Tuesday, October 07, 2008

Financial markets still volatile

Tens of thousands of British savers were left in shock this morning as they logged on Icesave, an Icelandic internet savings bank. They were greeted with a message which declared they would be unable to make any financial transactions. The freezing of all transactions came after Icesave’s parent company Landsbanki was taken under the Icelandic government’s control to stop its collapse. Landsbanki is the country’s second biggest bank and its being propped up by the Icelandic government will do nothing to raise confidence in an already turbulent financial market [BBC]. Shares in major British high street banks plummeted as the London Stock Exchange opened on the news from Iceland. RGS, HBOS, Lloyds TSB and Barclays all saw their share value drop significantly [BBC / Sky News]. And although there have been signs of positive movement on the world markets there is still a great deal of uncertainty remaining [BBC].

French finance minister, Christine Lagarde said today that “Europe is determined to act in a coordinated manner in response to this crisis” [BBC] while the French Foreign Minister has said it was “more important to protect savers rather than the bosses of financial institutions”.
The biggest problem facing Europe is in developing a cohesive plan. Europe has to be united in its tackling the financial crisis. But ironing out any agreement is taking time.

While European Markets entered positive territory, most Asian markets saw furthers declines. However China saw some gains after the 5.23% drop seen on Monday. After an initial slide of some 4.6% on Tuesday, the Shanghai Composite regained territory closing at 0.73% down on the day's trading [Xinhua News].

Michael Bloomberg who today visited Britain‘s Prime Minister Gordon Brown, said that the banks have enough money but they were not prepared to make loans even amongst each other, There was, he said, a “Lack of willingness for anyone to take any kind of risk”. But his words will be seen as somewhat hollow as Icesave customers were told they may need to apply through the banking compensation scheme in order to obtain savings left in the bank [BBC]. But speaking on Sky News the Head of Claims at the FSCS, Jonathon Clark, said it could take months for savers to retrieve their money

[market data]

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