Unlucky Hedgefunds

After a suprise announcment from Porsche, the Volkswagen's share rose more than 140%. Porsche told the press that they had acquired more than 70% of Volkswagen shares and at the same time hedge funds were trying to cover there short positions from a small amount of available shares in the market.

Porsche used derivatives to increase its share from 35% to 74.1%, this ignited an outcry from other market players such as investors and analysist. Several analysist and experts explained that this was a huge embaressment for European regulators and goverments. It was a total disrespect for all corporate governance policy's and regulations set up by the markets, governance expert Christian Strenger said.

Many analysist and hedge funds were betting on a share price fall from Volkswagen, so the huge rise in price meant that the estimated loss were around $15bn and only 5.8% of the shares were still availabe to buy up.

Many hedge fund managers were sure this was a very secure bet but turned out to be a big bomb in investors pockets. Volkswagen had the highest percentage of shares on loan to investors in all of Germany. The value of the company grew on one day to be worth around $153bn, which is more than all EU and US carmakers put together.

Another deep sea trip by Wall Street

After American earnings showed new dissapointment, US stocks fell to a new 5 year low as concerns about the future keept growing with this news. The company results were only secondly important as the glooming future was the main concern for investors. Energy and material were the biggest loosers with a plummet of 10.4% and 8.3%.

The S&P 500 closed at minus 6.1%, Dow Jones Industrial Average fell 5.7% and the Nasdaq Composite Index went down 4.8%, a bigg fall for the US stock market.

Many large corporation were not able to hold of this fall such as Boeing, AT&T, Merck and known as a very safe stock McDonalds even though they showed an increase in profit fell by 1.7%

Oil was the reason for the large fall in energy stocks as the price went bellow $70. This sector also had one of the worst drops this day. Baker Hughes the oil company dropped 22.1%, with the reason being as stated before, the confidence.

This large drop will have put more fire in the oven for the support of analysts predicting a uncertain and difficult future. The market is looking for short term positive figure which at the moment is very difficult to produce and will have to rather sooner that later change their strategy to more long term goals.

Finally US rescue plan is on course

A $250bn rescue deal to purchase stakes in a wide number of banks is finally on the way. Hopefully this will restore confidence in the banking system efter the recent turmoil US goverment officials said.

Mr. Bush said that this is not an attempt to take over the free system but to perserve it. This is only seen as a short term effort to restore confidence and to keep the system from total collapse. The money will come from the £700bn plan that came through earlier this week.

Federal Reserve Chairman Mr. Ben Bernanke said that they will not stand down until the system has been repaired and reformed.

This plan has been long awaited by the market and will come as a welcoming plan to both the public and the banks. The announcement comes after European countries have already put in place a rescure package itself.

Although these billion will come from tax payers the goverment is hoping that in the end they will come out of this crisis with profit after resale of the banks stocks to the market.

Panic avoided by German savings guarantee

In an attempt to avoid panic, Germany said it would guarantee all private bank account worth £438bn. Angela Merkel German chancellor said "We want to tell people that their savings are safe" as the financial crisis was spreading panick withdrawls from their savings.

German official's said the country's commercial banks had agreed to inject €15bn extra into Hypo Real Estate, the German mortgage and public sector lender, the bailout is now up to € 50bn.

Germany's guarantee was a done after Ireland last week to guarantee the six largest banks liabilities. UK and France and many more European countries were trying to learn the details of the new deal Germany had done. One UK official said that they were very dissapointed with chancellor Merkel's secret plans after she attended the economic forum in Paris only one day before.

The Danish goverment was the latest to guarantee all bank deposits in a move to calm and secure its peoples savings.

Asia up on expecting US deal

The Nikkei index was up 1% after news that the US senate would vote on a new deal later in the week. Japans index was not the only one that followed upwards after the US news, Australian and New Zealand stocks were up 4% and 3%.

One of the changes to deal that has been made are an increase on goverment guarantee from $100,000 to £250,000 in the hope that congress will be more satisfied. For an approval the new bill will need to have 60 out of the 100 senates voting for a yes. The Down Jones index saw some recuperating after the record one day fall.

Data from the Bank of Japan which showes a snapshot of the business confidence was on a minus for the first time since June 2003. This means that a majority of the large Japanese firms are staring to become very pessimistic about the future business conditions.