Gold9472
10-07-2008, 06:33 PM
Global economic meltdown continues
http://rawstory.com/news/2008/Globam_economic_meltdown_continues_1007.html
by Rob Lever
Agence France-Presse
10/6/2008
WASHINGTON (AFP) - US and European authorities launched fresh initiatives Tuesday to break the grip of a global credit crunch, but the moves failed to boost market confidence as Wall Street and other stock markets sank to new lows.
The US Federal Reserve said it would buy up short-term commercial paper or company debt in an effort to kick-start credit flows and ease a squeeze in bank lending, a move it described as "necessary to prevent substantial disruptions to the financial markets and the economy."
A Fed official said the move is aimed at restoring flows in a market worth some 1.3 trillion dollars needed for corporate day-to-day funding that has been nearly halted by a credit crunch.
Despite the dramatic move by the Fed and new actions in Europe, markets ran into new turbulence a day after a meltdown in most stock markets.
The Dow Jones Industrial Average of blue chips slid 508.39 points (5.11) percent to a five-year closing low of 9,447.11 following a 369-point slide Monday and a global rout.
The tech-heavy Nasdaq plummeted 5.80 percent and the Standard & Poor's 500 index slid 5.74 percent.
Analysts at Charles Schwab & Co. said the market was slammed by "continuing fears about the credit crisis and worries about the health of the economy, exacerbated by Fed chairman Ben Bernanke's comments in a speech today."
Bernanke hinted that the central bank could cut interest rates soon as the outlook for economic growth worsened.
Speaking to business economists in Washington, Bernanke explained how the latest economic data showed the prospects for the world's biggest economy had grown gloomier amid a credit crunch and broad financial crisis.
"In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate," he said.
Bank of America economist Peter Kretzmer said the comments offer a clear hint at a rate cut, possibly with other major central banks that could come at a gathering Friday in Washington of global finance officials from the Group of Seven leading industrial nations.
"In view of the intensifying international dimension to the crisis, it would not be a surprise if a coordinated rate move (cut) were announced at G7 meetings on Friday in Washington," he said.
EU finance ministers agreed at a meeting in Luxembourg to increase an EU-wide savings deposit guarantee to 50,000 euros from 30,000. They said they would coordinate their response to the crisis.
Britain was set to announce a rescue package for its ailing banking industry before markets opened on Wednesday, officials said as key bank shares tumbled 40 percent.
In Russia, the Kremlin pledged 36 billion dollars to strengthen banks, but the move failed to help confidence. The RTS market finished down 0.95 percent after a record 19 percent slide Monday.
Iceland, where the economy is imperiled by debt and the credit crunch, nationalized its second biggest bank, Landsbanki, and gave its biggest institution, Kaupthing, a 500-million-euro (678-million-dollar) loan. Glitnir bank, the third largest, was nationalized last week.
Russia also agreed to negotiate a four-billion-euro (5.4 billion dollar) emergency loan to help Iceland's fight against national bankruptcy.
The credit crunch remained acute with banks desperate to find dollars even at punitive interest rates.
The European Central Bank on Tuesday pumped 50 billion dollars (37 billion euros) back into interbank money markets, but it said banks sought more than twice that amount.
The ECB said 67 eurozone banks had requested more than 109 billion dollars, and paid a whopping 6.75 percent for dollars made available in the daily attempt to keep cash flowing through the financial pipeline.
It announced a schedule for new coordinated action with other central banks to support the provision of dollars to cash-strapped commercial banks.
The Bank of Japan also poured more billions into the system.
In the US, the Fed gave no estimate of how much money would be put into the new commercial paper effort, but said the new program to soak up corporate debt would begin rapidly.
The US administration has already committed 700 billion dollars to a bailout of banks' bad debt and the latest move extends the government support.
John Ryding, economist at RDQ Economics, said most of the new funds are likely to go to banks and financial companies that have been trying to roll over debts linked to troubled real estate investments.
"This is basically unsecured lending to the banks," Ryding said.
The market in short-term company debt -- commercial paper and short-term securities issued by companies and banks for payrolls and day-to-day expenses -- is worth tens of billions of dollars each day.
The Fed action came a day after the Fed agreed to pay interest on commercial bank reserves with the central bank, a move aimed at helping the central bank keep control of interest rates in a frozen market.
US President George W. Bush discussed the global economic meltdown with leaders of Britain, France and Italy, seeking a common strategy ahead of weekend crisis talks.
"I was on the phone with them this morning to ensure that our actions are closely coordinated. We live in a globalized world; we want to make sure that we're effective," he said in a speech outside Washington ahead of the G7 gathering.
The troubles on Wall Street sent Brazil's share market down 4.66 percent while Mexico's Bolsa slid 3.97 percent.
Earlier, European stock markets had a mixed performance, with gains in Paris and London and a drop Frankfurt, a day after suffering huge losses on evidence of European banking sector vulnerability.
The London FTSE 100 index of leading shares rose 0.35 percent while in Paris the CAC 40 gained 0.55 percent. But in Frankfurt, the DAX fell 1.12 percent.
http://rawstory.com/news/2008/Globam_economic_meltdown_continues_1007.html
by Rob Lever
Agence France-Presse
10/6/2008
WASHINGTON (AFP) - US and European authorities launched fresh initiatives Tuesday to break the grip of a global credit crunch, but the moves failed to boost market confidence as Wall Street and other stock markets sank to new lows.
The US Federal Reserve said it would buy up short-term commercial paper or company debt in an effort to kick-start credit flows and ease a squeeze in bank lending, a move it described as "necessary to prevent substantial disruptions to the financial markets and the economy."
A Fed official said the move is aimed at restoring flows in a market worth some 1.3 trillion dollars needed for corporate day-to-day funding that has been nearly halted by a credit crunch.
Despite the dramatic move by the Fed and new actions in Europe, markets ran into new turbulence a day after a meltdown in most stock markets.
The Dow Jones Industrial Average of blue chips slid 508.39 points (5.11) percent to a five-year closing low of 9,447.11 following a 369-point slide Monday and a global rout.
The tech-heavy Nasdaq plummeted 5.80 percent and the Standard & Poor's 500 index slid 5.74 percent.
Analysts at Charles Schwab & Co. said the market was slammed by "continuing fears about the credit crisis and worries about the health of the economy, exacerbated by Fed chairman Ben Bernanke's comments in a speech today."
Bernanke hinted that the central bank could cut interest rates soon as the outlook for economic growth worsened.
Speaking to business economists in Washington, Bernanke explained how the latest economic data showed the prospects for the world's biggest economy had grown gloomier amid a credit crunch and broad financial crisis.
"In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate," he said.
Bank of America economist Peter Kretzmer said the comments offer a clear hint at a rate cut, possibly with other major central banks that could come at a gathering Friday in Washington of global finance officials from the Group of Seven leading industrial nations.
"In view of the intensifying international dimension to the crisis, it would not be a surprise if a coordinated rate move (cut) were announced at G7 meetings on Friday in Washington," he said.
EU finance ministers agreed at a meeting in Luxembourg to increase an EU-wide savings deposit guarantee to 50,000 euros from 30,000. They said they would coordinate their response to the crisis.
Britain was set to announce a rescue package for its ailing banking industry before markets opened on Wednesday, officials said as key bank shares tumbled 40 percent.
In Russia, the Kremlin pledged 36 billion dollars to strengthen banks, but the move failed to help confidence. The RTS market finished down 0.95 percent after a record 19 percent slide Monday.
Iceland, where the economy is imperiled by debt and the credit crunch, nationalized its second biggest bank, Landsbanki, and gave its biggest institution, Kaupthing, a 500-million-euro (678-million-dollar) loan. Glitnir bank, the third largest, was nationalized last week.
Russia also agreed to negotiate a four-billion-euro (5.4 billion dollar) emergency loan to help Iceland's fight against national bankruptcy.
The credit crunch remained acute with banks desperate to find dollars even at punitive interest rates.
The European Central Bank on Tuesday pumped 50 billion dollars (37 billion euros) back into interbank money markets, but it said banks sought more than twice that amount.
The ECB said 67 eurozone banks had requested more than 109 billion dollars, and paid a whopping 6.75 percent for dollars made available in the daily attempt to keep cash flowing through the financial pipeline.
It announced a schedule for new coordinated action with other central banks to support the provision of dollars to cash-strapped commercial banks.
The Bank of Japan also poured more billions into the system.
In the US, the Fed gave no estimate of how much money would be put into the new commercial paper effort, but said the new program to soak up corporate debt would begin rapidly.
The US administration has already committed 700 billion dollars to a bailout of banks' bad debt and the latest move extends the government support.
John Ryding, economist at RDQ Economics, said most of the new funds are likely to go to banks and financial companies that have been trying to roll over debts linked to troubled real estate investments.
"This is basically unsecured lending to the banks," Ryding said.
The market in short-term company debt -- commercial paper and short-term securities issued by companies and banks for payrolls and day-to-day expenses -- is worth tens of billions of dollars each day.
The Fed action came a day after the Fed agreed to pay interest on commercial bank reserves with the central bank, a move aimed at helping the central bank keep control of interest rates in a frozen market.
US President George W. Bush discussed the global economic meltdown with leaders of Britain, France and Italy, seeking a common strategy ahead of weekend crisis talks.
"I was on the phone with them this morning to ensure that our actions are closely coordinated. We live in a globalized world; we want to make sure that we're effective," he said in a speech outside Washington ahead of the G7 gathering.
The troubles on Wall Street sent Brazil's share market down 4.66 percent while Mexico's Bolsa slid 3.97 percent.
Earlier, European stock markets had a mixed performance, with gains in Paris and London and a drop Frankfurt, a day after suffering huge losses on evidence of European banking sector vulnerability.
The London FTSE 100 index of leading shares rose 0.35 percent while in Paris the CAC 40 gained 0.55 percent. But in Frankfurt, the DAX fell 1.12 percent.