It seems such a short time ago that people who invested all of their money in the stock market were regarded as being "risqué," and those who kept their money in the bank in short and long term deposit accounts were described as being "sensible". Well that role has certainly been reversed over the last crazy year or so, when the financial world turned upside down for so many.

Nowadays people who still have money on deposit at the bank are regarded as being some form of masochists, and no less than the banks themselves. With interest rates seemingly stuck forever on 0.5%, money left in a bank account is not only gathering dust, it is also paying for the privilege. On the other hand, the FTSE can almost do no wrong. And it has been that way for more than half a year, when the first indications that the global economic downturn might not last forever began to look evident. Sufficient to say that, the FTSE 100 rose by 21% in the third quarter of 2009, and 45% since March the highest percentage rises since the exchange was created in 1983. At current interest levels, investors would have to leave their money in the bank for around 7 years to earn that kind of return on their investment.

Leading economists argue that by trying to jump start the economy, the UK government has damaged national growth for the foreseeable future, with the only way that the situation can be reversed is to put an end to the stimulus passage and increase interest rates. They go on to suggest that as soon as the government does increase interest rates, only then will the stock market boom begin to fizzle out. That will be the time for the smart investor to release their equity exposure and return most if not all their capital to their bank account and earn some reasonable interest. Like the good old days.

financial

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Tags: Bank Account, Banking, British Economy, British Pound, Credit Crunch, Currency, Economic Downturn, Economics, Economy, Financial News, FTSE, Global Credit Crisis, Interest Rates, Investment, Money, Money Management, Recession, Savings, stimulus passage, stock market, Stock Markets, Stocks and shares, UK Banks, UK Banks, UK Economy, UK government, UK Recession

According to recent reports UK Business Secretary Lord Mandelson has "strongly advised" the Indian conglomerate Tatas to accept a revised proposal that will guarantee them hundreds of millions of pounds in short-term funding for luxury brands Jaguar Land Rover.

Apparently the UK government has issued a subtle hint to the Tatas management that they should not take too much time to accept their revised proposal to guarantee hundreds of millions of pounds in short-term funding s they run the risk that the offer will be withdrawn. Mandelson’s team are reportedly surprised that Tatas are stalling on the offer, obviously on the look out for better terms, which according to reports coming out of the UK treasury will not be forthcoming. What is currently on offer are government guarantees for 290 million pounds (340 million Euros) of European Investment Bank loans.

Britain’s biggest retailer Tesco, seem very determined to establish a financial services division and at a considerable scale. Recent reports suggest that the company is even considering seeking a separate credit rating for their banking wing that will provide them with considerably more clout to take on the UK existing high street banks.

The new division to be known as Tesco Personal Finance, planning to launch a current account section within the next 18 months, and a mortgage section, within the next two years.

On the stock markets, fears of the severity of a second wave of swine flu hitting the West has played a part in forcing share values down, with British Airways, down on Monday 2.4 per cent to 134¾p.

The insurance sector had an erratic day, with speculation that Resolution was preparing to offer about 80p a share for Friends Provident, valuing the company at £1.9bn.

After the market closed, Friends announced that they had rejected Resolution’s merger proposals. On the day shares in the insurance company, added 2.4 percent to 73¼ pence, while Resolution’s shares fell by 2.2 percent to 90¼p.

Shares in Legal & General closed up 7.6 per cent to 61¼p, as rumours began to mount that the company might be interested in selling off or at least splitting up their investment management business.

Sector leader Prudential also gained 5.5 per cent to 409½p, while Aviva added 2.9 per cent to 237¾p and Old Mutual who were 2.3 per cent higher on 88¾p.

In the banking sector, Barclays stood firm 313p, despite the fact that there were rumours abounding was that the bank were courting offers for their wealth management unit…

Shares in Lloyds Banking Group rose by 6.7 per cent to 72p, in anticipation of the announcement that they had made a trading profit for the first half of 2009.

Anticipating profits from the swine flu epidemic are drug makers, GlaxoSmithKline Plc whose shares added 2.6 percent to finish on 1,141 pence. Sales of GlaxoSmithKline’s swine flu vaccine could reach as high 1.3 billion pounds in 2010 if fears of the extent of the diseases prove to be true.

In the commodities sector, things were fairly rampant. Shares in BHP Billiton Ltd., the world’s largest mining company, added 3.4 percent as copper prices continued to rise. Europe’s second largest producer of zinc Boliden AB rallied 14 percent they announced higher than projected profits.

U.K. stocks continued their rally with the FTSE 100, which has climbed 7.7 per cent in six sessions, up a further 54.87 points to 4,443.62. The FTSE 250 climbed 85.97 points to close on 7,666.63. The FTSE 100 closed 1.3 per cent higher to reach its best level since early June.

The pound had a solid day, rising against all the main currencies.

Pound/US dollar 1.6524

Pound/Euro 1.162

Pound/Japanese Yen 155.837

Pound/Swiss Franc 1.7622

Stateside, there were sighs of relief all round as CIT Group, the struggling commercial lender, announced that they were on the brink of closing a deal that could save it from bankruptcy. As investors waited an official announcement from CIT Group, unofficial reports had it that bondholders would supply them with $3 billion in emergency funding over two years.

Inspired by the news, US stocks climbed towards their highest levels for the year.

On Monday’s trading , the Dow Jones continued its steady rise, on the day by 194,21 points to 8848.15 while the NASDAQ also climbed, breaching the 1900 point mark by closing up 22.68 points to 1909.29..

There was also some good news coming out of Iceland, for the first time in a while. The Icelandic Government announced their long overdue £1.3billion ( 270billion-crown) plan that it will enable the country’s s banking system to get back on its feet after their three main banks were subject to a last minute rescue bid in 2008..

The Iceland treasury intends to inject capital into three new banks to be formed to replace those that failed. The failed banks, Glitnir, Landsbanki and Kaupthing, all collapsed within a week last October, with debts of $60 billion.

Under the plan, the government will also offer controlling stakes in Islandsbanki (formerly Glitnir) and New Kaupthing to the old banks’ existing shareholders.

The dollar’s continued weakness helped commodity markets make a positive start to trading on Monday. Oil prices rose by more than $1 a barrel on Monday while gold jumped above the $950 level.

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Tags: British airways, British Economy, Credit Crunch, Financial News, Insurance, Jaguar Land Rover, Lord Mandelson, Money, Recession, stock market, Tesco, UK Banks, UK Recession