Fed Pressured to Launch QE3; MARKET REPORT
Byline: Geoff Foster
DESPERATELY disappointing data from across the Pond showing that no new jobs were created in the US in August, against consensus forecasts of a 75,000 increase, hit stock markets hard.
But it raised expectations that the Federal Reserve will have to print more money (QE3) to help re-ignite the US economic recovery.
Fed chairman Ben Bernanke is under intense pressure to sanction a move at, if not before, the next Federal Open Market Committee two-day meeting which begins on September 20.
Dealers had feared the worst after Wall Street fell 119 points on Thursday when Goldman Sachs downgraded its expectations for a 50,000 increase in jobs to a mere 25,000. It stopped the Footsie's recent strong recovery in its tracks.
The London index was already trading over 100 points lower before confirmation of US jobs stagnation dragged it sharply lower still. It traded 160 points down before rallying to close 126.62 off at 5,292.03, while the FTSE 250 ended 195.79 points lower at 10,381.02.
It was the last thing dealers in New York needed before the long Labor Day weekend in the US. Wall Street collapsed 201 points at the opening with the mood not helped by a hefty sell-off in the US banks sector.
It followed a report that the Federal Housing Finance Agency is suing the big banks, including Bank of America and Goldman Sachs, accusing them of misrepresenting the quality of mortgage securities they sold at the height of the housing bubble. The Dow Jones ended the day 253.31 points lower at 11,240.26.
Domestic banks succumbed to a wave of profit-taking after recent gains. Barclays lost 15.15p to 165.275p and the part nationalised Lloyds Banking Group 2.55p to 33.1275p.
A bad week for BP, which saw one of its offices in Moscow raided by Russian authorities and all of its eight oil and natural gas platforms in the Gulf of Mexico closed ahead of a tropical cyclone, ended with Halliburton suing the group for defamation over the Gulf of Mexico oil spill. The shares slumped a further 14.15p to 374.375p.
As the gold price jumped to $1,879 an ounce on safe-haven buying, gold miner Randgold Resources soared 275p to 6670p.
Staring relegation from the Footsie in the face, 3i's shareholders are no doubt hopeful that recent rumours of a [pounds sterling]4 a share cash bid from private equity giant Blackstone prove correct. …