May 2009
29 May
Standard and Poor's downgraded its view of the UK to ‘negative’ from ‘stable’ for the first time since it started analyzing its public finances in 1978. It said the UK's finances were deteriorating faster than expected. The change came as data confirmed that new government borrowing has soared, to a record of almost £8.5bn in April.
General Motors and the US Treasury have improved the offer to GM's bondholders, as they prepare for the firm's move into bankruptcy protection. Bondholders with US$27bn of GM debt are now being offered the option to buy an extra 15% of GM shares as part of a proposed bankruptcy deal. This is on top of the 10% they had previously been offered.
Japan's factory output has jumped at its fastest rate in more than 50 years, but higher unemployment figures have dampened hope of an early recovery. Output rose by 5.2% in April from the previous month, the biggest monthly gain since 1953, official figures show. The jobless rate hit 5% in April, up from 4.8% in March.
India's economy grew 5.8% in the first three months of the year compared with the same period last year, which was better than had been expected. The official gross domestic product figure was down from 8.6% annual growth seen in the first quarter of 2008.
28 May
German inflation has turned negative for the first time in more than 20 years, fuelling fears of a fall in prices across the euro zone that will add to pressures facing the European Central Bank as it grapples with Europe’s severe recession. Consumer prices in Germany fell 0.1% this month from a year ago on a European harmonized basis, the country’s statistical office said. The unexpected drop was the first negative annual inflation rate since comparable records began in 1996 and since March 1987 on the previous basis.
The Swedish krona fell sharply as the country’s central bank warned that the worst of the financial crisis may not be over. The Riksbank said it was raising foreign currency to boost its US$22bn currency reserves. Over the past year, Sweden’s currency reserves have declined by US$6bn as the Riksbank monetized reserves to provide currency liquidity to its domestic banks, which have high levels of exposure to the slowdown in the Baltic region.
27 May
The South African economy has gone into recession for the first time since 1992, following a sharp slowdown in the manufacturing and mining sectors. Africa's biggest economy contracted at an annualised rate of 6.4% between January and March, compared with the same period a year earlier. It was the biggest decline since 1984 and followed an annualised 1.8% fall in the previous three months.
Russia's economy contracted sharply in April - shrinking by 10.5% from the same month a year ago - Deputy Economy Minister Andrei Klepach has said. The data came as officials were quoted as saying Russia would have a budget deficit equivalent to 9% of GDP in 2009, from an earlier 7.4% prediction.
26 May
Confidence among UK business professionals has risen for the first time since the end of 2007, a survey indicates. The Institute of Chartered Accountants' index of business confidence rose to -28.2 at the end of March, from -45.3 at the end of the previous quarter.
Japan's central bank has upgraded its economic outlook, saying the worst of the recession might be over. The move came after the bank's two-day policy meeting, at which it opted to keep interest rates on hold at 0.1%.
Firms in Germany , Europe's largest economy, are more confident now than they have been for six months, according to a key index. The Ifo index climbed for the second month in a row to 84.2 in May from a reading of 83.7 in April.
Australia’s securities regulator lifted its eight-month ban on covered short selling of financial stocks, bringing the country into line with all major developed markets that had already lifted their temporary bans on the practice.
Malaysia is preparing to announce the onset of its first recession for 11 years amid growing concern about the depth of the slowdown and the likely timing of a recovery. Malaysia’s exports fell 20% in the first quarter compared with the same three months of 2008, although the rate of decline appears to be on a moderating trend. Exports fell 15.6% year on year in March compared with 28% in January.
Australians are getting bonus payments worth US$700 (£440) - the largest cash handouts in the country's history. The payments, aimed at protecting a flagging economy from the worst effects of a recession, will cost the government a total of US$33bn.
_22 May _
A group including such big investors as Blackstone, Carlyle, Centerbridge andWLRoss won an auction for BankUnited after the Florida lender - worth nearly US$13bn by assets - was closed by federal regulators in the biggest US bank failure of 2009.
GMAC , the automotive financing company, received US$7.5bn of government aid, allowing it to stay in business and offer loans to buyers of Chrysler vehicles. The investment comes before the June 1 deadline for General Motors to complete a restructuring or file for bankruptcy and could result in the government owning a majority stake in both the carmaker and its main financing company.
Euro zone prospects brightened this month with the pace of economic contraction slowing markedly, according to a survey by Markit, which will boost hopes of the region’s recession ending this year. Purchasing managers’ indices for the 16-country region jumped more than expected in May to the highest for eight months. Although they still indicated economic activity was contracting, the rate of decline fell for a third consecutive month. The improvement in Germany, the euro zone’s largest economy, was particularly sharp.
The output of the UK economy fell by an unrevised 1.9% in the first three months of 2009, revised figures from the Office of National Statistics show. But spending by households fell by 1.2%, the biggest drop since 1980. The figures suggest the decline in manufacturing output was less steep than previously thought, down 5.5% rather than the earlier figure of 6.2%. On a year-on-year basis, the UK economy is 4.1% smaller than it was in the first quarter of 2008.
UK car productio n fell 55.3% in April, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT).
21 May
UK’s government borrowing rose sharply in April, the Office for National Statistics (ONS) said. Public sector net borrowing rose to £8.46bn this April compared to £1.84bn in the same month last year.
The US dollar weakened against the pound after Federal Reserve minutes showed it considered adding to money supplies, easing concerns over dollar funding. One pound was worth US$1.5817, its highest since November, before later falling to US$1.577.
Japanese electronics firm Sony plans to halve the number of its suppliers and reduce purchasing costs by 20% over two years, as part of restructuring plans. Cutting procurement costs is aimed at saving 500bn yen (US$5.3bn).
20 May
Japan's economy shrank a record 4% in the first quarter as companies slashed investment and exports. This is the quickest drop since records began in 1955.
Venezuela's economy grew at its slowest rate in five years during the first quarter, as the country felt the effect of falling oil prices. In the first three months of the year output rose 0.3% from the same period a year earlier, the slowest level since 2003, the central bank said. Compared to the previous quarter the economy shrank by 16.4%.
19 May
UK annual inflation slowed in April as consumers' energy and food bills continued to drop, figures show. The Consumer Prices Index (CPI) fell to 2.3% from 2.9% in March, the Office for National Statistics (ONS) said.
American Express is cutting about 4,000 jobs - approximately 6% of its global workforce - as part of a plan to save US$800m (£521.6m).
18 May
Small and medium-sized US banks must raisesome US$24bn to meet the capital standards set by the government in its stress tests of large institutions, research for the Financial Times shows. News of the potential capital shortfall could increase pressure on many of the 7,900 US banks that form the backbone of the US financial system. As many as 500 more banks could close, according to investment bank Sandler O’Neill, which carried out the research.
Shares in Lloyds Banking Group have risen 6% following chairman Sir Victor Blank's announcement he would be stepping down by June next year.
General Motors (GM) has announced plans to close up to 1,100 of its dealerships in the US as it desperately tries to cut costs and stave off bankruptcy.
The European Bank for Reconstruction and Development (EBRD) says it aims to invest a record €7bn in 2009 to tackle the slowdown.
15 May
The economies of the 16 countries that make up the euro zone declined by 2.5% in the first three months of 2009, the EU's statistics agency Eurostat said. A sharp fall in German exports was a key factor in the decline.
The three biggest banks in Italy - UniCredit, Intesa Sanpaolo and Generali - are profitable and relatively optimistic about their prospects for the rest of the year, according to first-quarter figures. The three companies saw income and profits substantially lower than a year ago, but other measures of financial health improved, including tier 1 capital ratios for Intesa and UniCredit.
Temasek Holdings , the Singapore state investment company, disclosed that it sold its entire 3.8% stake in Bank of America in the first quarter of 2009, bringing to an end its unprofitable investment in the US financial group after little more than a year.
Crédit Agricole , France’s second-biggest bank, reported a 77% fall in net profit in the first quarter from the same period last year, after more than doubling its loan-loss provisions to €1.1bn. Net profit of €202m in the first three months to the end of March underperformed consensus expectations of €350m profit after losses in its investment banking and international retail businesses.
Singapore Airlines , the world’s biggest carrier by market value, warned that the recent outbreak of swine flu could delay a recovery in air travel as it reported a 92% drop in quarterly earnings.
The number of homes repossessed in the UK rose to 12,800 in the first three months of the year, the Council of Mortgage Lenders (CML) has said. This was up 23% from the 10,400 in the previous three months and 50% up on the 8,500 in the same period last year.
14 May
Spain's economy suffered its largest contraction in 50 years in the first three months of 2009, preliminary estimates have shown. GDP fell 1.8% from the previous quarter and was down 2.9% year-on-year, the National Statistics Institute said.
Electronics giant Sony has reported its first annual loss in 14 years, after being hit by a big drop in sales. Sony reported a loss of 98.9bn yen (£685m) for the year to the end of March, compared with a profit of 369.4bn yen the previous year.
Dexia , the Franco-Belgian bank bailed out by three countries last year, said it was “on the mend” as it reported a profitable first quarter after net losses of €3.3bn in 2008. The bank, which is the world’s largest lender to local authorities, reported net profits of €251m in the three months to the end of March. This was 13% lower than in the same period last year but higher than expectations of €90m.
Allianz announced a 97% fall in first-quarter net profits as Europe’s biggest insurer drew a line under its misadventure with Dresdner Bank. Losses at Dresdner, sold to Commerzbank during the first quarter after seven years of ownership by Allianz, helped to depress net income at its former parent to just €29m, compared with €1.2bn in the first quarter a year ago.
Freddie Mac said it would draw US$6.1bn of capital from the US Treasury after a US$9.9bn first-quarter loss drove its net worth below zero.
Europe should follow the US in conducting stress tests on individual banks, theInternational Monetary Fund said as it warned that economic recovery in the region next year depended on bolder and more forceful policy action.
The German cabinet has agreed a ‘bad bank’ scheme, to enable the country's lenders to remove remaining toxic assets from their balance sheets. Under the plan, the banks will be able to swap their toxic debt for government-backed bonds, in return for paying an annual fee.
European Central Bank president Jean-Claude Trichet signalled that the global downturn had bottomed out with some large economies already able to put the recession behind them and look forward to renewed growth. His remarks came as the Organisation for Economic Co-operation and Development (OECD) said there were signs of a ‘pause’ in the economic slowdown in France, Italy, the UK and China.
Goldman Sachs has agreed to a US$60m settlement to resolve claims by a Massachusetts regulator that it participated in unfair and deceptive lending practices involving subprime mortgages.
11 May
Royal Bank of Scotland (RBS) has said it is preparing for two "very tough" years, after announcing a loss for the first three months of 2009. The bank reported a pre-tax loss of £44m, compared with a profit of £479m for the same period a year earlier. Despite a good performance from its investment banking division, it was hit by losses of about £5bn on loans and investments that have gone bad. RBS, which is 70%-owned by taxpayers, also warned of more job cuts to come.
US bank Wells Fargo has said it plans to raise US$7.5bn from selling new shares, a day after the US Treasury said 10 banks needed to boost reserves. Morgan Stanley is also hoping to raise US$3.5bn from share sales. Bank of America said it planned to sell assets and raise capital to secure the US$33.9bn it needs.
France and Italy both saw much larger than forecasted falls in industrial output in March. French output was down 1.4% on the previous month, said national statistics office INSEE. Economists had predicted a decline of only 0.5%. Meanwhile monthly production in Italy fell for the 11th month in a row, down 4.6% on February's output. Analysts had expected a monthly drop of 1.6%.
China's consumer prices fell by 1.5% in the year to April, which is the third consecutive month of decline.
8 May
European central banks unveiled bolder-than-expected moves to buy assets and boost growth through historically-low interest rates. The European Central Bank cut its main interest rate by a quarter percentage point to 1%, the lowest yet, and announced plans to buy €60bn of covered bonds, which are backed by mortgage or public sector loans. Separately, the Bank of England said it would pump a further £50bn (€56bn) into the UK economy through its programme of ‘quantitative easing’.
US regulators ordered 10 of the nation’s largest banks to add a total of US$74.6bn in equity following the completion of stress tests, triggering a frenzy of activity as banks lined up to announce capital-raising plans. The US authorities said that the tests projected that losses at the top 19 banks over 2009 and 2010 would reach US$599bn if the adverse scenario set out in the stress test materialized.
Taiwan’ s exports in April fell 34% from a year ago to US$14.9bn, the eighth consecutive month of decline and steeper than the 28.2% consensus forecast of economists polled by Reuters.
Nasdaq OMX Group reported a 22% decline in first-quarter profit as rivals continued to cut into its market share in US equity trading. The exchange group reported earnings of US$94m, or 44 cents per share, compared with US$121m, or 69 cents per share, in the same quarter last year.
7 May
US financial stocks soared as investors expressed relief that the capital shortfalls identified by the government’s ‘stress tests’ at 19 large banks were not as big as some had feared. Citi and Bank of America emerged as the banks with the biggest capital shortfalls, with Citi’s equity needs projected to be more than US$50bn and BofA requiring about US$34bn in fresh equity, while JPMorgan Chase , Goldman Sachs and American Express are among those that will not need additional capital.
Barclays Bank has announced a rise in profits in the first three months of this year despite the ongoing financial crisis. Profits before tax came in at £1.37bn, up by 15% compared with the same period last year. Total income almost doubled to a record £8.15bn because of strong performance at the group's investment banking arm.
Commerzbank is to divest its Eurohypo property finance subsidiary as part of a deal with European competition authorities to compensate for the €18.2bn of state aid given to Germany’s second largest bank.
Volkswagen and Porsche announce plans to merge.
UBS’s core Swiss and international wealth management businesses are to bear the brunt of the job losses that should help the Swiss group save SFr4bn (US$3.5bn) a year by the end of 2010. Some 4,000 jobs will go in the wealth management and Swiss bank division, the group’s biggest unit, and 2,500 in wealth management for the Americas. Together, the cuts will account for about 65% of the bank’s 10,000 planned job losses.
_5 May _
The German government has issued an ultimatum to the country’s seven Landesbanken to agree by July to consolidate the troubled state-owned banking sector or face exclusion from Berlin’s plan to take toxic assets off banks’ books. Government officials told the Financial Times that four of the banks held so many troubled assets that it was “impossible” to see how their owners - German regional governments and municipal savings banks - could save them without Berlin’s help.
Japan has offered US$100bn in financial assistance to Asian countries hit by the global financial crisis. Tokyo announced at a meeting of the finance ministers of the 10 countries of the Association of South-East Asian Nations in Indonesia that it would set up a Y6,000bn (US$61.5bn) bilateral currency swap scheme , on top of a US$38.4bn commitment to the multilateral Chiang Mai initiative. The Chiang Mai deal, a $120bn currency scheme that has been under discussion for years, was formally agreed by the Asean countries at a meeting with the finance ministers of Japan, China and South Korea.
Switzerland's biggest bank, UBS , has confirmed it made a 2bn Swiss francs (£1.2bn) loss during the January to March quarter.
1 May
Chrysler filed for Chapter 11 bankruptcy protection after US President Barack Obama criticised hedge funds for blocking an out-of-court restructuring of the US carmaker’s US$6.9bn debt.
The number of people being declared bankrupt in England and Wales has hit a new record, according to the government's Insolvency Service. In the first three months of the year there were a record 19,062 bankruptcies and 10,713 individual voluntary arrangements (IVAs).
Unemployment across the 27 EU member states reached 20 million in March.
New Zealand’s central bank has forecasted interest rates will remain at record lows until the ‘latter part of 2010’ as it cut its official cash rate by 50 basis points to a record 2.5%.