Across the Spectrum - October 2008
Last week the US House of Representatives voted in favour of a USD700 billion bailout plan aimed at supporting the US financial system by removing tainted assets from bank balance sheets. Last Saturday leaders from the four biggest European economies stopped short of agreeing a similar package for European banks.
Hypo Real Estate, Germany's second-biggest commercial property lender, has been bailed out by the German government to the extent of 50 billion euro (USD68 billion). The German government has also given savers a commitment towards protecting their deposits and the UK, Spain and Portugal are expected to follow suit. This follows moves by the Irish, Danish and Greek governments to implement full protection for deposit holders. Sweden has substantially increased the level of protection and Austria has announced increased deposit protection but has yet to announce details.
BNP Paribas has confirmed it has agreed to buy 75% of Fortis's operations in Belgium and Luxembourg. In return, the governments of Belgium and Luxembourg will take a minority stake in BNP. The Icelandic government is reported to be agreeing measures for the country's banks to sell off some foreign assets in a bid to support its financial system. Iceland's currency has lost 20% against the dollar in the last week.
None of the banks, including the European Central Bank and Bank of England, have commented on potential rate hikes or cuts. But analysts believe the Bank of England, which meets this Thursday, will likely lower its rate below 5 percent. The ECB left its rate unchanged at 4.25 percent on Thursday, but opened the door to a rate cut.
The number of bank bailouts in Europe has caused stock markets to slide causing investors to seek the relative safety of government debt. European bonds have risen, sending the yield on the two-year note to the lowest level since March.
The euro declined to a 14 month low against the dollar at USD1.3598 and the weakest in two years versus the yen at 139.96. The yen was the best performer in September and the only currency to appreciate against the dollar.
Commodity markets have continued to slide and are heading for their biggest annual decline since 2001 as investors exit leveraged arrangements and slowing economic growth erodes demand for raw materials.
Crude oil for November delivery fell to USD89.96 a barrel on the New York Exchange. Prices declined 12% last week as reports showed US fuel demand for the previous four weeks was the lowest in seven years and that manufacturing had slowed in September at the fastest rate since 2001.
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.
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