Economic woes send oil price down to $89

Oil prices fell below $89 on fears that weak economic growth will result in lower energy demand, traders said. Opec cut its world oil demand growth forecast for this year to 1.02 per cent from 1.17 per cent in the face of falling demand already occurring in the United States.

Crude has now fallen by about 40 per cent since hitting record highs above $147 in July. London’s Brent North Sea crude for delivery in November fell to a seven-month low of $88.99 a barrel. The contract later stood at $90.79, down $3.45. New York’s main contract, light sweet crude for October, lost $4.34 to $91.37. Hurricane Ike is expected to hit the Gulf of Mexico, threatening oil and gas facilities, most of which still remained offline in a slow recovery from earlier damage caused by Hurricane Gustav. (AFP)

Washington Mutual swims against tide

Shares in Washington Mutual rose 10 per cent, or 20 cents, to $2.20 in early afternoon New York trading amid reports that JPMorgan was in talks to buy the troubled savings and loan institution. However, sources denied that talks were taking place. WaMu has said that its home loan losses could reach $19 billion by 2011 and analysts believe it might be forced to find a buyer or raise more capital. Standard & Poor’s moved to downgrade WaMu’s credit rating to “junk” status on Monday. Shares in Wachovia fell a further 25 per cent to $10.71 after recording their steepest one-day decline in 28 years on Monday. (Tom Bawden)

Fortis denies rumours of a new rights issue

Fortis, the Belgian-Dutch financial services group, denied talk of an imminent rights issue as its shares fell by as much as 20 per cent. “Fortis notes that speculation regarding its share price is being exacerbated by e-mails spreading misinformation regarding a possible imminent rights issue. Fortis categorically denies this rumour,” the group said. Shares in Fortis, which in June announced an €8 billion (£6.3 billion) capital programme, including a €1.5 billion rights issue, hit a 13-year low of €6.64 before closing 10.9 per cent lower at €7.43. UBS closed down 17 per cent at SwFr16.64 after a 15 per cent fall on Monday that had reversed a recovery. (Reuters)

Goldman and Morgan debt insurance soars

The cost of insuring the debt of Goldman Sachs and Morgan Stanley against default rose after the bankruptcy of Lehman Brothers inflamed fears about the health of other investment banks. Credit insurance costs on other financial firms rose by 100 basis points or more. Five-year credit default swaps on Goldman jumped by 165 basis points to about 500 basis points, while Morgan Stanley five-year CDS jumped by 275 basis points to 750 basis points, Phoenix Partners Group said. Merrill Lynch’s credit default swaps rose by 120 basis points to 468 basis points, according to data from CMA DataVision. (Reuters)

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