Leith Community portal, edinburgh, eh16, Leith, Persevere

Get ready. The UK stockmarket is gearing up for its next big fall.

We’re not just talking about a few hundred points here. Royal Bank of Scotland’s credit strategy team reckons we could see one of the worst global stock market slides in the last 100 years, with US shares falling 20% by September. That’s bound to hit London stocks hard too.

But why now? Well, the good news – if there is any – is that there’s one key indicator that seems to be a remarkably good predictor of when things are going to get nasty.

All you have to do is to watch the iTraxx Crossover index. I’ll explain what that is in a moment.

But first, let’s have a look at what could be on the way…
(more…)

SACRAMENTO — A key Senate committee Wednesday killed or greatly watered down a series of Assembly bills that would have imposed new regulations on sub-prime mortgages in an attempt to curb the worst wave of foreclosures since the Great Depression.

The measures, part of a package launched with fanfare last winter by the Assembly leadership, sought to protect Californians from getting stuck with loans they couldn’t afford and didn’t understand. for more click here

The Financial Services Authority (FSA) said that it could veto American efforts to impose regulation on the London oil market, as the City took centre stage in an escalating row over the role of speculators in driving up the global price of crude oil.

Stuart Fraser, the City of London’s policy chief, described the call as “American imperialism” and rebutted attacks on the FSA in the US Congress as “unhelpful”. In an announcement on Tuesday, America’s Commodity Futures Trading Commission (CFTC) sought to extend disclosure requirements to oil futures trading on the ICE Europe exchange in the City. for more click here

House prices are likely to fall by 9 per cent this year - doubling previous forecasts, Britain’s biggest mortgage lender warned today.

Halifax Bank of Scotland (HBOS) predicted deepening gloom for the property market with sales this year down by 45 per cent on last year’s level. for more click here

The FTSE 100 had a pretty grim day yesterday, falling more than 100 points, to end at 5,756.

So why all the gloom? Well, it was an unsurprising combination of miserable retail news, and a hammering for property-related stocks, which then sent the banks lower as well.

It seems that no matter how low these sectors go, there’s always a little bit more to lose…
(more…)

The UK faces its “most difficult economic challenge for two decades”, the Bank of England governor has said.

Mervyn King was speaking at the Mansion House dinner and made it clear that inflation was set to rise, while growth and house prices were likely to fall. for more click here

Average pay rises have fallen behind the official rate of inflation for the first time.

While wage increases are running at 3.2 per cent, the Consumer Prices Index has gone up by 3.3 per cent - its highest rise since 1992.

And it is expected to breach the four per cent barrier within months - double the Government’s official two per cent target. for more click here

I was in Guernsey last week. While I was there, I thought I’d pop into one of the island’s famed gold-and-silver smiths to pick up a bit of silver bullion. What happened next was a bit of a shock.

There in the window was a rather fetching kilo bar of silver. It looked destined for a role as doorstop in the Frisby household. “How much for that kilo bar?” I asked.

“£425,” came the reply.

“But the spot price for a kilo of silver is only £275,” I spluttered. The assistant dutifully called her boss. After a hushed conversation punctuated by furtive glances in my direction, she returned. “We can do it for £415,” she announced generously.

“But that’s 60% above the spot price.”

“Ah, well. There’s a physical shortage, you see.” But is there really? Are these reports I’ve been reading about a silver shortage really true?
(more…)

A LEADING political economist, close to Gordon Brown, has called for the scrapping of the Barnett formula, claiming that Scotland gets more than its fair share of UK public spending.

Iain McLean, professor in politics at Nuffield College, Oxford University – one of the independent specialists giving evidence to the Calman commission on Holyrood’s financial powers – also said the Barnett formula was being used to tackle the threat of independence. for more click here

Bank of England governor Mervyn King will be penning his second “Dear Gordon” letter this morning.

The annual rate of inflation, as measured by the consumer price index (CPI), came in at 3.3%. It’s the BoE’s job to keep it at no more than 1% above or below a central 2% target.

Its failure to do so won’t have come as much surprise to Mr King. He’ll have had his quill sharpened and his ink well refilled at the ready for quite some time now. The Governor has already told us all that he expects CPI could hit an annual rate of as much as 3.7% this year. So I suspect the tone of his letter may be more “I told you so” than “whoops, I did it again”.

If it’s any consolation for Mr King and his colleagues on the Monetary Policy Committee, they’re far from being the only ones missing their targets…
(more…)