Switzerland unveils UBS bail-out

Switzerland is taking steps to strengthen its largest bank, UBS, becoming the latest European government to unveil a banking rescue plan.

UBS is raising 6bn Swiss francs ($5.3bn; £3.1bn) from the government.

It will also be able to transfer up to $60bn of distressed assets to a fund supported by the Swiss central bank.

Credit Suisse was also offered government assistance but was instead able to raise 10bn Swiss francs from major global investors.

The Swiss National Bank (SNB) said its moves would help to stabilise the financial system and was favourable for the development of the Swiss economy.

"The SNB is convinced that it will result in a sustainable reduction of the strains in the Swiss financial system," it said.

The government also said it would moderately increase the guarantee on bank deposits, echoing steps taken by other European countries.

Thankful

UBS has been one of the heaviest losers from the sub-prime crisis.

It will transfer its exposure to the US mortgage market and other assets to a fund controlled by the central bank.

The fund will be financed by $6bn from UBS and a $54bn loan from the central bank.

The SNB will receive interest on the loans and is entitled to a share in any profits the fund makes.

The Swiss National Bank said it was a "highly unusual" and "unprecedented" operation.

However, it said the risk of losses was limited because UBS had already made aggressive write-downs on its risky positions.

The additional $6bn capital injection means the Swiss government will emerge with a temporary 9.3% stake in UBS.

UBS thanked the Swiss government and central bank authorities for finding a "commercial solution".

"In these turbulent times, we want to ensure that we do everything possible to safeguard the solidity of our bank," said Peter Kurer, chairman at UBS.

"Their efforts and decisiveness to act swiftly demonstrates the professionalism of the Swiss financial centre."

Profit

UBS also announced that it made a small net profit of 296m Swiss francs in third quarter, mainly due to its wealth management business. Its investment banking arm made a loss of 2.8bn francs.

Credit Suisse said it expected to make a loss of 1.3bn Swiss francs in the three months to September.

The bank said that the Qatar Investment Authority was among the group of global investors that had helped the bank to shore up its finances.

Credit Suisse had been required by the SNB to strengthen its capital base.

"Over the past few months we have had a constructive and close dialogue with regulators about future capital requirements," said Brady W. Dougan, the bank's chief executive.

Global shares carry on tumbling

European shares have been trading lower following dramatic falls in Asia that saw Tokyo's Nikkei index fall 11%.

Global falls have largely wiped out the gains earlier in the week, as fears of recession cancelled out any optimism from government bank rescue packages.

In early trading, London's FTSE 100 fell 2.3% while the Cac 40 in Paris and the Dax in Frankfurt both fell 3.1%.

On Wednesday, New York's Dow Jones saw its worst one-day percentage fall since October 1987, closing almost 8% down.

In Tokyo, the Nikkei 225 index fell more than 1,000 points, closing down 11.4% at 8,458.45
Hong Kong's Hang Seng fell 7.6% to 14,785.60 points
Australia's main share index fell 6.7% while India's was down 4%
Fears of a protracted downturn also hit oil prices with benchmark US light, sweet crude for November delivery at a 14-month low of $71.64 a barrel

Oil slides again, now 50 percent off record highs

Oil prices slid further on Thursday as the global credit crunch and fears for slowing energy demand took their toll, with prices now down about 50 percent from July's record highs.

US light, sweet crude fell $2.44 to $72.10 a barrel. London Brent crude fell $2.31 to $68.49 a barrel.

Oil prices are about half what they were in July this year, when they hit a record above $147 a barrel.

"The market is just very worried about a severe international economic downturn," said David Moore at Commonwealth Bank of Australia.

"They're thinking that oil consumption will be weaker than expected."

On Wednesday, US economic data showed that retail sales fell 1.2% in September, a sign that consumers were tightening their belts.

Also the US central bank's Beige Book report, which reflects the economic conditions, said the economy had showed further signs of contraction, fanning fears that the US economy is already in a recession.

According to Mr Moore, oil cartel group Opec is tipped to cut production when it next meets in November.

Inflation slips to 11.44 percent on falling oil prices

Inflation fell to 11.44 percent for the week ending 4th October on account of decline in oil prices and manufactured goods, giving some respite to the government which is battling the impact of global meltdown.


The inflation was 11.80 per cent a week ago.

The index for fuel prices declined by 1.1 percent on account of lower prices of naphtha, aviation turbine fuel and furnace oil.


The inflation figures were released in the first half of the day, as against the normal practice of making the data public on Thursday evening, even as the stock markets tumbled by over 700 points by mid-day on Thursday.


The rate of price rise eased mainly on account of prices of those petroleum goods which are linked to international crude prices that declined to below USD 75 a barrel in recent weeks.



The prices of naphtha during the week declined by 11 percent, aviation fuel by 6 percent and furnace oil 5 percent. Bitumen, however, became dearer by 4 percent.


In the manufactured goods category, the index, measured movement in the wholesale prices, declined by 0.5 percent on account of cheaper imported edible oil, steel, pig iron and lead ingots.


However, in the foods category, several items like fruits and vegetables, pulses and cereals became dearer during the week.



The index for the week ending September was revised up at 12.82 percent as against the provisional figure of 12.63 percent