There is certainly some very good data coming though at present albeit combined with some not so good news, so things are looking good for the UK economy.

I read today that the manufacturing sector grew last month at the strongest rate for 15 years – and Mr Noble (chief executive at the Chartered Institute of Purchasing & Supply) said:

“Companies reported that higher demand from export markets wasn’t just on the back of the softer sterling but also improving global market conditions. Meanwhile there were mentions that many production lines, which ground to a halt at the height of the recession, kicked into action again. Good news was also reported on the job front as firms – mainly SMEs – hired staff for the second consecutive month in line with increased levels of production.”

So now is a good time to start looking at either setting up in business or buying one, as the outlook is on the up and yet interest rates are still relatively low. I appreciate that it is not so easy to get bank lending right now, but so long as you have a good solid proposition backed up by a good business plan and sound cash flow forecasts you should still get a loan.

I have decided to include more of the world stock market indices this week, as my blog is starting to get read more and more across the world by people from the UK, Europe, America, Australasia and the Far East.

Notably this week is the fall in the value of the Yen against Sterling and the US Dollar, falling by over 4% against UK Sterling and by 2.5% against the Dollar. However, the US Dollar has suffered too this week and slid against Sterling by 1.6% ending close to $1.50 to the Pound for the first time in a while.

The reason for the weakening Dollar is due to the US economy contracting by more than expected at 6.1% in Q1 2009. Investors are focusing on a rise in private consumption for the first time since Q2 of 2008 combined with a sharp decline in private inventories.

In the short-run falling inventories hurt an economy and at a point where inventories have reached their optimal levels, companies will need to increase production to meet demand, as economies pick up again.

Due to the falling pace in contraction in the US economy The Federal Reserve is refraining from new stimulus announcements.

UK Sterling rose this week on comments by UK Chancellor Alistair Darling that he expects a UK economy to recover by the end of the year.
End of the week saw:
Stock exchanges:
FTSE 100: 4,243.22 GBX
FTSE 250: 7,571.33 GBP
UK All Share: 20,647.03 ZAX
US DOW: 8,212.41 USD
US S&P: 877.52 USD
US NASDAQ: 1,719.20 USD
Japan Nikkei: 8,977.37 JPY
China H Seng: 15,520.99
Australian ASX 200: 3,769.60 AUD
German DAX: 4,769.45 EUR
French CAC 40: 3159.85 EUR
Spanish Ibex 35: 9,038 EUR

Currencies
UK Sterling £ to US Dollar $ 1.49089
UK Sterling £ to Euro € 1.12313
UK Sterling £ to Japanese Yen 147.906
UK Sterling £ to Aus $ 2.03507
US Dollar $ to Euro € 0.753325
US Dollar $ to Japanese Yen 99.2063
US Dollar $ to Aus $ 1.36500

Commodities
Nymex Crude oil – $52.65
Gold – $887.90

Another week of turmoil on the financial markets with the FTSE 100 falling by another 7.8% on the week and the US Dow Jones down by 6.2%.

Also, the UK Pound lost ground this week against all currencies falling 1.3% against the US Dollar and 1.5% against the Euro which is largely due to the Bank of England’s decision to drop base rate to 0.5% this week. Not only that the UK is faced with having the need to opt for Quantative Easing too whereby up to £150 billion is to be pumped into the economy to get it going. The strong US Dollar (or weak UK Pound, which ever way you want to look at it) has helped the media group Pearson make increased profits. Profits were up to £585 in 2008 from £468 in 2007 from a company that owns The Financial Times and Penguin Books.

Despite the problems being faced by the UK, London has retained its place as the number one financial centre in the world, followed by New York and Singapore. However, the City of London Corporation has said that there are no “Safe” financial centres in the world.

This week also saw yet another UK high street bank have control be taken by the Government. The Lloyds TSB bank, which took over HBOS in January 2009, is to be owned 65% by the UK Government after putting up further cash to support it’s cash flow and a deal to insure its toxic debt to the tune of £260 billion. Lloyds TSB have agreed to commit to an extra £28 billion of lending over the next two years as part of the deal with the Government.

Things are not looking too rosy in the US with 12.5 million people now out of work which represents 8.1% having risen by a staggering 651,000 last month, making a total of 2 million jobs lost in the last three months! The knock-on effect of these job losses on the US economy will be far reaching and will prolong the economic agony.

Adding to the US wows the car industry has fallen yet further with sales of cars from General Motors falling by 53% and Ford by 48% in February 2009 over the previous February.

House prices continue to fall, despite the lowest interest rates the UK has ever seen in its history. House prices fell by a further 2.3% in February 2009 making the year-on-year fall since February 2008 17.8%. The Government is putting things into place to encourage banks to lend with what it has done with Lloyds TSB and the Bank of England pumping Quantative Easing cash into the banking and insurance institutions. However, although the banks will lend they are being extremely fussy about who they will lend to, so if the borrower has missed a credit card or phone bill payment they will likely be refused a loan.

Some good news for LDV vans with the possibility of a management buy-out being worked on. To help the deal go forward the unions and workers have seen sense by agreeing to work a three-day week and have taken a 10% pay cut together with a cancellation of all bonuses. If all goes to plan the business should see production start again on 6 April 2009 and if things go as management hope they will 850 jobs will be saved. However, if sales of the vehicles do not go well then they will need to speak with the unions again about cutting the workforce.

Oil prices have fluctuated down and then up this week starting out at $44.25 a barrel dropping to $40.15 in the week and closing higher at $45.52 at the end of the week. The 10% fall in the week was on the back of a slew of bad economic data across the world. Insurance giant AIG reported huge losses of $61.7 billion (£43.68 billion) this week and HSBC bank went to the market for £12.5 billion of additional funding, which sent markets tumbling. As a result of these huge losses they will receive a further $30 billion (£21.23 billion) from the US government as a rescue package for the business. AIG has now received the most money of all US companies in bail-out cash with this making it a total of $180 billion (£127.43 billion).

End of the week saw:
Stock exchanges:
FTSE 100: 3,531
DOW: 6,627
S&P: 683.38
Nikkei: 7,173

Currencies
UK Sterling £ to US Dollar $ 1.41254
UK Sterling £ to Euro € 1.11484
UK Sterling £ to Japanese Yen 139.001
UK Sterling £ to Aus $ 2.20393
US Dollar $ to Euro € 0.789297
US Dollar $ to Japanese Yen 98.4037
US Dollar $ to Aus $ 1.56039

Commodities
Nymex Crude oil – $45.52
Gold – $942.70

The end of this week has seen Japan announce a rescue package pf 1.5 trillion Yen (£11.4 billion) to help Asian Countries threw the economic slow down.

The Prime Minister of Japan Taro Aso has decided on this rescue package and will be spent on promoting trade within the region and on infrastructure over the next three years.

The Japanese Prime Minister has called upon other wealthy nations to help smaller countries in the same way and has warned against protectionism. We are already seeing signs of protectionism in the UK, with workforces showing their growing resentment or foreign workers.

Japan has been hit hard by the slowdown and only this week NEC has announced 20,000 job cuts over the next 14 months and Hitachi has announce 7,000 job losses due to a drop in sales and is predicting a 700 billion Yen (£5.3 billion) loss for the year.

In contrast to this bad news Subway announce that it intends to open 600 new stores across the UK creating around 7,000 new jobs. Also, good news for Amazon as they saw their profits increase by 9% for the final quarter to December 2008 making a final annual profit of $1 billion (£685 million), so there is good news around despite the gloom.

A tough time for the air industry yet again, after getting through the high oil prices over the last several months we have now seen a huge fall in freight traffic and even more that the drop after 9/11. Freight traffic has falling by 22.6% in December of 2008 over the same month last year. The International Air Transport Association (Iata) is warning of a tough time for both passenger and freight airlines alike.

With the G20 summit coming up in April in the UK the UK’s Prime Minister Gordon Brown has urged a global confidence, saying that world leaders must have the “confidence to act” to tackle the global recession. Mr Brown was speaking at the Economic Forum in Davos where there were many world business entrepreneurs speaking and included Sir Stelios Haji-Ioannou the founder of Easyjet, who was trying to talk up the opportunities that exist in a down-turn.

Turning to commodities, gold has seen a further rise this week ending the week at $929 having risen 3.7% over the end of last week. The price of gold will remain high and might go even higher with the prospect of a continuation of a weak US dollar. Oil is still flirting around the $40 mark having dropped back again this week ending at $41.75, representing a drop of over 10%.

The first oil company to show signs over the affect of falling oil prices is the worlds largest oil giant Exxon Mobil. The company has reported a big 33% fall in profits for the last quarter of 2008 over the same quarter for 2007, falling to $7.8 billion (£5.3 billion).

End of the week saw:
Stock exchanges:
FTSE 100: 4,150
DOW: 8,001
S&P: 825.88
Nikkei: 7,994

Currencies
UK Sterling £ to US Dollar $ 1.45905
UK Sterling £ to Euro € 1.13592
UK Sterling £ to Japanese Yen 131.282
UK Sterling £ to Aus $ 2.28796
US Dollar $ to Euro € 0.778240
US Dollar $ to Japanese Yen 89.9350

Commodities
Nymex Crude oil – $41.75
Gold – $929.00

The American franchise chain Subway has announced that it plans on opening 600 new stores across the UK.

This is both an opportunity for those who have lost their jobs and who might be looking for a new business venture in setting up a franchise and good news for the UK economy, as it will create up to 7,000 new jobs.

If you have been made redundant you might think about using your redundancy money (if you received any that is) to set up in business. A good opportunity in this is to set up a franchise, as you are setting up a business which is a known quantity and one that the market already recognises, which not only means a higher likelihood on making it a success, but also the banks would look on this type of business more favourably.

A week of record lows for interest rates from one side of the world to the next as the Bank of England cut rates to the lowest in 315 years to 1.5%, in the same week that South Korea reduces its rate to a record low of 2.5%.

Some good news on the high street

JD Sports has bucked the trend over Christmas with their sales up by 2.8% and that it expected its full-year profits to be ahead of forecasts. JD Sports has outperformed the FTSE all-share general retailer’s index by 1% over the last year and in September 2008 the company reported – so it is good to see a company on the high street performing well.

The other companies that fared better included supermarkets like Waitrose where sales were up 41% in the week to 27 December. Sainsbury’s also reported a rise in sales of 4.5% (excluding petrol) from last year for the 13 weeks to 3 January and John Lewis’s sales rose by 27.4% in the week to 3 January – so maybe the interest rate cuts are having a positive effect on consumer spending.

UK manufacturing at a low point

The UK’s manufacturing output has fallen to its lowest level for 27 years which shows just how difficult things are right now for the UK economy. The output has fallen by 7.4% year-on-year which is the biggest fall since June 1981. This was reported in the same week as Nissan announces the loss of 1,200 jobs in Sunderland due to the slow down – Nissan’s Sunderland factory was once hailed as the future of British manufacturing.

Record job losses in the US

Job losses within one year in the USA were the worst they have been since the time of World War II with employers axing a staggering 2.6 million posts in 2008, with over half a million of those in December 2008! This level of losses in US jobs puts the percentage of unemployment up to 7.2%! A similar situation is growing in Spain with unemployment hitting a 12-year high in 2008 of 3 million with one million of those unemployed being added to the jobless list in 2008 alone!

A bizarre twist on the car sales front

Car Manufacturer BMW has seen the sale of its Mini brand rise by 4.3% in 2008, whilst the sale of BMW cars has fallen by 4.3%. However, what is strange in an economic slowdown is that sales of Rolls Royce’s is up, with sales of the Rolls Royce Marque increasing to 1,212 in 2008 (2007 1,010).

End of the week saw:
Stock exchanges:
FTSE 100: 4,449
DOW: 8,599
S&P: 890.35
Nikkei: 8,837

Currencies
UK Sterling £ to US Dollar $ 1.52339
UK Sterling £ to Euro € 1.13428
UK Sterling £ to Japanese Yen 137.425
UK Sterling £ to Aus $ 2.15682
US Dollar $ to Euro € 0.744575
US Dollar $ to Japanese Yen 90.2100

Commodities
Nymex Crude oil – $40.39
Gold – $854.50

Bank of England was first started 315 years ago and in all this time interest rates have never been as low as 1.5%. It is still too early to know whether the 4 interest cuts that the bank has made since October 2008, when the base rate was 5%, will have the desired effect on the UK economy.

The 3.5% rate cut since October has happened so rapidly that the effects of it have not had a chance to filter through to the economy. However the data the bank reviews on the UK economy is still showing bad signs, as for example, the UK property prices continue to fall, having fallen by just under 16% year-on-year, having fallen 2.5% in December 2008 alone.

So what does this mean for your mortgage and what should you do with the interest rate cuts and the money you save on your mortgage payments?

Around 40% of borrowers are on a tracker rate mortgage so will benefit from the latest rate cut as well as the others since October. Those people with fixed rate mortgages which is around 50% of all mortgages will obviously not benefit from these rate cuts, leaving the other 10% who are on standard variable rate mortgages.

If you are on a standard variable rate (SRV) mortgage then you may or may not benefit from the rate cut and it will be down to the lender you are with. However, some banks are passing on these rate cuts to the borrowers, so hopefully you are one of these.

There are also some tracker rate mortgages out there that have clauses in the mortgage deed restricting how low their rate will fall. You will need to read your mortgage documentation or speak with your bank about this and whether or not they have in fact got a minimum rate level.

One good idea is to keep your mortgage payments at the same level they were prior to the rate cuts so that, if you are on a repayment mortgage as compared to an interest only loan, then you will pay-off more of your capital and save on the total amount of interest you pay on your loan and significantly reduce the mortgage term. For example on a £150,000 mortgage, if your interest rate is 5.25% and you overpay by just £100 per month then on a 25-year mortgage you will reduce the term by 4.6 years and save £24,832 on interest.

Click her to calculate your own mortgage saving

The Bank of England is treading a wavering tightrope – will it cut the base-rate from the present 2% to the lowest level ever seen of 1% today?

The balancing act the Bank is juggling here is split between avoiding the UK economy going into a deflationary period and putting further pressure on an already weak pound. The Euro is trading at around €1.10 to the pound having recovered from a low of under €1.05.

The Bank of England might well drop the rate to 1.5% instead of the full 1% cut and we will see later whether this is the case.

Official figures from the Office for National Statistics reported this week that UK retail sales rose last month with total sales volume rising by 0.3% in November 2008 and are up by 1.5% from the same time last year.

Sales had been predicted to fall in November and in the same week we see shoppers out in force, so it looks like Christmas might not be as bad as predicted for retailers. However, shops have been discounting their prices heavily and staying open late to entice shoppers in. A survey has also shown that UK consumer confidence has improved for two months running with the reduced VAT rate, lower interest rates and lower petrol prices helping.

Low interest rates in the US

This week also saw the US cut interest rates to below 1% this week and now stand at 0.25%. This was a surprise move, as the rate was expected to be dropped to 0.5%. However, the US Federal Reserve is so concerned about the state of the US economy that it felt the step was necessary. We wait to see what the UK’s Bank of England will do next month with UK interest rates.

Major fraud hits banks and investors at a bad time

HSBC has emerged as one of the worst hit by alleged $50 billion (£33.5 billion) fraud by Bernard Madoffs at a time when banks and investors are already struggling to cope with the credit crunch. It amazes me that financial systems and controls can allow this sort on situation to arise in the first place. It just shows that world governments need to review their financial controls with what has happened in the banking sector and their abuse of sub-prime loans and with this recent alleged fraud.

Credit to remain tight until 2010

John Varley, Barclays Bank head, has told the BBC that although credit remains available to households and businesses, the amount is shrinking. He has also said that both consumers and businesses will continue to find it difficult to obtain credit for until up to 2010. During this period the amount of debt in the economy will reduce and will be hard on a number of individuals, but will be a necessary process to go through in order to get back to a healthy economy again.

Help for the US car-makers approved

President Bush has approved a US government loan of $17.4 billion (£11.7 billion) to help US car manufacturers General Motors and Chrysler in order to help them survive. However, Barack Obama has urged these carmakers to reform their ways and become more efficient and to “not squander this chance to reform”. However, it is very likely that these firms will be knocking on the Whitehouse door in early 2009, as this is a loan to see them through and to help them avoid immediate collapse.

End of the week saw:
Stock exchanges:
FTSE 100: 4,287
DOW: 8,579
S&P: 887.88
Nikkei: 8,589

Currencies
UK Sterling £ to US Dollar $ 1.49195
UK Sterling £ to Euro € 1.07165
UK Sterling £ to Aus $ 2.18563
US Dollar $ to Euro € 0.718290

Commodities
Nymex Crude oil – $42.94
Gold – $838.70

This week has seen tourists travelling to Europe getting just under one to one in an exchange between Sterling and the Euro, with the rate falling to under 1.12 and after commission and with the lower rates that tourists get they received less than one Euro for each Pound paid.

With UK interest rates at the lowest they have been for 57 years and worries that the UK economy will be one of the worst hit by the credit crisis and financial slow-down the Pound has taken a serious hit.

Job losses

This has been another week of heavy job losses with the Bank of America announcing job cuts of up to 35,000 this week as part a its efficiency drive after it merged with Merrill Lynch. Another bank Santander, which owns Abbey, Alliance and Leicester and Bradford & Bingley, is to cut its workforce by 1,900 and in the receivers of Woolworths have cut 700 jobs in the distribution side of the company.

The car industry

The US government is considering using money already earmarked to rescue the banking sector, but their plans were rejected this week. The US government is worried that the US economy could not face a major collapse of one of the three major car manufacturers (Ford, General Motors and Chrysler), so that it had to provide cash to keep them going to avoid major job losses and the knock-on effect of such a failure.

With the economy already weak a loss of up to 250,000 jobs and the impact on related businesses would be too much to bear right now! The Unions of the UK car manufacturers are now asking the UK government for similar help for the UK car industry as car sales fall off!

End of the week saw:
Stock exchanges:
FTSE 100: 4,280
DOW: 8,630
S&P: 879.73
Nikkei: 8,236

Currencies
UK Sterling £ to US Dollar $ 1.49470
UK Sterling £ to Euro € 1.11813
UK Sterling £ to Aus $ 2.25213
US Dollar $ to Euro € 0.748113

Commodities
Nymex Crude oil – $46.28
Gold – $820.50