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Title: FTSE 100 sees £49bn wiped off shares on euro fears and bank lawsuit
Source:
The Telegraph
URL Source: http://www.telegraph.co.uk/finance/ ... ro-fears-and-bank-lawsuit.html
Published: Sep 5, 2011
Author: Angela Monaghan
Post Date: 2011-09-05 19:24:35 by Happy Quanzaa
Keywords: None
Views: 2021
Comments: 1
Forty-nine billion pounds was wiped off the value of the UK's leading shares on Monday following renewed fears over the health of the British economy and concerns over the fate of British banks being sued by US regulators. The FTSE 100 tumbled 3.6pc - 189.45 points - to close at 5,102.58 after investor confidence was knocked by an unexpectedly sharp fall in services sector growth in August. The Markit/CIPS services purchasing managers' index fell to 51.1 in August from 55.4 in July, the biggest drop since the foot and mouth crisis a decade ago. Economists were alarmed by the scale of the fall, which had been far larger than expected and triggered fears that the UK is now on course for a double-dip recession. David Noble, chief executive of CIPS, described the decline in services growth as "eye-watering". Accounting for three-quarters of the UK economy, the services sector has a crucial impact on gross domestic product figures. Investor confidence was also dented by the news that Royal Bank of Scotland, HSBC and Barclays are being sued by the US Federal Housing Finance Agency for their role in the sale of a combined $41.5bn (£25.8bn) of sub-prime mortgage debt to Fannie Mae and Freddie Mac, the American home loan financial institutions, in the run-up to the financial crisis. Investors across Europe were also in cautious mode as key indices in Germany and France suffered heavy losses. Traders said the market turmoil on Monday could mark the beginning of another volatile week for the markets. "The FTSE has started the week off with a triple-digit loss, as significant drops in the likes of Barclays and RBS have dragged blue-chips lower," said Yusuf Heusen, sales trader at IG Index . "This is in reaction to the weekend news of the lawsuits filed by the US government against a selection of banks covering mis-selling of mortgage-backed securities prior to the financial crisis." "We may have to wait until the resumption of US trade on Tuesday to see if [the] drop is just a correction or the start of another steeper sell-off." The FTSE 100 has now lost £82bn in the past two trading sessions. Analysts said the lawsuits were likely to hang over the banks for a prolonged period, despite a vigorous denial of any wrongdoing from RBS, which was the biggest faller on Monday. "At this stage it is impossible to put an accurate estimate on the potential financial impact for the banks involved, but we note that Royal Bank of Scotland is by far the most exposed and hence we expect its shares to come under the most pressure as a result," said Gary Greenwood of Shore Capital. The pound closed down a cent against the dollar, at $1.6103. Heightened market uncertainty and the recently weak data for the UK economy will provide a gloomy backdrop for the latest meeting of the Bank of England's Monetary Policy Committee, which begins on Wednesday. Although the MPC is expected to hold interest rates at 0.5pc for the foreseeable future, economists said there was now a greater chance that it would re-start its quantitative easing programme in the coming months in a bid to stimulate the economy. It will announce its decision at noon on Thursday.
Traders said the market turmoil on Monday could mark the beginning of another volatile week for
the markets
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#1. To: Happy Quanzaa (#0)
Talas causes severe damage in Japan, already reeling from Fukushima. What would a nucklear scientist focus on...;} This neglect of a gigantic fall in the price of corporate Europe’s assets and earnings power is a bit scary. If there is any wonder as to why the alternative blogosphere is gaining readers by leaps and bounds, today’s Bloomberg shows why. The mass media in the U. S. decidedly accentuates the positive." The last time MSM was ignoring this much was the days before 9/11....
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