The Dow Jones Industrial Average also known as the Dow 30 and informally known as the Dow Jones or The Dow is one of a few American stock market indices. The Dow Jones was compiled to gauge the performance of the industrial sector of the American stock market and is the second oldest American-Market index, after the Dow Jones Transportation Average.

The “industrial” in its name is purely historical and since its creation many of the 30 companies that make-up the index have little or nothing to do with traditional heavy industry.

For a list of companies on the Dow Jones

End of the week saw:
Stock exchanges:
FTSE 100: 3,754
DOW: 7,224
S&P: 756.55
Nikkei: 7,569

Currencies
UK Sterling £ to US Dollar $ 1.39570
UK Sterling £ to Euro € 1.07956
UK Sterling £ to Japanese Yen 136.737
UK Sterling £ to Aus $ 2.12377
US Dollar $ to Euro € 0.773485
US Dollar $ to Japanese Yen 97.9700
US Dollar $ to Aus $ 1.52165

Commodities
Nymex Crude oil – $45.80
Gold – $928.10

The government could have see this coming and the Bank of England should have acted sooner. Admitely the scale of the present problem has taken every one by surprise, but there is no excuse for having an economy in such a bad state so that when the “Bust” happens the government has to borrow to such high levels that it puts the whole country in trouble.

So what else happened of significance in 2008…

America elected it’s first black president in 2008, Barack Obama, and as he takes office in a few days time he has one hell of an economic situation to sort out and a Middle East problem to resolve yet again.

One of the the UK’s oldest high street chains went into receivership, Woolworths which was first set up by Frank W. Woolworth in 1909 so it has just about survived 100 years of trading. Something I only learned recently was that Mr Woolworth paid for the building of the Woolworth Tower in New York, which was the highest building in the world up until 1930. What is even more unusual is that Mr Woolworth paid for this building in “cash” and at a cost of $13.5 million was quite unusual and in todays terms using the Consumer Price Index is worth over $300 million (£208 million), and using the relative share of GDP would be worth near $8 billion (£5 billion).

After the colapse of Sub-prime loans in the US a World banking crisis ensued with governments around the world pledging unpresidented amounts to shore-up the banking system. With the UK government topping the list at $725 billion and in second place the US government setting aside $700 billion, with Germany and France setting aside $360 billion and $250 billion respectfully. Fall-out from this crisis hit the 150-year-old investment bank Lehman Brothers, the fourth largest bank in the US which filed for bankruptcy in September 2008!

Low, low interest rates in 2008…

2008 saw deep cuts in interest rates with the lowest rate ever seen in the USA closing at 0.25% leaving the US treasury not much more room for movement in a difficult economic environment. The UK also saw the lowest interest rates it has seen for 57 years falling to 2% in December 2008, with the Bank of England commenting that these rates could fall lower still.

Stock markets in a turmoil…

World stock markets saw both huge losses and huge gains during 2008 ending the year at 4,434 in the UK with the FTSE 100 and in the US at 8,776 on the Dow Jones. In October 2008, just after Wall Street saw the worst week in the stock market’s history, the Dow Jones rose by a record 11% or 936 points on the day, which was the biggest one-day gain seen by the index since it began. Also, the UK’s FTSE 100 jumped by 9.84%, which is the highest jump it has seen in its history in November 2008.

Oil price volatility…

The price per barrel of oil has seen an all-time high of $147 per barrel in 2008 and has dipped to below $40 to the end of December 2008 and closed the year at $44.60, only rising slightly as a result of the unrest and fighting in the Middle East. There were predictions of the price per barrel falling to $25 and if Israel and Hamas can agree their differences in the short-term the price per barrel could quite easily fall to below $40 per barrel again soon.

End of the week saw:
Stock exchanges:
FTSE 100: 4,434
DOW: 8,776
S&P: 903.25
Nikkei: 8,860

Currencies
UK Sterling £ to US Dollar $ 1.44950
UK Sterling £ to Euro € 1.03739
UK Sterling £ to Japanese Yen 131.846
UK Sterling £ to Aus $ 2.05640
US Dollar $ to Euro € 0.715690
US Dollar $ to Japanese Yen 90.9783

Commodities
Nymex Crude oil – $44.60
Gold – $884.30

In the same week Sterling has strengthened slightly against the US Dollar and Euro and the price of a barrel of oil rose by around $5 representing a 10% gain on the week. Although in a meeting in Egypt this Week Opec President Chakib Khelil left oil production unchanged, leaving any decision for a reduction to be made at their next meeting in December.

Bad news on the high street

One of Britain’s iconic high street chains has gone into liquidation, but there is some light at the end of the tunnel for Woolworths with a rescue bid by Dragons Den entrepreneur Theo Paphitis, who is known for taking over troubled chains and turning them around. Mr Paphitis has turned Rymans and La Senza’s fortunes around in the past so it is no surprise that he is in talks with receivers on this one. The government has also announced this week that is preparing to draw up a list of industries that it is prepared to help through this financial down turn.

Short-term tax reductions with higher taxes in the future

Next week the UK will see a lower VAT rate of 15%, with some shops bringing in the reduction early to entice shoppers to spend more. However, the country will have to pay for these tax reductions and extra spending in the future and in particular the higher rate income earners will be targeted with the introduction of a 45% tax band! Some good news though from across the pond with the US holiday season shopping getting off to a good start, rising 3% over the same time last year.

House prices in England and Wales fall by over 10%

In the year to October fell by just over 10%, with the average house price falling to 2006 levels at £165,529. One of the main causes for the fall is that house sales between May and August this year have dropped by more than 50% as a result of the financial crisis. However, the fall in November has slowed according to the Nationwide to just 0.4% over the fall of 1.3% in October.

Unrest in the world as the slowdown hits

China has already seen unrest amongst redundant workers as the world slowdown has hit China in a big way, with over 50% of toy manufacturers going in to liquidation and as recession bights things are expected to get worse. This week saw 500 workers over turn police cars outside of a toy manufacturer over a pay dispute.

End of the week saw:
Stock exchanges:
FTSE 100: 4,288
DOW: 8,829
S&P: 896
Nikkei: 8,512

Currencies
UK Sterling £ to US Dollar $ 1.53836
UK Sterling £ to Euro € 1.21130
UK Sterling £ to Aus $ 2.34940
US Dollar $ to Euro € 0.78740

Commodities
Nymex Crude oil – $55.00
Gold – $819.00

The Dow Jones industrial average closed almost 1.5% lower after Mr Paulson was grilled by a Congressional hearing.

The plan faced opposition from both Republican and Democrat senators on the Senate Banking Committee.

Investors are concerned that the measures could now either be delayed or watered down.

“We have got to look at some alternatives,” said senior Republican senator Richard Shelby.

The committee’s chairman Democrat senator Chris Dodd, speaking after the hearing, said: “What they have sent us is not acceptable.”

Another senator asked if a smaller programme worth $150 billion might be enough to begin the bail-out, with a promise of more to come.

Mr Paulson replied that this would be a “grave mistake” and would fail to end the financial turmoil in the markets.

‘Private greed’

Senators voiced concerns that taxpayers would be paying the price of mistakes made by banks.

“I believe if the credit markets are not functioning that jobs will be lost…that the economy will just not be able to recover in a normal, healthy way” Ben Bernanke, US Federal Reserve chairman

Global reaction to financial turmoil

They also said it was crucial not to rush through the bail-out, without carefully considering how it would work.

Richard Shelby said: “I have long opposed government bail-outs for individuals and corporate America alike.”

And Chris Dodd said the “economic maelstrom” stemmed from a mixture of “private greed and public regulatory neglect”.

However US Federal Reserve Chairman Ben Bernanke urged swift action.

He warned that without the plan, the “fragile” financial markets would almost certainly get worse and this would have an effect on the rest of the economy.

“I believe if the credit markets are not functioning that jobs will be lost, that our credit rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way,” said Mr Bernanke.

European markets were also hit by concerns about the bail-out plan.

The UK’s FTSE 100 closed down 1.6%, France’s Cac 40 fell 1.7%, while in Germany the Dax ended 0.5% lower.

Earlier in Asia, Hong Kong’s Hang Seng index ended nearly 4% lower. Japan’s market was closed for a public holiday.

News reported by The BBC

Economists said the Federal Reserve might lower interest rates, having earlier expected them to stay on hold.

Markets worldwide slumped on Monday with the Dow Jones Industrial Average closing down more than 500 points.

Faced with the twin threats of high inflation and a slowdown, the bank kept interest rates on hold at 2% in August.

Lehman Brothers – the fourth largest US investment firm – filed for bankruptcy after failing to find a buyer at the weekend.

A main worry is that Lehman’s bankruptcy will make it even harder to gain access to credit – hitting both other large lenders but also small firms and US homebuyers.

“It puts a Fed rate cut back on the table” said Stuart Hoffman, lead economist at PNC Financial Services group.

A group of leading banks, including JP Morgan, Goldman Sachs and Citigroup, developed a $70bn (£38.9bn) pool that banks or brokerages can tap into to boost liquidity.

And the Federal Reserve took steps to improve access to emergency credit for struggling financial companies, by increasing the types of securities financial institutions could use to gain emergency funding.

Stocks falls

Lehman’s demise was not the only news creating market jitters on Monday, before which analysts had expected interest rates to remain on hold.

“This is the result of the mania for deregulation which began when Reagan was president” David Stowell, Portland, Oregon

Send us your commentsThe future of insurance giant AIG remained unsure, after reports that it had sought $40bn in emergency funding over the weekend from the government to shore up its finances.

Later on Monday the firm gained access to $20bn, thanks to New York State approval.

And Bank of America announced that it would buy Merrill Lynch in a $50bn deal.

Such uncertainty over the state of the markets and in particular key financial institutions prompted stocks worldwide to see sharp falls.

While the Dow Jones was down some 4% on Monday, the Standard & Poor’s 500 index shed 4.69% and the Nasdaq composite index ended 3.60% lower.

Leading European indexes had ended lower, including the UK’s FTSE 100 index which was 3.92% down.

News reported by The BBC

Oil prices touched three-month lows of $118 a barrel, nearly $30 below their recent peak, amid signs of rising supplies and slowing demand.

The news, allied to the Federal Reserve’s decision to keep interest rates on hold, sent the benchmark Dow Jones index up nearly 3% to 11,615.77.

Markets also put on strong gains in London, Paris and Frankfurt.

Buoyant markets

The FTSE 100 index closed up 2.5% while Germany’s Dax and France’s Cac indices rose 2.6% and 2.4% respectively.

The spike in oil prices in the early part of the summer, which saw the cost of a barrel of oil hit nearly $150, depressed many stock markets.

But the situation has now reversed with US crude settling down $2.24 at $119.13 on Tuesday while Brent crude fell by $2.98 to settle at $117.70.

This prompted the best day’s trading on the Dow Jones in four months.

Oil prices have fallen in the past couple of days after it seemed that storms in the Gulf of Mexico were unlikely to lower output.

But analysts have also said that slowing economic growth is set to cut demand for commodities in general.

Announcing its decision to keep interest rates on hold on Tuesday, the Federal Reserve said economic growth was likely to remain weak for the rest of the year and beyond.

At the same time, it said economic activity improved in the second quarter and it believed inflationary pressures would ease in 2009.

Analysts said that many investors were now focusing more on the potential imbalances between supply and demand on the oil market, and were looking at moving cash from oil and into other assets.

“Most of the hedge funds have been taking profits,” said Angus McPhail of British-based investment firm Alliance Trust.

He added that prices could fall to “about $100 within the next month if you keep on getting weak demand data”.

News reported by The BBC