As had been widely predicted, the UK Monetary Policy Committee has chosen to hold interest rates at 0.5 percent as well as continuing with the existing programme of buying £175 billion of assets. The Bank of England will have to decide in November whether to continue expanding its programme of money creation and asset purchases.

Two of Britain’s biggest banks, Lloyds Banking Group and Royal Bank of Scotland face what could be a crucial month for them. Their future will be laid bare as they hear around the end of the month what Neelie Kroes, the EU Competition Commissioner, has decided exactly what concessions Lloyds must make as it integrates HBOS as well as ruling on the amount of state aid that Lloyds and RBS have received and what actions to take regarding the aid. Shares in RBS closed yesterday at 49.65 pence, down on the 50.5 pence value when the government acquired its 70 per cent stake. Shares in Lloyds closed on 95.66 pence, a poor performance compared with the value of 122.6 pence that the shares were sitting on when the UK government acquired the shares.

Financial services firms showed the first signs of recovery in the last three months, after almost two years of falling business volumes and profitability, according to a recent survey. Business volumes across the financial sector have grown for the first time in two years, although the survey showed that levels of business were still considered to be well below normal. Firms are more optimistic about the overall business situation compared with three months ago, but they remain worried that a lack of demand will hamper business expansion in the coming months.

According to rankings published today by the World Economic Forum (WEF) London now wears the mantle of being the world’s leading financial centre having wrested New York from its traditional first place The WEF’s highly respected and influential Financial Development Report, which ranks 55 global financial centres said that London was in first place, a result that surprised many, especially the UK capital’s leading European rivals, in France and Germany, who have fallen out of the top 10 altogether

According to a recent survey, consumer morale in the UK has risen to its highest level since April 2008. In general, the UK public were reported to be at their most regarding the future than at any time since way back in 2005. The Nationwide Consumer Confidence Index rose to 71 in September from an upwardly revised 65 in August reflecting an improvement in Britons’ sentiment about their present circumstances, future prospects and willingness to spend. Another guide, the Nationwide Expectations index, which gauges public sentiment regarding the economy, jobs as well as personal own finances in a six months period ,also rose, to 106 in September from 97 in August,, This was the highest level that the index had reached since December 2005.

A spokesman for Jaguar/ Land Rover announced on Wednesday that that the company succeeded in securing a £175 million loan from the State Bank of India and were on track to receive their planned total of £500 million of new financing facilities for 2009. The car company, owned by India’s Tata Motors said it had “been making significant progress” in raising new loans despite its current loss making situation. In addition to the £175 million loan from India, the company has also added a £56 million export financing facility with ABC International Bank. Tata’s ability to line up new financing for their luxury brands is vital as they seek to curtail their losses, as well as reduce costs and revive sales.

The FTSE 100 continued to rise, this time by 16.74 points to close on 5154.64. The FTSE 250 is strengthening in leaps and bounds, closing up a further 147.09 points to close for the day on 9,373.44.

The pound continued its minor recovery against the leading currencies, creeping slightly over the $1.60 mark.

• Pound/US dollar 1.6073
• Pound/Euro 1.10875
• Pound/Japanese Yen 142.0389
• Pound/Swiss Franc 1.6489

The Dow Jones index came back strongly on yesterday’s trading, closing up 61.29 points to 9786.87, down 5.67 points. The NASDAQ index also continued its steady rise, up 13.6 points to close on 2,123.93.

Jeans maker Levi Strauss has reported a 41% drop in profits after seeing lower sales and currency fluctuations. The San Francisco-based firm saw its net income for the third quarter fall to £25 million ($41 million) on turnover down 6% to around £700 million, with sales falling in both in the US and across Europe.

The European Union has intervened by pledging that any job cuts and factory closures at either Opel and Vauxhall factories will not influenced by levels of state aid given to Magna, who are in the process of buying the firm. The UK, Spain, Poland and Belgium governments have stated their concerns that the planned takeover of GM’s Opel will favour German factories and jobs as the German government have offered Opel’s would-be buyer Magna a £4 billion (€4.5 billion) loan. Recent reports have suggested that if the deal goes through, Magna plan around 25% of their 45,000 workforce in Europe

Asian central banks, worried about the effect of the weak dollar on their export industries, are believed to have intervened in the global currency markets in an attempt to slow the slide of the US currency. According to foreign currency traders, central banks in South Korea, Taiwan, the Philippines and Thailand have been buying the US currency; the falling dollar has become a problem for many countries as signs of economic recovery begin to emerge, with traders rapidly switching from the traditionally "safe" US dollar to other currencies. The dollar fell to a 14-month low against a basket of currencies on Thursday and analysts now believe that if other economic forces have not intervened till now, they soon will.

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Tags: ABC International Bank, Bank, Bank of England, Banking, BOE, British Economy, British Pound, Credit Crunch, Currency, Dow Jones, Economy, EU Competition Commissioner, Financial Development Report, Financial News, FTSE, GM, HBos, Jaguar, Land Rover, Levi Strauss, Lloyds Banking Group, Magna, Money, Money Markets, NASDAQ, Nationwide Consumer Confidence Index, Neelie Kroes, Opel, Recession, Retail, Royal Bank of Scotland, State Bank of India, Stock Markets, Stocks and shares, Tata Motors, UK Banks, UK Economy, UK government, UK Monetary Policy Committee, UK Recession, Vauxhall, WEF, World Economic Forum

Royal Bank of Scotland is considering approaching the market for extra money to avoid handing more control to the government. The bank, now 70% owned by taxpayers, is preparing to join the government’s Asset Protection Scheme (APS) to stop some toxic investments going bad. But it is also considering asking shareholders to invest further to prevent the government’s stake rising to a possible 84.5% if it insured all its bad assets with the APS.

According to official figures released on Friday, the UK government posted a record budget deficit for an August as the recession continues to bite into government tax receipts, The Office for National Statistics said the public sector net cash requirement (PSNCR) stood at £10.379 billion in August. That was lower than the 12 billion pounds expected by analysts but still twice the level of the same month a year ago and a record for the month of August. July’s PSNCR was also revised up by some £1.5 billion. The government’s preferred accruals-based measure, public sector net borrowing came in at £16.119 billion s, also weaker than expected and a record high for August, versus £9.876 billion pounds in 2008.

The flow of net lending to companies fell in July by the largest sum on record, according to a statement issued by the Bank of England on Friday. The figures provide further indication that more action may be needed to get credit flowing in the UK economy.

On a more positive note, mortgage approvals by major UK lenders rose in August for the seventh consecutive month to 57,000 from 53,000 in July. The net flow of lending to UK businesses fell £15.5 billion in July after a £3.6 billion pounds fall in June, making for the largest single decline since 1998.

UK Business Secretary Peter Mandelson has called on the European Union to intervene to prevent governments using state aid as a bargaining chip to protect jobs during Magna International Inc.’s takeover of General Motors Co.’s EU plants. Mandelson has joined the list of European politicians concerned that a German plan to provide €3 billion in loan guarantees to support the GM-Magna deal will sway the company. As the carmaker struggles with overcapacity, Magna has said it plans to cut about 10,500 jobs.

According to senior officials at the State Bank of India,(SBI) India’s largest lender, are looking at acquisitions of up to $1 billion in the UK and expect to maintain a 40 per cent growth rate in its UK business.

The bank’s overseas business plans, expected to be driven by both expansion and acquisitions, include the opening of 40 overseas branches, according to SBI chairman OP Bhatt. The bank was looking at all regions of the World, including the UK, for acquisitions. Besides the UK, the regions where the bank plans to open new branches include North America, Bangladesh and Nepal, where its subsidiary will set up 11 more outfits. It will open five more in branches in the UK by June next year and make London a hub for its European operations to boost international business. At present, the lender has seven branches in the UK and plan to open another, hopefully in October.Currently, the UK contributes over $3 billion to SBI’s turnover.

British Sky Broadcasting has accused the media regulator of making elementary errors in an official review of the pay-television market, and said that Ofcom, the independent regulator and competition authority for the UK communications industries, was exceeding its powers. BSkyB delivered its detailed response to the regulator’s findings that it should sell its most valuable content, including Premier League football and first-run films, to rivals at prices set by Ofcom. In the document, the broadcaster accuses the regulator of producing a financial analysis is fundamentally flawed, as well as challenging Ofcom’s right to even rule on the case, that has taken two years to decide. The pay-TV review was prompted by a complaint from four of BSkyB’s competitors, Top-Up TV, BT Vision, Virgin Media and the now defunct Setanta.

The biscuit group that makes Jammie Dodgers and Wagon Wheels, Burton’s Foods have been taken over by its lenders in a debt restructuring move that leaves Duke Street Capital, its private equity owner, nursing a considerable loss. The fate of Duke Street’s investment in Burton’s comes just over two years after its plans to close one of the biscuit maker’s factories caused the private equity group to be invited to a parliamentary inquiry for questioning.

On the FTSE Standard Life rose 1.8 per cent to 283 pence after Goldman added the insurer to its “buy” list.

Leading property stocks were higher. British Land gained 3.3 per cent to 528 pence after completing the sale of half its Broadgate development to Blackstone. Hammerson followed, gaining 2.6 per cent to 439½ pence.

The UK’s FTSE 100 index continued to climb but at a slower pace , rising 8.94 points to close at 5172.89, making for a 3.2 per cent gain for the week.

Meanwhile the FTSE 250 lost almost all of its previous day’s gains on Friday, falling 57.15 points to wrap up for the weekend on 9,306.93

The dollar fell to fresh one-year lows this week as rising risk appetite stemmed haven demand for the US currency. Continued improvement in sentiment encouraged investors to abandon the low-yielding dollar to seek higher returns elsewhere. The pound continued to lose value against the main currencies on Friday’s trading.

• Pound/US dollar 1.6271
• Pound/Euro 1.1059
• Pound/Japanese Yen 148.7878
• Pound/Swiss Franc 1.6751

Another two US banks have been closed by the federal regulator, taking the total number of American banking failures this year to 94.

The Federal Deposit Insurance Corporation (FDIC), which controls the banking sector, has shut Irwin Union Bank & Trust and Irwin Union Bank.

The move comes after their parent firm – Irwin Financial – was unable to meet an FDIC demand to boost their capital.

The failure of the two banks is likely to cost the FDIC £522 million.

The Dow Jones Industrial Average continued to move upwards towards the weekend , up 36.28 points at 9,820.2. The NASDAQ consolidated a little, up 6.11 points to 2132.86.

Gold dominated trading this week with bullion inching towards its record high of $1,030.80 a troy ounce set in March 2008.

It reached $1,023.85 on Thursday but was back to $1,012 on Friday, up 0.7 per cent on the week. It found support from dollar weakness and concerns about the outlook for inflation.

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Tags: APS, Asset Protection Scheme, Bank, Bank of England, Banking, British Economy, British Pound, British Sky Broadcasting, BskyB, BT Vision, Burton’s Foods, Currency, Dow Jones, Duke Street Capital, Economy, FDIC, Federal Deposit Insurance Corporation, Financial News, FTSE, General Motors, GM-Magna, Irwin Financial, Irwin Union Bank, Magna International Inc, Money, Money Markets, NASDAQ, Ofcom, Office for National Statistics, Peter Mandelson, PSNCR, RBS, Recession, Royal Bank of Scotland, Setanta, State Bank of India, Top-Up TV, UK Banks, UK business, UK Economy, UK government, UK Recession, US Banks, Virgin Media