Monday July 14, 11:00 AM
Stock Market Rallies After Falls
By Sky News
The FTSE 100 Index of Britain's leading companies has rallied after big falls on Friday. It opened around 85 points up this morning, or 1.6%, and recovered some of the losses suffered last week.
The rise in the London stock
market comes after the US Treasury and Federal Reserve said it would lend to Fannie Mae and Freddie if the troubled mortgage giants require funds.
On Friday, the FTSE tumbled 2.7% to 5261.6, wiping £34.5bn off the value of blue-chip firms.
Record oil prices and fears over the financial health of the two US financial giants sent shockwaves through the UK's leading shares.
Friday's falls marked the Footsie's lowest close since October 2005 and put it in "bear market" territory - defined by a fall of 20% or more from its peak in June last year.
Among today's gainers were banking stocks. Alliance & Leicester soared over 40% after it said it was at an advanced stage of discussions regarding a possible offer for the firm.
Standard Chartered Bank, Bradford & Bingley, Barclays, Lloyds TSB and HBOS, which were all up between 2.9% and 30.5%.
Speaking about the stock market as a whole, Sky's business editor Michael Wilson said: "There has been a bit of a bounce but the general feeling in the market is one of extreme pessisism".
The US Treasury and Federal Reserve has called for sweeping measures to lend money and buy equity if necessary in Freddie Mac and Fannie Mae.
The proposals seek to bolster confidence in the shareholder-owned but government-sponsored enterprises and head off a potential meltdown in global financial markets.
Treasury secretary Henry Paulson said the continuing strength of Fannie Mae and Freddie Mac is "important to maintaining confidence and stability in our financial system and our financial markets".
"Therefore, we must take steps to address the current situation as we move to a stronger regulatory structure," he said.
A senior Treasury official said all proposed actions need Congressional approval, but was confident that could be secured within this week.
Democratic presidential hopeful Barack Obama said any government support measures "should protect taxpayers and not bail out the shareholders and management of Fannie Mae and Freddie Mac".
Shares in the two companies, which own or guarantee just under half of the country's $12 trillion in mortgage debt, have been hit by fears that they might run out of capital amid mounting home-loan losses.
Fannie Mae and Freddie Mac purchase mortgages from lenders and package them into guaranteed securities sold around the world, providing more funds to keep mortgage markets flowing.
The US housing markets is already experiencing their deepest downturn since the Great Depression.
Click here for more breaking stories from Sky News
|
Send Article by Email
