Government to assist Lloyds takeover of HBOS.

Government to assist Lloyds takeover of HBOS.

Lloyds TSB last night sealed a £12.2bn takeover over HBOS, the UK’s largest mortgage lender. The government, who was active in negotiations in the 232p all shares deal, has waived competition rules to allow the merger. In the US it emerged yesterday evening that Morgan Stanley is in preliminary talks with Wachovia in another possible merger.

Earlier in the day the $85bn rescue deal of AIG had failed to negate anxiety in the equity markets as investors sought the traditional safe havens of US Treasuries and gold. Short term yields fell as low as 0.2 per cent while bullion prices gained 11.4 per cent. The S&P 500 index shed 4.7 per cent while the FTSE 100 closed below 5,000 for the first time since June 2005. Asian trading overnight continued the trend as the main indices all lost ground while the Russian government closed the country’s two main exchanges to halt declines.

In currencies, the Dollar fell against sterling, the euro and the yen on the back of the concerns over financial stocks while sterling lost ground on the euro after unemployment figures reached their highest levels since 1999. Oil prices rose as inventories fell more than expected, with West Texas and Brent reaching $97 and $95 per barrel respectively.

Central banks have responded to the concerns in markets by announcing coordinated action ‘designed to address continued elevated pressures in US Dollar short-term funding,’ in a joint statement made this morning. The Bank of England will offer further overnight loans in an effort to aid liquidity. The release of the minutes of the Monetary Policy Committee’s last rate decision revealed a slightly more dovish stance with Besley no longer calling for a hike while committed dove Blanchflower raising his cut call to 50bps. The voting showed an overall 8-1 majority in favour of holding rates at 5.25 per cent.

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.

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.