The effect of the global bank crisis became clear this weak. Friday the shares decreased around the world.
For example in London, the FTSE 100 closed down with 5 percent, The markets of Germany and France fell down with 4.96 percent and 3.5 percent. But also Asia got swept away. The Nikkei fell down with 9.6 percent.
Not only the shares were hit by the crisis but also the currencies. The cause of this problem is the fear for the global recession.
But also bleak outlook for corporate earnings played their role.
On the currency market the yen was the biggest winner. Investors want to invest in currencies with a low interest rate. And the yen is one of them. They jumped 8 percent against the pound, 6.5 percent against the euro and 4.7 percent against the dollar.
Ashraf Laida, the chief currency strategist at CMC Markets said that the magnitude of such historical market moves in currencies could only be the result of imploding hedge funds leading to massive liquidations.
According to Marco Annunziata, chief economist at UniCredit said that we need some drastic steps to restore the confidence. The European Central Bank and the Bank of England staid too long optimistic about the economic growth and they need to act fast in slashing the interest rate. The ECB cut their interest by another half percentage point at 3.25 percent.
The Eurozone purchasing managers’ indices showed the strongest fall since the survey’s start in 1998.
According to me the financial crisis is almost over, we have had the worst on the markets. Now we can see an evolution in the currencies and it’s the task of ECB and the Bank of England to act to the point and on time.
They know that their will be hard times now and it’s their chance to act on time. They have to restore the confidence, when this happened the worst of the crisis is over.
I think Asia is one of the markets who suffered not so hard as Europe. Especially now with the financial crisis because in Asia you got a lot of countries like China where the banks are nationalized. The banks of Asia don’t have to cut their interest rate and that’s why a lot of investors invest in the yen. But I think it’s now time for actions of the ECB and the Bank of England so they can restore the confidence.
Source: http://www.ft.com/cms/s/0/5130339a-a202-11dd-a32f-000077b07658.html
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I don't completely agree when you say that the crisis is almost over. It is true that the worst part is behind us now, but I think a lot of other problems will follow. A recession is unevitable.
On the other hand, I agree that the ECB has to take actions for instance to restore the confidence on the markets.
I don't agree with you about the end of the crisis. I think the banks are starting to recover but we now see that there are other sectors where the problems start, for example the insurance industry is starting to get in trouble. We will also have to deal with a recession, like Tim already said. Asia is dodging the bullet for the moment but who knows how long it will last untill the problems start there as well? We need a solution that will work on a global level.
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