Tag Archives: DOw Jones

World Markets Rally!!!!

A move to boost lending by six central banks including the Bank of England has triggered a rally on world markets.

The banks, also featuring the European Central Bank and US Federal Reserve, agreed to lower interest rates on US dollar loans, which should encourage lending and help to stave off another credit crunch.

The FTSE 100 Index surged as soon as the measure was announced, rising 3.3% or 176 points to 5513.

In the US, the Dow Jones Industrial Average was up by a similar level in early trading, while the Dax in Germany rose 4% and the Cac-40 in France was 3% higher.

Before the announcement was made London’s leading shares index saw gains of up to 1%, amid hopes European leaders would make headway expanding the region’s bailout fund to help shore up confidence in the eurozone.

Banks led the charge despite some of the sector’s biggest UK players suffering a credit ratings downgrade from Standard & Poor’s.

Lloyds was ahead 7%, or 1.6p at 24.8p, Royal Bank of Scotland was 1.4p higher at 20.9p and Barclays rose 11p to 179.9p.

Miners also surged on the news, with South American copper miner Antofagasta topping the risers’ board, up 96p at 1180p.

Cairn Energy was the biggest faller after it reported more disappointing results from its exploration activities in Greenland. Cairn shares were 8.3p lower at 266.9p, a drop of 3%.

The Edinburgh-based firm said it had failed to find oil in two more wells, following the closure of three other wells earlier this year.

We need a GFSA

” Yo political dudes. We need $700 billion dolleros for the money dudes. $1000 dollar bills? Can you do Wallmart vouchers or  Euros?”

We are chewing into last week’s shares rally and the FTSE 100 is heading down to 5000 again. That always happens when there is a knee-jerk government announcement. The initial upswing caused by happy noises is then followed by a couple of days of reflection and analysis.

When the US government announced its $700 billion rescue package, the markets relaxed and rallied. Over the following weekend, everyone took time to think.

Then it was realised that the rescue package was far from a signed deal.

For instance, the U.S. Democrats want the government to take a stake in the companies that it helps.

Their proposal is that companies who effectively sell assets to Uncle Sam should give the government shares in their company.

The Democrats also require the government to come up with “a systematic approach for preventing foreclosures and ensuring long-term, sustainable home ownership…..”

That makes sense because the government is being asked to purchase sub-prime mortgages.

They are also looking for curbs on executive compensation as well as an ability for judges to modify a bankruptcy petition where a primary residence is included.

In addition, financial institutions are now coming out of shock and are confident enough to specify what they want in the new bill.

So, the current situation is that there are too many parties with vested interests for the bill to be agreed quickly. Unfortunately it will probably take some time for all the horse-trading to be concluded and if there is one thing that the stock market dislikes is uncertainty. The market likes good news and can certainly deal with bad news. No-news means some jittery trading for the next few days.  The FTSE  100 is very likely to be bouncing off the 5000 line for a few days but for as long as there is hope, it will not make that drop below 5000. If at some stage it does go below 5000 then would ther last person to leave please switch off the lights.

If the politicians cannot agree or if the market does not reacquire confidence, the drop will be so fast that we will all feel the  G-forces.

Needless to say, the U.S government wants and needs a “clean bill” to be passed quickly so that the rescue package can be put into place. Any undue delay will affect stock prices all over the world and slight “wobbles” are already taking place.

Meanwhile, there are banks and other FS companies which are holding their collective breath in the vain hope that they can keep quiet and just sneak under the wire when “the announcement” comes but there are those who cannot keep it up for too much longer.

I think that the above reinforces an immediate need for a Global Financial Services Authority so that all other economies are not “pointing” at the USA

 

Note to Hector:  Why don’t you ban “shorting” oil stock?