bill.jpgEver-worsening economic and financial data since our last report on February 29 pummelled global stock markets, slashing the DJ Industrials and FTSE 100 by 315 and 253 points respectively to 11,951 and 5,631. Markets were shocked by news of the troubled Bear Stearns investment bank, America’s fifth largest, seeking emergency funding from the Federal Reserve Bank and JP Morgan Chase. It is unlikely to be the last major bank rescue attempt as the fallout from the American sub-prime mortgage implosion spreads into other markets. These include the so-called Alt-A and options ARMS, mortgages once seen as more solid than sub-prime, and where Credit Suisse estimates that banks could lose up to $125 billion, with a further $150 billion at risk in non-residential loans. Attempts by the Fed to ease market conditions through aggressive rate cuts and liquidity injections, with more expected, failed to work because the lack of confidence has led to a lack of liquidity.

In Britain, that same lack of confidence among the banks has almost frozen lending, as they rush to strengthen their balance sheets. Even good quality mortgage borrowers are now being turned down as the banks phase out relatively cheap deals at almost zero notice. This can only squeeze the housing market further as mortgage applications fall, leading to a return of negative equity.

Some commentators, however, may be overdoing the gloom. Current estimates of losses from the American sub-prime debacle are put at no more than $450 billion, in a mortgage market worth $10 trillion. During the dot com bust of 2,000, around $6 trillion was lost, yet the markets recovered quickly. Even so, there are some fundamental differences between the two events and it is the public’s perception of events that counts more than the factual substance of events.

When the dust has finally settled on this chapter of financial history the big question on legislators minds should be how to cut the risk of a re-run. The market’s current casino style mentality, which allows busted hedge funds like the Carlyle Capital Corporation to borrow 31 times its own equity, needs to be addressed, along with exotic financial instruments engendered by rampant greed for fast bucks.

Our own list of stocks was bathed in a sea of red ink, as 25 fell while only 4 rose. The forklift sector saw some of the heaviest falls, led by Nacco Industries (Hyster and Yale), down by 10.75%. A deteriorating final quarter for Nacco in 2007 and a very uncertain outlook for the North American market hit sentiment. Adjusted for special items, Nacco’s fourth quarter earnings fell from $6.83 a share to $6.24. The company admits that its materials handling division faces challenges. Cargotec (Kalmar) also shed over 10%.

All of the 3PL providers saw significant losses, with TNT down 9.8% to hit its year’s low of 23.4 Euro. Deutsche Post added to its losing streak by falling 8.2%, Geodis lost 9.1% and Kuehne & Nagel 7%. TDG remained unmoved since our last report by the announcement of a take over bid from its largest shareholder, Laxey & Partners, valuing the group at £222.6m or 275p per share.

The biggest fallers, however, were in the IT sector, with EMS Technologies leading the way down with a 13.1% fall. Despite showing good annual results for 2007 and a 6% dividend hike, Belgravium eased back 10%, while Motorola (Symbol Technologies) hit its year’s low.

Bill Redmond

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