... commodity and base metal prices. While the Chinese market plunged more than 5%, markets in ... won will boost its price competitiveness overseas. Chinas Shanghai Composite Index closed down 195.36 points or ...
Thursday, March 27, 2008
Asian Stocks Close Mixed As Pessimism About U.S. Economy Grows
Thomson Financial Europe AM at a glance share guide: Stocks mixed; oil edges up
... seems more capable of handling bad news. FOREX: The dollar was lower against major currencies ... a lacklustre performance on Wall Street overnight. Japan posted the biggest decline as the dollars ... mark revived concerns about export earnings. BONDS: Japanese government bond prices ended Wednesday morning mostly ...
Metals - Gold up as dollar flops, rebound seen after last weeks falls UPDATE
... against the euro this morning as the German Ifo business climate index in March boosted ... from over and any major falls in equity markets are likely to spark another round of ...
Orascom Cons. Inds. - OCI Dividend Payment Details
... RELEASE OCI Cash Dividend Payment Details Cairo, Egypt - 27 March 2008: Orascom Construction Industries ... The company news service from the London Stock Exchange END DIVDGGZFRNKGRZG ...
Wednesday, March 26, 2008
Credit-card crunch, other serious issues, face next president
... East where the oil comes from, the Iraq war has been going on for five ... life. Just watch the Asian and European stock markets reel and rock as a result of ...
Yen lower in Asia as market jitters ease
... weeks," said Yosuke Hosokawa, head of the forex group at Chuo Mitsui Trust Bank. Traders ... reinvigorate demand for high-yielding currencies like the Australian dollar," NAB Capital strategist John Kyriakopoulos wrote ...
Arsenal Energy Inc. Releases Year End Results
... to explore strategic alternatives for the companys Egyptian concession. The process should conclude sometime in ... of availability of qualified personnel or management, stock market volatility, the ability to access sufficient capital ...
Euro surges after Ifo data
... euro, rising energy prices and a declining stock market. It appears we should start believing the ... 0.7 per cent to SFr0.9995 against the Swiss franc. ...
Brazils stocks steady, real weakens on US economy
... SAO PAULO, March 26 (Reuters) - Brazils stock market seesawed near the unchanged mark on Wednesday ... company said it ended takeover talks with Anglo-Swiss rival Xstrata. The national currency weakened as ... emerging market assets. of the Sao Paulo Stock Exchange was 0.09 percent higher at 61,290.72 points. ...
Datang Power Announces 2007 Annual Results
... of the largest independent power producers in China. As at 31 December 2007, the Companys ... The Company has been listed on The Stock Exchange of Hong Kong Limited and the London ... Company has been successfully listed on the Shanghai Stock Exchange since December 2006. Note *: ...
Asian stocks closed mixed as US weighs on sentiment
... Singapore and Wellington were little changed but Tokyo shed 0.30 percent, Shanghai was down 0.63 ... and Bangkok was down 0.33 percent. TOKYO: Japanese share prices ended slightly lower as investors ... the face of continuing volatility on global equity markets," he said, adding "mixed economic data in ...
Asian stocks turn mixed on lackluster Wall Street; yen weighs in Tokyo UPDATE
... in Tokyo UPDATE SINGAPORE (Thomson Financial) - Stock markets across Asia pared early gains to trade ... gains are South Africa, Mexico, Sri Lanka, Pakistan and Taiwan. Investors are understandably cautious in ...
Tuesday, March 25, 2008
Euro Sees Assorted Results Versus Other Majors
... was up against the Japanese yen and Swiss franc and generally even with the dollar, ... low against British pound, with the London Stock Exchange also closed for Easter. The pair moved ...
JP Morgan ups Bear bid to $10 a share
... drop since records began in 1968. The stock market was also buoyed by reports that the ... financial stocks, because of the likelihood of Swiss bank UBS is tipped to embark on ...
Babylon Fund Does Well In Iraq
... portfolio contributed to the rebound, Godvig said, Iraqi bond yields fell, equity prices of oil ... as did banking stocks on the Iraqi stock exchange. No longer the lone foreigners on the ...
Not fast enough
... ownership, at 13 per cent, of any stock market in Europe. The country lags its peers ... hands of foreigners - the UKs Vodafone, Egypts Orascom and Hutchison Whampoa of Hong Kong. ...
City Lodge in R485m BEE deal |
... JSE listed City Lodge Hotels has concluded a ... transaction including its employees, the University of Johannesburgs School of Tourism and Hospitality and the ...
Monday, March 24, 2008
Stocks Rise on Bear Stearns News
Stocks are trading higher with investors more upbeat over a report that Bear Stearns Cos. could fetch more money than the amount set in a buyout deal a week ago.
Global oil prices down on profit taking
Commodity Online SYDNEY: Oil prices fell by $1.50 to near the $100 a barrel mark on Monday, extending last week\s deep losses as funds sought to lock in first quarter profits.
Malawi to maintain growth above 7 pct in 2008 - IMF
BLANTYRE (Reuters) - Malawis real economic growth will remain above seven percent in 2008, boosted by high tobacco prices, aid inflows and fiscal discipline, the International Monetary Fund (IMF) forecast on Sunday.
Saturday, March 22, 2008
Fake gold suspects denied bail in Ethiopia
ADDIS ABABA (Reuters) - Ethiopias federal court denied bail on Friday for 27 suspects in a $17 million fake gold scandal at the countrys central bank.
Banks brace for deepening financial crisis
The rapid demise of Bear Stearns threatens to sap dwindling confidence in the banking system, which has lost liquidity after the collapse of the subprime mortgage market.
Dow up 3.4% for week; is the worst over?
A rally erupts on Wall Street as some analysts say the worst of the credit crisis may be over. Citigroup jumps 11% and leads financial stocks. GE gets an upgrade, but FedEx thinks the outlook is still weak. Markets will close for Good Friday.
Wednesday, March 12, 2008
Humana, Following WellPoint, Cuts Earnings Forecast
(Bloomberg) -- Humana Inc., the second-largest seller of Medicare drug plans, followed rival WellPoint Inc. in cutting its 2008 earnings forecast as prescription costs jumped. The insurer fell the most ever in New York trading.
Humana's revised forecast stems from ``updated projections'' for the company's Medicare prescription drug plans, a stand-alone drug benefit sold to Americans age 65 and older. Humana has been racing UnitedHealth Group Inc., the largest seller of Medicare drug plans, to gain more members and has lowered some prices as a result, analysts said.
Humana, of Louisville, Kentucky, fell 26 percent, or $12.14, to $35.24 at 9:37 a.m. in New York Stock Exchange composite trading. It dropped 24 percent yesterday. The industry selloff that began two days ago continued as WellPoint, UnitedHealth and Aetna Inc. also declined. Investors yesterday cut $24 billion in value from the four biggest U.S. insurers.
``Humana priced their drug plan too low in order to gain market share, and we're seeing the result of that today,'' said Sheryl Skolnick, a CRT Capital Group analyst in Stamford, Connecticut, in a telephone interview. ``They are offering a plan with zero co-pays for a 90-day supply of generics through RightSource, their mail-order. And when you tell seniors something is free, they keep coming back again and again.''
Earnings will range from $4 to $4.25 a share, rather than the $5.35 to $5.55 given on Feb. 4, Humana said in a statement. First-quarter earnings will be 44 cents to 46 cents a share, down from a forecast of 80 cents to 85 cents, the insurer said.
Societe Generale Says Another Employee Held by Police
(Bloomberg) -- Societe Generale SA, the French bank stung by a record trading loss of 4.9 billion euros ($7.6 billion), said a second employee has been taken into police custody as part of the investigation into unauthorized trades.
The headquarters of France's second-biggest bank in La Defense, just outside Paris, were searched by police today, who took some documents, Societe Generale spokeswoman Laura Schalk said in an interview.
The latest development deepens a probe that began after the bank said in January that 31-year-old trader Jerome Kerviel amassed 50 billion euros in trades backed by fake hedges and false documents. Unwinding his bets resulted in the biggest trading loss in banking history and forced Societe Generale to replenish depleted capital.
``It's normal for the investigation to widen, and we will see where this brings us, given that many people said Kerviel could not have acted alone,'' said Arnaud Scarpaci, who helps manage about $235 million at Agilis Gestion SA in Paris. ``At an image level, it's not the best for the company.''
Societe Generale failed to follow up on 75 warnings on bets by Kerviel, independent board members concluded in a report last month. While the board has twice turned down Chairman Daniel Bouton's offer to resign, the document highlighted the shortcomings of Societe Generale's management supervision that allowed Kerviel to forge documents and emails undetected for more than two years.
Unidentified Broker
The Societe Generale employee taken into custody today is the second broker to be questioned in the Kerviel case. Moussa Bakir, a 32-year-old broker at Newedge, was questioned and released last month. Kerviel passed trades through Societe Generale's Fimat unit, which merged in January with Credit Agricole SA's futures brokerage to form Newedge.
The police are questioning the second broker, Isabelle Montagne, a spokeswoman for Paris prosecutors, said today in a telephone interview. She declined to name the broker. She said the broker was taken into custody mid-morning and would be held for 24 hours. The detention could be extended to up to 48 hours.
Kerviel, who admitted to exceeding his trading limits and faking documents to show his bets were covered by hedges, has been interrogated six times since he was incarcerated on Feb. 8. He has been charged with hacking into the bank's computers, falsifying documents and breach of trust.
The latest development comes just two days before a hearing at the Paris appeals court to consider his release.
Monday, March 10, 2008
Blackstone says tough conditions hit results
(Reuters) - Private equity and real estate company Blackstone Group LP (BX.N: Quote, Profile, Research) posted lower-than-expected quarterly results on Monday, citing tough market conditions and a write-down of bond insurer FGIC, and said it did not know when business would improve.
Under a measure known as economic net income (ENI), Blackstone earned a fourth-quarter profit of $128.2 million, or 8 cents a share, compared with a pro forma adjusted figure of $894.9 million, or 72 cents, a year ago.
Analysts polled by Reuters had expected it to report 16 cents a share.
"Lack of available financing in the U.S. and Europe for large leveraged transactions limited our transaction fees," Blackstone's Chairman and Chief Executive Stephen Schwarzman said in a statement. "Difficult market conditions in the U.S. and Europe continue in 2008 and there is little visibility on when these conditions might improve."
The company cited decreases in the value of Blackstone's portfolio investment in Financial Guaranty Insurance Company, which was hit by turmoil in the credit markets, and lower net appreciation of portfolio investments in other sectors as compared with the prior year.
ENI is net income excluding income taxes, noncash charges related to vesting of equity-based compensation and amortization of intangible assets. Blackstone prefers to focus on ENI because of the huge payouts associated with its more than $4 billion initial public offering in June.
On a generally accepted accounting principles basis, Blackstone posted a net loss of $170 million. That compares with net income of $1.18 billion a year earlier.
TIPS' Yields Show Fed Has Lost Control of Inflation
(Bloomberg) -- Bond investors have never been so sure that the Federal Reserve will lose control of inflation. They're so convinced that they're giving up yields just to buy debt securities that protect against rising consumer prices.
The yield on the five-year Treasury Inflation-Protected Security due in 2012 has been negative since Feb. 29, and traded today at minus 0.17 percent. The notes, which were first sold in 1997, have never before traded below zero. Even so, firms from Deutsche Asset Management to Vanguard Group Inc., the second- biggest U.S. mutual fund company, say TIPS are a bargain.
For the first time in a generation, money managers must come to grips with a central bank that's more intent on spurring the economy than restraining price increases. With oil above $100 a barrel, gold approaching $1,000 an ounce and the dollar at a record low against the euro, TIPS show investors aren't convinced Fed Chairman Ben S. Bernanke will be able to tame inflation once policy makers stop cutting interest rates.
``The way TIPS are trading now, investors believe headline inflation will stay lofty and are willing to give up the real yield for that,'' said Brian Brennan, a money manager who helps oversee $11 billion in fixed-income assets at T. Rowe Price Group Inc. based in Baltimore. Prices for the securities indicate ``a real concern of a recession and high headline inflation,'' he said.
Because TIPS pay a principal amount that rises in tandem with the consumer price index, buyers accept lower yields in a bet the inflation adjustment will make up the difference.
Volcker Fed
Investors typically determine what they are willing to receive in interest by deducting the rate of inflation expected over the life of the securities from the rate on a comparable Treasury. Investors can still earn money from TIPS with sub-zero rates because the principal rises with the CPI.
Five-year TIPS yielded 2.36 percentage points less than similar-maturity Treasuries as of 9:14 a.m. in New York. The so- called breakeven rate has risen from a four-and-a-half-month low of 1.89 percent on Jan. 23, the day after policy makers cut their target lending rate by three-quarters of a point to 3.50 percent in an emergency move.
The last time investors were so worried about faster inflation amid slowing growth, Paul A. Volcker presided over a Fed that would raise rates as high as 20 percent to end the stagflation crisis of the 1970s, according to Seth Plunkett, a bond fund manager at American Century Investment Management in Mountain View, California. The firm manages $20 billion.
Fed Forecast
Inflation ``is going to be higher than the Fed's targeted area,'' said Plunkett, whose fund owns a greater percentage of TIPS than contained in the index he uses to measure performance.
In forecasts released last month, the Fed said it expects inflation to accelerate 2.1 percent to 2.4 percent this year, and 1.7 percent to 2 percent in 2009.
TIPS have returned 6.2 percent this year, compared with 3.7 percent from regular Treasuries, according to indexes compiled by Merrill Lynch & Co. Mutual funds that specialize in inflation-linked debt attracted a net $2.87 billion in January, boosting their assets to $47.6 billion, according the latest data available from Financial Research Corp. in Boston. In all of 2007, the funds added a net $3.54 billion.
``TIPS are a really good buy,'' said Bill Chepolis, a money manager who helps oversee $9 billion at Deutsche Asset Management in New York. He bought five-year TIPS in the last six months. ``They're cheap with the Fed continuing to emphasize growth over inflation and inflation continuing to come in higher.''
Hedge Funds Reel From Margin Calls Even on Treasuries
(Bloomberg) -- The hedge-fund industry is reeling from its worst crisis in a decade as banks are now demanding more money pledged to support outstanding loans even when the investment is backed by the full faith and credit of the United States.
Since Feb. 15, at least six hedge funds, totaling more than $5.4 billion, have been forced to liquidate or sell holdings because their lenders -- staggered by almost $190 billion of asset writedowns and credit losses caused by the collapse of the subprime-mortgage market -- raised borrowing rates by as much as 10-fold with new claims for extra collateral.
While lenders are most unsettled by credit consisting of real estate and consumer debt, bankers are now attempting to raise the rates they charge on Treasuries, considered the world's safest securities, because of the price fluctuations in the bond market.
``If you have leverage, you're stuffed,'' said Alex Allen, chief investment officer of London-based Eddington Capital Management Ltd., which has $195 million invested in hedge funds for clients. He likens the crisis to a bank panic turned upside down with bankers, not depositors, concerned they won't get their money back.
The lending crackdown is the worst to hit the $1.9 trillion hedge-fund industry since Russia's debt default in 1998 roiled global credit markets and required the U.S. Federal Reserve to pressure the securities industry to arrange a $3.6 billion bailout of Greenwich, Connecticut-based Long-Term Capital Management LP. Today, hedge funds are being forced to sell assets to meet banks' margin calls, resulting in the dissolution of the funds.
``There has to be more in the next weeks,'' Allen said. ``There are people who have been hanging on by their fingernails who can't hold on much, much longer.''
`Mercy of Counterparties'
Ivan Ross, founder of Westport, Connecticut-based hedge fund Tequesta Capital Advisors, received a call from his bankers on Feb. 22 demanding he put up more money or risk losing his loans. Ross was unable to meet the margin call as the market for mortgage- backed debt seized up, preventing him from selling securities to raise the cash. Four days later, lenders liquidated his $150 million fund.
``Because it's impossible in this environment to move among dealers, you're at the mercy of counterparties,'' said the 45-year- old Ross, who has managed hedge funds for 13 years, including a stint handling mortgage-backed debt for billionaire George Soros. ``To the extent they want to shut you down, they can.''
The demise of Tequesta revealed the deathtrap for hedge funds caught in the credit maelstrom of banks selling mortgage-backed bonds as fast as they can while demanding more collateral from clients who use the securities to back loans.
Carlyle Fund
On Feb. 24, London-based Peloton Partners LLP gave up a ``night and day'' effort to stave off demands from banks, including Goldman Sachs Group Inc. and UBS AG, for as much as 25 percent collateral for securities that once required 10 percent, according to investors in the fund. Peloton, run by former Goldman partners Ron Beller and Geoff Grant, liquidated the $1.8 billion ABS Fund, its largest.
The same day, about 5,000 miles (7,770 kilometers) away in Santa Fe, New Mexico, JPMorgan Chase & Co. told Thornburg Mortgage Inc. that it had defaulted on a $320 million loan because it couldn't meet a $28 million margin call, according to U.S. regulatory filings.
Thornburg, the home lender that lost 93 percent of its market value in the past year, was near collapse March 7 after it failed to meet $610 million of margin calls. Chief Executive Officer Larry Goldstone said in a statement the company fell victim to a ``panic that has gripped the mortgage financing industry.''
Repo Agreements
Carlyle Capital Corp., the debt-investment fund started by private-equity firm Carlyle Group of Washington, was suspended from trading in Amsterdam on March 7 after it couldn't meet margin calls, and its banks seized and sold assets.
``Banks are reducing exposure anywhere they can and the shortest way to do that is to cut leverage,'' said John Godden, chief executive officer of London-based hedge-fund consultant IGS AIS LLP.
Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.
The managers that trade fixed-income securities generally borrow money through repurchase agreements, or repos. In a repo, the security itself is used as collateral, just as a homeowner puts up the house as collateral for a mortgage.
Thursday, March 6, 2008
ECB holds rates, seen forecasting lower growth
(Reuters) - The European Central Bank kept euro zone interest rates unchanged at 4.0 percent on Thursday, and will publish updated economic forecasts which analysts will scrutinize for guidance on future monetary policy.
ECB President Jean-Claude Trichet is due to comment on the competing threats of high euro zone inflation and slower growth at 1330 GMT when he holds his monthly news conference and delivers a quarterly update to the bank's economic projections.
All 72 economists polled by Reuters last week expected the ECB to keep rates on hold this month for a ninth month in a row <ECB/INT>, and the euro was little moved versus the dollar <EUR=>, despite hitting a record high of $1.5349 earlier in the day.
Economists expect ECB staff to forecast lower growth but higher inflation for this year and possibly for 2009, highlighting the Governing Council's dilemma as food and energy prices climb. It is not helped by the strong euro, which holds back inflation but also hampers growth.
Annual inflation in the 15-nation region hit a record high of 3.2 percent in January and February, dampening expectations that the ECB would soon follow other major central banks and loosen monetary policy.
Many economists believe the inflation projections will be revised up. BNP Paribas economist Ken Wattret said he expected the 2009 forecast to be raised to 1.9 or 2.0 percent from the current midpoint forecast of 1.8 percent.
A worsening inflation outlook would make it difficult for the ECB to justify lower interest rates, and mixed economic data and high uncertainty will color the discussion.
Wal-Mart February same-store sales up 2.6 pct
(Reuters) - Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research) on Thursday reported a 2.6 percent rise in sales, excluding fuel, at U.S. stores open at least a year in February.
Analysts, on average, were expecting the company to report a rise of 1.1 percent, according to Reuters Estimates, while the company had forecast same-store sales to be between flat and up 2 percent.
Ambac to Sell Half the Company, Bet May Not Pay Off
(Bloomberg) -- Ambac Financial Group Inc., the bond insurer seeking capital to salvage its AAA credit rating, will sell half the company in a bet some investors say won't pay off.
Ambac said yesterday it plans to issue $1 billion of common stock, more than doubling the number of shares outstanding. The New York-based company will also offer $500 million of units that convert to shares in 2011.
Investors had anticipated Ambac would be bailed out by banks, which would backstop a capital raising of as much as $3 billion, enough to overcome record losses on subprime-mortgage debt. Instead, the company announced it would raise half that amount in a transaction that would dilute existing shareholders, sending Ambac down 19 percent in New York Stock Exchange trading.
``The new offering is highly diluting to existing shareholders,'' Jim Ryan, an insurance analyst at Morningstar Inc. said in an interview with Bloomberg Television. ``The market was looking for a backstop, to say the least.''
The sale of common stock, managed by Credit Suisse Group, Citigroup Inc., Bank of America Corp. and UBS AG, is scheduled for tonight, according to data compiled by Bloomberg.
Ambac fell 26 cents to $8.44 in early New York Stock Exchange composite trading. The shares have tumbled 90 percent in the past year, reducing the company's market value to $884 million.
Abandoned Plan
By proposing a sale of common shares, Ambac is reverting to a plan it abandoned in mid-January. The company announced a $1 billion sale Jan. 16, sparking a 70 percent plunge in its stock, and canceled the offering Jan. 18.
Ambac cut its dividend to 1 cent from 21 cents a share and said it will suspend writing guarantees on debt, including mortgage-backed bonds. The combined plans will probably bolster capital enough for an AAA rating, Moody's and S&P said yesterday.
Stock investors were ``expecting something different in terms of some type of a more orchestrated event that looked less like a conventional offering of common stock and more like a carefully crafted infusion from business partners,'' said Colin Glinsman, who oversees about $25 billion as chief investment officer at Oppenheimer Capital in New York.
Credit-default swaps tied to Ambac's AAA rated insurance unit rose 38 basis points to 513 basis points from 475 basis points before the announcement, according to CMA Datavision in London. A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
CDO Losses
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.
Ambac, its larger competitor MBIA Inc., and the rest of the industry stumbled after expanding beyond municipal insurance to guarantees on collateralized debt obligations that have since tumbled in value. Bond insurers with AAA ratings have guaranteed $2.4 trillion of debt.
The loss of Ambac's top rating would cast doubt on $556 billion of municipal and asset-backed securities insured by the company, forcing some investors to sell the debt and others to reduce their holdings.
Ambac, which pioneered municipal bond insurance in 1971, and the rest of the industry are reeling from their expansion into CDOs, which package pools of securities then split them into pieces with different ratings.
Tuesday, March 4, 2008
Bernanke Urges Banks to Forgive Portion of Mortgages
(Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, battling the worst housing recession in a quarter century, urged lenders to forgive portions of mortgages for more borrowers whose home values have declined.
``Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping, but more can, and should, be done,'' Bernanke said in a speech in Orlando, Florida today. ``Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure.''
Bernanke's call goes beyond the stance of the Bush administration and previous Fed comments. By comparison, the central bank's Feb. 27 report to Congress called for lenders to ``pursue prudent loan workouts'' through means such as modifying mortgage terms and deferring payments.
``Delinquencies and foreclosures likely will continue to rise for a while longer,'' Bernanke said in the comments to the Independent Community Bankers of America. ``Supply-demand imbalances in many housing markets suggest that some further declines in house prices are likely.''
Subprime borrowers are about to see their mortgage rates increase more than 1 percentage point, he said. ``Declines in short-term interest rates and initiatives involving rate freezes will reduce the impact somewhat, but interest-rate resets will nevertheless impose stress on many households.''
`Vigorous Response'
In the past, homeowners could refinance, though that option is now ``largely'' gone because sales of bonds backed by subprime mortgages ``have virtually halted,'' Bernanke said. ``This situation calls for a vigorous response.''
Bernanke didn't comment in his speech text on the outlook for the economy or interest rates. Traders expect the Federal Open Market Committee to lower the benchmark rate by 0.75 percentage point by or at the panel's next meeting on March 18, based on futures prices.
Bernanke signaled in congressional testimony last week that the Fed is prepared to lower rates again even amid signs of accelerating inflation.
Yesterday, the Fed and other regulators sent letters to institutions they supervise, encouraging the banks to report on their efforts to modify mortgages at risk of default.
``This will make it easier for regulators, the mortgage industry, lawmakers and homeowners to assess the effectiveness of these efforts,'' Fed Governor Randall Kroszner said in a statement yesterday.
Foreclosures Climb
The number of U.S. homeowners entering foreclosure rose 75 percent in 2007, with more than 1 percent in some stage of foreclosure during the year, according to RealtyTrac Inc. of Irvine, California. For the year, more than 2.2 million default notices, auction notices and bank repossessions were reported on about 1.3 million properties.
``Lenders tell us that they are reluctant to write down principal,'' Bernanke said. ``They say that if they were to write down the principal and house prices were to fall further, they could feel pressured to write down principal again.''
The Fed chairman countered that by reducing the amount of the loan, this ``may increase the expected payoff by reducing the risk of default and foreclosure.''
Bernanke spoke in a state that's among the worst affected by the housing collapse. Miami home prices have dropped 17.5 percent in the past year, the most of 20 large U.S. cities, according to the S&P/Case-Shiller index. Foreclosures in Florida jumped at more than double the nationwide pace, rising 158 percent in the past year, according to RealtyTrac.
MGIC Plans Stock Sale to Bolster Mortgage Insurance
(Bloomberg) -- MGIC Investment Corp., the largest U.S. mortgage insurer, said it will sell shares to increase capital.
Part of the money raised will be used to boost sales, the Milwaukee-based company said late yesterday in a statement. MGIC plans to decide on the size of the stock offering by ``mid to late March,'' and the company may consider other ways of raising capital, it said.
MGIC needs to raise capital to avoid a downgrade of its claims-paying ability after a record fourth-quarter loss of $1.47 billion, Fitch Ratings said Feb. 25. The insurer said Feb. 13 it hired an adviser to help raise money.
Mortgage insurers, which reimburse lenders when borrowers don't repay their debt, are facing a surge in claims amid the worst housing slump in 25 years.
Canada Cuts Rate a Half Point, Signals More Is Needed
(Bloomberg) -- The Bank of Canada cut its benchmark interest rate a half point, the first such move since 2001, and signaled it will have to act again to offset a slump in exports to the U.S.
Mark Carney, in his first decision as governor, cut the target rate for overnight loans between commercial banks to 3.5 percent, the lowest since March 2006. Thirteen of 26 economists surveyed by Bloomberg News predicted the move.
``Further monetary stimulus is likely to be required in the near term,'' the central bank said today in a statement from Ottawa. Signs of economic slowdown in Canada are ``materializing and, in some respects, intensifying.''
Tumbling exports to the U.S. will limit 2008 economic growth to a seven-year low of 1.8 percent, the central bank says, and have erased the country's broad trade surplus for the first time since 1999. The bigger rate cut today also helps catch up with moves this year by the U.S. Federal Reserve, and may slow the Canadian dollar's advance that has battered manufacturers.
``There are clear signs that the U.S. economy is likely to experience a deeper and more prolonged slowdown than had been projected,'' which will have ``significant spillover effects on the global economy,'' the Bank of Canada said today.
Canada's decision comes two days before meetings of the Bank of England, and the European Central Bank, where economists predict policy makers will keep rates unchanged.
Further Cuts
``With further rate cuts clearly needed to insure against the downside risks from a rapidly softening U.S. economy, and since monetary policy acts with a lag, we see no reason for the Bank of Canada to wait,'' Jacqui Douglas, economics strategist at TD Securities in Toronto, said before the decision.
The Fed is expected to cut borrowing costs again on March 18. Canada's benchmark is now half a point greater than that of the U.S., narrowing what was the biggest gap since June 2004. That premium has helped keep Canada's currency close to a record high.
The currency rose to a record 90.58 Canadian cents per U.S. dollar on Nov. 7 and has gained 26 percent in three years. Today it weakened 0.3 percent to 99.32 Canadian cents per U.S. dollar at 9:19 a.m. in Toronto.
Canada sends about three-quarters of its exports to the U.S., making the two countries the world's biggest trading partners, and the high dollar makes those goods less competitive. The U.S. economic woes have sapped demand for Canadian lumber and automobiles, two of the five biggest exports.
Monday, February 25, 2008
Citigroup May Post First-Quarter Loss, Whitney Says
(Bloomberg) -- Citigroup Inc., the biggest U.S. bank by assets, may post its second-straight quarterly loss because of writedowns on home-equity loans and junk-grade corporate loans, Oppenheimer & Co.'s Meredith Whitney said.
The bank may post a loss of $1.6 billion, or 28 cents a share, for the first quarter, compared with a profit of about $5 billion, or $1.01, a year earlier, Whitney wrote today in a note to clients. The prediction compares with the 63-cents per share average of 12 analyst estimates surveyed by Bloomberg.
The rate of loan losses is ``grossly underestimated by consensus estimates'' at Citigroup and other U.S. banks, Whitney wrote. ``Core fundamentals are rapidly deteriorating.'' She cut her per-share estimate for 2008 earnings by more than 70 percent to 75 cents. The New York-based company's shares could fall more than 36 percent to less than $16, she wrote. They've declined about 15 percent this year.
Citigroup posted a $9.8 billion loss for the fourth quarter, the widest in its 196-year history, after writing down subprime mortgage-linked collateralized debt obligations whose value plummeted last year as investors shunned securities linked to the least creditworthy borrowers. Vikram Pandit stepped in as chief executive officer in December, after Charles O. ``Chuck'' Prince was forced to resign.
Whitney was among the first analysts to gauge the depth of Citigroup's losses, writing in a note last October that the bank may have to cut dividend payments to shareholders for the first time since the 1990s. In January, the bank slashed its dividend by 41 percent, reversing a pledge made by its executive- committee chairman, former U.S. Treasury Secretary Robert Rubin, to preserve the shareholder payout.
Stocks Advance in Europe, Asia, Led by UBS; U.S. Futures Fall
(Bloomberg) -- Stocks gained in Europe and Asia, led by financial companies, on speculation bond insurers will avoid a cut in their credit ratings and limit further losses related to subprime mortgages. U.S. index futures declined.
UBS AG and BNP Paribas SA led banks higher in Europe, while Millea Holdings Inc., Japan's biggest insurer, and Commonwealth Bank of Australia climbed in Asia. Royal Bank of Scotland Group Plc gained on expectations Qatar Investment Authority may buy a stake, while Alliance & Leicester Plc jumped on speculation it may get a bid from Lloyds TSB Group Plc.
The MSCI World Index gained 0.7 percent to 1,458.88 as of 1:24 p.m. in London, while Standard & Poor's 500 Index futures slipped 0.1 percent. The MSCI World Financials Index jumped 1.3 percent, the most in almost two weeks, as investors speculated Ambac Financial Group Inc. may get new capital.
``We're making our way toward a rescue plan for Ambac,'' said Salah Seddik, who helps oversee $5.9 billion at Richelieu Finance in Paris. ``This is reassuring and good news for financial stocks. It means that in terms of writedowns, the worst is behind us.''
Speculation that companies in the bond-insurance industry may not be able to maintain the AAA credit ratings they rely on to insure about $2.4 trillion in securities has contributed to an 8.1 percent decline in the MSCI World this year.
Europe's Dow Jones Stoxx 600 Index advanced 1.3 percent, with all 18 national markets gaining. Germany's DAX added 1 percent, while France's CAC 40 rose 1.5 percent. The U.K.'s FTSE 100 jumped 1.4 percent.
Asian Indexes
The MSCI Asia Pacific Index climbed 1.4 percent. Japan's Nikkei 225 Stock Average increased 3.1 percent to 13,914.57, the highest close since Jan. 15.
UBS, Europe's largest bank by assets, rallied 2.5 percent to 36.58 Swiss francs. BNP Paribas, France's biggest bank, advanced 4.3 percent to 63.84 euros. Deutsche Bank AG, Germany's largest lender, gained 1.9 percent to 75.79 euros.
Millea jumped 8.9 percent to 4,030 yen, the most since Oct. 2. Commonwealth Bank, Australia's biggest mortgage lender, rose 4.9 percent to A$44.67.
Ambac may get $3 billion in new capital as part of a rescue agreement with banks, according to a person with knowledge of the discussions. Ambac spokeswoman Vandana Sharma declined to comment specifically on the discussions.
Bailout Plan
Stocks climbed in late trading in the U.S. on Feb. 22 after CNBC on-air editor Charles Gasparino said that a bailout may be announced this week, citing bankers working on the deal. Gasparino also said ``the entire deal could fall apart.''
``The efforts to prevent Ambac from collapsing will push the market up today, particularly financial stocks,'' said Erhan Aslan, a sales trader at Concord Investmentbank AG in Frankfurt.
Royal Bank of Scotland rallied 6.2 percent to 401.5 pence. The Qatari government is considering an investment in the U.K.'s second-largest bank, the Sunday Telegraph Business reported, citing unidentified people with knowledge of the matter.
Alliance & Leicester gained 7.4 percent to 547.5 pence, and Bradford & Bingley Plc jumped 7.2 percent to 202 pence.
Lloyds TSB, the biggest U.K. provider of personal loans, is in the ``early stages'' of assessing approaches to smaller rivals Alliance & Leicester and Bradford & Bingley, the Sunday Telegraph reported, citing unidentified people close to the bank.
Thursday, February 21, 2008
SocGen in record loss, may take new writedowns
(Reuters) - Societe Generale (SOGN.PA: Quote, Profile, Research) confirmed a record fourth-quarter loss of 3.35 billion euros ($4.93 billion) after absorbing a huge rogue trading scandal that has made France's second-biggest listed bank a potential takeover target.
The loss coincided with an internal report acknowledging that better systems might have prevented the costly stock market gambles it blames on junior trader Jerome Kerviel.
SocGen, like many of the world's top banks, has also been hit by losses related to a global credit crunch and the bank warned it may make further writedowns in the future.
Executive Chairman Daniel Bouton told Reuters the 144-year-old firm was determined to ride out the storm as an independent bank, despite reports of a potential bid from long-time suitor and arch-rival BNP Paribas (BNPP.PA: Quote, Profile, Research).
"I am completely determined to continue with our strategy because, even taking into account our very bad year in 2007 due to the financial crisis and this fraud, it's this strategy which creates and will create the most value for shareholders," Bouton said in an interview. "This is my opinion, and it's one that's backed by the board."
SocGen's fourth-quarter net loss compared with a 1.18 billion euro profit a year earlier and a fourth-quarter profit of 1.0 billion euros unveiled by rival BNP Paribas, although BNP Paribas' results were down from the year before.
SocGen cut its 2007 dividend to 0.90 euro from 5.20 euros.
Microsoft to open up some key software blueprints
(Reuters) - Microsoft Corp said on Thursday that it would make key technology elements of some of its best-selling software products widely available to boost interoperability of its software with that of competitors and customers.
To make connecting Microsoft products with third-party software products easier, Microsoft will publish on its Web site key software blueprints, known as application program interfaces, pertaining to its high-volume products used by other Microsoft products.
Microsoft also pledged not to sue open-source developers for development or noncommercial distribution of those software blueprints.
In January, the European Commission launched new antitrust investigations into Microsoft to see whether the company broke competition rules to help its Web browser and its Office and Outlook products.
Microsoft to Change Technology Practices in Bid to Appease EU
(Bloomberg) -- Microsoft Corp., the world's biggest software maker, announced a series of changes in its technology and in how much information it gives developers about its products, in a bid to satisfy European regulators.
Wednesday, February 20, 2008
Sharper Image Files for Bankruptcy Following Losses
(Bloomberg) -- Sharper Image Corp., the seller of $300 electric shavers and $1,999 massage chairs, filed for bankruptcy protection after losing money in 11 of the last 13 quarters.
The 31-year-old retailer will shed 90 stores while it deals with a ``severe liquidity crisis,'' Chief Financial Officer Rebecca Roedell said in papers filed last night in U.S. Bankruptcy Court in Wilmington, Delaware. Sharper Image has lost more than $135 million since early 2005 on bad publicity stemming from lawsuits over its Ionic Breeze air purifiers and ``ever-tightening'' credit markets, the company said.
Former Chairman Richard Thalheimer founded Sharper Image in 1977 and built it into a company with 184 stores by selling gadgets such as the Ionic Breeze and $100 shaving mirrors. By January, sales had fallen every quarter for three years, and the San Francisco-based retailer brought in turnaround specialists to run the company last week.
The chain ousted Thalheimer, 59, in 2006 after losing more than three-quarters of its stock market value. Sharper Image, which peaked at $39.98 in February 2004, traded at 40 cents at 11:39 a.m. in Nasdaq Stock Market composite trading.
The company listed assets of $251.5 million and debt of $199 million and is in negotiations to sell its most unprofitable stores and inventory. It competes with Brookstone Inc. and New York-based Hammacher Schlemmer.
Another retailer, Virginia Beach, Virginia-based catalog company Lillian Vernon Corp., also filed for bankruptcy protection with a plan to sell its assets to help pay creditors.
KKR Financial Delays Repayments, Starts Negotiations
(Bloomberg) -- KKR Financial Holdings LLC, Kohlberg Kravis Roberts & Co.'s only publicly traded fixed-income fund, delayed repaying debt a second time in six months after failing to find buyers for commercial paper backed by mortgages.
Lenders to the fund agreed to the delay as KKR Financial seeks to restructure, the San Francisco-based company said yesterday in a regulatory filing. KKR Financial, whose stock has fallen 50 percent in the past year, didn't say how much debt is affected.
The announcement rekindled concerns that the decline in the market for short-term asset-backed debt, which totaled $1.2 trillion in August, will accelerate after a rebound early last month. Assets fell to $796 billion in the week ended Feb. 13, the third weekly drop. Standard & Poor's downgraded ratings on notes issued by KKR Pacific Funding Trust last week, citing uncertain pricing on the AAA rated securities that support them.
``The picture is getting worse and worse,'' said Felix Freund, who helps manage the equivalent of $14.7 billion of fixed-income securities at Frankfurt-based Union Investment GmbH. KKR Financial's second repayment extension ``shows there is still a lot of levered investments in the credit market that we can't see.''
About half the debt will be due by March 3 instead of Feb. 15, with the rest owed on March 25, according to the filing.
The talks come less than six months after the fund received a $230 million cash infusion from investors following losses on residential mortgages in the wake of the U.S. subprime crisis. The fund, led by Chief Executive Officer Saturnino Fanlo, raised a further $270 million in a rights offering with some of New York-based KKR's own partners buying shares in it, which had $19 billion of assets at the end of December.
Repricing `Driver'
The deferral drove investors to seek the security of government debt, sending 10-year Japanese bonds to the biggest gain in two weeks while perceived corporate risk in Asia and Europe soared. Contracts on Europe's Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 26.5 basis points to 611.5 today, according to Deutsche Bank AG. A basis point is 0.01 percentage point.
``The driver behind the current repricing is KKR Financial Holdings delaying repayment of CP for the second time,'' analysts led by Mark Harmer, head of credit research at ING Groep NV, said in a note to clients today.
KKR Financial fell 30 cents, or 2.1 percent, to $14.23 at 11:44 a.m. in New York Stock Exchange composite trading. Zoe Watt, a spokeswoman for KKR in London, declined to comment.
IPO
Kohlberg Kravis Roberts, the New York-based investment firm run by Henry Kravis and George Roberts, raised $800 million in KKR Financial's initial public offering in June 2005, selling the shares for $24 apiece. The fund raised money by selling commercial paper to invest in mortgages. It sold almost half of its mortgage loans in August as prices on bonds linked to U.S. home loans started to drop, leaving it with about $5.3 billion of mortgages.
Both Kravis and Roberts sit on KKR Financial's six-member investment committee, alongside KKR Partner Scott Nuttall, KKR Financial's Fanlo and Chief Operating Officer David Netjes.
Kravis and Roberts started the firm with Jerome Kohlberg, their colleague from Bear Stearns Cos., in 1976. Kohlberg left in 1987 and started his own buyout group, Kohlberg & Co. LLC. The private-equity business owns more than 42 companies with more than $180 billion of annual revenue and about 800,000 workers around the world. The firm's investments range from Alliance Boots Ltd. in the U.K. to Texas power producer TXU Corp., now known as Energy Future Holdings Corp.
U.S. Economy: Housing Slump Fails to Quell Inflation
(Bloomberg) -- The two-year housing slump pushing the U.S. economy toward a recession hasn't alleviated inflation pressures, reports today showed.
Consumer prices rose 0.4 percent from December, with costs excluding food and energy climbing 0.3 percent, the most since June 2006, the Labor Department said. Builders started work on 1.012 million homes at an annual rate in January, close to a 16- year low, the Commerce Department reported in Washington.
The figures mean Federal Reserve Chairman Ben S. Bernanke will need to consider raising interest rates as soon as the economy stabilizes. Bernanke, who last week said the Fed is prepared to keep lowering interest rates, warned that faster inflation would ``greatly complicate'' the central bank's job.
``What this means is that they don't have as much comfort to play with rates,'' Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said on Bloomberg Television, referring to Fed officials. ``Once the U.S. economy looks like it's started to stabilize, they're going to have to jump right back in to that, raising rates back up to neutral.''
Treasury securities slumped after the consumer price report, while recouping most of the losses later. Ten-year note yields increased to 3.93 percent at 9:54 a.m. in New York from 3.90 percent late yesterday. The Standard & Poor's 500 stock index lost 0.8 percent, to 1,337.97.
Lowest Since 1991
Building permits, an indication of future construction, fell 3 percent to a 1.048 million rate, the lowest level since November 1991, today's Commerce report showed.
Housing starts were projected to rise to a 1.01 million pace from an originally reported 1.006 million rate in December, according to the median forecast in a Bloomberg survey of 72 economists. Permits were forecast to drop to a 1.05 million rate, from 1.068 million in December.
``We don't think housing has hit bottom yet,'' said Douglas Porter, deputy chief economist at BMO Capital Markets in Toronto. ``Until we get some stabilization in sales or even a mild improvement, it's likely that construction will continue to weaken.''
A jump in food and energy costs, rents and clothing prices led the consumer-price index higher last month. Economists had forecast a 0.3 percent increase, with the so-called core rate gaining 0.2 percent, Bloomberg surveys showed.
Today's price report ``certainly showed a broad-based intensification of inflation pressures,'' said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. While the Fed currently ``is looking at growth,'' inflation ``will come back on the radar screen'' when economic data improve, he said.
Food Costs
Food prices, which account for about one-seventh of the CPI, rose 0.7 percent, matching the biggest gain since May 2004, after a 0.1 percent increase in January. Energy prices last month increased 0.7 percent, after rising 1.7 percent the previous month.
``Even if energy prices remain flat, the continued rise in retail food prices will damp consumer spending growth,'' JPMorgan Chase & Co. economists wrote in a note to clients last week.
Fuel costs were up 4.5 percent. Apparel prices rose 0.4 percent after a 0.1 percent increase in December.
The consumer price index is the government's broadest gauge of costs for goods and services. Almost 60 percent of the CPI covers prices that consumers pay for services ranging from medical visits to airline fares and movie tickets.
Tuesday, February 19, 2008
U.S. Stocks Rise, Led by Energy Companies; European Shares Gain
(Bloomberg) -- U.S. stocks rose, led by energy and mining companies, after oil gained for the seventh time in eight days and copper climbed to a four-month high.
Exxon Mobil Corp., the biggest U.S. fuel company, and Freeport-McMoRan Copper & Gold Inc., the world's second-largest copper producer, advanced. Wal-Mart Stores Inc., the biggest retailer, increased after fourth-quarter profit topped analysts' estimates. Rallies in raw-materials producers lifted Asia's stock benchmark to a two-week high, while European shares rebounded from earlier losses as insurers rose.
The Standard & Poor's 500 Index added 14.13 points, or 1.1 percent, to 1,364.12 as of 9:41 a.m. in New York. The Dow Jones Industrial Average rose 121.63, or 1 percent, to 12,469.84. The Nasdaq Composite Index gained 22.46, or 1 percent, to 2,344.26. The U.S. market was closed yesterday for Presidents' Day.
``The general earnings picture is quite good,'' said Lincoln Anderson, the Boston-based chief investment officer of LPL Financial Services, which helps oversee about $271 billion. ``U.S. stocks are sort of on sale.''
Fourth-quarter profit for the S&P 500's 412 members that have reported results dropped by an average 19 percent, data compiled by Bloomberg show. Excluding financial companies, earnings climbed 18 percent. The S&P 500 trades at 13.9 times its members' estimated 2008 profit, based on analysts' projections compiled by Bloomberg. Index members last traded at a valuation of less than 14 times historic earnings in 1990.
Weekly Gain
The S&P 500 rose last week for the third time in a month after the biggest jump in oil since November lifted energy producers, and earnings from consumer companies exceeded analysts' estimates.
The MSCI Asia Pacific Index gained 1.6 percent today to a two-week high as Rio Tinto Group said it's seeking a bigger price increase for its iron ore from steelmakers than the 65 percent obtained by a rival.
Europe's Dow Jones Stoxx 600 Index rose 0.9 percent after earlier declining as much as 1.3 percent. A gauge of insurers added 2.1 percent for the biggest gain among 18 industry groups.
Staples in 2.5 bln euro offer for Corp. Express
(Reuters) - U.S. office goods supplier Staples proposed a 7.25 euros per share offer for Dutch peer Corporate Express on Tuesday, valuing the company at around 2.5 billion euros ($3.68 billion).
Ending months of speculation about a possible bid, Staples said its all-cash offer represented a premium of around 67 percent to Corporate Express' closing price of February 4. Shares in Corporate Express jumped 33 percent on the news.
Corporate Express, one of the world's largest office products wholesalers, has been under pressure from hedge funds to put itself up for sale after losses in the United States, its key market. It was not immediately available to comment.
"Staples has high regard for the Corporate Express management team, and believes together our combined companies will create significant opportunities for all stakeholders," said Ron Sargent, Staples chairman and chief executive.
Monday, February 18, 2008
Bayer stops late-stage Nexavar trial
(Reuters) - Bayer HealthCare, a U.S.-based unit of Bayer AG (BAYG.DE: Quote, Profile, Research), stopped a late-stage trial of Nexavar in patients with non-small cell lung cancer, after an independent data monitoring committee concluded that the study would not meet the main goal of improved overall survival.
In the late-stage study, patients received Nexavar in combination with chemotherapeutic drugs carboplatin and paclitaxel.
Bayer said higher mortality was observed in a certain subset of patients treated with the combination of Nexavar and the chemotherapeutic drugs, versus those treated with carboplatin and paclitaxel alone.
Bayer and co-developer Onyx Pharmaceuticals Inc (ONXX.O: Quote, Profile, Research) will review the findings of the analysis to determine what, if any, impact they have on other ongoing Nexavar lung cancer trials.
Northern Rock a lingering risk to Brown's future
(Reuters) - Nationalizing ailing Northern Rock bank may be the best option left to British Prime Minister Gordon Brown, but lingering doubts over its future risk chipping away at public confidence in the run up to the next election.
Hopes for a fast Northern Rock turnaround are hostage to financial markets stabilizing, a buoyant housing market returning and approval for nationalization from the European Union that does not result in a breakup and big job losses.
Brown has staked his credibility on protecting Britain from the fallout of the global credit crisis. But with the economy and the housing market slowing, he will be in the firing line if things get worse and the public looks for someone to blame.
And if those with Northern Rock mortgages get houses repossessed in a downturn, the chances are high that newspapers hostile to the ruling Labour government will use their headlines to attack Brown's policies.
So just as the Iraq war and a scandal over political party funding dogged former Prime Minister Tony Blair until he finally threw in the towel last year, so Northern Rock risks becoming a millstone for Brown.
"It was interesting that Brown was saying the test for the government is economic stability as there are no guarantees it would pass that test given the turmoil could still pass through to the economy," said Philip Shaw, chief economist at banking group Investec.
Bayer, Onyx Stop Cancer Trial on Higher Death Rate
(Bloomberg) -- Bayer AG, Germany's biggest drugmaker, and U.S. partner Onyx Pharmaceuticals Inc. stopped a late-stage test of their Nexavar cancer drug in lung tumors because of a higher death rate among some of the patients.
An independent committee that monitors trials advised the companies that the treatment wouldn't meet the main goal of the test, Leverkusen-based Bayer said today in a statement on PRNewswire.
Friday, February 15, 2008
New York Fed Manufacturing Index Dropped to -11.7 in February
(Bloomberg) -- Manufacturing in New York unexpectedly contracted this month for the first time in almost three years as new orders and shipments declined.
The Federal Reserve Bank of New York's general economic index fell to minus 11.7, the first negative reading since May 2005, from 9.0 in January, the bank said today. Readings below zero signal contraction. The New York Fed's index averaged 17.2 in 2007.
The worst housing slump in a quarter century and cutbacks at U.S. automakers are weakening manufacturing and helping to push the broader economy toward a recession. Fed Chairman Ben S. Bernanke yesterday told lawmakers that the central bank will act in a ``timely'' manner to help growth, after already cutting the benchmark interest rate 2.25 percentage points since September.
``Prospects for manufacturing are shaky,'' Robert Dye, a senior economist at PNC Financial Services Group Inc. in Pittsburgh, Pennsylvania, said before the report.``We are relying on strong exports but I'm not convinced that will hold up indefinitely. We expect to see capital spending softening.''
Economists forecast the New York manufacturing index would fall to 6.5 in February, according to the median of 49 estimates in a Bloomberg News survey. Projections ranged from minus 1.2 to 11.6.
The New York Fed's measure of new orders fell to minus 11.9 from 0.0 the prior month, and a measure of shipments dropped to minus 4.9 from 15.8 in January.
Inventory Gauge
A gauge of unfilled orders decreased to minus 1.1 from 1.2, while the index of inventories was unchanged in February after a minus 4.9 reading the month before.
The employment index fell to minus 2.1 from a positive 2.4 a month earlier, the New York Fed said. An index of prices paid rose to 47.4 from 40.2, while a gauge of prices received fell to 17.9 from 18.3.
The report provides one of the month's earliest clues to the state of manufacturing nationwide. Similar data for the Philadelphia region will be released Feb. 21. New York's economy is less vulnerable to the auto slump and more exposed to financial services and trade, economists said.
The index measuring the manufacturing outlook for six months from now rose to 22.7 from 19.4, today's report showed.
Banks at Risk From $203 Billion Writedowns, Says UBS
(Bloomberg) -- The world's banks ``remain at risk'' of up to $203 billion in additional writedowns, largely because the bond insurance crisis could worsen, UBS AG said.
``Banks have made progress in credit-market related writedowns,'' London-based UBS analyst Philip Finch said in a note to investors today. ``But more are expected,'' he added.
Writedowns for collateralized debt obligations and subprime related losses already total $150 billion, Finch estimated. That could rise by a further $120 billion for CDOs, $50 billion for structured investment vehicles, $18 billion for commercial mortgage-backed securities and $15 billion for leveraged buyouts, UBS said. ``Risks are rising and spreading and liquidity conditions are still far from normal,'' the note said.
U.S. monoline insurers MBIA Inc. and Ambac Financial Group Inc. are struggling to maintain the AAA ratings on their insurance units because of losses on residential mortgages, exposing banks to possible writedowns on CDOs guaranteed by the insurers. Monoline insurers guarantee the repayment of bond principal and interest in the event of defaults.
Ambac was the first monoline insurer to ever be downgraded when Fitch Ratings cut it to AA from AAA in January, citing ``significant uncertainty'' over the insurer's business model.
Thursday, February 14, 2008
MagtigeMoer.moermagtig2@blogger.com, MagtigeMoer.moermagtig9@blogger.com, MagtigeMoer.moermagtig6@blogger.com
(Reuters) - Federal Reserve Chairman Ben Bernanke said on Thursday the central bank will act as needed to help the struggling economy, but said the Fed has to be mindful that growth should pick up later in the year.
"The (Federal Open Market Committee) will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," Bernanke said in remarks prepared for delivery to the Senate Banking Committee.
Wednesday, February 13, 2008
YRC to cut 1,100 jobs
(Reuters) - North America's largest trucking company, YRC Worldwide Inc (YRCW.O: Quote, Profile, Research), said on Wednesday that as part of its plans to shut 27 service centers it will cut approximately 1,100 jobs.
In a presentation to analysts that was filed with the U.S. Securities and Exchange Commission, Chief Executive Bill Zollars said the company expects cash proceeds from property sales of between $8 million to $10 million.
YRC said that as part of the restructuring plan more than 600 trucks and 1,200 trailers would be removed from its fleet.
Global Confidence Weakens for Third Month on Slowdown
(Bloomberg) -- Confidence in the global economy fell for a third month in February as the slowdown in the U.S. spread to Europe and Japan, a survey of Bloomberg users on five continents showed.
The Bloomberg Professional Global Confidence Index fell to 14.3 from 21.0 in January. Users in Asia were the most pessimistic about the global economy, with the index falling to 12.6 from 15.0. A reading below 50 indicates negative sentiment.
Global stocks have lost more than $6 trillion this year as credit dried up for some borrowers and the U.S. expansion stalled. After insisting Europe would weather the slowdown, European Central Bank President Jean-Claude Trichet said last week uncertainty was ``unusually high,'' while Bank of Japan Governor Toshihiko Fukui may see his interest-rate increases reversed by his successor within months.
``First credit markets collapsed and that led to a banking crisis which has affected the real economies of all regions,'' said Jose Carlos Diez, chief economist at Intermoney SA in Madrid and a participant in the survey. ``We have yet to know when the slowdown of the global economy will end and I don't expect a recovery before the summer of 2009.''
The Bloomberg Professional Confidence Survey collated the responses of 6,878 Bloomberg users from Auckland to New York on the economic health of their region and the world. The survey was conducted from Feb. 4 to Feb. 8. The investors, traders and analysts were also asked about the outlook for their currencies, bonds, stocks and rates in the next 6 months. Participants answered questions in cities including Hong Kong, Zurich and London.
Pessimistic Americans
North American users were the most pessimistic about economic growth in their region, with the index falling to 19.3 from 19.6. Home sales in the world's largest economy fell at the fastest pace since at least 1963. While users in Asia were the least pessimistic, the index suffered the sharpest deterioration, falling to 43.5 from 51.1.
``We're already getting signs that things are deteriorating, but there's fear that things are going to get worse,'' said Samra Al-Harthy, an economist at Standard Chartered Plc in London.
In Europe, sentiment toward the world economy dropped to 12.9 from 17.3. Participants there also soured on their own economy, pushing the regional index down to 26.2 from 27.3.
IMF Lowers Forecast
The International Monetary Fund in January lowered its forecast for global economic growth this year to 4.1 percent, the lowest since 2003, from 4.4 percent predicted in October. The IMF said last year's increase in credit costs resulting from defaults on mortgages aimed at borrowers with poor credit histories is hurting the rest of the economy.
Financial institutions around the world face $400 billion of write-offs as a consequence of the U.S. subprime mortgage slump, according to Group of Seven estimates, German Finance Minister Peer Steinbrueck said on Feb. 9.
UBS AG, Europe's largest bank by assets, last month posted the biggest loss ever by a bank after raising fourth-quarter writedowns to $14 billion. The world's biggest financial companies have booked more than $145 billion of writedowns and losses since the beginning of 2007, partly because of the declining value of securities backed by assets including U.S. subprime mortgages.
``The epicenter of this slowdown is clearly the U.S.,'' said Kathleen Stephansen, chief global economist at Credit Suisse in New York. Still, ``the credit crunch will be exported to Japan and, particularly, Europe.''
Auction-Bond Failures Roil Munis, Pushing Rates Up
(Bloomberg) -- Bonds sold by U.S. municipal borrowers with rates set through periodic auctions failed to attract enough buyers as banks including Goldman Sachs Group Inc. and Citigroup Inc. that run the bidding wouldn't commit their own capital to the debt.
Rates on $100 million of bonds sold by the Port Authority of New York and New Jersey, with bidding run by Goldman, soared to 20 percent yesterday from 4.3 percent a week ago, according to data compiled by Bloomberg. Presbyterian Healthcare in Albuquerque and New York state's Metropolitan Transportation Authority also experienced failures, officials said.
What began three weeks ago with too few bidders for auction-rate debt backed by relatively small entities, such as Georgetown University and Nevada Power, has widened in recent days to include large issues of state governments, such as New York state's Dormitory Authority. The auction failures provide new indication of Wall Street's unwillingness to commit capital amid $133 billion in credit losses and asset writedowns.
``It's the beginning of the end for the auction-rate market,'' said Matt Fabian, a senior analyst with Concord, Massachusetts-based Municipal Market Advisors. ``Banks have stopped supporting the market.''
Investor demand for the securities has declined on waning confidence in the credit strength of insurers backing the debt, and on reluctance by banks to submit bids and risk ending up with too many of the bonds. Local governments that have borrowed in the $300 billion auction-rate market confront the prospect of higher borrowing costs as economic slowing trims tax revenue.
Auction-Rate Bidding
Auction bonds have interest rates that are determined by bidding that typically occurs every seven, 28 or 35 days. When there aren't enough buyers, the auction fails and bondholders who wanted to sell are left holding the securities. Rates at failed auctions are set at a level spelled out in official statements issued at the initial bond sale.
Other borrowers paid higher rates, even if their auctions didn't fail. Wisconsin's 28-day auction yesterday of taxable bonds was set at a 10 percent rate, up from 4.75 percent for identical securities Feb. 7.
Frank Hoadley, Wisconsin's director of capital finance, said he had no advance warning from bankers about the jump in rates. ``We are making decisions'' about converting the auction bonds to different kinds of debt, he said.
Local governments are obliged to pay the high rates until either the auctions start attracting more buyers or they modify the bonds to some other kind of variable-rate debt or a fixed interest rate. Bankers and borrowers have been working on conversion plans for several weeks.
Port Authority Bonds
The 20 percent rate for the $100 million of Port Authority auction bonds will cost it $388,889 until the next weekly auction, up from $83,611 last week. Interest on the bonds is subject to federal income tax.
``We have seen widening spreads, reduced demand for certain auction-rate securities and failed auctions, including some auctions in which Citi acted as broker dealer,'' Danielle Romero-Apsilos, a spokeswoman at New York-based Citigroup, said in a statement.
A Citibank-run auction for the New York state's Dormitory Authority failed yesterday, resulting in an interest rate of 6.26 percent, up from 3.12 percent a week earlier, according to Bloomberg data. Following the auction miss, the interest rate was set at twice one-month Libor, the London interbank offered rate for wholesale bank deposits, according to the official statement for the bonds.
Michael DuVally, a spokesman at New York-based Goldman, declined to comment.
U.S. Economy: January Retail Sales Unexpectedly Rise
(Bloomberg) -- Retail sales in the U.S. unexpectedly rose in January, easing concern that the world's largest economy has already slipped into a recession.
The 0.3 percent increase was led by spending on autos, clothes and gasoline, the Commerce Department said today in Washington. The figure followed a 0.4 percent decrease the previous month. Purchases excluding automobiles and gasoline were unchanged.
``Today's report will diminish recession anxieties, but it doesn't dispel them altogether,'' said Richard DeKaser, chief economist at National City Corp. in Cleveland, who accurately forecast the sales gain. Federal Reserve Bank of St. Louis President William Poole said yesterday ``the best bet'' is the U.S. will avoid a recession.
Demand from consumers, whose spending accounts for about 70 percent of the economy, will probably wane in coming months, forcing the Fed to lower interest rates further, economists said. Macy's Inc., Target Corp. and Limited Brands Inc. said last week that sales at stores open more than a year declined in January. Macy's cut 2,300 jobs.
Treasury securities dropped after the report, with 10-year note yields rising to 3.70 percent at 10:22 a.m. in New York, from 3.66 percent late yesterday. The Standard & Poor's 500 Index added 0.6 percent to 1,356.24. At the same time, the S&P Retailing Index, which includes Home Depot Inc. and Best Buy Co., retreated 0.4 percent.
Inventories Increase
A separate report showed declining sales at U.S. businesses in December led to the biggest increase in inventories of unsold goods in a year and a half.
The 0.6 percent gain in inventories, the highest since July 2006, followed a 0.4 percent rise in November, the Commerce Department said today in Washington. Sales declined 0.5 percent, the steepest since January 2007, after a 1.4 percent gain the prior month.
Retail sales were projected to fall 0.3 percent after an originally reported 0.4 percent drop the prior month, according to the median estimate in a Bloomberg News survey of economists.
Threats to Spending
The worst housing slump in a quarter century and shrinking access to credit threatens to hurt spending this quarter. The economy lost 17,000 jobs in January, the first drop in more than four years. The Standard & Poor's 500 Index has fallen three consecutive months, the longest losing streak since 2003, eroding households' investment portfolios.
Consumers are increasingly limiting expenses to those they can't avoid. The amount Americans must spend each month on debt service, housing, medical costs, and food and energy bills rose to 66.9 percent of their total spending in December, the highest since records began in 1980, according to Bloomberg figures.
``Food prices have been rising and gasoline prices have been rising and so we got a little boost to overall sales there,'' said Kevin Logan, senior market economist at Dresdner Kleinwort in New York, who forecast retail sales would advance 0.2 percent. ``There's evidence here that the slump in the housing market is affecting spending.''
Excluding automobiles, purchases gained 0.3 percent after a 0.3 percent decline in December.
Car Dealers
Sales at automobile dealerships and parts stores rose 0.6 percent after a decline of 1.1 percent in December, the Commerce Department said.
That contrasts with industry figures that showed cars and light trucks sold last month at a 15.2 million annual pace, down 6.7 percent from December. Auto industry sales this year are forecast to drop to the lowest level since 1998.
``There is still a lot of concern about consumers,'' said David Wyss, chief economist at Standard & Poor's in New York, said in an interview with Bloomberg Radio. ``Car sales did really badly during the month. People are going to continue to worry about this and darn well ought to continue to worry.''
Filling station sales rose 2 percent in January after remaining unchanged the prior month, today's report showed. Regular gasoline reached as high as $3.11 a gallon in early January, about 11 cents more than the average for the prior month, according to AAA. Excluding gas, retail sales rose 0.1 percent.
Sales also rose at clothing retailers, which posted a 1.4 percent increase, and grocery and beverage stores, which gained 0.6 percent. Purchases at non-store retailers, which include online and catalog sales, rose 0.5 percent.
Tuesday, February 12, 2008
Platinum sets lifetime high
(Fin24) - Platinum hit a record high for the ninth straight trading day on Tuesday as concerns deepened over output losses in top producer South Africa due to a power crisis, analysts said.
A spokesperson at Eskom said the company was in discussions with the government to ensure sufficient funding to meet its expansion programme.
Gold fell as much as 1% as the dollar gained ground versus the euro after Warren Buffett told CNBC television that he had offered to take over the liabilities of monoline bond insurers. But the metal later pared losses.
Platinum rose to a high of $1 965 an ounce before falling to $1 943/1 950 by 17:50, against $1 933/1 941 in New York late on Monday.
"You know that platinum demand is increasing on the back of emission controls and you know that supplies are going to be squeezed. So it just makes sense to be long in this market," said Johannesburg-based Walter De Wet, analyst at Standard Bank.
"There might be slight over-reaction as everybody is on the bandwagon because of the recent price rise, but there is also some realisation that things are going to get tighter. We believe that the bias is on the upside."
Platinum's rally, which has sent prices up 30% in just three weeks, gained pace after Anglo Platinum, the world's biggest producer, said on Monday the power problem alone would cut output by as much as 120 000 ounces in 2008. It had already cost 30 000 ounces in lost output this year.
Northam Platinum said on Tuesday its production fell 16.5% to 150 755 ounces the July-December period of 2007 from a year earlier and saw its output at the same level in the next six months, provided mines got 90% power.
The market nervously awaits financial results of Impala Platinum, the world's second-biggest producer of the metal, on Thursday for more cues on total production losses.
"It's a chronic problem. It has been a deficit market for many years and it looks like it has returned to a significant deficit market again," said David Holmes, director of metals sales at Dresdner Kleinwort Investment Bank.
Mines across South Africa, which accounts for four-fifths of the world's supply of the metal, ground to a halt for five days at the height of the power crisis last month. Platinum is used in jewellery and auto catalysts to clean exhaust fumes.
Negotiations were under way for South African state-owned power utility Eskom to buy surplus electricity from local producers as part of its bid to solve the nation's energy crisis, Public Enterprises Minister Alec Erwin said on Monday.
A spokesperson at Eskom said the company was in discussions with the government to ensure sufficient funding to meet its expansion programme.
TPG Seeks More Than $15 Billion for Buyout Fund, Investors Say
(Bloomberg) -- TPG Inc., the private-equity firm that last year bought TXU Corp. in the largest U.S. leveraged buyout, is seeking more than $15 billion for a new fund, according to potential investors.
The investment committee of Washington state's pension fund, which met with TPG co-founder David Bonderman Feb. 7, will recommend a $750 million commitment, said Liz Mendizabal, a spokeswoman in Olympia. Bonderman is set to discuss the fund, called TPG VI, with the Oregon Investment Council Feb. 27.
TPG, based in Fort Worth, Texas, is putting together the fund even as deal-making is stalled after a doubling of financing costs in the second half of 2007. Endowments and pension funds, seeking returns that top stocks and bonds, are increasing their investments with private-equity firms, whose assets may reach $5 trillion by 2012, according to research firm Private Equity Intelligence Ltd. in London.
``The public markets are down or soft and there's no other game,'' said Lyons Brewer, a managing director of C.P. Eaton Partners LLC, a Rowayton, Connecticut-based firm that helps buyout firms and hedge funds raise money.
Funds raised a record $502 billion last year, according to Private Equity Intelligence, including $21.7 billion by New York-based Blackstone Group LP, the industry's biggest pool.
TPG Partners IV, the $5.3 billion fund the firm started in 2003, has since returned an average of almost 36 percent a year to investors, according to data on the Web site of the California Public Employees' Retirement System.
Read more at Bloomberg
Paulson, U.S. Banks Forge Foreclosure-Freeze Deal
(Bloomberg) -- Bank of America Corp., Citigroup Inc. and four other U.S. lenders agreed with Treasury Secretary Henry Paulson to take new steps to help borrowers in danger of foreclosure stay in their homes.
Paulson and the banks offered a 30-day freeze on some foreclosures while loan modifications are considered. The Treasury chief, with Housing and Urban Development Secretary Alphonso Jackson, said today at a news conference in Washington that ``Project Lifeline'' would help stabilize communities disrupted by mortgage defaults.
``If someone is willing to make a call, to reach out, there's a chance they can save their home,'' Paulson said. ``As our economy works through this difficult period, we will look for additional opportunities to try to avoid preventable foreclosures.''
The program is designed to help a broad range of homeowners, not just subprime debtors who borrowed more than they could afford. Still, it won't help everyone, Paulson said. The U.S. housing correction ``is not over'' and ``the worst is just beginning'' for subprime borrowers who face higher interest rates in the next two years, he said.
In a statement, the banks said the program would start with a letter to homeowners more than 90 days delinquent on payments that lays out procedures for them to ``pause'' the foreclosure process. The homeowner has 10 days to respond to the notice and give additional financial information so the lender is able to weigh new payment options.
Loan Types
Subprime, Alt-A and prime borrowers are eligible, according to the plan. Subprime mortgages are made to borrowers with poor credit or high debt. Alt-A loans are for borrowers who want atypical terms, such as proof-of-income waivers or investment- property collateral, without sufficient compensating attributes, such as larger down payments.
JPMorgan Chase & Co., Wells Fargo & Co., Washington Mutual Inc. and Countrywide Financial Corp. will also participate in the plan. All six are members of Hope Now, the alliance of lenders, trade groups and counselors formed last year to head off a surge of foreclosures by identifying and working with borrowers struggling to meet higher payments.
The Treasury chief said the six banks account for half of the U.S. mortgage market, and called on other lenders to adopt the plan as well.
Rate Freeze
Paulson, who as recently as last month opposed a moratorium on foreclosures, wants lenders to go beyond earlier pledges to freeze subprime interest rates for five years. The deepest housing slump in a generation is threatening consumer spending and the job market, pushing the economy to the verge of a recession.
Jackson said the plan is a ``responsible, timely effort'' aimed at encouraging borrowers to come forward if they're having trouble making payments.
``In some parts of our nation, the foreclosure crisis is have a devastating impact on neighborhoods and communities,'' said Floyd Robinson, head of Bank of America's home-loan business. He stressed that ``homeowners can only take advantage of this program by taking action -- they must respond when they hear from us.''
Democratic Complaints
Paulson last week heard complaints from Democrats in Congress that the number of homeowners receiving relief so far has been insufficient. ``We are now in the midst of one of the most serious economic crises we have seen in recent years,'' Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee, said in Boston yesterday.
Federal Reserve officials project about 2 million homeowners face higher mortgage rates over the next two years as their loans reset higher. Economists at the Federal Deposit Insurance Corp. estimate foreclosures this year will be about 1 million more than average, a level that FDIC Chairman Sheila Bair has said ``is just too high.'' They average about 600,000 in a typical year.
``This is good, but we've seen this over and over again,'' said Kathleen Day, a spokeswoman for the Center for Responsible Lending in Washington. ``The fact that they keep having to roll out subsequent rescue plans every few weeks underscores that each plan is inadequate.''
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