Bush to host world finance summit

President George W Bush will host the world's first global financial summit in the US on 15 November, a White House official has said.

The meeting - the first in a series - will discuss the financial crisis and ways to prevent it recurring.

Leaders from the G20 group of nations - the world's leading industrialised countries and major developing nations - will attend.

The winner of the US presidential election will also attend the summit.

The meeting, to be held in the Washington DC area, will consider the reforms needed to avoid another financial crisis and look at the progress being made so far.

"The leaders will review progress being made to address the current financial crisis," said White House spokeswoman Dana Perino.

In order to avoid a repetition of the crisis, she said they would "agree on a common set of principles for reform of the regulatory and institutional regimes for the world's financial sectors".

Worldwide crisis

Later summits will focus on working out the details of the reforms needed.

Some European leaders had pushed for a summit before the end of the year, and French President Nicolas Sarkozy had said it should take place in New York.

Among those expected to attend the summit will be leaders from the G20 group of nations, which includes the G7 group of major industrial economies, as well as key emerging-market countries such as China, India and Brazil.

The head of the International Monetary Fund, the president of the World Bank, the United Nations secretary general and the chairman of the Financial Stability Forum have also been invited to participate

Pound tumbles to a five-year low

The pound has tumbled almost 3% against the US dollar - falling to its lowest level in five years on recession fears.

Sterling's fall came after the Bank of England governor, Mervyn King, warned that Britain was probably entering its first recession in 16 years.

The pound dropped as low as $1.620 overnight, its lowest since September 2003. It later recovered to $1.6398.

The euro fell as low as $1.2736 against the dollar before rising to $1.2895 later in the day.

The dollar has also been rising against other currencies. It has jumped to a two-year high against a basket of currencies as investors have bet that interest rates outside the US will be cut sharply to try to bolster global growth.

In the UK both Prime Minister Gordon Brown and Bank of England governor, Mervyn King, have warned of the danger of recession, boosting expectations of lower interest rates.

Referring to the pound and the dollar, Simon Derrick, head of currency research at the Bank of New York Mellon, said: "I think it is a combination of both strength in the dollar and weakness in sterling.

"I certainly believe this was a very direct reaction to Mr King's comments overnight.

"The recession talk is clearly undermining investors in the equity markets and therefore people are bringing their money home."

Meanwhile, concerns there may be a deep slowdown in the world economy have prompted investors to cash in more of their bets against the US dollar which had built up in recent years.

"Investors continue to flock to the dollar as speculation mounts that central banks elsewhere will continue with aggressive rate cuts in an attempt to stimulate growth in the near term," said James Hughes, an analyst at CMC Markets in London.

"The pound has to be the stand-out, with losses here being compounded by unprecedented comments from Mervyn King last night, essentially confirming the fact that the British economy is now in a recession and any recovery will be far from swift," he added

UK borrowing hits a 60-year high

The UK government borrowed a record amount last month, Office for National Statistics (ONS) data shows.

Public sector net borrowing hit £8.092bn in September, up from £4.775bn in the same period a year earlier, marking a record for the month.

The amount borrowed so far this financial year stands at £37.6bn - the highest since records began in 1946.

The government has said it will keep investing money into public works to prevent a recession

Record borrowing

Prime Minister Gordon Brown insisted Britain's economy remained in a strong position to weather the downturn.

The United Kingdom cannot insulate itself from this global downturn," he said.

"But with interest rates low and falling, inflation expected to come down over the next year, these underlying economic indicators - particularly interest rates - make us stronger than at any other previous downturn, " he added.

Conservative leader David Cameron said the government had to take responsibility for the country's economic woes.

"The government keeps saying - and the Prime Minister I think said it at least three times in his statement - this is a crisis from America, as if no-one in Britain has any responsibility for anything that went wrong," said Mr Cameron.

Liberal Democrat leader Nick Clegg said the government should over tax cuts for people on low and middle incomes.

Slowdown

On a net cash requirement basis the government borrowed £12.65bn last month, compared with a deficit of £8.72bn in the same period a year ago.

This was also more than expected; analysts had forecast that public borrowing would reach around £10.1bn in September.

The cumulative borrowing for the period from April to September of £37.59bn is up from the £21.46bn borrowed in the same period a year earlier, and represents the largest total for a six month period since records began in 1946.

The figures come a day after Ernst & Young Item's Club said the UK economy was already in a recession and would see the economy shrink by 1% next year, before growing by 1% in 2010.

In response to the latest figures the Item Club said: "The UK's public finances are in a complete state and in much worse shape than a year ago".

Figures later this week are expected to show that the UK economy shrank in the third quarter - the first contraction since 1992.


Chancellor Alistair Darling had forecast in his Budget statement in March that public sector public borrowing for the full financial year - up to April 2009 - would reach £43bn.

But the Item Club believes borrowing will reach £60bn in the financial year 2008-09, with a current budget deficit of £27 billion, "much higher than the government's own projection".

In light of this, the club said it was clear "substantial revisions will be necessary in the Pre-Budget Report".

Unemployment is already rising and forecast to continue doing so, which will will add further pressure on the government's finances.

And recent data has underlined the weakness in the housing sector; mortgage lending fell to its lowest level for more than three and a half years in September, according to the Council of Mortgage Lenders.

The UK and other governments recently took emergency steps to shore up the banking system in a bid to increase liquidity and stabilise the markets.

Oil prices fall to 16-month lows

Oil prices have fallen to 16-month lows on growing signs that a global economic slowdown is reducing demand.

The declines came as official US data showed that US crude stocks rose by 3.2 million barrels in the week to 17 October, higher than expectations.

Highlighting a fall in sales of petrol and other refined fuels, US light crude fell as low as $66.73 a barrel, its lowest point since June 2007.

Oil producers group Opec is due to cut output on Friday to help lift prices.

US light crude finished the day's trading down $5.43 to $66.75.

Brent crude fell $5.20 to $64.52 a barrel, after earlier touching $64.59, also a 16-month low.

Steadily fallen

Despite Opec's expected reduction in production, oil analysts said crude prices could fall as low at $60 as signs that the world is heading for recession continue to grow.

Opec's meeting as been brought forward by three weeks, reflecting the 12-nation group's concern at falling prices.

Oil hit an all-time high of $147 a barrel back in July, but has since fallen back steadily.

Opec members include Saudi Arabia, Iran, Iraq and Venezuela.

Recession fears drag shares lower

US stocks fell in morning trading in New York, echoing declines in Europe and Asia as fears of a global recession continued to hit investor confidence.

Wall Street's main Dow Jones index was down 2.9%, while in Europe, the UK's FTSE 100 lost 4.5%, Germany's Dax fell 5%, and France's Cac gave up 5.1%.

had lost 4.5% in late trading, and Germany's Dax ended down 5%.

Job cuts at Yahoo and drugs firm Merck have increased economic concerns.

The falls came as the White House said a global summit to tackle the financial crisis will be held next month.

The meeting will debate the reforms needed to avoid another financial crisis and look at the progress currently being made.

Leaders from the G20 group of nations - the world's leading industrialised countries and major developing nations - will attend

'Rapid deterioration'

Investor sentiment was also hit on Wednesday by warnings from both UK Prime Minister Gordon Brown and Bank of England Governor Mervyn King that Britain was most likely now entering its first recession in 16 years.

In the short term, the comments made by Mervyn King highlighting the fact that the economic environment has deteriorated quite rapidly over the past year have sent a shudder through the foreign exchange and equity markets," said Henk Potts, an equity strategist at Barclays Wealth.

"There's been a housing slump, the labour market has been suffering and business confidence has been hammered - it's no surprise that investors are spooked," he added.

Stocks were also dragged down by commodity stocks tracking weaker oil and copper prices.