FTSE begin to recover on Wednesday as bank shares climb

January 29th, 2009 by admin | Filed under Daily News, Debt, Money Management, Recession, The Markets, UK Banks.

The hard-hit banking sector surged in London on Wednesday, with some traders returning to lenders on the belief the U.K. government won’t fully nationalize them.

Lloyds also was helped by a Citigroup upgrade to buy from hold, as the U.K. lender’s net asset value per share would be 122 pence even if the British government were to provide all of the additional capital that it needs, the broker argued.

The feelings were that the bank’s recovery was largely due to the anticipated announcement from the US of the government’s program to remove bad debts from company balance sheets. Another confidence raising factor was the belief the government will make every effort to avoid total nationalisation of the U.K. banks.

The feeling that a form of stabilization may be kicking off in British currency as the pound rose to its highest level against the dollar for more than a week and the FTSE 350 Banks index showed an overall rise of 13 per cent., as Billionaire currency investor George Soros announced that he had stopped speculating that the pound’s decline would continue.

Also on the upturn was British Land, rising a healthy 8.8% percent on reports that together with their sister company Land Securities, plan to sell off £750 million of assets to help cushion some financing issues.

The FTSE 250 index stayed constant at 6,423.76 points The FTSE 100 finished the session at 4,295.20.

The pound rose for a third day against the dollar as welling as climbing against the euro.

Pound/US dollar 1.4118
Pound/Euro 1.0803
Pound/Japanese Yen 127.38
The US House of Representatives has passed President Barack Obama’s $825bn (£576bn) economic stimulus package.

Passed by 244 votes to 188, no Republicans backed the plan, saying it was too expensive and would not work.

The Senate debates the plan next week, and it could face stiff opposition as the Democrats have a slimmer majority.

After the vote, Obama urged members of Congress not to “drag our feet or allow the same partisan differences to get in our way”. He added that his package “would help create a favourable climate for American business to thrive”.

The bill is designed to cut taxes both for the public as well as for businesses by $275bn. In addition investing than $540bn into a range of public sector initiatives such as infrastructure, increased unemployment benefits, investment in new technology and renovations to ten thousand schools across the United States

It was too early to notice any effect that President Obama’s bill had on the Dow Jones Industrial Average which closed on Tuesday up 150 points at 8,243