US Stocks Close Lower


With the Eurozone and Japan in recession, Citigroup announcing a cut of 50,000 jobs, all the ingredients were there for US stock markets to close lower. And they did. Concern about the World economy after the credit crunch still remains high. The Dow Jones Industrial Average dropped almost 224 points, and Citigroup shares lost almost 7% of their value after the layoffs news was released. General Motors was up 5.7% due to new cash raising efforts, including the sale of a 3% stake in Suzuki Motor Corp.

U.S. stocks started the week solidly at a loss Monday, with word of Citigroup Inc. slashing 50,000 jobs and Japan slipping into recession heightening worries about the severity of the global slowdown.
“Investors continue to worry about the near-term fundamental weakness of the global economy and the continued need for capital by banks, brokers and now insurance companies and automakers,” said Robert Pavlik, chief investment officer at Oaktree Asset Management.

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Asian Markets Gain


Asian markets have gained points this Monday morning, with Hong Kong’s benchmark Hang Seng rising 3 percent. The gains come as South Korea is the latest government to reveal a stimulus plan to boost the economy and trust in financial institutions. The South Korean measures are aimed at preventing the country from falling into a recession. Australia’s S&P/ASX 200 was up more than 5 percent despite concern that national manufacturing and retail sales are slowing.

India’s main stock index rose 4.6 percent after a central bank decision over the weekend to cut the nation’s key interest rate and release $8.1 billion into its financial system.

Hong Kong’s blue-chip Hang Seng Index was among the region’s top gainers, climbing 414, or 3 percent, to 14,382, Singapore’s key index also rose by about 4 percent.

“I don’t think it’s a massive change in direction, more a case of a little more confidence going forward in massively oversold stocks and … global organized attempts to deal with the issues,” said Miles Remington, head of Asian sales trading at BNP Paribas Securities in Hong Kong.

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Central Banks Favour Gold


With the US dollar becoming less interesting as reserve asset, banks are looking to invest in gold. Sales of gold by European central banks is expected to be lower next year due to the conservation of gold reserves in a world hit by economic crisis. Gold is becoming the “safer choice” once more. American and European banks have been hit by the credit crisis, in which banks are no longer willing to lend each other money. Several financial institutions in Europe and the US have already been nationalized to keep them from collapse. Consumers are worried about their savings and are looking to governments for action. European and Asian markets have all opened lower today as more European banks get hit by the ongoing crisis.

Update : Germany has agreed a 50 billion-euro plan to save Hypo Real Estate. Click here to read more.

London: Sales of gold by European central banks are likely to be lower than expected over the next year as the global banking crisis boosts bullion’s appeal as a “safe” reserve asset.

And banks elsewhere in the world, most notably in Asia and the Middle East, may even become buyers of gold in an attempt to diversify their reserves away from the dollar, analysts say.

Full article here.

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European Governments Rescue Banks


European governments have acted to prevent the demise of some of Europe’s largest insurance and banking companies. The U.K. treasury took hold of Bradford & Bingley, Britain’s biggest lender to landlords. Governments from the Netherlands, Belgium and Luxembourg took over parts of Fortis, which has seen its share price drop dramatically over the last few months. Belgium paid 4.7 billion-euro, the Netherlands 4 billion, and Luxembourg 2.5 bilion to keep the company from collapse. Customer confidence in Fortis has been at a record low. The Associated Press reported that ING might buy ABN-AMRO from Fortis for an estimated 10 billion-euro.

Fortis Rescue

To head off the collapse of its biggest bank, Belgium agreed to buy 49 percent of Fortis’s Belgian banking unit for 4.7 billion euros, while the Netherlands will pay 4 billion euros for a similar stake in the Dutch business, the governments said in a statement late yesterday. Luxembourg will provide a 2.5 billion-euro loan convertible into 49 percent of Fortis’s banking division in that country.

The talks to rescue Fortis involved European Central Bank President Jean-Claude Trichet. Former Bank of England policy maker Willem Buiter said today on his blog that the rescue of Fortis showed “the ability of the euro-area fiscal authorities to coordinate on a bailout for a bank with not only strong cross-boundary operations, but indeed with a strong multi- national identity.”

Full article here.

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Oil, Fed Causes Rally


Steadily decreasing oil prices and positive signals from the Federal Reserve have caused a rally on the Dow Jones, rising at the fastest rate since April 10 of this year. Investors feel that with oil prices falling, and no interest rate hikes by the Fed in sight, the US recession is going to be a light one. The Dow Jones rose almost 3% to 11615.77 points. European stock indexes responded positively to the Dow Jones’ performance, with all major indexes rising.

Plunging oil prices and reassuring signals from the Federal Reserve combined to spur hopes that the worst could be over for stocks, driving the Dow Jones Industrial Average on Tuesday to its sharpest one-day gain since April 1.

This was hardly the first time since the bear market began in October that stocks have staged a strong rebound. Skeptical investors warned that this could be another false start: A potential recession is looming, the financial system is in disarray and housing prices continue to fall amid mounting foreclosures.

Full article here.

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