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Unemployment Reality Check

While many problems can be solved by throwing money at them, it may be that the latest round of banking and financial bailouts has run it course in terms of supporting the stock market. Of course from the Friday open to yesterday’s peak there were gains of well over 10%, something which would almost certainly have to be retraced to a greater or lesser extent. The reality check for euphoric bulls today came in the form of UK unemployment data showing the fastest rise in 17 years.

The Euphoria Continues

It would appear that Monday / Tuesday this week have been the mirror image in terms of price action to Thursday / Friday last week. The only problem for the bulls is that the new found euphoria may be just as much of an over reaction as the sub 4,000 dive. The main focus once again are the banks in the wake of the announcement from Northern Rock that it has managed to pay back half of the Bank of England emergency loan of £26.9bn made at the end of last year.

The Stock Market Crashes

As could have been anticipated the passing of the $700bn Bailout on Friday was simply too far behind the curve of what is going on in the world’s financial system to make a difference. Indeed, so far it would appear to have been simply another sell signal for stock markets. A further sell signal was delivered over the weekend in Germany with the £30bn bailout of Hypo Real Estate. This was accompanied by the German Chancellor underwriting all savers funds, putting it in line with Ireland and Greece. Unfortunately, in the UK we have to make do with a £50,000 limit, a problem which most would probably like to have.

The Banks Are Saved

Courtesy of the generosity of the Great British taxpayer HBOS (HBOS) and RBS (RBS) have been saved from a grisly fate. They avoid going to Credit Crunch heaven via a £37bn cash injection. Of this £20bn goes to RBS, the canny people who bought ABN Amro at the top of the market, with £5.5bn going to Lloyds TSB (LLOY), and £11.5bn to HBOS.