Chaos US Economy - Central Banks Try To Bail Out US with $ 110 BILLION - BUT ITS ALL BAND-AID ECONOMICS - COMPLETE US CREDIT LOCKUP LOOMS
Stock markets swung violently overnight as traders digested the news of a linked, $US100 billion move by major central banks to try and stave off the tightening US credit crunch.Overnight word was leaked of the planned joint approach from the central banks and it appeared in the major financial media in Europe and the US before the market opened, hence the very sharp rise. But as the day wore on, investors had second thoughts, and at one stage the Dow fell back into the red to be down more than 50 points. It closed with a small gain of 41 points on the Dow. Driving the rethinking was news from three major US banks that they will be making bigger than expected write-downs and reporting losses on sub-prime mortgages and related debt in the fourth quarter. Bank of America, First Wachovia and PNC all said their fourth quarter results would lower after the bigger write-downs.Bank of America's new forecast contradicted a previous statement a few weeks ago that it got its write-downs right. The three joined UBS and Washington Mutual which this week announced write downs and losses of $US10.5 billion and $US1.6 billion respectively and revealed they had raised or were looking for $US15 billion and $US2.5 billion in new capital and capital saving deals (such as converting dividends to shares or cutting payouts). The reports told traders that whatever the central banks did, the problems remained, so sentiment switched.
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