18/9/08

FTSE 100	4912.4, -113.2	Dow	10609.66, -449.36
FTSE 250	8309.8, -99.3	Nasdaq	2098.85, -109.05
FTSE All Share	2509.43, -53.46	S&P 500	1156.39, -57.2
Nikkei	11489.3, -260.49	Hang Seng	17229.22, -407.97
Oil (Crude)	$97.16	Gold	$850.50
Base Rate	5%	10 Yr Gilt	4.378%
£/$	1.811	Euro/Gbp	0.792

Markets
US markets plummeted yesterday with the Dow reaching its lowest level since November 2005. Late Tuesday the Federal Reserve said it will lend AIG up to $85 billion in exchange for a stake in the company that could reach 80%. However, instead of reassuring investors the deal seemed to add to the uncertainty surrounding financial markets. Selling did ease in the afternoon as oil and gold prices boosted related stocks, but there was no real recovery with indices finishing just off their lows for the day.

The Dow Jones tumbled 449.36 points to close at 10,609.66, the S&P 500 slumped 57.2 points to end at 1,156.39. The Nasdaq dropped 109.05 points to finish at 2,098.85.

In the financial sector, Goldman Sachs endured its biggest one day drop ever. Shares in the company fell 13.9% to $114.50, having earlier been below the $100 for the first time in three years. Morgan Stanley suffered its worst day for 15 years, falling 24%, with investors citing fears over profits and the company's ability to raise capital. After the close, however, the New York Times reported that Morgan Stanley was in talks with regional bank Wachovia about a possible merger. Elsewhere in deal news, Washington Mutual has reportedly put itself up for sale, with Wells Fargo and Citigroup showing interest.

The airline sector suffered after oil prices spiked. American Airlines parent AMR and Continental Airlines both declined 14%, while JetBlue Airways fell 6%. Transport stocks were down in general, with the Dow Jones Transportation average falling 3.5%.

US light crude oil for October delivery rallied $6.01 to close at $97.16. COMEX gold for December delivery surged $70 to $850.50 an ounce. Treasury prices jumped, lowering the yield on the 10 year note to 3.41% from 3.49%.

The Nikkei dropped 260.49 points to close at 11,489.30 this morning. Nomura Holdings, Japan's biggest brokerage slid to its lowest level in five years, while Nipponkoa Insurance Co lost 10%. Sumitomo Metal Mining, the nation's biggest gold producer, gained 7.2% after gold prices surged the most in nine years.

The Hang Seng is currently 407.97 points lower at 17,229.22. Industrial & Commercial Bank of China Ltd and Bank of China Ltd, which have disclosed holdings tied to bankrupt Lehman Brothers Holdings Inc, both dropping more than 10%. HSBC Holdings Plc retreated 6.9% after CNBC reported that it was a possible suitor to merge with Morgan Stanley.

The FTSE 100 is currently 50.30 points higher this morning at 4,962.70. Investors have been cheered by the overnight news that Lloyds have bid £12 billion for HBOS. Shares in HBOS are currently 28.8% higher topping the risers board, although in contrast Lloyds shares are trading 7.5% lower, topping the fallers board. Kingfisher is 10% higher after first half profits beat expectations. Enterprise Inns completes the top three risers, up 7.7% after Goldman Sachs removed the company from its Pan-Europe sell list.

Economics
UK Retail sales (Aug) 09.30bst

After the extremely volatile readings of the last few months, the market may now be placing less weight on the official retail sales figures than previously. The picture from the various retail surveys remains bleak. A decline in August is expected.

UK Public finances (Aug) 09.30 bst

The Chancellor is expecting total public sector net borrowing to be £43bn in the current fiscal years. HSBC think this is optimistic and expect borrowing to be closer to £53bn.

US Initial jobless claims (week 13 Sept) 13.30 bst

Initial claims were elevated at 445,000 last week, and the 4 week average at 440,000 is consistent with persistent job losses. Job losses are expected to be 430,000 this week. Continuing claims for the prior week may climb again, rising to 3.57m from 3.53m.

US Philadelphia Fed (Sept) 15.00 bst

The Philadelphia Fed has underperformed other manufacturing surveys, averaging -18.6 so far this year. The August reading of -12.7 was actually the highest since last December, but new orders at -11.9 remains deep in negative territory, while shipments and employment are sluggish. Another soft reading of -12 is expected for this month.

US Leading indicators (Aug) 15.00 bst

August leading indicators should fall 0.2 percent. The biggest negative contributions will come from a drop in the ISM supplier deliveries index (50.3 from 55.1) and from higher initial jobless claims. July leading indicators could be revised up a bit to -0.6 percent, reflecting stronger capital goods orders than initially estimated in the previous months report.

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