Four ‘Dead’ Banks In Four Days: US, European Stocks Sharply Lower; British Pound Top Loser

The British pound got off to a very bad start on Monday in the forex markets, posting a very steep decline against the US dollar and Japanese yen on news that the UK buy-to-let mortgage bank Bradford & Bingley (BB.L) has been nationalized by the UK government, in the latest round of financial market turmoil. The UK Treasury said on Monday morning that the B&B’s savings accounts and 200 branches were being sold to Spanish bank Santander for £612million, but the state is absorbing all the rubbish - £41billion “worth” (well, worthless) of mortgage-related assets. GBP/USD tumbled a massive 400 pips in forex trading today - the steepest daily drop in 15 years - and GBP/JPY fell a whopping 600 pips. Unbelievable shorting action! Currency traders are finding it more rational to short the British pound against these currencies, and B&B’s woes only served to worsen the sentiment on the sterling. Keep in mind that when you trade the pound, make sure you factor possible slippage into your calculations as that can be very wide even when the market moves in your favor.

As for the bailout deal that’s being sorted out in Washington now, that has not soothed investors’ nerves about the ongoing market turbulence. Yes, some help is on the way, but is it enough? Will it be enough? For it would only be relieving the symptoms, but not fix the ailment itself.

Asian stock markets fell, followed by European stock indices. At the time of writing, UK’s FTSE 100 (^FTSE) fell more than 5% and Germany’s DAX (^GDAXI) fell more than 4%.

In the US, the Dow (^DJI) at one point today fell more than 300 points, saddled with its own domestic issues of financial stability. Today it was announced that Wachovia (WB) was to be acquired by Citigroup (C) as it couldn’t survive on its own anymore, so that’s another big US bank knocked down. It wasn’t so long ago (only late last Thursday) that Washington Mutual (WM), US’s largest savings and loan was seized by the government and many of its assets sold at rock-bottom prices to JP Morgan (JPM). On a sidenote, isn’t it fishy that JP Morgan always gets the best deals? First was the Fed-financed Bear Stearns buy and now Wamu.

Oh, did I mention that Fortis (FORB.BR), partly Belgian and Dutch, is the latest to be bailed out today? It is the largest European financial institution to be bailed out as a result of the credit crisis, and it was not bailed out by one government, nor two governments, but by three governments - Belgian, Dutch and Luxembourg.

Lots of twists and turns in the financial markets right now. If you are in the market, keep a sharp eye on your risk exposure and don’t get caught in the headlights!

Economic Calendar For Tuesday:

Australia retail sales 0130 GMT

UK GDP 0830 GMT

Eurozone CPI estimate 0900 GMT

Canada GDP 1230 GMT

US S&P/Case-Shiller home index 1230 GMT

US Chicago PMI 1345 GMT

US consumer confidence 1400 GMT

Japan Tankan survey 2350 GMT

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