From bad to worse

18th January 2008, Comments 0 comments

The big US banks continue to reveal huge losses.

18 January 2008

MADRID - The big US banks continue to reveal huge losses as a result of the liquidity crisis brought on by the slump in securitised instruments based on underlying subprime mortgage assets. Yesterday was the turn of Merrill Lynch, which in the last quarter of 2007 booked a loss of $10.3 billion. The announcement queered the performance of the European stock markets.

In the case of Spain, the blue-chip Ibex 35, which had been knocking on the door of the 14,000-point mark all morning after gaining as much as 1.29 percent, ended the session down 0.30 percent.

Analysts are in no doubt about the crisis facing the stock markets, particularly now that economic forecasts have a significant downward bias.

The Federal Reserve Bank of Philadelphia's index of manufacturing activity dropped to minus 20.9 points in January from minus 1.6 points the previous month. Meanwhile, housing starts in the United States in December fell by the biggest amount since 1980, confirming the downward trend in the world's largest economy accompanied by a strong increase in inflation.

Inflation was the main focus of concern in Europe after the ECB said it was ready to act to prevent the effects of higher food and energy prices being passed onto prices in general and salaries.

Within this scenario, the Ibex 35 has suffered its worst run in more than four years and looks set to test support levels. The first of these, and the most solid, is at 13,600 points. Thereafter, the following support levels are less robust.

Turnover in the continuous market dropped to EUR 6.612 billion, of which open-market deals barely accounted for EUR 5 billion, some

EUR 2.275 billion less than the previous session.

[Copyright EL PAÍS / RAFAEL VIDAL 2008]

Subject: Spanish news

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