Sub-prime charges rock US confidence: Economy roundup
Friday, June 20, 2008/
The sometimes shady dealings that led to the sub-prime meltdown in the US have been uncovered in an investigation that has resulted in more than 400 people being charged.
Two Bear Stearns hedge fund managers are among the latest industry figures to be charged in the investigations conducted by the FBI and US Department of Justice.
The managers are alleged to have committed fraud by marketing two sub-prime mortgage backed funds as a “low-risk strategy” and making “misrepresentations to stave off investor withdrawal” when they realised the funds were at risk of collapse.
The shock announcement comes as more bad news emerged for the US economy overnight, with the business index prepared by the Philadelphia Reserve Bank dropping from negative 15.6 in May to negative 17.1 in June, disappointing marketing expectations of a slight rise.
And the survey revealed manufacturers are being hit hard by soaring fuel costs, with per-unit production costs hitting their highest levels since 1980.
The grim news has done little to bolster already shaky market confidence in Australia this morning, with the S&P/ASX200 down 0.6% on yesterday’s close to 5331.9 at 12.20pm.
But the US gloom has helped continue the resurgence in the Australian dollar of recent days, lifting it to US95.08c at 12.20pm.
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