Wednesday morning business bulletin

Oct 8 2008 By Karen Dent

Banking stocks made strong gains on the London market today after the Government unveiled details of a £50bn bail-out for the sector.

HBOS jumped 27% and Royal Bank of Scotland rose 12% as the pair steadied after losing 42% and 39% respectively last night.

Turbulence in Asian markets meant the FTSE 100 Index opened 2%, or 100 points, lower, although this was better than the 270 points forecast by some traders at the start of the day.

Japan’s Nikkei index slid nearly 10% at one stage amid fears that the spreading financial crisis could bring a global recession. In New York, the Dow Jones Industrial Average lost more than 500 points, or 5%.

Bank of England policymakers meet today under intense pressure to slash interest rates after a month of unprecedented financial chaos and worsening economic gloom.

Inflation fears have kept the rate set by the Bank’s Monetary Policy Committee (MPC) on hold at 5% since April, but it could vote for a 0.5% cut tomorrow - the first such move since the aftermath of the 9/11 attacks in November 2001.

Business leaders have piled on the pressure for deep cuts as policymakers prepare their response to the worst financial turmoil in living memory.

The pain is being now being felt in the real economy as businesses feel the squeeze of tighter credit from lenders and mortgage lending all but grinds to a halt, hitting house prices and consumer confidence.

Billionaire businessman Sir Richard Branson has called on the MPC to slash rates as much as 1% this week, with both the British Chambers of Commerce and CBI calling for 0.5% cuts.

Troubled bank Halifax Bank of Scotland has agreed to sell its Australian banking business for £1.2bn in a bid to boost its balance sheet.

The bank said the sale of Bank of Western Australia Ltd and St Andrew’s Australia Pty Ltd would "further enhance the group’s capital position and reduce the group’s wholesale funding requirements".

The retail, business banking, insurance and wealth management businesses will be sold to Commonwealth Bank of Australia subject to approval by Australian regulators.

HBOS was, until recently, considered the UK’s banking giant, commanding leading positions in both mortgage lending and savings markets.

The pound at 9am was US$1.7530 compared to US$1.7589 at the previous close, while the euro at 9am was £0.7778  compared to £0.7752 at the previous close.