(CNN) – The topsy-turvy world of the stock markets continued Wednesday with the main indices all off very sharply. Today's serious falls came when Wall Street opened and tumbled sharply.
It was a classic case of the European market grumbling for most of the day, seeking direction from the U.S. - and then responding accordingly.
Behind the falls are real and growing worries about the economic health of the major economies.
The Governor of the Bank of England, Sir Mervyn King, said: "There are a number of headwinds to world and domestic growth ... and these headwinds are becoming stronger by the day."
The U.S. Federal Reserves statement yesterday said U.S. growth this year was "considerably slower" than expected, "household spending had flattened out" and the housing sector remained "depressed."
Most important of all, the Fed has announced for the first time that it will keep rates low until 2013: A remarkable admission of the weakness being faced.
In China, the state-run media is full of scathing editorials about America's mounting debt.
Commentary published by the Xinhua news agency over the weekend stated the U.S. should live within its means. The agency said the alarm has rung and Washington politicians need to stop playing chicken.
An article in the Communist Party newspaper Global Times reads "The World Should Kick America's Behind".
The downgrade of U.S. credit by ratings agency Standard and Poor’s from AAA to AA+ is feeding fears in some circles that China could damage the American economy, by selling its massive debt holdings.
Cutting 30,000 jobs despite recording almost $12 billion in profit may sound irresponsible – but it’s not.
Banks are basically huge computers with relationship managers interfacing with customers. While most investment in retail banks has drawn to a halt, technology departments have actually grown, with the level of automation increasing.
Hong Kong, China (CNN) – Cut cost, boost revenue. From global businesses to national governments across Europe and North America, this seems to be the monetary mantra of 2011. For HSBC, one of the world’s largest banks, it’s no different.
Today, HSBC confirmed the first steps of its Great Realignment around the world. To cut costs, an eye-popping 25,000 employees will lose their jobs between now and 2013. To boost revenue, retail banking will be scaled down while more lucrative corporate banking will be scaled up.
Right after the plan was unveiled late Monday in Hong Kong, HSBC’s London share price popped 4.5% in early trade. The company’s better-than-expected first half earnings likely supported that as well. The data, also out today, showed HSBC’s earnings for the six months to June came in at $11.5 billion – 3% up from the first half of 2011 and 45% up from the second half of 2010. Analysts had expected pre-tax profits of $600 million less. The world’s local bank needs more good news like this.
New York (CNN) – In just over a week Ben Bernanke and his colleagues at the Federal Reserve will turn off the life support system that has kept the U.S. economy alive for the last two years. How will the markets respond? It’s anyone’s guess.
Optimists, like former White House Advisor Laura Tyson, say the economy - though still fragile - has healed enough to breathe on its own. The Fed has been clear about its intentions to end its program of buying treasury bonds and mortgage-backed securities, the market had time to prepare and the withdrawal of quantitative easing should end without much drama.
But executives at Pimco, the world’s largest bond fund, disagree. CEO Mohammad El-Erian is sticking by the firm’s bearish and controversial call that the end of quantitative easing will spark a sell-off in U.S. treasury bonds. I talked with both Tyson and El-Erian ahead of the Federal Reserve’s June meeting and he gave the following assessment.
(CNN) – “Coordinated foreign currency intervention” may prove a mouthful, but get used to it. It’ll be the catchphrase for the next few news cycles, as we talk about Japan’s attempt at economic recovery. And as one J.P. Morgan analyst told me, this intervention is “a big deal.”
G7 finance ministers and central bank governors held a special conference call early Friday morning Tokyo time. Their goal with this intervention: to weaken a super strong yen. And at least for today, their actions are working. Before the G7 announcement, the yen was trading at around the 79 yen to the dollar mark. Right after the communiqué was released, the yen weakened sharply to push past the 81 yen mark.
But wait, a two-yen uptick? Is that really significant? You bet.
Flagship British company. American CEO. Where have we heard that before?
New Barclays CEO Bob Diamond (left) and BP counterpart Bob Dudley.
Bob Diamond’s appointment as CEO of Barclays comes barely a month after Bob Dudley was named as the new CEO of the embattled oil giant, BP.
The circumstances are obviously very different. One company is paying for the worst environmental disaster in U.S. history. The other is – as far as any bank can be in the current climate – a bailout-free success story.
But what can we learn from the rise of the two Bobs?
Perhaps that the concept of a British or an American company, or any other nationality for that matter, is now void.
In this time of mergers and takeovers the so-called “nationality” of corporations is being diluted.
BP has not been British Petroleum for nine years. A large proportion of its shareholders and employees are American.
And Barclays has swallowed up much of what was the American investment bank Lehman Brothers. If you need any more proof this is the state of things to come, just look at the airline industry.
There’s no getting around it. The corporate world is getting smaller, and Messrs Diamond and Dudley are reaping the rewards.
The UK Q4 GDP figures announced this morning were a shocker. However, the British economy scraped its way from recession in Q4 by its dirty finger nails. The median forecast of a 0.4 percent gain in GDP by the majority of renowned economists were rubbished and the official figure of 0.1 percent increase is a massive set back.
I wondered why Lord Mandelson was so guarded about the recovery, reiterating that it was so brittle. The services sector underperformed. It expanded by just 0.1 percent and not the 0.5 or 0.6 percent rise suggested by the business surveys.
With household incomes under pressure, credit in short supply and a major fiscal squeeze looming, the path to a full recovery is going to be a long and tortuous. I am in the minority that believes that GDP will grow by just 1 percent in 2010. Talk of an exit of quantitative easing, despite opinion to the contrary, is not only precipitous, but also folly in the current circumstances.
The auto sector did well thanks to a stimulus program, which may be fully utilised before too long.
Going forward, this recovery may well be achieved with high unemployment. Last month’s retail sales rise of 0.3 percent was disappointing. Going forward we’re all skint with taxation likely to increase and with less disposable income finding its way to the shopping malls. Retail is so important!
Perhaps Messrs Brown, Darling, Myners et all will desist from larruping the banks too much, whilst the economy is in such a parlous state. That does not presuppose that radical regulation is not a prerequisite ,as well as some taxation over a protracted period of time to ensure the taxpayer is repaid in full. The bonus culture is being altered. Few disagree with that philosophy.
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