From Times Online

March 14, 2010

Difficult year ahead for China admits Premier Wen Jiabao

China faces a difficult year as it works to maintain economic growth and spur development, but it would not be bullied into boosting the value of its currency, Premier Wen Jiabao said today.

In a wide-ranging press conference at the end of China's annual session of parliament, Mr Wen said Beijing was not ready to withdraw stimulus measures put in place in late 2008 to pull the world's third-largest economy out of the crisis, and denied criticism that China is keeping its currency undervalued in order to boost exports.

He also said that he would not allow the US to push China on the issues of China and Tibet, and claimed he was snubbed at last year's Copenhagen climate change summit.

Keeping the yuan stable was "an important contribution" to global recovery from the economic downturn, Mr Wen told hundreds of reporters gathered at the Great Hall of the People for his only formal press conference of the year.

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"This year is going to be the most complicated year for the economy," he said.

"We will maintain the continuity and stability of our macroeconomic policies," he said, adding that as circumstances change, Beijing would make every effort to make its policies "more flexible".

During the two hour press conference, Premier Wen also repeated China's stance that a recent dip in relations with the United States was entirely the fault of Washington for allowing the Dalai Lama to visit the U.S. and approving the sale of arms to Taiwan.

"The responsibility does not lie with the Chinese side, but the United States," Mr Wen said. "We hope the U.S. will face the issue squarely ... so as to restore and improve China-US relations."

Speaking just after the country's annual legislative session ended with the approval of a budget that extends job-creation and welfare programs to deal with a rapidly expanding rich-poor gap, Mr Wen said

China had to be wary of a "double dip" recession this year as it sought to balance growth, economic structural adjustments and inflation expectations. 

China "must have firm confidence" in dealing with any economic problems, he said. "The only way out and hope when facing difficulties lie in our own efforts," he said during the televised news conference

China, the world's third-largest economy, escaped the worst of the global financial crisis by ordering $1.4 trillion in bank lending and government stimulus.

Although economic growth bounced back to 10.7 percent in the final quarter of 2009, authorities say the global outlook is still uncertain, amid worries that the torrent of lending is adding to inflation and fueling a dangerous bubble in stock and real estate prices. 

When asked if China would play a bigger role in international affairs, Mr Wen said China was still a developing country and was focused on improving living standards across the country. 

He said the government would reform its controversial exchange rate controls but will keep its currency "basically stable." He gave no indication when Beijing might allow its yuan to rise against the US dollar — a move sought by Washington and other trading partners.

Critics say the yuan is kept undervalued, giving China's exporters an unfair price advantage and swelling its trade surplus. China has allowed a roughly 20 percent rise in the currency's value against the dollar since 2005, but re-imposed tight control after the global financial crisis hit.

Related Links

• China economy grows at slowest pace in 15 years

• Chinese exports fall at fastest pace in 13 years

Beijing has more than $800 billion of its foreign reserves invested in U.S. Treasury securities, and Mr Wen said the value of the U.S. dollar was a "big concern." He said he wanted to see the United States "take concrete steps to reassure investors," but gave no details of what Beijing wanted done.

Mr Wen promised to increase imports to promote trade and appealed to other nations to oppose what he said was rising global protectionism. He complained that some countries were trying to boost exports by weakening their currencies, but did not name any. 

The budget passed by the congress called for a 10 percent rise in spending to fuel the economic recovery, with more money for low-cost housing, pensions, and other social programs for the country's 1.3 billion people.

The priorities extend Mr Wen and President Hu Jintao's years long efforts to spread the benefits of economic growth more broadly across a rapidly changing society. This year, inflation is a looming challenge, with housing prices soaring and worrying rises in food prices that consume as much as 40 percent of household incomes. 

Mr Wen said inflation is a serious concern, along with endemic corruption and a yawning gap between rich and poor that leaves millions of migrant workers and farmers without basic government aid. 

"These are enough to affect social stability, and even (affect) the consolidation of state power," he said.
Speaking of his perceived snub at Copenhagen in November, when China was blamed by some for undermining efforts to reach a binding he was criticized for skipping a meeting of top leaders attended by President Barack Obama, Mr Wen said he was never formally notified of the event and had sent Vice Foreign Minister He Yafei to register a protest. Wen said no explanation had been given about the failure to issue a formal invitation.

"So far no one has given us any explanation about this and it still is a mystery," he said.

http://business.timesonline.co.uk/tol/business/economics/article7061436.ece?token=null&offset=0&page=1

Sterling's recent storm risks intensifying

After rallying to $1.70 in recent weeks, sterling faces new and potentially severe headwinds, writes Ian Campbell.

 

Published: 5:51AM BST 12 Aug 2009

The UK's sanguine summer has suddenly turned unsettled. Not for the first time it was the Bank of England that changed the weather. Its decision last Thursday to print another £50bn has clobbered the previously resurgent pound, which fell by 3pc against the dollar in just two trading sessions. The storms could soon get worse.

The central bank's response to the pound's immediate fall is likely to be: "Oh dear, what a pity, never mind". Spencer Dale, the bank's chief economist, described the exchange rate in June as a "key channel through which the monetary easing may be transmitted". The weaker pound favours exports, tourism – and inflation. The UK's 1.8pc inflation rate is far away from the deflation in the US, the eurozone, Japan and even fast-growing China. Rising prices keep real interest rates low, even negative. That's impossible if deflation gets a grip.

The bank's now £175bn quantitative easing (QE) scheme is intended to be mildly inflationary, as that stimulates GDP growth. But if growth doesn't revive, QE, in the context of the huge fiscal deficit, could prove counterproductive. The government's financing projections call for borrowing of £348bn this fiscal year and next. The danger is that this is beyond what the market will tolerate.

The dollar was undermined earlier this year when the US Federal Reserve committed itself to buying $300bn of government debt. That was just 2pc of US GDP, far less than the BoE's purchases, mainly of government bonds, worth 13pc of GDP.

It would be surprising if the pound did not fall further. Sterling could easily return to its $1.40 lows of earlier this year. That would help the UK economy to revive. But if anxiety about the UK's finances were to turn to panic, the drop could become dangerously steep.

If emergency fiscal measures are required, the central bank could also be forced into an embarrassing change of course.

http://www.telegraph.co.uk/finance/currency/6011675/Sterlings-recent-storm-risks-intensifying.html

Japan is unloved, under-owned and most importantly undervalued

Five of the top 10 performers out of 1,965 unit trusts this year so far are Japan funds, but the sector is shunned by investors.

 

By Ian Cowie
Published: 10:18PM GMT 11 Mar 2010

Now here's a funny thing. Five of the top 10 performers out of 1,965 unit trusts this year so far are Japan funds, but the sector is shunned by investors. While individual savings accounts (Isas) as a whole enjoyed their biggest-ever inflow last month, investors took £503,000 more out of Japan Isas than they paid in.

Not that this mismatch between very short-term returns and popularity should come as any surprise. As the graph on this page demonstrates, the Nikkei 225 index has been stuck in a 20-year sulk while the FTSE 100 has powered ahead. 

But that has not prevented some fund managers making handsome profits in Japan, due to shrewd stock-picking and the way the yen has strengthened against the pound. Now some contrarians claim the currency is set to unravel and this will be the long-awaited key to rekindle the profitability of Japan's exporters.

This is a counter-intuitive and complex strategy based on Japan's new government, soaring debt (much worse as a percentage of gross domestic product than that of Britain or Greece), its ageing population and collapsing savings ratio. 

After so many false dawns over the past two decades, could things really be looking up in the land of the rising sun? Could the world's second-biggest economy see share prices rise from their current level, three quarters lower than their peak in 1990? 

All things considered, this was an interesting time to go and see for myself. My host in Tokyo, Chris Taylor, fund manager of Neptune Japan Opportunities, a UK-based open-ended investment company, has taken big bets here and won before. In 2008 he shorted the country's banks before they hit the buffers and delivered returns of more than 80pc to sterling investors, during a year in which the Nikkei fell by 40pc.

But swimming against the tide is not easy and hedging the yen backfired last year when this fund could only edge forward by 7pc. Even so, Mr Taylor remains the top performer in Japan over three and five years. He is not alone in favouring this country as the next opportunity to demonstrate that the best way to make big profits is to buy before the herd arrive.

Gartmore recently launched a Japan Absolute Return fund and GLG, PSigma, Skandia and Threadneedle are all increasing their exposure to Japan.

Tom Becket, chief investment officer at PSigma, said: "Investors have chosen to ignore Japan's geographic location on the dragon's doorstep, which allows huge opportunities for Japanese companies to benefit from Asian growth.

"One of the key investment lessons of the past few years is that you make the serious cash by betting against the rest. Japan is unloved, unfashionable, under-researched, under-owned and – most importantly – undervalued." 

Similarly, Ian Burden, head of the Japan desk at Threadneedle, claims: "Although a weaker yen would reduce returns for an unhedged overseas investor, it would provide further earnings leverage to our expectations for the export sector, while moving the domestic economy towards recovery."

http://www.telegraph.co.uk/finance/personalfinance/comment/iancowie/7424374/Japan-is-unloved-under-owned-and-most-importantly-undervalued.html

How to profit from the plunging pound

Our currency is being hammered, but for those planning to exchange sterling into euros or dollars there are ways to avoid the pain – or even make money.

 

By Emma Simon
Published: 12:11PM GMT 05 Mar 2010

Photo: HOWARD McWILLIAM

 
Fears about Britain's public finances mean the pound has lost about a third of its value against the euro and a fifth against the US dollar during the past three years, creating misery for holidaymakers, retired expats and those with property abroad.

But last week the pace of this decline accelerated, prompting fears of a sterling crisis. By midweek the pound was worth just $1.50, its lowest level for 10 months. It also lost value against the euro – which has been struggling itself in recent months. This volatility has resulted in the the pound dropping to €1.11 in a matter of weeks.

 

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These falls have been partly caused by speculation that there will be a hung Parliament, delaying Britain's economic recovery. And while uncertainty remains, there is the chance that the pound could fall further.
Mark Bodega, marketing director at HiFX, the currency broker, said: "While no one can predict where the markets will end up, one thing we can be sure of in the coming months is no let up on volatility."

But whether you are looking to invest overseas, transfer money abroad, or go on holiday later this year, there are steps you can take now to minimise the risks that the currency markets may move against you. Bolder investors may even want to follow in the footsteps of George Soros – who bet against the pound in 1992 – and try to make money from our weaker currency.

BOOST SPENDING MONEY

The recent dive in the value of the pound will affect those due to travel abroad soon. According to Travelex, those heading to Europe will now get €22.17 less when exchanging £500, compared with the same time last month, the equivalent of a guided bus tour of Paris. Those travelling to the US will be $53.32 short when exchanging £500 compared with early February, the price of two main meals at LA's Chateau Marmont.
But David Swann, a currency strategist at Travelex, says: "Compared to a year ago, British travellers aren't faring too badly. Those travelling to the States are actually getting a slightly better exchange rate, while holidaymakers buying euros get just €13.74 less [again on £500]."

But travellers got a lot more bang for their bucks in 2007, before the credit crunch hit. Those switching £500 into euros got an additional €185.94 compared with today, while those changing money into dollars pocketed an extra $230.89.

Bob Atkinson, a travel expert with Moneysupermarket.com, said: "Even if you think the pound will weaken further, keep an eye on short-term movements; if there is a slight rally then you may want to use the opportunity to buy euros for the summer." But he also urges holidaymakers to ensure they don't pay over the odds on commission or charges: "Those who search out the best deal will get almost 10pc more spending money than those who simply leave it to the last minute and change their money at the airport." 

The cheapest deals are invariably the prepaid cards offered by the companies such as FairFX and Caxton FX, according to Mr Atkinson. He said: "Check whether there is any fee to take out a card and what fees, if any, are levied each time you reload the card."

Buy currency online, he advised, from either Travelex or Thomas Cook. "Online exchange rates are usually far more competitive than those offered at a bank or bureau de change." Even if you have left it to the last minute, it is possible to order online, and pick up the money at the airport, usually for no extra charge. 

Check what charges are levied on debit and credit cards. If you are not travelling abroad until summer, apply now for one of the cheaper debit or credit cards available. Santander's Zero card and Nationwide's debit card remain two of the better options.

DON'T SAVE IN STERLING

Savers can open a euro or dollar-denominated account instead and will benefit if the pound weakens further against these currencies. (Although they lose out if it strengthens.)

These accounts are particularly useful for those who travel frequently or receive or make regular payments in another currency. Holding money in euros (or dollars) means customers don't have to pay frequent foreign exchange fees each time they travel, and it also helps protect them from currency fluctuations. For example, if you receive monthly rental payments in euros from a property, banking this in a euro account leaves you free to convert it back into sterling when exchange rates are more favourable. 

Cater Allen offers one account that allows customers to switch money between dollar, euro and sterling sub-accounts, at no cost. Most require a minimum deposit of at least £5,000. Historically, the interest rates paid on such accounts has been low, but given the rock-bottom rates paid on most British savings account today, this is less of a cost today.

According to Moneyfacts.co.uk, the top-paying euro accounts include Anglo Irish Bank (paying 2.25pc on £10,000) and Halifax International (paying 1.35pc, again on £10,000). Most dollar-based accounts pay less than 1pc – the only exceptions being Anglo Irish Bank (1.5pc) and Irish Permanent (1.5pc on a 30-day notice account).

REALISE OVERSEAS GAINS

The weak pound has increased the costs of maintaining a property abroad, but it does help those selling. Mr Bodega said HiFX has seen a significant increase in people selling overseas assets, repatriating to Britain and converting gains back into sterling.

In total, HiFX says it has seen a 180pc increase in the number of euro-to-sterling transactions in the past six months, and an 111pc increase in the number of dollar-to-sterling transactions.

TAKE A BET ON CURRENCY MARKETS

Opening a euro or dollar account leaves you exposed to movements in the currency markets, which can work for or against you. But losses and gains are limited: provided your bank remains solvent, the money deposited is safe, although its value may fluctuate.

Those who want to take a more aggressive position on currency markets can do so via spread betting or "contracts for difference". For currency trades, most private investors use spread betting, as there is no capital gains tax to pay on profits.

Spread betting allows you to take a stake on future price movements, be it in currencies, stock markets, bond prices or even sports results.

A firm such as City Index will give a spread bet price on a currency market, such as the sterling/dollar pair of $1.5040-$1.5043. If you thought that the sterling/dollar rate would increase, you would buy the spread price, or if you believed that the sterling would weaken, you could place a sell bet. These are "pound per point" bets, so if you place a buy bet with a stake of £2, you will make £2 for every point the pound rises above your entry level.

If the market moves against you, you will pay £2 for every point it moves in the wrong direction. The spread price will track the underlying exchange price of the sterling/dollar currency pair. Given the volatility of currency markets, it is not hard to see how people can ether make money quickly or owe significant sums.
These are also leveraged bets, as investors only put down a "margin trade", which may be just 1pc of their exposed position. This can mean bigger gains, but also magnified losses. 

But spread betting isn't just used to speculate. It can also be used as a hedging tool to protect investors against currency markets moving against them. Joshua Raymond of City Index says: "If you were looking to buy a house in Spain for €300,000 and money was due to transfer on April 1, this would cost you about £271,500 at today's exchange rate.

But if the pound weakens over the next month – say it goes back to be worth just €1.0250 again – this investor will have to find an extra £21,189 to complete the deal.

"To combat this, you can make an FX spread bet to cover this difference," Mr Raymond said.
If you take a short position on the pound, any profits made should cover the extra payments due on the mortgage deal. If the market moves against you and the pound rises, you have lost money on the spread bet, but will need less money to complete the housing transaction.



http://www.telegraph.co.uk/finance/personalfinance/investing/7375451/Sterling-how-to-profit-from-the-plunging-pound.html

Should You Keep Investing in a Sinking Market?

Should You Keep Investing in a Sinking Market?

By BestStockTradesBlog

Sure, it’s been a rocky year in the markets—to say the least.  It is so hard to for anyone to hide from the perpetual bad news, so in times like this, it’s easy to let our emotions cloud our good judgment.  Despite the erratic movements of the global markets lately, many of us continue, with great discipline, to plow money into our current savings programs, whether through brokerage accounts or our 401k plans.  But, is this the right thing to do?  Or, are we simply throwing good money after bad?

Everybody loves investing when the market is up because we often see immediate returns on our investments.  When the markets are down, however, our fears tend to paralyze our inclination to keep investing new dollars.  Psychologically and emotionally, nothing is more depressing than seeing your money evaporate.  But if you invest regularly and have some time before retirement, bear markets can be quite a blessing.  

Upward Bias

If history is any indication, we can safely assume that the stock market is expected to yield positive long term returns over time.  Does this happen every year?  Of course not; performance will vary by time period and asset class, and there will always be bad years mixed in with good years.  That’s just the way markets work. The best time to buy, or keep buying, is when the market is in the toilet. For the past few decades, every time the market took a significant fall, investors who bought on the dips were soon were rewarded with a profitable bounce.  Let’s look at the numbers a little closer, using several indexes as benchmarks.  The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market, the Morgan Stanley EAFE index (Europe, Australia, and Far East) is a proxy of for large caps in the foreign developed markets, and the The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe.

                                      Returns 1980 –  2007                          
                 
                    Russell 3000         MSCI EAFE          Russell 2000
1980                  32.59                       24.43                    38.57
1981                  (4.44)                       (1.03)                      2.00
1982                  20.66                       (0.86)                    24.88
1983                  22.68                       24.61                    29.09
1984                    3.43                         7.86                     (7.28)
1985                 32.13                        56.72                    31.07
1986                 16.71                        69.94                    5.70
1987                   1.94                        24.93                    (8.78)
1988                 17.82                        28.59                    24.91
1989                 29.31                       10.80                     16.24
1990                 (5.06)                      (23.20)                  (19.52)
1991                 33.32                       12.50                    46.04
1992                   9.69                      (11.85)                   18.42
1993                 10.88                       32.94                    18.89
1994                 (0.25)                        8.06                     (1.82)
1995                 36.83                       11.55                    28.45
1996                 21.84                         6.36                    16.54
1997                 31.79                         2.06                    22.38
1998                 24.13                       20.33                    (2.56)
1999                 20.89                       27.30                    21.26
2000                  (7.46)                    (13.96)                   (3.03)
2001                (11.46)                    (21.21)                    2.49
2002                (21.55)                    (15.66)                 (20.48)
2003                 31.04                       39.17                   47.25
2004                 11.95                       20.70                   18.32
2005                   6.12                       14.02                      4.55
2006                 15.72                       26.86                    18.37
2007                   5.14                       11.63                     (1.56)

The data depicted tells a story, the years that follow a market downturn can be quite lucrative, often wiping away any losses experienced in the preceding period.

One of the worst sustained bear markets of the past half century occurred during between the late 1960’s and early1980’s.  Yet, had you continued to invest on a regular basis during that dark period, you would have set up your portfolio for a long and prosperous run shortly thereafter. Once the market turned around in the early 1980s, investors who stayed the course enjoyed exceptional returns over the following 15 year period.  Using the Dow Jones Industrial Average as a proxy,
from 1975 to 2006, there were 23 positive years and 9 negative years. If you were to take a simple average of the yearly returns over this time period, you would come up with an average return of 10.83%.  

Still not convinced?  Let’s look at the crash of 1987.  An investor who bought into the market right after the crash of 1987 would have fared very well over the next 24 months. From its low in the fall of 1987, the Dow moved up 56% by the end of 1989.  See, if daily market returns are random (and they are), market timing is a flip of the coin. Investors who attempt to predict market drops are just as likely to avoid them as to miss out on strong return periods.  That is why it would be a mistake to sell out of the market or cut back on your investments during slow times. Because once a market bottoms out, the returns on the bounce can be exceptional, and the market can turn around quite rapidly, which we can never predict in advance.

Dollar Cost Averaging

One of the most effective ways to invest, in particular when the markets are down is dollar cost averaging.  Dollar-cost averaging is an effective wealth-building strategy that involves investing a fixed amount of money at regular intervals over a long period. This type of systematic investment program is used by anyone participating in their company’s 401k or 403b retirement plan.  

In “bullish” markets you buy fewer shares per dollar invested because of the higher cost per share. But, when the markets are down (or bearish), it’s quite the opposite.  You purchase a greater of number of shares per dollar invested because you are buying positions at (presumably) cheaper prices. The blended average of these purchases (high and low) becomes your average cost basis.

So what should you do in a bear market? You do nothing different!  If you’re a long-term investor you do the same thing in a bear market that you would in a bull market, keep investing.

None of us have the clairvoyance to predict market returns.  And those that claim they can are full of hot air.  So the best thing that we can do now, and always, is follow a reasonable investing strategy structured upon our past experience, our common sense, and our reasonable expectations for the future.

http://beststocktradesblog.com/should-you-keep-investing-in-a-sinking-market/

Stock Market Tip and Investing Advice

Stock Market Tip and Investing Advice

Posted on March 14 2010

Stock market investing advice

Beginner stock market investing advice is far popular already in the internet. The individual investor will find it hard to make money in stocks. Almost  many individuals are ready to invest in stocks right now. Yet to make lots of money means you need to study and studying takes motivation, which is very hard if all you want to do is impatiently throw your money into stocks.

If you hate to study then here are some stock investing tips.

Throw out the rulebook as there are no set rules for investing and there are no guarantees of success.

The best analysts are those who make informed decisions because they have detailed reasons for buying a stock and for selling.

Determine how much risk you could take  as this depends on your goals, so have your goals formulated first.

Price is not often times the same as value and check a companies’ net worth, which is profit AFTER taxes.

Stock market tip

You have worked so hard and saved a lot of money. This time you want those savings to work for you and earn you even more money. The stock market is one of the easiest and best ways to do it, provided of course you know what you are doing.

Listed below are ten stock market tips for beginners that if followed will lead you to success.

1) Make sure to determine your goal. Once you know to define your goal, then you can create a trading strategy for achieving that goal.

2) Mutual funds are not for everyone. As advised, take the time to learn how to pick good stocks so you can easily make double even triple-digit gains rather easily.

3) No single stock trading strategy will work in all markets. You must have a store of at least three trading strategies.

4) If possible, avoid short selling. Short selling is not a good advice as it is a strategy used to create wealth when stocks are falling. It is extremely risky and your broker is in control.

5) Find a low cost broker and do your own investing. Those full service brokers charge hundreds of dollars to place one single trade. Online discount broker can do the same thing for $5 or even less.

6) Practice paper trading your stocks and strategies. “Paper Trading” simply means that you find the stocks to invest in and pretend you are buying them

7) Have an exit strategy. The stock market can be tough for beginners. Try to make a plan before buying and stick with it.

 Go over your trades yearly. Try to figure out why the losers lost and you should learn from it so you don’t make the same mistakes next year.

9) Try to at least master technical analysis. It is good to be able to predict the direction of any stock or index with fairly accurate results.

10) Learn how to pick winning stocks. Use a stock picking service if possible. You can find these all over the Internet.

Stock investing tip

In general, when investing in a stock it is easy to become distracted and lose focus. Maybe your stock picks have been going down recently and you are afraid of losing any more money. Maybe you have found another stock that you are interested in buying, but you need to sell your other stock first. Maybe you don’t like the ups and downs associated with investing in an individual stock.

Stock invesment software

There are various stock investment software options on the market today. By investing in the good stock picks which they generate, you can make a great deal of your money in short-term. I would like to recommend going for penny stock specific stock investment software. Some programs only target those cheap stocks because of the high profit potential associated with them. Because of these stocks have cheaper prices, penny stocks are a great deal more potentially profitable overall.

Good stock pick

So many investors and stock beginners today want to know how to find good stock picks for their portfolio. They are always finding for that next hot stick tip that they can make a killing off in the next 30 days of investing. The most common problem with most investors is that they take on a very short term outlook. This is the same of a number of business owners. In both business and stock investing, it’s only a small minority who ever make a significant amount of money. Why is this?

Instead of being committed to a strategy and sticking to it long term, the vast majority become so focused on finding that ‘get rich quick’ scheme they will jump from one stock to the next, and ultimately make very little money at all.

http://thegetwealthy.com/2010/03/stock-market-tip-and-investing-advice/

No turning back: Sterling is going to fall further over coming months, warns Unicredit

Europe's banks brace for UK debt crisis

UniCredit has alerted investors in a client note that Britain is at serious risk of a bond market and sterling debacle and faces even more intractable budget woes than Greece.

By Ambrose Evans-Pritchard, International Business Editor
Published: 8:20PM GMT 11 Mar 2010

Comments 111 | Comment on this article

No turning back: Sterling is going to fall further over coming months, warns Unicredit

The Italian-German group, Europe's second largest bank, said Britain's tax structure will make it hard to raise fresh revenue quickly enough to restore confidence in UK public finances.

"I am becoming convinced that Great Britain is the next country that is going to be pummelled by investors," said Kornelius Purps, Unicredit 's fixed income director and a leading analyst in Germany.

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Mr Purps said the UK had been cushioned at first by low debt levels but the pace of deterioration has been so extreme that the country can no longer count on market tolerance.

"Britain's AAA-rating is highly at risk. The budget deficit is huge at 13pc of GDP and investors are not happy. The outgoing government is inactive due to the election. There will have to be absolute cuts in public salaries or pay, but nobody is talking about that," he told The Daily Telegraph.

"Sterling is going to fall further over coming months. I am not expecting a crash of the gilts market but we may see a further rise in spreads of 30 to 50 basis points."

Yields on 10-year gilts have already crept up to 4.14pc, compared to 3.94pc for Italian bonds, 3.48pc for French bonds, and 3.19pc for German Bunds, though part of this reflects worries about higher inflation in Britain.

Ian Stannard, currency strategist at BNP Paribas, said markets are fretting over how the UK will cover its deficit following the pause in quantitative easing by the Bank of England. The Bank has absorbed £200bn of debt, more than total Treasury issuance over the last year.

"The UK may have difficulty in attracting extra investors to fill the gap. We think they will have to do more QE as recovery falters," he said.

BNP Paribas expects sterling to drop to $1.31 against the dollar this year and reach parity against the euro despite troubles in Club Med. "We're very bearish on the UK," he said.

Big global banks are divided over Britain's economic prospects . Goldman Sachs is betting on a turbo-charged recovery as the delayed effects of sterling devaluation kick in. Britain's trump card is an average debt maturity of 14.1 years, nearly three times US maturities and double those of France. This greatly reduces the risk of a "roll-over" crisis.

UniCredit said Greece is better placed than the UK in coming months even if deficits look comparable. "The polls point to a minority government in the UK, while Greece's government can count on a majority to push austerity measures through parliament. Secondly, the British tax system offers less leverage for a rise in revenue," he said.

Paradoxically, Greek tax evasion creates scope for a surge in revenues from tougher enforcement. "It is not out of the question that we will see a positive surprise in Greece: is there any such hope for Britain?" said Mr Purps.

Still, while it is arguable whether a hung Parliament in Britain will lead to policy drift, analysts said Greece was in trouble already. The country was brought to a standstill on Thursday by the second general strike in weeks. Police clashed with rioters , again reducing Athens to a fog of tear gas. Observers said that did not augur well for a nation that has hardly begun its three-year ordeal of draconian cuts.

http://www.telegraph.co.uk/finance/economics/7423138/Europes-banks-brace-for-UK-debt-crisis.html

How important is critical illness cover?

With one in every five critical illness claims for breast cancer now could be the time to make sure you have the right protection.

By Kara Gammell
Published: 3:56PM BST 01 Oct 2009

Most home buyers purchase life assurance when they arrange a mortgage, but only a minority obtain another form of financial protection that they are five times more likely to need before they reach retirement.

Critical illness assurance pays a tax-free lump sum on diagnosis of any one of a list of serious illnesses – including cancer and heart attacks. Claims statistics suggest you are five times more likely to suffer from one of these than you are to die before you reach 65.

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  Get critical illness cover for peace of mind

The good news is that medical advances mean more people than ever are surviving conditions that might have killed earlier generations. For example, more than 90pc of men diagnosed with testicular cancer are still alive five years later, while more than 80pc of women diagnosed with breast cancer have the same survival rate, according to the Office for National Statistics.

Critical illness cover can provide cash to allow people to pursue a less stressful lifestyle while they recover from illness, or use it for any other purpose. But half of women in Britain have no life assurance, critical illness cover or income protection and a quarter rely on their partner's policies instead, according to a survey by Axa.

But with one in every five claims for critical illness cover for breast cancer, and about 46,000 people diagnosed each year, now is the time to make sure you have the right protection.

Critical illness is relatively cheap and, on the face of it, relatively straightforward. You insure a fixed sum at the outset – usually the outstanding balance on your mortgage – this is paid out on the diagnosis of one of the 30 or so conditions listed on the policy.

But why do very few woman have this protection?

This cover has come in for repeated criticism in recent years as many consumers have complained that insurers rely on complex medical definitions to decide who does and does not get a payout. To be fair to insurers, most have clearly listed the exact nature of the conditions covered in the policy terms and conditions. But to the average healthy consumer, terms such as "in situ carcinoma" or "pre-malignant or non-invasive cancer" are nearly meaningless. Most simply assume that if they have bought a policy it will pay out if they have cancer.

If you bought the policy from an independent financial adviser, they should explain that they only cover certain conditions, and that these conditions have to be of a specified severity to qualify for a payout.

Kevin Carr, spokesman from PruProtect, said: "Breast cancer is covered by critical illness policies, but many policies exclude 'early stage cancer' which is when cancer is considered to be non-invasive. Breast cancer may be considered 'early stage' even if a lumpectomy or mastectomy is required and therefore many insurers will not pay out. The other main exclusions are for certain types of prostate and skin cancer."

However, he said that there are a few insurers such as PruProtect, Axa, Royal Liver and Skandia who look at cases on a severity basis and will pay anything from 10pc to 100pc of the sum assured, depending on the condition.

Prudential takes a slightly different approach with its "serious illness" policy. It will make reduced payments to those with less severe types of breast cancer and other conditions typically not covered on a standard critical illness policy. Those buying a critical illness policy have the option of renewable or guaranteed premiums.

The latter are more expensive, but you know payments will remain level throughout the life of the policy – which may run for 20 years. Renewable premiums may be lower, but prices could rise if, for example, new screening methods result in more claims.

Mr Carr said: "Critics of this system say that it is too confusing for customers, but we disagree. When you break your wing mirror on your car, your car insurer does not pay out the total value of your vehicle. Our system is basic common sense."

Many insurers will have a detailed guide to the illnesses and conditions covered, which will be written clearly. Ask to see this, as well as the document setting out the policy's key features, benefits and exclusions.

Most people buy critical illness cover when they take on a major financial commitment, but it's important not to buy the first policy offered – shop around.

It also pays to start young when premiums will be relatively cheap, rather than leaving it until later in life when the price of cover will start to rise substantially.

Matt Morris, policy adviser at independent financial advisers LifeSearch, said: "Once you take out a critical illness policy, it is not usually worth making any changes to it and you have to be very careful when switching critical illness policies. But if you do, it is crucial you never cancel an existing policy until a new one is in place."

Survivors of cancer who want to take out this type of cover need not pay more than they have to, as Bupa, Fortis, LV= and Zurich will cut a client's premium if they exclude cancer from a policy.

There are more than 200 types of cancer, according to charity Cancer Research UK, and one in three people will develop some form of cancer during their lifetime.

Michael Whyte, chief underwriter for Aviva, said: "Critical illness and life policies are the type of policy nobody wishes to
need to claim against, yet evidence shows that these are vitally important policies that can support families and secure their financial wellbeing during the worst of times."

October is Breast Cancer Awareness Month. To make a donation to Cancer Research UK, call 08701 602040 or send a cheque to: Cancer Research UK, PO Box 1527, Oxford, OX4 9FG

http://www.telegraph.co.uk/finance/personalfinance/insurance/criticalillness/6251215/How-important-is-critical-illness-cover.html