Pound Sterling - UK Markets

The Pound is up 0.1% against the USD to 1.8011 and displayed mixed results against its major currency partners overnight.

The FTSE 100 index gained over 300 points in early trading following news that the Federal Reserve is working on a plan to alleviate institutional debt, and the FSA and SEC decision to temporarily ban the practice of short selling. The news stimulated confidence and activity in markets on both sides of the Atlantic and markets reacted positively to the news.

Gordon Brown yesterday gave the official seal of approval to the Lloyds TSB HBOS merger, in a move indicative of the current financial crisis. Under normal conditions the merger would be subject to howls of protest from competition watchdogs but now is being hurried through in the interests of market stability.

British retail data released yesterday continues to confound expectations, showing the number of sales is up 1.2% for August and 3.3% for the year. There are no major announcements due in the UK today.    

US Dollar - US Markets

Shares in AIG rallied the most in 6 years yesterday as a wave of optimism swept the markets following news of the Federal Reserve plan and the crackdown on short selling. Details of the scheme are yet to be determined but it is thought problem assets are to be transferred to a federally sponsored entity, cutting the “toxic debt” of financial institutions and allowing them to begin recovery. The move will be subject to congressional approval but has injected optimism into markets, reflected in soaring share prices in the US and UK this morning.

The Federal Reserve coordinated a response yesterday from major central banks to make over $247 billion available in emergency loans as over $3 trillion has been wiped from markets this week. This too has helped buffer the shallow liquidity as banks lend conservatively in the midst of market uncertainty.

Euro - European Markets

The Euro is down against the Pound overnight, hovering at 0.7900 this morning and is up 0.24% to 1.4231 against the US Dollar.

Data yesterday showed the German Producer Price Index declining 0.6% from July to August, largely due to the drop in oil prices.

Commodities

Gold leapt 10% on Wednesday, posting its largest ever one day gain, as investors seek safety in the tangible assets. Oil is also up to $98 a barrel after floating around $92 earlier in the week.