 

Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.

 

This information is only provided as a guide and, if you need assistance in this area you are strongly advised to seek the help of a specialist in this field as each individual case is different.

 


If you have a question, want to arrange for a free financial review or just want further information I can be contacted on +33 (0)325461631, via my website
www.financialexpat.com or via e-mail steven.grover@spectrum-ifa.com  
Spectrum IFA Group company TSG Insurance Services Sarl is registered and licensed in France."

 


TSG Insurance Services S.A.R.L.
Siège Social: 34 Bd des Italiens, 75009 Paris
« Société de Courtage d'assurances » R.C.S. Paris B 447 609 108 (2003B04384)
Numéro d'immatriculation 07 025 332 -
www.orias.fr

 

 

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September 25, 2008

Across the Spectrum – September 2008 Update

While a week may be a long time in politics, we have seen that it is certainly true in financial markets at the moment.

The US Government first intervened to save AIG following its near collapse. Meanwhile in the UK, following a steep decline in its share price, HBOS was forced to accept a takeover by Lloyds TSB, a move that will see the formation of the UK's largest banking group with roughly a one third share of the UK retail banking market.

Stock markets continued to tumble until the US Government made a second intervention and announced a USD700 billion plan to set up a fund to buy back much of the bad debt held by banks. The new fund will aim to sell off these "toxic" assets in the future, perhaps at a profit. This led to stock markets registering their largest daily gains since the 1930s.

Markets were also helped by US and UK regulators temporarily banning the short-selling of financial stocks. The US and UK Governments are also taking the initiative on greater international regulation and are proposing a framework for stricter governance of the global financial system.

The scale of US Government intervention could put the dollar under pressure. While the move will restore confidence in the stock markets, analysts see traders continuing to focus on the budget, the current-account deficit and negative real US interest rates.

The dollar stands at USD1.4568 per euro and 106.46 yen to the dollar. Two currencies, which have been the biggest losers against the dollar in recent months, have been Brazil's real and Australia's dollar. However, analysts forecast both to rebound if demand for higher-yielding assets reappears.

UK retail sales unexpectedly jumped in August by 1.2%, against a market concensus expectation of a 0.5% drop, and were 3.3% higher year on year. However, sales for the three months to August fell 0.8% compared to the previous three months, the largest drop since 1990.

The price of crude oil has risen sharply in the last week due to speculation that the stabilisation of financial markets following the US Government's rescue plan will invigorate demand. Crude oil for October delivery rose to USD105.77 a barrel on the New York Exchange.

A new gas and oil field on India's east coast has started production. India is Asia's third-biggest economy and imports 70% of its energy needs and doesn't produce enough natural gas to meet demand for power and fertiliser producers. The new field raises the possibility of further oil discoveries that could reduce India's massive deficit on the supply side.

The information set out herein has been obtained from various public sources and is published by way of information only. The Spectrum IFA Group can accept no liability of any sort in relation there to and readers should obtain their own verification of any statement before making any decision which may have any financial or other impact.

 

Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.

 

This information is only provided as a guide and, if you need assistance in this area you are strongly advised to seek the help of a specialist in this field as each individual case is different.

 


If you have a question, want to arrange for a free financial review or just want further information I can be contacted on +33 (0)325461631, via my website
www.financialexpat.com or via e-mail steven.grover@spectrum-ifa.com  
Spectrum IFA Group company TSG Insurance Services Sarl is registered and licensed in France."

 


TSG Insurance Services S.A.R.L.
Siège Social: 34 Bd des Italiens, 75009 Paris
« Société de Courtage d'assurances » R.C.S. Paris B 447 609 108 (2003B04384)
Numéro d'immatriculation 07 025 332 -
www.orias.fr

 

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Across the Spectrum – September 2008

After posting heavy third quarter losses last week due mainly to bad debts on real estate, Lehman Brothers, the fourth largest US investment bank, has filed for bankruptcy protection earlier this week. The bank had lost 94% of its market value this year. Following on from Bank of America's rescue of Merrill Lynch and AIG's USD40 billion capital restructure, are the financial markets beginning a cathartic purge that was postponed last March when US regulators decided to shield investors from the worst effects of the Bear Stearns failure?

 

Many financial commentators now believe we are entering a significant re-ordering of global financial power structures. Many, including former Federal Reserve Chairman Alan Greenspan, believe more banks and financial companies may yet succumb to the credit crunch in what is probably a once in a century event.

 

The banking industry is making cash available in this crisis: ten major banks (Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs. JPMorgan, Merrill, Morgan Stanley and UBS) have created what is in effect a USD70 billion emergency fund which can make short-term loans to financial institutions in potential trouble.

 

US regulators appear to now believe the short-term pain from a purge is necessary for the market's long-term health.

 

Some market commentators are suggesting that the Bric (Brazil, Russia, India and China) and other emerging economies are fast becoming defensive plays as the credit crisis unfolds further. The relatively unsophisticated financial institutions in the Bric countries have largely escaped the effects of the credit crisis afflicting western economies.

 

The events of the last week have lead to equity markets falling sharply and the dollar has lost the most against the yen in a decade. The yen is now at a two month high against the dollar at 103.93 yen to the dollar.

 

Crude oil has fallen to a seven month low as the Lehman Brothers filed for bankruptcy and the oil infrastructure of the Gulf of Mexico escaped the worst of hurricane Ike. Crude for October delivery now stands at USD92.11 a barrel on the New York Exchange.

 

Gold has increased in price in response to the recent developments in the credit crunch saga as investors seek a haven from weaker stocks. The price of gold futures for December rose to USD776.50 per ounce but has fallen back after investors have begun selling gold to raise cash.

 

 

The information set out herein has been obtained from various public sources and is published by way of information only. The Spectrum IFA Group can accept no liability of any sort in relation there to and readers should obtain their own verification of any statement before making any decision which may have any financial or other impact.

 

Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.

 

This information is only provided as a guide and, if you need assistance in this area you are strongly advised to seek the help of a specialist in this field as each individual case is different.

 


If you have a question, want to arrange for a free financial review or just want further information I can be contacted on +33 (0)325461631, via my website
www.financialexpat.com or via e-mail steven.grover@spectrum-ifa.com  
Spectrum IFA Group company TSG Insurance Services Sarl is registered and licensed in France."

 


TSG Insurance Services S.A.R.L.
Siège Social: 34 Bd des Italiens, 75009 Paris
« Société de Courtage d'assurances » R.C.S. Paris B 447 609 108 (2003B04384)
Numéro d'immatriculation 07 025 332 -
www.orias.fr

 

 

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