Markets receive boost over bad debts

City traders will be wondering what the day will bring following one of the stormiest weeks ever seen in the financial world. It is hoped a ban on short-selling, where speculators make money on falling share prices, will help the calm the volatile markets. The Financial Services Authority has introduced the emergency measure to bring back some stability after the shock take-over over banking giant HBOS by Lloyds TSB. In the US, Wall Street rallied to its best day in six years. After a huge slump, the Dow Jones jumped more than 400 points after the US Government announced it is working on a rescue plan to help banks with their bad debts. US Treasury Secretary Henry Paulson is considering the formation of a vehicle like the Resolution Trust Corp that was set up during the savings and loan crisis of the late 1980s and early 1990s. Wall Street hoped a huge federal intervention could help financial institutions discard bad mortgage debt and stop the drain on capital that has already taken down companies including Bear Stearns and Lehman Brothers. Worries about financial landmines on companies' books have essentially crippled parts of the world's financial markets in recent days and led to the intense volatility in the markets this week. Sam Stovall, the chief investment strategist at Standard and Poor's, described it as the first glimmer of hope for the market this week. "It's almost like stamping on a floor that was recently put in, you stamp on it to make sure that you're not going to fall through. Of course you might end up falling through, then you realise it wasn't a good floor," said Mr Stovall. "And that's what the market does, it tries to take a look at the bottom that was put in recently, you retest that bottom, if the bottom held, then chances are we're back into the beginning's of a new bull market," he said.

» More on this story... «

ITN | September 19, 2008

Tags:. .sam. .might. .wall. .six. .recently