Weekly market: The week the banks fell
After one of the most turbulent weeks the finance world has seen, some banks emerged intact but others fell...then Friday brought soaring stock markets around the world.
Market watch: Our round-up of the week's trading
It has been a week to remember and then some. Any market optimists endured something of a reality check in the past week, which if anything showed there was still an abundance of poison in the system which urgently required removal.
The week began with share prices in London falling sharply in the wake of Lehman Brothers' decision to file for Chapter 11 bankruptcy protection in the US and the purchase of Merrill Lynch by Bank of America.
The London Stock Exchange was forced first thing in the morning to rush out an announcement calling a halt to trading with Lehman until further clarification of its position. Shares of Lehman in London slumped 84% to 42 cents before rallying to 72 cents.
In London, the stock market battering of HBOS began as Britain's biggest mortgage lender became the UK's ship foundering on the rocks.
The Bank of England, on Tuesday, pumped another £20bn of emergency funding into the market, only a day after putting in £5bn, while the FTSE 100 dropped 3.43%, falling below 5,000 at one point for the first time in three years.
After hopes that the storm was easing in recent weeks, this week witnessed the continued mayhem of the credit crunch and it claimed its largest victim to date - giant insurer American International Group being taken over by the US government.
AIG – best known in the UK for its sponsorship of Manchester United - was bailed out in an £48bn deal after US authorities decided it would be 'catastrophic' to allow the insurer to fail. The US government is lending the money in return for an 80% stake in the company.
In the UK, the focus of the turmoil was Halifax Bank of Scotland enduring a week of market horror and such was the battering it took that competitor, Lloyds TSB stepped in to takeover the troubled bank.
Over the past 12 months, Lloyds TSB shares have dived by 47%, while HBOS collapsed by 75%. The two companies employ a total of 140,000. Halifax has 72,000 workers and Lloyds has 70,000. If the proposed deal goes ahead, there are likely to be massive redundancies due to a massive staff overlap.
Yesterday, City speculators who bet on bank shares falling faced, were dealt the severest of blows as the stock market came roaring back.
Short-selling of leading banks and insurance companies was outlawed until January by the Financial Services Authority. Tom Hougaard, market strategist at financial spread betting firm City Index, said: 'The short-sellers have just been handed a death sentence, they are totally screwed.'
The crackdown on short-selling and the promise of a wide-reaching solution to the crisis in the US financial sector triggered an unprecedented rally among leading shares with the FTSE 100 gaining 461.6 points to 5341.6 at 14.30BST - the biggest ever one-day rise.
The index, closed at 5311.3, up a hefty 9% on the day but flat over the week, pushing ahead just below 0.5%. The short-sellers who have been blamed for much of the turmoil in the City, especially over the past week, stand to lose hundreds of millions of pounds after the practice was partially banned.
Unsuprisingly, it was the financials that bore a fair share of the brunt of the week's sell-off, in particular the banks. The worst casualty of the top 100 over the week was HBOS, which slumped 21% to 222frac12;p, well below the 275p at which its cash call was priced earlier this summer, Lloyds TSB dropped just 1%.
Royal Bank of Scotland dropped 9% to 213½p, Barclays, which had pulled out of last weekend's talks to buy Lehman, enjoyed a 14% hike to 399p over the trading week, while in stark contrast, the beleaguered buy-to-let specialist Bradford & Bingley dropped by 26% to a meagre 27¾p, which represents a 92% fall over the past 12 months.
Among UK insurers, Friends Provident gained 5% to 104p, Prudential put on 9% to close at 600p and Standard Life firmed 2% to 246p. Hedge fund operator Man Group ran into selling over the week, leaving the shares down 8% at 470p and inter-dealer broker Icap loosened by 8% to close the week at 451½p.
Other big losses over the week were witnessed in Eurasian Natural Resources, down 8% to 662p, while British Airways dropped back 15% to close at 218¾p. The banking sector generates around 10% of BA's total revenue and job losses will hit leisure travel too. The biggest riser over the week was the London Stock Exchange, up 17% to 907½p. While Legal & General gained 8% to close at 107p and Schroders jumped 6% to 1,089p.
Ne
Most watched Money videos
- BMW meets Swarovski and releases BMW i7 Crystal Headlights Iconic Glow
- Blue Whale fund manager on the best of the Magnificent 7
- Skoda reveals Skoda Epiq as part of an all-electric car portfolio
- BMW's Vision Neue Klasse X unveils its sports activity vehicle future
- How to invest for income and growth: SAINTS' James Dow
- Tesla unveils new Model 3 Performance - it's the fastest ever!
- 'Now even better': Nissan Qashqai gets a facelift for 2024 version
- Mini celebrates the release of brand new all-electric car Mini Aceman
- 2025 Aston Martin DBX707: More luxury but comes with a higher price
- Land Rover unveil newest all-electric Range Rover SUV
- Mail Online takes a tour of Gatwick's modern EV charging station
- Mercedes has finally unveiled its new electric G-Class
- Air Mauritius lost my luggage and it ruined my holiday:...
- We do need to resolve inequality admits £8m-a-year...
- Snoop Dogg cannabis firm to ditch London after losing 97%...
- Banks should be forced to disclose why they debank small...
- Spring property bounce is a damp squib - Rics estate...
- Hedge fund tycoon's £34m silver salvage claim sunk at the...
- Millions kept in the dark over City watchdog's mystery...
- TSB to close one in six branches: More than 6,000 shut by...
- Oil industry engineer Wood Group rejects £1.4bn Dubai...
- Don't ditch name and shame plan - it has the City running...
- MARKET REPORT: IAG leads Footsie higher as airline shares...
- Tesco uses AI to give millions of Clubcard holders...
- Brewdog founder James Watt steps down to become 'captain'...
- Events planner Informa hikes share buyback scheme to £500m
- Investors pull cash out of UK equity funds for the 35th...
- JLR offering £150 a month towards the cost of insuring...
- Controversial Brewdog founder James Watt steps downs
- Minis new electric Cooper SE tested: Can BMW harness the...