Chancellor of the Exchequer Alistair Darling now appears likely to give Lloyds the go ahead to test the seriousness of its ambitious £25 billion refinancing plan. Darling’s tacit agreement will be looked upon by city watchers as a definite indication that the chancellor could be prepared to release the bank from its obligations to the government’s toxic asset insurance scheme. It would appear that Darling has concluded that Lloyds’ plan to bring in more private capital is in the public interest. However it would appear that his final decision will only be positive when he is convinced that the market is ready for such a bold initiative. Darling is expected to announce his decision to the Lloyds at the early part of next week. The move will mean that the bank can then begin to appoint underwriters and test the market. Only then will Darling make the final decision and may even withdraw approval for the plan if he concludes the move carries to many risks for the already under siege UK taxpayer.

As expected, the European Union (EU) has approved plans for nationalized bank Northern Rock to be split into two parts, a move that is expected to pave the way for a partial sale of the bank.

One half of the bank, known as the "good" bank, would trade as retail bank holding deposits including some of the Rock’s existing mortgages, as well as lending money to consumers only.

The toxic side of the bank will remain in government hands, whose unenviable task it would be to attempt to salvage as much as the taxpayer’s money tied up there. The chancellor has ruled out the possibility of completing the sale of Northern Rock before the general election, in spite of winning approval from Brussels.

Meanwhile Spanish banking giants Santander continue to clean up on the UK high street. The bank announced that profits during the first nine months of the year for its UK banks have risen by more than a third.

Abbey, Alliance & Leicester and Bradford & Bingley banks, owned by Santander announced a £1.2 billion profit, up 38% from the same period in 2008.

Debt laden bus and rail operator National Express has wound up their discussions with rival Stagecoach regarding a possible merger. Instead they will press ahead with their plans to mount a rights issue to re-finance the company. Yesterday’s announcement follows weeks of speculation over a possible tie-up between the groups that would have created a transport giant with an estimated worth of £1.7 billion.

Oil and gas supply group BG, announced on Wednesday that their post-tax profits for the third quarter had fallen 39 per cent to £474 million from last year’s £777 million. A spokesman for the company said that the fall in gas and oil prices had been partially offset by advance sales of liquefied natural gas at advantageous prices. Although natural gas has rallied since early September, it had not done as well as crude oil during continued signs of economic recovery.

Sterling continued to rise in value yesterday against the dollar, while rising slightly against the Euro.

• Pound/US dollar 1.6393
• Pound/Euro 1.1131
• Pound/Japanese Yen 148.0908
• Pound/Swiss Franc 1.6804

London’s FTSE 100 dropped 2.32% or 120.55 points to close on 5080.42. The FTSE 250 plummeted a further 3.19% percent yesterday, down 291.78 points to close on 8849.50

For the first time in half a year, sales of new homes in the US fell as buyers opted for bargains on existing and foreclosed houses. Unexpectedly new home sales fell by 3.6 per cent from August to September, defying economists’ expectations that they would increase. Compared with a year ago, sales of new homes were down by 7.8 per cent, according to commerce department figures

On Wall Street, the Dow Jones Industrial Average closed down 1.21% after news that the annual rate of US new home sales had fallen unexpectedly in September.

At close of trading Wednesday it had fallen 119.48 points to 9762.69. The NASDAQ Composite index also took a tumble down 56.48 points to 2059.61.

It was announced on Wednesday that new orders for durable goods rebounded in September after slumping the prior month, offering another sign that manufacturing activity is stirring in the US

European shares also fell fairly sharply yesterday, largely due to disappointing company results and negative US economic data.

Norway has become the first European country to raise its interest rates since the beginning of the global financial crisis. The country’s central bank raised the cost of borrowing from 1.25% to 1.5% in a move that was widely expected. A spokesman for the bank stated that the increase was necessary due to increases in inflation and recent unemployment figures that were considerably lower than previously projected.

Oil prices dropped by more than $2 a barrel on Wednesday, as the latest US weekly inventories data continued to show supply outstripping demand. All in all the expected recovery in the dollar weighed on investor sentiment towards the commodities market.

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Tags: Abbey, Alastair Darling, Alliance & Leicester, Bank, Banking, BG, Bradford & Bingley, British Economy, British Pound, Chancellor of the Exchequer, Currency, Current Account, Darling, Dow Jones, Economy, Employment, Financial News, FTSE, gas, llo, Lloyds, Lloyds Banking Group, Money, Money Markets, Mortgage, NASDAQ, National Express, Northern Rock, Oil, Recession, Retail, Santander, Savings, Stagecoach, Stock Markets, Stocks and shares, UK Banks, UK Economy, UK government, UK Recession, Unemployment, Wall Street

There were one or two petted lips around Westminster yesterday in response to governor of the Bank of England Mervyn King’s call for Britain’s biggest banks to be split up to prevent the possibility of a financial crisis of similar proportions to the one that the UK is going through, in the future. Particularly peeved were Gordon Brown and Alistair Darling who even went as far as rebuking. Mr. King for his comments. King was seemingly unfazed at their comments.

According to Terry Duddy, chief executive of Home Retail Group, owners of the Argos and Homebase chains, the rise in VAT due on January 1 could act as a major for sales of large value items in the weeks leading up to the increase. Whilst announcing that the company had returned to profit in the six months to August 29, , Duddy said went on to announce a rise in consumer confidence and that his company was more optimistic about the outlook for the fourth quarter.

Chocolate kings, Cadbury have subtly increased the pressure on Kraft to raise its proposed £10 billion ($16.6billion) takeover offer. They did so through reporting unexpectedly strong third-quarter trading figures, surpassing even the toughest analysts’ expectations, The Company have succeeded in raising its full-year revenue targets to the “middle” of its 4-6 per cent goal range. Cadbury announced quarterly revenue growth of 7 per cent, which they claimed had been achieved by increasing prices and profit margins, despite a fall in turnover for the period of percent. Correspondingly, Cadbury had made considerable efforts to cut costs and reduce market spending. Since Kraft announced its offer proposal in early September, indications are that investors expect the US food group to pay at least 800 pence per share, while the current cash and shares proposal values Cadbury’s equity at 731pence a share. In the light of the recent results, some investment banks have revalued the target price on Cadbury to 900 pence, however a Kraft offer at this level is considered unlikely, unless counter-bidders suddenly emerge. The consensus is that Kraft will succeed with their offer, if it comes back with a 50-50 split of cash and stock bid of around 825 pence per Cadbury share. Kraft are understood to be considering returning with a formal offer but may wait until after its third-quarter results on November 3, while the UK Takeover Panel has set Kraft a final deadline of November 9 to make a formal offer.

Sterling continued its steady rise against the ever weakening dollar, recovering against the Swiss Franc. whilst faltering against the Euro.

• Pound/US dollar 1.6606
• Pound/Euro 1.1093
• Pound/Japanese Yen 151.6918
• Pound/Swiss Franc 1.6587

The FTSE 100 lost out on some of yesterday’s gains, down 33.79 points to close on 5257.85 The FTSE 250 25 shed all of the previous days gains. Down 143.60 points to close on.9421,04

Morgan Stanley has returned to profit after three quarterly losses in a row, after reporting a net income of £457m in the third quarter of 2008. The bank’s investment banking division fared particularly well with underwriting revenues up 74% from 2008 levels. Meanwhile, Wells Fargo, the country’s fourth-largest bank, reported record $3.2bn profits for the quarter, reporting that revenues from mortgages and consumer credit had surged.

Despite that positive news, the Dow Jones was down for the second consecutive day, yesterday by 92.12 points to crash below the ten thousand points on 9949.36. The NASDAQ Composite index also continued to fall, this time by 12.74 points to close on 2,150.73.

Recent reports continue to speculate that US companies who received billions of dollars of government aid in the financial crisis are to be forced to cut any excessive salary packages awarded to their leading executives. Of the seven companies that received the highest aid from the US Treasury will be obliged to reduce the basic salaries of their 25 best-paid employees, by up to nine tenths of the salary packages, while each firm’s 125 top earners would be see their pay slip cut in half, under the US government plan. There has been widespread outrage in the US over the high level of bonuses paid by firms that not so long ago were forced top go to the government cap in hand and ask for government help to stave of bankruptcy .

Figures just published confirm that China has exceeded its target for economic growth in the third quarter, for the first time this year. Chinese government figures show year on year GDP growth was up 8.9% from 7.9% in the previous quarter. Chinese officials have also said they are sure they will reach their full year target of 8% for economic growth, with the economy grewing by 7.7% in the nine months to September.

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Tags: Alastair Darling, Argos, Bank of England, Banking, British Economy, British Pound, Brown, Cadbury, Currency, Darling, Dow Jones, Economics, Economy, Employment, Financial News, FTSE, Global Credit Crisis, Gordon Brown, Home Retail Group, Homebase, Kraft, Mervyn King, Money, Money Management, Money Markets, Morgan Stanley, NASDAQ, Recession, Terry Duddy, UK Banks, UK Economy, UK government, UK Recession, US Treasury, Wells Fargo