A new credit crunch could hit the UK if the crisis ravaging the Eurozone spreads to Britain’s banking system, Bank of England Governor, Mervyn King, warned yesterday, in one of the grimmest interventions to date. Deputy, Paul Tucks, added to the sense of gloom, warning “almost anything could happen in the Eurozone in the next few months”. He added: “It is in the interests of banks’ shareholders and the economy as a whole to put themselves in a position to withstand this.” Banks should build up capital to prepare for the oncoming storm, the Bank’s Financial Policy Committee said, although it urged them to keep lending to individuals and businesses at the same time.
EUROPEAN authorities have imposed sweeping new sanctions on Iran and threatened to ban states from buying its oil yesterday in a significant escalation of efforts to prevent the country progressing its nuclear ambitions. European Union foreign ministers added 180 Iranian people and institutions to a blacklist that imposes asset freezes and travel bans on those involved in nuclear research and development they believe is leading to military uses. Iran’s government insists the work is to provide power.
MARKETS: BRITAIN’S leading share index closed lower yesterday, led by weaker commodity issues as earlier gains were reversed in tandem with a weaker showing on Wall Street as Wednesday’s boost from central bank intervention moves proved short-lived. At the close, the FTSE 100 index was down 16.08 points or 0.3% at 5,489.34, just off the day’s low of 5,486.87, having reversed from a session peak of 5,553.89 in choppy trade following a 3.2% leap on Wednesday. U.S. blue chips were down 0.3% by London’s close, also having posted strong gains on Wednesday, after the latest weekly U.S. jobless claims rose by more than expected, creating some concerns ahead of today’s November jobs report.
CURRENCIES: THE YEN and dollar headed for their biggest weekly declines against the euro in more than a month as signs the economy is picking up damped demand for haven currencies. The dollar was set to weaken versus 15 of its 16 major peers this week before data forecast to show the pace of hiring quickened. The yen held a two-day drop against the euro after Japanese Finance Minister Jun Azumi said he’ll take action on speculative currency moves. Gains in the euro were limited before German Chancellor Angela Merkel outlines her stance on stemming the region’s debt crisis ahead of a summit on December the 9th.
ENERGY: OIL headed for its first weekly gain in three as the clash between Iran and the West heightened speculation that Middle East supply may be at risk, countering concern of faltering demand in the U.S., China and Europe. Futures were little changed near $100 a barrel, heading for a 3.5% gain this week. The U.K. ordered Iran, the second- biggest oil producer in the Organization of Petroleum Exporting Countries, to close its embassy in London yesterday after a mob attack on the British legation in Tehran bought international condemnation.
COMMODITIES: COPPER traders are bullish for the first time in six weeks on signs that demand is still expanding as global inventories decline to an 11-month low and central banks cut funding costs to shore up growth. The last time they were bullish overall prices surged more than 14% in the following five days.