The great interest rate rip off part 1

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Wall Street follows FTSE's lead higher - Times Online

 

London's blue-chip stocks embarked on a recovery today, with the benchmark FTSE 100 index trading up more than 155 points at one stage after five consecutive sessions in the red.

The FTSE 100 was up 130.0 points, at 6336.1, in mid-afternoon trading.

The UK rally looked likely to be supported by a strong early showing on Wall Street, where the Dow Jones was up more than 100 points in early deals, lifted by positive earnings news from General Motors and Sun Microsystems.

The Dow Jones was last up 100.47 points, at 13,458.78. The Nasdaq Composite Index was up 22.87 to 2,606.15 and the Standard & Poor’s 500 index had gained 9.65 to 1,483.56.

In the US, concerns over inflation were also alleviated after the Commerce Department reported that core personal consumption expenditures - one the Federal Reserve’s preferred gauges of inflation - rose 1.9 per cent in June on a year-on-year basis, a level within the Fed’s comfort zone.

 

I wonder how rigged the inflation figure is and how it's been massaged!!

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BBC NEWS | Business | Share rally derailed by US falls

 

The rebound in global shares after recent losses has come to an end after the Dow Jones index fell more than 1% on renewed housing worries. Wall Street had opened higher after its worst week in four years but financial problems at another mortgage firm led to a wave of selling in the afternoon.

The Dow Jones industrial average closed down 146.32 points at 13,211.99.

Confidence in markets has been hit by fears a credit squeeze will end an era of cheap funding for takeovers.

Mortgage pressure

These fears resurfaced on Tuesday after American Home Mortgage Investment said it was suffering credit problems and would consider going into liquidation among other options.

It stressed that volatility in financial markets meant it was not currently able to meet its day-to-day lending obligations.

Yep somebody farted.

 

The city is full of highly educated idiots who through money around like confetti.

 

Central bankers have helped create a situation which could prove catrosphic, if another major shock hits the economy....

 

I mentioned in an earlier post about all we need is for a bank or a financial institution to go under and then a potential candidate turns up...

 

Is there a recession looming.... The worlds central bankers could have created one of the greatest recessions of all time, although to be fair they may find a get out of jail card providing nothing else go's wrong.

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O dear looks like something else is going to hit the economy as well.

 

BBC NEWS | Business | Oil prices close to record high

 

Oil prices are within touching distance of all-time highs after supply concerns lifted them above $78 (£38 )a barrel. A barrel of US light, sweet crude was worth $78.18 at the end of trading on Tuesday, its highest closing price.

That price was close to the record high of $78.40, reached in the aftermath of the conflict in Lebanon in 2007.

Prices have been rising for weeks after disruptions to Nigerian and North Sea output and concerns that demand will outstrip supply by the end of 2007.

Stockpile data

Light, sweet crude rose $1.35, or 1.8%, while Brent crude rose $1.34 to $77.08 in London.

Whether prices set new records on Wednesday is likely to depend on the latest figures for US oil inventories.

The US Department of Energy is expected to reveal that stocks fell last week as demand from refineries continued to rise, but the scale of the drop remains key.

Analysts are divided on whether the recent surge in prices can be sustained.

Stock markets have recovered from last week's turbulence, and the latest projections for the amount of oil available against demand remain tight.

"There is something very strong holding this market up," said Tony Rosado of IAG Energy Brokers in Florida.

Something strong like demand from India/China/Russia perhaps???

 

Why o why weren't people saying something in the 70's about potential oil shortages, we could have been prepared and done something.....

 

The problem with politicians is that they only care about the next election if a problem is decades away they don't care as it won't be there problem to deal with. Current political thinking revolves around crisis management and everyone in power hopes the crisis won't be while they are in power.

 

Interest rates won't do anything for the massive inflationary pressures looming on the horizon. Whether the sh*t does hit the fan is anyone's guess the the economic signs don't look good.

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FT.com / World - Opec steps up oil and gas search

 

The world’s biggest oil producers have boosted their search for oil and gas to one of the highest levels in two decades as prices on Tuesday neared record highs of more than $78 a barrel.

The Organisation of the Petroleum Exporting Countries, the cartel that controls three-quarters of global oil reserves, on Tuesday said that its members operated 336 oil rigs last year, an increase of 11.5 per cent since 2005, in response to strong demand from developing countries such as China and India.

The cartel’s annual statistical bulletin shows that member countries were operating the second largest oil rig fleet since 1982, when oil prices hit an all-time high in today’s money of about $90 a barrel. US oil prices on Tuesday rose to $78.23 a barrel, just below the $78.40 nominal high.

The number of oil rigs in operation is seen as one of the best estimates of investment trends. Oil producing countries rarely give out data on the amount of money they invest. Opec is financing its capacity expansion on record revenues of $650bn last year, up 22 per cent from 2005.

The International Energy Agency, the industrialised countries’ energy watchdog, recently warned of an oil “supply crunch” within five years as a result of accelerating consumption growth and output falls in mature areas, such as the North Sea, and long delays in new production projects.

 

Wow within 5 years...... Good job the world isn't dependent on oil.

 

Not looking too good at least the central banks know what to do increase interest rates....

 

Somehow there single and only trick is looking very tired and dated and doesn't meet modern economic requirements.

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FT.com / Capital markets - US nerves hit credit derivatives rally

 

Credit derivatives markets underwent another day of extreme volatility on Tuesday. A dramatic recovery on both sides of the Atlantic was tempered by weakness in US markets during late trading.

In the US, debt insurance on a portfolio of investment-grade companies tumbled from Monday’s peak of $103,250 to end around $72,000 – but it had earlier reached about $63,000.

News that two mortgage insurers could be sitting on a loss of a combined $1bn appeared to rattle sentiment.

However, the annual cost of insuring €10m ($13.7m) ($13.7m) of high-yield European corporate debt against default over a five-year period shed some 70 basis points to fall as low as €388,000 – compared with a life-time record high of €505,000 reached on Monday.

“Credit feels like it has just had a bad case of schizophrenia, where a year’s worth of credit volatility has been achieved in a little over 24 hours,” said Alan Ruskin, chief international strategist at RBS Greenwich Capital.

One key indication of this high level of volatility was that the difference between bid and offer prices for the indices remained five times wider than normal, said Michael Kastner, portfolio manager at SterlingStamos. Prices on the US CDX Crossover index were quoted 15bp wide rather than the customary spread of 2-3bp.

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FTSE 100 enjoys strong rebound - Telegraph

 

The FTSE 100 bounced back from last week's plunge to post its biggest one-day points gain in more than four years.

The FTSE rallied 154 to 6360.1, the best performance since March 2003, and the FTSE 250 recovered 265.8 to 11337. As London closed, the Dow Jones was up 71 points.

David Jones, chief market analyst at CMC Markets, said: Whether this will prove to be sustainable in the longer term remains to be seen. As we enter the typically lacklustre August period there's got to be the scope for further volatility - and downside pressures - to be seen."

 

You mean like we'll probably see tomorrow (Weds) as the US markets have jitted once more.

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David Prosser's Outlook: HIPs scheme is an embarrassing fiasco - Independent Online Edition > Business Comment

 

A half-hearted and utterly toothless version of the Government's Home Information Pack (HIP) initiative finally comes into force across England and Wales tomorrow - a policy that has been so watered down it will now fail to remedy any of the problems that it was first designed to tackle.

The policy wonks who cooked up HIPs almost a decade ago had hoped to simplify the process of buying a house in Britain, ensuring that prospective buyers did not waste thousands on surveys and solicitors fees, only to find themselves gazumped at the last minute.

 

Another half-arsed policy that the taxpayer will end up footing the bill for.

 

Governments don't you just love them.

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BBC NEWS | Business | Asian shares fall after US slump

 

Stock markets across Asia have suffered heavy falls on fresh concerns over the impact of the problems in the US housing market. Financial problems at a US mortgage lender and Macquarie, the Australian bank, prompted the sell-off which followed sharp losses on Wall Street.

Japanese stocks were among the worst hit, with the Nikkei down 2%, with big falls also in Hong Kong and Korea.

Fears remain that a credit squeeze will take its toll on economic growth.

Japan's main share index, the Nikkei 225 was down 348.1 points, or 2%, at 16,900.80 in late afternoon trade in Tokyo, dropping below the 17,000 level for the first time in four months.

Hong Kong's Hang Seng index sank 3.31% to 22,417.84 and dragged down shares listed in mainland China, while Korean stocks were also affected by the volatility in equity markets.

Korea's Kospi index tumbled 2.1% as exporters such as carmaker Hyundai and semiconductor firm Samsung Electronics tracked losses in the US.

 

The lemmings hitting the panic button. Perhaps if greed for greater and greater profit wasn't paramount big losses may not be happening.

 

Luckily we've got the central banks carefully managing the situation and not fanning the flames with interest rate rises.....

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BBC NEWS | Business | Zimbabwe launches $200,000 note

 

Zimbabwe is to start circulating a new 200,000 Zimbabwe dollar note, in a bid to tackle the country's inflation, the highest in the world. The new note, issued by the Reserve Bank of Zimbabwe from Wednesday, can buy 1kg (2.2lb) of sugar.

Food and fuel shortages have become common as the government relies more heavily on imports, pushing prices to new heights.

The official annual rate of inflation in Zimbabwe is nearing 5,000%.

In practice, this means the price of a loaf of bread costs 50 times more in cash than it did a year ago.

Shortages

The new note is worth US$13 at the official exchange rate or $1 on the black market.

Zimbabwe's government has created a commission to find a way to control soaring living costs.

But correspondents say that as long as Zimbabwe has a shortage of staple foods, including maize, food shortages are likely to continue.

 

I think it's more to do with having an idiot as President.

 

And our BoE is panicking because it's near 3%.

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Lender pulls plug as US loans crisis spreads to prime sector - Times Online

 

Shares in American Home Mortgage Investment, the US lender, nosedived yesterday after its credit lines were cut and it pulled the plug on hundreds of millions of dollars of home loans, as the US mortgage crisis ensnared another victim.

The lender was forced to pull $300 million (£147 million) of home loans already agreed on Monday and was preparing to break its agreement on up to $500 million more yesterday.

American Home Mortgage’s warning came just days after it conceded that a surge in defaults on so-called “prime” and near-prime mortgages, made to borrowers with solid credit histories, had prompted “major” writedowns on its loan book. The group’s waning fortunes also prompted it to delay its latest quarterly dividend.

American Home Mortgage’s shares, which plunged by 45 per cent after the first warning, fell by nearly 90 per cent yesterday. This left its market value, which reached $1.95 billion in December, at just $62 million last night.

The S&P 500 index declined by 1.3 per cent, to close at 1,455.27, as investors fretted that the growing woes of America’s mortgage industry would fuel a more general credit crunch by rippling across the home-loan market to other forms of debt.

Investors were also reacting to news that Harvard University has suffered a blow from the credit crisis after a hedge fund manager that it backed as a start-up lost more than $1.5 billion (£736 million) in July and has been sold for a knock-down price to a rival firm.

The hedge fund manager, Sowood, was set up in 2004 by Jeff Larson, a former manager of Harvard’s endowment fund, with $500 million in “seed funding” from his former employer.

However, after the loss of more than half of Sowood’s value last month, its lenders demanded more collateral and Sowood was forced to sell its remaining assets to the rival Citadel, at a fraction of their purchase price.

 

Are the worlds central bankers creating mass panic??? Is this really how interest rates work? And people think this is a good system? Obviously making people pay back the money they owe is just completely ridiculous..... just make them pay more for the borrowing is much more sensible.

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MPC decides on fate of millions - Telegraph

 

The committee's 123rd decision on interest rates could be its most important one yet, reports Edmund Conway

In only a few hours' time, the doors to the lustrous state rooms in the Bank of England will open for arguably the most important regular meeting for the UK economy.

As the clock nears 3pm, the nine most influential men and women in monetary policy will file into the committee room in the Bank's inner court. There, where the sound of the traffic outside on Threadneedle Street can barely be heard beyond the thick walls, the financial plight of millions of households will be decided.

In the following hours, the MPC members will meet and talk through their thoughts on the economy in general terms. By dinner time the intense and often exhausting discussions have died down - so much so that it is now a rule that the members are specifically forbidden from discussing monetary policy over the meal they take together.

Tomorrow, they reconvene at 9am and must come to a decision on rates by noon.

At only six hours, the rate-setting meeting is shorter than many think. However, there was a pre-MPC meeting on Friday, where the committee was briefed by officials about the state of the economy. Also, as the Bank publishes its Quarterly Inflation Report this month, members have been meeting for long sessions to discuss the forecasts over the past couple of weeks.

 

Luckily they know what they are doing, it's not like they are collectively responsible for the current financial chaos sweeping the global markets. Anyway at the end of the day for them it's merely numbers, for them repossessions are just figures for making calculated judgements it's just such a good job there isn't any family stress or suffering linked to decision.

 

For me repossessions if a sign of economic failure by the MCP.

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The occasional joke, little verbal violence - Telegraph

 

Aside from guarding the gold bullion in the vaults beneath the building, one of the chief tasks of the Bank of England's internal security team is to sweep the committee room for bugs ahead of the MPC's monthly meeting.

The ostensible reason is to prevent anyone attempting an audacious bit of insider dealing, but it is also a sign of just how secretive the interest rate meetings are.

Few, if any, stories surface of how heated debates get inside the room; of the differences of opinion which raise the tension when the meetings are split; of the personal disagreements between members. The meetings' minutes describe them as reasoned discussions. But the committee members' backgrounds as cerebral academics does not mean the meetings are stolid, calm occasions: anything but.

With relatively little time to decide what to do with rates - a decision which could sentence many families to penury - it is no surprise there is a palpable sense of pressure in the meetings.

 

These meetings should not be in secret, nor should we get sanitised minutes. The public should be able to see and hear how the decisions that can affect the nation and potential cause a recession are made. Especially as none of these people are elected.

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Deutsche Bank's Net Climbs 31% On Investment-Banking Strength - WSJ.com

 

FRANKFURT -- Deutsche Bank AG Wednesday said its second-quarter net profit rose 31% as its investment-banking business remained resilient, beating market expectations.

Net profit in the second quarter amounted to €1.78 billion ($2.44 billion), up from €1.36 billion a year earlier, well ahead of analysts' forecasts of €1.59 billion. Total revenue at the bank climbed 27% in the quarter to €8.8 billion from €6.94 billion a year earlier. Analysts had predicted total revenue of €8.09 billion. Pretax profit in the period rose 32% to €2.69 billion from €2.04 billion.

 

Another Bank another massive increase in profits. A cynic may suspect that the Banking sector has chased profits by loaning out as much money as possible with little regard for the economic consequences, fortunately our Central Banks would have spotted that and prevented a potential bubble from forming wouldn't they???

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FT.com / Markets / UK - FTSE falls sharply as credit fears return

 

London equities fell sharply in opening trade on Wednesday, tracking overnight losses on Wall Street and in Asia on returning fears about the implications of the US subprime credit crisis.

The FTSE 100 started the session 2 per cent weaker at 6,231.0, a broad-based loss of 130 points dominated by mining and oil stocks. Mid-cap investment stocks were hit hard by the resurgent sell-off, contributing to 2.5 per cent decline on the FTSE 250, a fall of 285 points.

 

Overnight in New York, equities moved sharply lower as more financial companies revealed the extent to which they had been drawn into the subprime mortgage crisis.

 

If one lemming jumps they all jump.

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Trading revenues boost Deutsche Bank

 

But for the second successive quarter the bank emerged as one of the winners from the US property lending market. Unlike some of its investment banking peers, Deutsche Bank profited from betting that the US subprime mortgage market would weaken.

Revenues in sales and trading rose 34 per cent to a record for the quarter of €4.3bn. The bank said revenues in the trading of debt products rose 18 per cent to €2.9bn, reflecting strong performances in credit products and emerging markets debt.

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http://www.ft.com/cms/s/483395ae-3fe6-11dc-ad26-0000779fd2ac.html

 

China has bought a 0.46 per cent stake in BG, Britain’s third largest gas producer, and analysts say it might raise its shareholding further, according to published reports.

Fred Lucas, an analyst at London brokers Cazenove Group, said an analysis of BG’s share registration data showed the People’s Bank of China bought 15.5m shares in the company between June 15 and July 13, Bloomberg News reported.

The stake is worth around £125m ($254m) at BG’s closing share price on Tuesday of 808 pence.

The news agency cited a BG spokeswoman as confirming that the Chinese central bank was a shareholder but declined to specify its stake.

A PBOC official in Beijing declined to comment but said the central bank does not have any direct investment business.

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BBC NEWS | Business | Mortgage exit fees on scrapheap

 

Mortgage lenders are scrapping exit charges, levied when a home loan is paid off, following pressure from the Financial Services Authority (FSA). HBOS, which includes the Halifax, has become the latest lender to scrap mortgage exit fees.

Earlier this year, the FSA said that lenders had raised mortgage exit fees too rapidly and some customers could be in line for a refund.

But lenders are simultaneously raising mortgage set-up fees, researchers say.

 

They give with one hand and take away with another, a bit like governments with tax cuts....

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BBC NEWS | Business | Economic angst drags down shares

 

Stock markets worldwide have plunged after a rocky week of trading, amid fresh fears over the problems in the US housing market. Financial problems at a US mortgage firm and losses at two funds owned by Macquarie, the Australian Bank, aggravated a sell-off across Asia.

The slump followed sharp losses on Wall Street, reflecting anxiety over future economic and market conditions.

European stocks also nosedived, with London's FTSE 100 falling 2.4%.

Analysts predict the volatility will continue until more is known about the extent of the crisis in the US sub-prime mortgage market, which offers high-interest loans to higher-risk customers or people on low incomes.

 

Put up interest rates because those on low incomes can afford it. Genius financial thinking. A crisis created entirely by the central bank and further proof that the concept of a single interest rate for everyone is a complete fallacy.

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The backlash has started against income inequality - Telegraph

 

God it's tough being filthy rich these days. In years gone by a few million in the bank was enough to get you the top table at any restaurant. But now we know that being a mere multi-millionaire is no longer good enough: to make it on to the bottom of the Rich List one has to have at least £70m.

As Brits we are institutionally envious of those who make lots of money, but does the fact that some are getting richer at a rapid rate make the rest of us any poorer? There are many burning political and economic issues facing the world - global warming and the ageing population to take just two. But I suggest that they will soon be overshadowed by the problem of inequality.

We are, at the moment, entering a landmark period of inequality, where the gap not just between rich and poor countries, but also between the haves and have-nots within the western world, is widening to almost unprecedented levels.

Already it is starting to bite. Many commentators are blaming Labour's drubbing at the local elections last week on the growing disparity between London and elsewhere around the country. Statistics show that the income divide rose during Labour's first decade in office, and is now close to record levels. For a stark illustration, check out the chart below of the Gini coefficient, the most comprehensive measure of this divide.

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BT customers face a 150% increase in the cost of weekend calls to mobiles from today as a new charging structure kicks in.

The hike was concealed alongside a round of minor reductions in charges for calls to mobiles announced earlier this summer. The changes meant that daytime calls would be cut by 4% and evening calls by 6.25%, but BT also took the opportunity to abolish lower rates for calls to mobiles and 0870 numbers at weekend.

The change will increase the cost of daytime weekend calls by 150% and evening weekend calls by 50%.

Landline calls to mobiles at the weekend previously cost 5p per minute daytime and evening from a BT landline, they have now gone up to 12.5p per minute and 7.5p per minute respectively. The new seven day per week rates are a small saving on the previous 13p per minute daytime and 8p per minute evening rates.

 

Slightly above the 2% inflation rate target.

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The big four banks are making record profits but failing to give customers good value and decent service, financial experts say.

None of the current accounts offered by Barclays, HSBC Lloyds TSB or NatWest qualified as a 'best buy' in research by the consumer group Which? Borrowers and savers are getting poor value interest rates while customer service is below the standard of some smaller rivals, according to Which?

It suggested the banks are offering a two-star service while generating five-star profits.

Martyn Hocking, editor of the magazine Which? Money, said: 'Some of the biggest banks on the high street get poor ratings while new providers get great reviews.

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Market report: Wednesday latest | This is Money

 

Just when City investors thought it was safe to move back into the stock market, they found themselves on the receiving end of yet another mauling by the bears.

In what promised to be another jittery day for traders and investors alike, the FTSE 100 index gave back most of yesterday's gains as it slumped 117.4 to 6242.7, as of 11.15. Some brokers say it showed just how flimsy yesterday's rally was. This latest setback followed a dramatic session on Wall Street overnight where the Dow reversed a 140-point rise to finish 146 down as more casualties emerged from the credit crunch facing debt markets.

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Travis Perkins warns on housing | This is Money

 

Builders' merchant Travis Perkins today warned that rising interest rates are slowing the housing market as the Bank of England's monetary policy committee gathered for its monthly meeting to set rates.

Geoff Cooper, chief executive of Travis Perkins, which owns Wickes, said the housing market was feeling the impact of five interest rate rises since last August to a six-year high of 5.75%. He warned further increases will slow the market even more as would-be buyers are put off by higher mortgage costs.

'We remain cautious about market prospects due to the potential impact of increasing interest rates on both new and secondary housing markets and weakening consumer confidence,' said Cooper, who also reported a 16.5% jump in first-half profits to £128.6m.

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Yesterday's trading: China fuels BG buying | This is Money

 

Beijing buying sparked renewed speculative interest in perennial takeover favourite BG Group. News that the People's Bank of China in recent weeks has bought 15.5m shares, or 0.46%, in the oil and gas producer prompted heavy buying of the stock.

It touched 811½p before closing 32p higher at 808p on a turnover of 34m. Top broker Cazenove called it a 'significant development' and raised its target price to 870p.

 

When one buys they all have to buy!!!

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CBI says high street survey shows no need for rate rise | Special_reports | Guardian Unlimited Money

 

Britain's leading business organisation yesterday urged the Bank of England to hold back on further increases in interest rates after its latest snapshot of the high street showed slowing growth as higher borrowing costs hit demand for DIY and big-ticket items.But with consumer inflation expectations picking up and higher oil and food prices adding to price pressures, analysts maintained their expectations that rates will hit 6% this year.

Five interest rate rises in under a year hit demand for hardware products and items like washing machines and flat-screen TVs, crushing retailers' hopes for a boost to profits from summer sales, the CBI said.