Equities Tumble as Congress Rejects Plan

Yesterday saw government intervention across the globe on an unprecedented scale. Fortis, Bradford & Bingley, Wachovia, Glitnir and Germany’s Hypo Real Estate all requiring external support. Furthermore, central banks pumped a further $330bn into the system in another attempt to provide liquidity to global money markets.
All eyes were on the US last night as Paulson’s Emergency Economic Stabilization Act of 2008 went to vote. Surprisingly, the $700bn proposal which was backed by the Bush administration and leaders of both parties, was rejected by the House of Representatives by a vote of 228 to 205. The rejection caused US equity markets to fall sharply. Markets across Asia also closed markedly lower, underlining the fact that the financial problems are not restricted to Wall Street.
In terms of economic releases, yesterday’s Bank of England mortgage data reported the first fall in mortgage debt since records began in 1993. Although August is generally the quietest month for house sales, last month saw only 32,000 mortgage approvals – 70% fewer than a year ago, suggesting that the decline in house sales and prices will continue into next year. The European Commission’s report showing that sentiment fell to a more-than-expected 87.7 in September also weighed on the euro.

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

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