Headlines October 10, 2008

From: Reuters
Canada rated world’s soundest bank system
‘Canada has the world’s soundest banking system, closely followed by Sweden, Luxembourg and Australia, a survey by the World Economic Forum has found as financial crisis and bank failures shake world markets.
But Britain, which once ranked in the top five, has slipped to 44th place behind El Salvador and Peru, after a 50 billion pound ($86.5 billion) pledge this week by the government to bolster bank balance sheets.
The United States, where some of Wall Street’s biggest financial names have collapsed in recent weeks, rated only 40, just behind Germany at 39, and smaller states such as Barbados, Estonia and even Namibia, in southern Africa.’

Ex-president Carter slams Bush on market crisis

‘Former President Jimmy Carter said on Friday the “atrocious economic policies” of the Bush administration had caused the worst global financial crisis since the Great Depression of the 1930s.’

From: The Canadian Press
Banks trim prime rate further after Ottawa offers $25B balance-sheet relief
‘Canada’s big banks are passing on more interest rate cuts to consumers and companies in the wake of Ottawa’s promise of help obtaining the billions of dollars required for their lending businesses.
TD Canada Trust (TSX:TD) and CIBC (TSX:CM) said Friday they will lower their prime lending rate by 15-hundredths of a percentage point to 4.35 per cent, effective next Tuesday.
The Bank of Nova Scotia (TSX:BNS) and Bank of Montreal (TSX:BMO) announced shortly afterward that they would cutting their prime rate by a quarter-point to 4.25 per cent.
Chris Hodgson, Scotiabank’s head of domestic personal banking, stated that: “At a challenging time in world financial markets, this reduction in interest rates reflects actions initiated by the Bank of Canada and the federal government.”
Flaherty said the federal government will buy up to $25 billion in residential mortgages from the banks and shift them to CMHC.

“This is going to make loans and mortgages more available and more affordable for ordinary Canadians and businesses,” said the finance minister.’

From : NY Times
Russia approves $36 billion loan and shuts down the stock market
The Parliament passed a law on Friday unlocking central bank lending to private banks in a $36 billion bailout, continuing a strategy that has essentially relied on making the government’s windfall oil profits available to banks, hoping they will in turn lend to companies and maintain growth.

In another bad sign for Russia, crude oil futures dropped to $82 a barrel. Russia’s finance minister has said the budget will go into deficit if prices drop below $70. And savings from a long period of high oil prices are now at risk.
Unlike in the United States, where the bailout funds are being gathered by borrowing that will raise the national deficit, in Russia they are being drawn from the national savings account from the period of high oil prices.

Also, Russian companies hit hard by declining commodities prices continued to announce layoffs or production cuts. Severstal, which makes automotive plate steel and had been on a buying spree for mills around the world, said Friday that it would cut production by 30 percent in the United States and 25 percent at plants in Russia and Italy.

Iceland, in Financial Collapse, Is Likely to Need I.M.F. Help
REYKJAVIK, Iceland — Iceland’s financial system collapsed Thursday, and analysts said it was probably only a matter of time before the country would have to turn to the International Monetary Fund for help.
“Iceland is bankrupt,” said Arsaell Valfells, a professor at the University of Iceland. “The Icelandic krona is history. The only sensible option is for the I.M.F. to come and rescue us.”
Prime Minister Geir Haarde, who had warned this week of the threat of “national bankruptcy,” declined to say Thursday whether Iceland was seeking a rescue package from the International Monetary Fund.

From: The Canadian Press
Loonie takes steepest one-day dive ever, trading extremely volatile
TORONTO — The loonie posted its biggest one-day decline on record Friday, falling almost five cents against the American dollar at one point, but began to rally in the last half-hour of trading.
The dollar fell as much as 4.87 cents in the afternoon to trade as low as 82.41 cents US, according to the Bank of Montreal’s currency desk.
However, the dollar’s value continued to bounce wildly. It had recovered more than 1.5 cents from its low within minutes. The loonie was at 84.28 cents US at 3:30 p.m., down three cents from Thursday.
The dramatic fall of the loonie this month reflects the impact of lower commodity prices, especially oil, along with weak economies around the world and concern that even Canada’s sturdy banks are being effected by a global credit crunch.
The loonie is also being sideswiped by rising demand for the U.S. dollar as the United States government tries to borrow heavily in global money markets to finance its $700-billion bailout of banks.
Ironically, the greenback is currently in huge demand because of the U.S. troubles and global economic uncertainty.
Fund managers from around the world are buying up U.S. Treasury bills – historically considered one of the most conservative investments – and need American currency to do so.

From: CNNMoney.com
Cheap oil soon to come
In a new report Friday, Deutsche Bank uses a number of interesting yard sticks to suggest crude is currently way too expensive and may fall to the $60 a barrel range as the economy worsens.
Peter Beutel, an oil analyst at Cameron Hanover sees a 2009 low of around $50 or $60 a barrel, then even lower prices in 2010.

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