Britain awaits yet another cut in interest rates to record low levels.
But it may not be enough to boost the London stock market as recession weighs on the economy, traders said.
The FTSE 100 index of leading shares closed on Friday at 4,149.64 points, up 2.39 per cent or 97.17 points from a week earlier.
The Bank of England (BoE) is widely expected to slash British borrowing costs by a further 50 basis points to an official cash rate of just 1 per cent at a meeting on Thursday.
Now at 1.5 per cent, interest rates are at the lowest level since the British central bank was formed in 1694.
This week, a statement from Barclays bank stressing it did not need a government bailout following speculation to the contrary sent its share price and those of its peers rocketing.
Some of the gains last week were lost as the weekend approached due to "poor earnings and bleak labour and housing market data from the US, heightening fears of a deeper global recession", said City Index market strategist Nick Serff.
"This ended a four-day surge for the major indexes, their best performance in two months," he said.
Another notable British corporate announcement this week came from Anglo-Dutch energy giant Royal Dutch Shell, which said it had made a net loss of $US2.81 billion ($A4.3 billion) in the final quarter of 2008 on plunging oil prices.
The loss compared with a net profit of $US8.47 billion ($A13 billion) during the fourth quarter of 2007, when crude prices were far higher, Europe's largest oil company said.
Showing posts with label Bank of England. Show all posts
Showing posts with label Bank of England. Show all posts
Monday, February 02, 2009
Wednesday, October 10, 2007
Mortgage lender Northern Rock gets a breath of life as the Bank of England gives new aid package.
The Bank of England threw a fresh lifeline to English mortgage lender Northern Rock overnight, offering to guarantee new retail deposits and extend funding arrangements to give the bank time to salvage something from its battered business.
The latest aid package came as the country's financial services watchdog said Northern Rock may not have needed to draw on emergency funds from the Bank of England (BoE) at all if its rescue had not been conducted in the full public glare.
Northern Rock, which saw a run on deposits last month after it was forced by the global credit crunch to seek an emergency funding line from the BoE, said the new package would cost it STG40 million ($A91.21 million) to STG50 million ($A114.01 million) this year -- around 10 per cent of its targeted 2007 profit.
But the bank said the new help would buy it time to assess its full range of options, which include being taken over as a whole, being broken up or even attempting to remain independent on a smaller scale -- an option largely discounted previously.
The review process should be completed by February, it said.
Analysts said the new arrangements could help to reassure prospective buyers and allay fears of shareholders and bondholders of a firesale of assets.
But the arrangements are also controversial, as the decision to guarantee new retail deposits could potentially give Northern Rock an advantage over competitors.
"If my mother were to ask me where she should put her money at the moment, I would say Northern Rock," Numis Securities analyst James Hamilton said.
"What (prospective) buyers will want to know, is how long these arrangements will last and whether they will continue (after a deal)."
Northern Rock said the arrangements would remain in place "during the current instability in the financial markets" and that it would "pay an appropriate fee ... to ensure that it does not receive a commercial advantage".
Paying a commercial rate should help ease concerns the move could be found to count as undue state aid. The EU Commission said Tuesday it would form an opinion once it had full details.
The government had previously agreed to guarantee retail deposits made with Northern Rock before Sept. 19 -- the day after its initial pledge -- but said moving beyond that would be unfair.
It said on Tuesday, however, that it would extend the guarantee to all new deposits "during the current instability in financial markets".
It also said it would offer additional funding from the BoE on more flexible terms, which will allow Northern Rock to also use commercial lending as and when it can.
News of the agreement lifted Northern Rock's shares, down almost 70 per cent since the crisis began in mid-September. The stock ended the day up 19.9 per cent at 206.75 pence.
Source: Reuters
The latest aid package came as the country's financial services watchdog said Northern Rock may not have needed to draw on emergency funds from the Bank of England (BoE) at all if its rescue had not been conducted in the full public glare.
Northern Rock, which saw a run on deposits last month after it was forced by the global credit crunch to seek an emergency funding line from the BoE, said the new package would cost it STG40 million ($A91.21 million) to STG50 million ($A114.01 million) this year -- around 10 per cent of its targeted 2007 profit.
But the bank said the new help would buy it time to assess its full range of options, which include being taken over as a whole, being broken up or even attempting to remain independent on a smaller scale -- an option largely discounted previously.
The review process should be completed by February, it said.
Analysts said the new arrangements could help to reassure prospective buyers and allay fears of shareholders and bondholders of a firesale of assets.
But the arrangements are also controversial, as the decision to guarantee new retail deposits could potentially give Northern Rock an advantage over competitors.
"If my mother were to ask me where she should put her money at the moment, I would say Northern Rock," Numis Securities analyst James Hamilton said.
"What (prospective) buyers will want to know, is how long these arrangements will last and whether they will continue (after a deal)."
Northern Rock said the arrangements would remain in place "during the current instability in the financial markets" and that it would "pay an appropriate fee ... to ensure that it does not receive a commercial advantage".
Paying a commercial rate should help ease concerns the move could be found to count as undue state aid. The EU Commission said Tuesday it would form an opinion once it had full details.
The government had previously agreed to guarantee retail deposits made with Northern Rock before Sept. 19 -- the day after its initial pledge -- but said moving beyond that would be unfair.
It said on Tuesday, however, that it would extend the guarantee to all new deposits "during the current instability in financial markets".
It also said it would offer additional funding from the BoE on more flexible terms, which will allow Northern Rock to also use commercial lending as and when it can.
News of the agreement lifted Northern Rock's shares, down almost 70 per cent since the crisis began in mid-September. The stock ended the day up 19.9 per cent at 206.75 pence.
Source: Reuters
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