Market Update

Posted on 4 November 2008 by Drew

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Skipton and Scarborough have announced that they are to merge. Scarborough says it sought shelter with Skipton after the market downturn impacted on its profits and weakened its capital position. David Cutter will become chief executive of the enlarged society, which will be called Skipton and will be headquartered at The Bailey, Skipton. The new society will be in the top 5 with approximately 860,000 members and over £16bn of assets.   
Yesterday the price of crude oil was hovering around $67 a barrel on expectations that demand will continue to slow as the world economy contracts. US light, sweet crude fell 36 cents at $67.45 a barrel, while in London Brent crude declined 63 cents to $64.66. The oil cartel, Opec, recently decided to cut output by 1.5 million barrels per day in a bid to shore up prices.
US manufacturing activity fell in October to its lowest level for 26 years, according to a new report from the Institute for Supply Management. The report cited "significant demand destruction", for the third consecutive month in which the sector contracted. The figures were far worse than expected and pushed the Dow Jones index briefly into negative territory in early morning trading.

The UK's manufacturing sector shrunk for the sixth month in a row in October but remained slightly above September's low, an industry survey indicates. The CIPD/Markit manufacturing index stood at 41.5 in October, better than September's 41.2 - the weakest reading since the survey began in 1992. A reading below 50 suggests the sector is contracting. Analysts said that although the survey was not as weak as expected, it would not dampen calls for a rate cut this week.

Royal Bank of Scotland has signalled it expects to make a loss this financial year (the first ever in it's history) as it unveiled further write-downs on assets hit by the credit crisis. They have said that bad debt charges and write-downs totalled £206m in the third quarter, on top of £5.9bn in the first half of the year. New RBS boss Stephen Hester said making a profit in 2008 would prove difficult. However he would be disappointed if he wasn't in a position to start paying dividends again in 2010.

The Chancellor, Alistair Darling has revealed details of the new firm that will control the government's (taxpayers) shareholdings in the country's banks. It will be called UK Financial Investments Ltd (UKFI) and its job remit will be to maximise value for taxpayers. In the chair will be Philip Hampton, chairman of Sainsbury's and former finance director of Lloyds TSB. The government also intends for UKFI to manage its holdings in Bradford & Bingley and Northern Rock "in due course".  

The eurozone is on the brink of recession with economic growth falling 0.2% in the second quarter, the European Commission has announced. A Commission statement warned: "In 2009, the EU economy is expected to grind to a standstill." The slowdown will mark the eurozone's first recession since the currency's inception in 1999. Figures also announced on Monday show that manufacturing in the zone fell in October to its lowest level since 1997.

Switzerland's largest bank UBS has reported a profit for the third quarter but has warned of challenges ahead. UBS made a profit of 296m Swiss francs ($256.3m; £163.3m) for the three months to 30 September, helped by write-ups and a tax credit. It was UBS's first profit after four quarterly losses in a row.  

Around 300,000 UK Savers will receive an e-mail this week advising how they can recover their money from Icesave.

Swaps showed no real change yesterday. Overnight Libor is down a further 10bps and 3 Months Libor down by 7bps, which by recent reductions is a huge drop ! The advice is still that anyone looking for a Tracker should get signed up before Thursday (BOE Rate cut) to secure rates now & look to change should better deals come along prior to completion.

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