On Thursday, barometers of stress hit highs that had not been seen for decades, on fears of a deep recession. In New York, the S&P 500 fell to a 1997 low and banking giant Cit fell 26% after a 23% plunge on Wednesday.
The Dow Jones Industrial Average plunged 444.99 points, or 5.6%, to 7552.29. The S&P 500's financial sector fell 10.7%, while the overall index dropped 6.7% to 752.44 - - its lowest close since 1997. The Nasdaq fell 5%.
Finfacts Report: Global Financial Crisis: Barometers of stress hit highs on fears of deep recession; Citi plunges 26%
Bloomberg reports that the bloodletting in the financial- services industry will accelerate in coming months, with job cuts doubling to about 350,000 worldwide by mid-2009, said Brian Sullivan, chief executive officer of search firm CTPartners.
Reductions on that scale would be equivalent to 20 percent of the global workforce at financial companies before the credit crisis began, said Sullivan, whose firm has worked with Citigroup Inc. and JPMorgan Chase & Co.. Banks, brokerages and funds have eliminated about 170,000 positions worldwide.
``This is the financial equivalent of World War II,''Sullivan said in an interview in Hong Kong. ``It's unprecedented. You're seeing a seismic shift in the population of banking.''
The Wall Street Journal says that executives at Citigroup Inc., faced with a plunging stock price, began weighing the possibility of auctioning off pieces of the financial giant or even selling the company outright, according to people familiar with the matter.
The Journal says the internal discussions are at a preliminary stage and don't signal that Citigroup's board and management are backing down from their insistence that the New York company has ample capital, funding and strategic direction, these people said. But with the stock down another 26% Thursday, its worst one-day percentage decline ever, Citigroup officials have decided they need to reckon with a range of scenarios that were unthinkable only weeks ago.
The MSCI Asia Pacific Index rose 2.9% today.
The Bank of Japan agreed to keep its benchmark rate at 0.3%.
The Nikkei 2225 rose 2.7%; china's CSI 300 fell 0.61% and India's BSE Sensex 30 gained 4.06%.
Asia-Pacific - benchmarks
In Europe, the Dow Jones 600 has risen 1.37% Friday.
Most markets have risen.
In Dublin, the ISEQ Index is up 3.77%.
Bank of Ireland is up 14% and CRH has risen 5%.
CRH said today that it had completed the renewal and extension of €1.5 billion of bank facilities. These renewals have now been completed.
Irish Share Prices
Euribor Rates
AIB Daily Report
Bank of Ireland Daily Report
Davy economist Rossa White says today that data send us back to the 1980s: "It has been an incredible week of macro data in the US. Here is a sample of what has been recorded so far: the lowest ever US housing starts figure, the record fall in the Consumer Price Index and now the worst jobless claims total since the early 1980s. They were not the only figures that point to this recession being the worst since the Volcker-induced painful 1980/81. Unfortunately, that one was deep and dragged on; this will be similar.
The Conference Board's leading indicator is an important index that we have commented on from time to time. Earlier in the year, we suggested that it pointed to US recession and that it had a near-perfect historical record as a guide. The index now suggests that the recession is closer to 1980/81 than 1990/91. Looking at the six-month change, it has been negative for 14 months unbroken. That has not happened since 1980.
We think that the US government has lots more to do before its economy reaches bottom. Monetary policy is almost ineffective, as widening spreads keep business and consumer funding costs elevated. The private sector balance sheet will not be gearing up again any time soon. A huge fiscal stimulus is the next measure required, followed by continued efforts to re-capitalise the battered banking system (perhaps using the €350bn left over in ex-TARP for a start).
Finfacts Report: Irish Economy: Keynes advice for Cowen when capital development of a country becomes by-product of a casino
Goodbody economist Dermot O'Leary says the Irish Government must concentrate on medium-term recovery: "While the Irish Government has had a lot on its plate dealing with the fate of the financial institutions here, the economy has continued to deteriorate at a rapid pace. The most visible evidence of this has been in the labour market. Later this morning we are likely to get confirmation that annual employment growth went into negative territory for the first time since 1991. In reality, it should not come as a surprise, as the Live Register data has been highlighting the rapid deterioration for some time. Following the Budget in October, we voiced our disappointment that an opportunity was missed to enact some much-needed cuts in current public sector expenditure and also in the lack of innovation and ideas to put the economy in a position to recover in the medium-term.
The fact that the Department of Finance economic growth estimates were too optimistic made it more likely that a “mini-budget” would be needed. We still believe that this will be the case, and there is also speculation in this morning’s media that “an economic recovery plan” is being hatched at the current time and will be unveiled over the coming weeks. The speculation is that is will attempt to incentivise R&D investment in the country, by introducing further tax incentives and grants. This is a good start. The severity of the current downturn in Ireland means that there are no silver bullets for recovery in the short-term. However, as part of this recovery plan, there must be recognition that current public spending will have to be reduced to ensure that the burden of reducing the budget deficit, which we think will exceed 8.5% of GDP next year, will not have to be fully borne by further increases in taxes that would have the effect of restraining growth in to the medium-term. Let’s hope the opportunity is taken this time around."
Goodbody analyst analyst Eamonn Hughes says on Irish financials: "There has been a lot of what appears to be well sourced commentary in the media in recent days about an inexorable move towards recapitalisation of the domestic banking sector. If the media reports are correct, all banks will have lodged their business plans with the government yesterday, which we presume will be a major input into any final decisions and the Minister of Finance is reported to have met with all six bank CEO’s and chairmen (which are part of the government scheme) through the day yesterday. The range of permutations and combinations floating around in the last 24 hours is no help in determining the shape of events to come. However, it is clear that the solution, as we have been commenting on for a while, will incorporate consolidation in the sector. Press speculation this morning carries stories of IL&P being folded into BOI, with private equity interests taking a stake in the enlarged bank, but also IL&P merging with EBS. In our Förlorat i översättningen note we opined that the Regulator’s core objective may be to create two national champions in due course, into which the smaller banks are folded.
Banks that are currently overweight commercial may be matched with more retailed oriented institutions and those with an overweight of retail may be balanced with more commercial. Our suggestions run counter to much of the media speculation this morning, in terms of the shape of the marriages, but it would make more sense to us that whatever emerges on the far side is more balanced than that currently being speculated upon in the media. Also, it would appear preferential that the system is tackled in one fell swoop rather than piecemeal. The lesson of say the Netherlands was that just tackling one bank was to the detriment of others, which ultimately required a solution for all (remember ING after Fortis). So all for one and one for all. What level of equity will be injected, will it be private equity only or in conjunction with the government, will it be pref’s, convertibles or straight equity or all of these? What will be the key capital ratios on a pro-forma basis? As such, until we see the structure of any transactions, it’s difficult to make informed long-term investment decisions. That probably explains the mixed share price performance of the stocks yesterday and is likely to be the case again today. Well, if nothing else, we are not alone. The Board of Citi are meeting today with some speculation mounting of a merger or break-up. Over the last few months, weekends have turned out to be as busy as weekdays, with most of grandest plans of mice and men hatched over the weekend – remember Bear Sterns, Tarp, Fortis and the UK banks. So easy on the booze this weekend in case something breaks and get to bed early on Sunday night in case it slips out til Monday morning."
Currencies
The euro is trading at $1.2544 and at £0.8417.
For live currency updates, check the right-hand column of the Finfacts home page.
The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.
Commodities
Crude oil for December delivery is currently trading on the New York Mercantile Exchange (Nymex) at $49.61 per barrel up 19 points from Thursday's close. In London, Brent for December delivery is trading on the International Commodities Exchange at $48.57 up 49 cents.
Gold spot price
Gold is trading at $757.80 up $13.20 from Thursday's spot price close in New York.
