Monday, October 13, 2008

World Markets Soar After Last Week's Plunge

HONG KONG — Global stock markets rebounded strongly on Monday after last week's historic sell-off as governments from Europe to Australia and the U.S. intensified efforts to ease a financial crisis that threatened to the throw the world into recession.
Hong Kong's Hang Seng Index, which tumbled more than 7 percent Friday, soared 1,434.33 points, or 9.69 percent, to finish at 16,231.20.
Australian and Singapore indices jumped more than 5 percent, while South Korean and Chinese benchmarks added around 3.7 percent.
As markets opened in Europe, Britain's FTSE-100 shot up 5.6 percent, Germany's DAX climbed 6.4 percent and France's CAC-40 advanced 7 percent.
In Japan, where the Nikkei 225 tanked nearly 10 percent Friday to close out its worst week in history, trading was closed for a public holiday.
Markets around the world sprung to life as nations expanded their efforts to save a financial system, reeling from seizing credit markets and risky debt, that threatened to throw the global economy into recession.
On Monday five central banks — including the U.S. Federal Reserve and the European Central Bank — unveiled new measures to thaw frozen credit markets and bolster funding to banks. The Bank of England, the European Central Bank and the Swiss National Bank said they would provide unlimited U.S. dollar funds to financial institutions. The Bank of Japan said it was considering similar measures.

In Britain, three of the country's largest banks — Royal Bank of Scotland Group PLC, Lloyds TSB Group PLC and HBOS PLC — announced plans to take up to 37 billion pounds (US$63 billion) of government money to boost their balance sheets.
Earlier in the day, Australia said it would guarantee bank and other lender deposits for three years.
The moves came after leaders of the 15 euro-zone countries said Sunday they would guarantee new bank debt until the end of 2009, allow governments to help banks by buying preferred shares, and vowed to rescue important failing banks through emergency recapitalizion.
The global effort brought a measure of relief after investor panic sent world equities markets spiraling last week in one of the steepest declines in decades.
"The government measures genuinely do help market confidence," said Daniel McCormack, a strategist for Macquarie Securities in Hong Kong. "We are reaching a point where policy could soon start to have an impact on the credit markets and once it does that will help the equity markets."
In the U.S., investors were waiting to see if the Treasury Department's newly announced plan buy equity in troubled banks would help stabilize the volatility on Wall Street. Lawmakers have urged quick action by President George W. Bush on the effort, to be funded by the US$700 billion bailout he signed Oct. 3.
Wall Street stock futures showed a rebound was in store for the major indexes ahead of the opening bell on Monday. Dow Jones industrials futures rose 331 points, or 3.9 percent, to 8,701. Nasdaq 100 futures rose 51.7, or 4 percent, to 1,334; and Standard & Poor's 500 futures added 43, or 4.8 percent, to 934.04.
In a volatile session Friday in New York, the Dow Jones industrial average fell 128, or 1.49 percent, to 8,451.49, gyrating within a 1,000 point range. The average had its worst week on record in both point and percentage terms.
Financials helped lead Monday's advance in Asia, with leading Chinese lender Industrial & Commercial Bank of China, or ICBC, soaring 13.6 percent. Leading Australian banks such as Commonwealth Bank of Australia and ANZ Banking Group Ltd were also up sharply. Commodity issues gained as well.
Elsewhere in the region, Indonesia's key index, down sharply in early trade, gained 0.9 percent after the lifting of a trading suspension, imposed last Wednesday amid a freefall in share prices. The upswing followed government measures to free up liquidity, including easing regulations for share buybacks and corporate financial reserve limits.
Taiwan's benchmark index closed down 2.15 percent after the market was shut Friday for a national holiday.
Oil prices recovered, with light, sweet crude for November delivery up US$3.33 at US$81.03. The contract fell Friday US$8.89 to US$77.70, the lowest price since Sept. 10, 2007.
In currencies, the greenback gained against the yen to 100.57. The 15-nation euro bought US$1.3532.
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Thursday, October 2, 2008

Senate Passes "Bail Out Bill"

The Senate passed the $700 billion economic-rescue package by a 74-25 margin on Wednesday night, just two days after the House had rejected a similar bill.
Legislators had spent a feverish two days putting together this revised package, hoping to appease both liberal Democrats and conservative Republicans, who had expressed major reservations about the legislation.
Congressional leaders, as well as President George W. Bush, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, had pressed over the past week for this package, which they said was necessary to stop a financial meltdown.
Paulson released a statement on Wednesday night saying, “I commend the Senate for tonight’s strong, bipartisan vote. This sends a positive signal that we stand ready to protect the U.S. economy by making sure that Americans have access to the credit that is needed to create jobs and keep businesses going. I urge the House to act promptly to pass this bill.”
Both major presidential candidates, Republican John McCain and Democrat Barack Obama, voted in favor of the bill.
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While the legislation is fairly complex, in basic form it offers a way for financial institutions to get some of their most-toxic securities off their books, with the federal government taking them over. This bill authorizes the Treasury Secretary to have up to $700 billion of securities “outstanding at any one time,” though the approval for the full $700 billion would come in stages.
The bill passed in the Senate differed from the rejected House legislation in a number of ways. Federal Deposit Insurance Corp. insurance will be raised temporarily to $250,000 from $100,000. In addition, there were changes to the Alternative Minimum Tax and incentives for small business, among other things.

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Because the bill had to be one that was already under consideration, it was basically substituted in for a mental-health parity bill, a measure the Senate voted on before considering the legislation itself, and approved by a vote of 74-25. However, some mental-health parity provisions were included in the measure.
Sen. Bernie Sanders (I-Vt.) had proposed an amendment that would create a surtax on those making over $500,000 a year, but it was defeated.
The bill will now journey to the House. A vote there is expected sometime on Friday, Rep. Barney Frank (D-Mass.) told FOX Business. It’s still expected to have a much tougher run there. Every House seat is contested in the early-November election, which means the Representatives are more mindful than their Senate counterparts of the opposition from constituents.
That opposition is still strong. The Web site survey on, which is not a scientific poll, indicates that only 12% of respondents support passage of the rescue package, while 15% want a better explanation of what’s in it. A full 73% say they understand what’s in it and just don’t want it.
Part of the challenge for those in favor of the bill is that it’s meant to help the credit markets, which are less visible. The stock market, which suffered one of its worst days in history on the day the House rejected the bill, is suffering but still liquid.
Activity in the credit markets is extremely low, with banks hesitant to lend to each other, or to customers. The fear of market and economic experts is that such a lack of money flow will devastate an already weak economy.