Financial Markets Update

Justin Gowen at November 25, 2008 : 11:36 am

The mood this week has so far been positive following the latest bank bailout in the US.

This time the giant Citigroup needed a cash injection from the Fed, as well as further guarantees totalling over $300bn. Stock markets around the world reacted well, with the FTSE, CAC and DAX all posting gains around the 10% mark. One surprising area of concern has appeared with Dubai, previously seeming completely immune with the glut of petro-dollars, now stating that it too is in trouble having over-leveraged to get to its current position. With property prices reportedly now some 40% off the highs it seems that realisation is dawning that no-one is likely to remain unaffected from this current crisis.

The UK issued its so-called ‘pre budget’ report outlining how it intends to finance its plans to further borrow its way to economic growth. Now being dubbed the ‘Robin Hood’ budget, there were some measures to tax high earners in the future to pay for some of the short term expenditure now. However the headline 2.5% off VAT failed to ignite too much interest - as one commentator wrote ” … would you go into a high street store offering a 2.5% discount off everything …” This morning we are seeing further calls from the Bank of England stating that the focus should remain on the credit markets, as there is still very little evidence of any real loosening of the mechanism at bank level.

The concern remains that it is likely to be a further 6 months before the real effects of this are felt in the real economy. With the country already firmly in recession, the bank is clearly concerned that there will be a direct correlation between when credit returns and how long the recession really will last for.

The rest of the week is likely to remain fairly quiet with the Thanksgiving holiday in the US, however the broad themes remain the same with most people remaining vigilant for any further signs of any worsening in market conditions. Now that it is broadly accepted the world is heading into recession through the majority of 2009, the real questions are now where investors will look to remain as insulated as possible.

We will be keeping you in touch with all of the latest relevant themes. Please post any comments and questions ….

Rating: 4.7/5 (3 votes cast)

2 Comments »

Great article - What’s your stance on the widening divide in opinion from the Tories to the Government over the best way to stear ourselves through this recession? Is there really a ticking tax timebomb? Or will this borrowing ‘Gamble’ pay off?

I just like the fact that there is actually some clear water beteween the Government and opposition for once.

VA:F [1.1.4_465]

please wait...

Rating: 0.0/5 (0 votes cast)

Comment by Chris — November 25, 2008 @ 7:13 pm
Chris,

Thank you for your feedback.

At this stage there is no clear evidence that the gamble will pay off at all. The forecasts are changing so rpaidly that the premise that these budget figures have been based, working 3 plus years ahead, can become irrelevant within a matter of weeks. Also if you look at the situation in the US, where arguably many of the problems of today originated, they are continuing to have to increase their bailouts weekly by billions of dollars. What is clear is that our borrowing will be the highest of the G7 nations, and will become some FOUR times higher than was stated in the last budget. This will have to be financed somehow, so in answer to your question there are clearly some tax hikes down the line that will have to be needed to claw some of this back.

Policy wise there ae alot of authors in the financial world claiming that labour has now taken us back to where we were in the 70s, and that ‘new labour’ is now undone. I agree that it is good that we now have some differentiation betwwen the two main parties, however we are clearly on an economic precipice, and the climate we are currently in is unprecented and the worst we have seen for a century, and there is as yet not a coherent plan as to how we are going to turn it around. The only comfort is that there is a global resolve to try and implement policies to try and prevent a 1930s style depression.

VN:F [1.1.4_465]

please wait...

Rating: 0.0/5 (0 votes cast)

Comment by justingowen — November 26, 2008 @ 7:42 am

RSS feed for comments on this post. TrackBack URL

Great article - What’s your stance on the widening divide in opinion from the Tories to the Government over the best way to stear ourselves through this recession? Is there really a ticking tax timebomb? Or will this borrowing ‘Gamble’ pay off?

I just like the fact that there is actually some clear water beteween the Government and opposition for once.

Rating: 0.0/5 (0 votes cast)

Comment by Chris — November 25, 2008 @ 7:13 pm

Chris,

Thank you for your feedback.

At this stage there is no clear evidence that the gamble will pay off at all. The forecasts are changing so rpaidly that the premise that these budget figures have been based, working 3 plus years ahead, can become irrelevant within a matter of weeks. Also if you look at the situation in the US, where arguably many of the problems of today originated, they are continuing to have to increase their bailouts weekly by billions of dollars. What is clear is that our borrowing will be the highest of the G7 nations, and will become some FOUR times higher than was stated in the last budget. This will have to be financed somehow, so in answer to your question there are clearly some tax hikes down the line that will have to be needed to claw some of this back.

Policy wise there ae alot of authors in the financial world claiming that labour has now taken us back to where we were in the 70s, and that ‘new labour’ is now undone. I agree that it is good that we now have some differentiation betwwen the two main parties, however we are clearly on an economic precipice, and the climate we are currently in is unprecented and the worst we have seen for a century, and there is as yet not a coherent plan as to how we are going to turn it around. The only comfort is that there is a global resolve to try and implement policies to try and prevent a 1930s style depression.

Comment by justingowen — November 26, 2008 @ 7:42 am

Business management concepts, theories, methods and models

Top Concepts

A - Z

KnowledgeBrief > KnowledgeBlog

Financial Markets Update

Justin Gowen at November 25, 2008 : 11:36 am

2 Comments »

Leave a comment

Bookmark & Share

Join KnowlegeBrief

Categories

Tags

Recent Posts

Blogroll

Admin

Username:
Password:
Register / My Account / Forgotten Password?