Harper: No bail out

Canadian investors holding $33 billion in short-term debt that plunged in value will have to rely on commercial banks for support after Prime Minister Stephen Harper said he won't bail them out.

Bonuses on Wall Street surge 14 percent. Four of the biggest U.S. investment banks — Goldman Sachs Group Inc., Morgan Stanley, Lehman Brothers Holdings Inc. and Bear Stearns Cos. — will pay out about $49.6 billion in compensation this year. Of that, bonuses are traditionally estimated to represent 60 percent, or almost $30 billion.

French bank Credit Agricole said that higher writedowns and provisions stemming from the ongoing credit crisis will have a 1.6-bln-eur impact on its 2007 earnings, which will cause its investment banking unit Calyon to post a loss for the year. The writedown doesn't change Credit Agricole's target of achieving a Tier 1 solvency ratio between 7.5 and 8.0 pct by either Dec. 31, 2007 or March 31, 2008, and there will be no cut to the 2007 dividend, the bank added.

Dozens of municipal bonds issued by California cities and public development agencies were downgraded on Wednesday after a credit rating agency slashed its rating for the bonds' insurer.

State and local borrowers are discovering that buying municipal bond insurance from MBIA Inc. and Ambac Financial Group Inc. is a waste of money. States and local governments with investment-grade ratings default on less than 1 percent of their debt because they can raise taxes and fees, according to a March report by Moody's Investors Service. They may be better credit risks than their ratings indicate.

Shares of bond insurer MBIA Inc. plummeted in Thursday morning trading after the company detailed its exposure to the troubled credit markets. MBIA said its total exposure to bonds backed by mortgages and collateralized debt obligations is about $30.61 billion.

Fox-Pitt analyst David Trone expects MER, the world's largest brokerage to take a $8.6 billion charge for the fourth quarter. That prediction suggests Merrill's portfolio will have lost $16.5 billion in value in the second half of 2007 as payment defaults on home loans spike and demand for mortgage debt evaporates.

Merrill Lynch & Co. rose in German trading after the Wall Street Journal reported that the world's biggest brokerage firm may receive a cash infusion of as much as $5 billion from Singapore's state-owned Temasek Holdings Pte.

Research In Motion Ltd. climbed 11 percent in early trading after consumer demand for the BlackBerry e-mail phone bolstered sales and profit forecasts.

Toshihiko Fukui's final act as governor of the Bank of Japan may be to cut borrowing costs for the first time in more than six years.

Marsh & McLennan Cos., the world's largest insurance broker, said it will replace Chief Executive Officer Michael G. Cherkasky after the company's performance this year fell ``far short'' of expectations.

Royal Philips Electronics NV, the world's biggest manufacturer of patient-monitoring systems, agreed to buy medical-equipment maker Respironics Inc. for 3.6 billion euros ($5.2 billion) in its biggest-ever acquisition.

Advantage Partners LLC, Japan's largest buyout fund, offered to buy Tokyo Star Bank Ltd. for as much as 252 billion yen ($2.2 billion) in the nation's biggest bank takeover in two years.

Kohlberg Kravis Roberts & Co. agreed to buy Northgate Information Solutions Plc for 593 million pounds ($1.18 billion) in a deal that may lead to a breakup of the biggest U.K. payroll systems supplier.

Kazakhstan's Bank Lending Frozen in Subprime Squeeze. Kazakhstan banks' sales of Eurobonds and syndicated loans, which totaled $8.63 billion during the first eight months of 2007, fell to $300 million in the following three months, according to data compiled by Bloomberg.

Lehman Brothers Holdings Inc., the largest U.S. underwriter of mortgage-backed bonds, faces legal action by Australian municipal governments after the value of their subprime-related investments dropped as much as 86 percent.

Fitch Ratings downgraded Bank of America (BAC) to Negative from Stable Thursday, as ratings firms scramble to reassess risk after being slammed by investors and economists for not foreseeing massive asset overvaluation that has resulted in huge writedowns by banks worldwide.

Washington Mutual said on Thursday it is cooperating with a U.S. Securities and Exchange Commission inquiry into the handling and reporting of mortgage loans that may have been based on inflated home appraisals.

German import price growth accelerated in November, led by a pick up in energy costs. Indeed, the import price index rose 0.7 percent during the month and 3.5 percent from last year, the biggest gain since September 2006.

GfK consumer confidence tumbled to an index reading of -14, the lowest in over 12 years. A breakdown suggests that discretionary spending will be weak in coming months, and retail sales in November support the GfK index reading as consumption was contained to food stores, while nearly every other type of retailer saw sales fall.

U.K. retail sales rose the most in three months in November, led by food and Internet stores, after discounts attracted shoppers unsettled by higher credit costs and falling house prices. Sales climbed 0.4 percent after remaining unchanged in October, the Office for National Statistics said today in London.

Consumer spending in the U.S. rose in November by the most in more than two years as incomes grew and shoppers took advantage of early holiday discounts. A bigger-than-forecast 1.1 percent rise in spending followed a revised 0.4 percent gain in October.

Copper futures on the Shanghai Futures Exchange climbed the daily limit as investors speculated an increase in interest rates in China, the world's largest user of the metal, will fail to damp demand.

Asia markets posted strong gains Friday, led by the Hang Seng (+2.26%). Tokyo's Nikkei (+1.5%) and the Shanghai Composite (+1.15%) were also up sharply. Tech stocks led gains in Japan following gains in U.S. tech stocks, though some traders said Friday's gains were no more than a technical rebound led by index futures. The Nikkei is closed Monday for a national holiday. Europe was up in mid-afternoon tading The German DAX was up 112.69 points (1.43%). The FTSE 100 was up 79.40 points (1.25%).

Bond Insurers in trouble

The ratings outlook for MBIA Inc. and Ambac Financial Group Inc., the world's largest bond insurers, was lowered to negative by Standard & Poor's, raising the specter of more writedowns for the companies' investment-bank clients. S&P also cut its A rating on ACA Financial Guaranty Corp. to CCC, suggesting potential default.

Troubled bond insurer ACA Capital Holdings has reached a last-minute deal with its counterparty banks, including Canadian Imperial Bank of Commerce, to starve off a potential slide into insolvency, according to people familiar with the matter.

The three-month euro interbank offered rate, or Euribor, dropped a third straight day, by 2 basis points to 4.79 percent, the European Banking Federation said today. It reached a seven- year high this month. The one-month rate for dollars fell 4 basis points to 4.9 percent, the lowest since Nov. 28. It touched a 2 ½-month high of 5.25 percent on Dec. 4.

Standard & Poor's reduced its ratings on about $7 billion of Alt-A mortgage securities, citing a sustained surge in delinquencies during the past five months. The lowered bonds represent about 1 percent of the $694 billion of securities backed by Alt-A mortgages created in 2005 and 2006. "It's not just a subprime problem,'' Joshua Rosner, managing director at New York-based research firm Graham Fisher & Co., said in a telephone interview today.

SunTrust Banks Inc., the seventh- largest U.S. lender, said it will buy $1.4 billion of securities from two of its money-market funds to protect investors from possible losses.

Natixis SA, France's fourth-largest bank by market value, plans to reorganize its corporate- and investment-banking division after writedowns and trading losses related to the subprime collapse cut third-quarter earnings.

Royal Bank of Scotland (RBS) has agreed to buy a 19.9% stake in Chinese bank Suzhou Trust, according to a source at the Wall Street Journal.

Fed's $20 billion auction on Wednesday drew a yield of 4.65%, which is slightly below the discount rate that currently stands at 4.75%. The stock and Treasury markets' response has been limited.

European Central Bank President Jean-Claude Trichet, who is trying to stave off both inflation and a credit squeeze at the same time, may soon have to choose sides. "The bank can't have it both ways,'' said Kevin Gaynor, head of economics and interest-rate strategy at RBS in London.

Oracle Corp posted a 35 percent rise in quarterly profit on strong new software sales, beating expectations at a time when investors are wary that growth in technology spending may be slowing.

Nike said on Wednesday that quarterly profit jumped 10 percent, topping Wall Street estimates, on strong international demand and higher margins, sending shares up 2 percent in after-hours trade.

Merger volume hit a record $1.57 trillion in the United States in 2007, according to research firm Thomson Financial, despite a sharp decline in dealmaking at mid-year when credit markets tightened and mergers became more costly to finance. Globally, mergers totaled a record $4.38 trillion in 2007, up 21 percent from 2006, while U.S. volume rose 5.5 percent to $1.57 trillion.

The U.S. administration declined on Wednesday to cite China for manipulating its currency for unfair trade advantages.

The average farmland price in Iowa has jumped 22% from last year due to rising biofuel demand, according to a new survey.

The benchmark one-year lending rate will increase by 0.18 percentage point to a nine-year high of 7.47 percent, starting tomorrow, the People's Bank of China said today on its Web site.

As was widely expected, the Bank of Japan unanimously decided to leave rates steady at 0.50 percent, as they lowered their assessment of the economy and forecasted that growth will “slow for the time being.”

SECO revised their 2007 GDP forecast for Switzerland to 2.8 percent from 2.6 percent in October. Unsurprisingly, exports pushed the revision higher as the trade surplus widened to a record of 1.89 billions francs in November. Employment conditions also helped propel the GDP outlook higher as labor markets remain tight.

German consumer confidence held surprisingly strong at the end of the year, as GfK's index for January rose to 4.5 from an upwardly revised 4.4. A breakdown of the index for December isn't quite as rosy, as the economic outlook and income expectations deteriorated further as they've done throughout the year.

The U.K. economy expanded faster than economists forecast in the third quarter, driven by the strongest consumer spending in more than a year. Gross domestic product increased 3.3 percent in the three months through September from a year earlier.

Copper advanced for a second day in London on speculation economic growth in China will spur demand from the world's biggest buyer of the metal. Aluminum, nickel and zinc declined, erasing earlier gains.

Bear Stearns Posts $854 Million Loss After Writing Down Subprime Mortgages. The loss was almost four times wider than the average estimate of $1.82 a share from 14 analysts surveyed by Bloomberg. Bear Stearns said it would take a $1.9 billion writedown on subprime mortgages, more than the $1.2 billion the firm forecast last month.

Brazilian consumer prices rose in the month through mid-December at their fastest pace in two years, driving inflation up toward the central bank's annual target. Consumer prices, as measured by the government's benchmark IPCA-15 index, jumped more than threefold to 0.70 percent in the month through mid-December from 0.23 percent in mid-November.

Holiday Sales in U.S. Fall for Third Week After Winter Storms. Sales in the seven days through Dec. 15 fell 0.4 percent from a year earlier, following declines of 2.7 percent and 4.4 percent the previous two weeks, Chicago-based ShopperTrak RCT Corp. said yesterday.

The U.S. Environmental Protection Agency said California can't regulate automotive carbon emissions because an energy bill signed by President George W. Bush already achieves greenhouse gas reductions through new mileage standards.

Japan (+0.01%) and Hong Kong (-0.05%) were flat Thursday, while China's Shanghai composite forged ahead by +2.06%. Stocks in Japan fell in late trading, giving back early gains, as traders quickly took profits in a light-volume trading session. Banks, including Mitsubishi UFJ (MTU +2.2%) rose after they said they will not contribute to a U.S.-led subprime rescue fund. Chinese's stocks were lead by the resource sector; shares in coal companies jumped on news mainland utilities will have to pay more for thermal coal in the coming year.
European stocks gained for the first time in four days, as investors speculated that concern world economies will stagnate was exaggerated. U.S. index futures rose. Markets in Europe inched up in early Thursday trading. London's FTSE (+0.66%) lead the way. The French CAC (+0.56%) and German Dax (+0.35%) were also up as of 7:12 a.m. ET. Energy shares were up on rising crude prices (RDS.A +0.8%), (BP +0.3%). Banks RBS (RBS) and HSBC (HBC) were up 0.9% and 0.8%. Volatile Northern Rock was down 3.4%.

Money market rates retreat!

Money market rates fell for a second day after the European Central Bank injected an unprecedented $500 billion into the banking system yesterday, adding to evidence that central banks are making headway in their attempts to counter turmoil in money markets. The three-month euro interbank offered rate, or Euribor, dropped 7 basis points to 4.81 percent, the lowest since Nov. 30.

Morgan Stanley, the second-biggest U.S. securities firm, reported a fourth-quarter loss of $3.56 billion, the first in the company's history, after $9.4 billion of writedowns on mortgage-related investments. MS said it sold a $5 billion stake to China Investment Corp to bolster its capital.

Goldman Sachs Group Inc. on Tuesday gave a cautious outlook for Wall Street in 2008 because of the ongoing credit crisis, even as the world's largest investment bank chalked up another record-breaking year.

Ralph Cioffi, the manager of Bear Stearns Cos. hedge funds that invested in subprime mortgages, left the firm as U.S. prosecutors investigate whether he withdrew money from two funds before they collapsed in July.

A growing number of Americans expect a U.S. recession in the next year as the housing slump and steep food and energy prices sour sentiment, a Reuters/Zogby poll released on Wednesday shows. Of the likely voters surveyed, 43.4 percent said they expect a recession, up from 40 percent a month earlier.

Concerns about the U.S. mortgage crisis and turmoil in global credit markets intensified, with U.S. policy makers seeking to clamp down on the practices that created the crisis and Europe's central bank pouring an unprecedented half-trillion dollars into an effort to soothe markets.

U.S. homeowners increasingly failed to keep up with their home loan payments in November, as the number of foreclosure filings surged 68 percent nationwide compared with the same month a year ago.

Retailers in the U.S. posted their smallest sales gain in two months last week as discounts failed to attract holiday shoppers and consumers made more purchases online.

Shares of home builder Hovnanian Enterprises tumbled on Wednesday after the company posted a wider-than-expected loss as the value of its land and inventory continued to deteriorate.

European Central Bank President Jean- Claude Trichet signaled faster inflation will prevent a cut in borrowing costs as German business confidence fell to the lowest in almost two years.

MasterCard Inc. must remove a credit-card transaction fee charged to retailers or face a daily penalty of up to 3.5 percent of global sales, European Union regulators said.

Goldman Sachs Group Inc. reduced its ratings on Barclays Plc and Natixis SA to ``sell,'' while UBS AG and HBOS Plc were cut to ``neutral'' on credit-market concerns.

Centro Properties Group, struggling to refinance A$3.9 billion ($3.4 billion) of debt, may sell assets to raise cash after losing 86 percent of its market value in two days.

Japan’s all-industries index increased 1.2%. The index which covers a broad range of economic data, was pushed higher by spending in the services sector. It rebounded from the previous months decline.

German business confidence fell more than expected as the IFO index fell to 103.0 from 104.2. Tight credit market conditions, higher energy costs and a strong Euro were the culprits. However, German producer prices increased 0.8% on a monthly basis.

Shanghai and Hong Kong were up strongly Wednesday, while Japan saw red. The Nikkei was down -1.17%, the Hang Seng was up +1.11% and the Shanghai Composite was up +2.18%.
European markets were down slightly in early afternoon trading Wednesday as of 7:15 a.m. ET. The FTSE was down -0.34%, the CAC was down -0.49% and the Dax was down - 0.24%.

Which way Monday?

Nearly $US185 billion ($215 billion) is locked up in the world's biggest corporate debt market but hopes are improving that the backlog will be cleared by the middle of next year despite ongoing effects of the global liquidity crunch.

A slowdown in the world economy, with Europe bearing the brunt of international adjustment is the most likely result of a big correction in the US balance of payments deficit, according to Tommaso Padoa-Schioppa, Italy’s finance minister, and the chairman of the international monetary and financial committee of the International Monetary Fund.

A panel seeking to restructure Canada’s frozen asset-backed commercial paper market is struggling to persuade more than a dozen Canadian and foreign banks to provide billions of dollars in back-up funding for the securities.

The No. 1 reason its customers have been defaulting on mortgage loans is because their income was cut. That accounted for almost 60 percent of Countrywide Financial Corp.'s loan defaults in the first 10 months of this year.

UK house prices, as measure by Rightmove, plummeted 3.2 percent during December. The reading was the worst since record keeping began in 2002, as higher mortgage rates and tighter lending standards constrict the housing market.

Swiss industrial production figures for Q3 proved to be better than expected against forecasts for a 2.2 percent drop and upward revisions to last quarter's index. Furthermore, the annual rate of IP growth jumped 10.7 percent - the sharpest gain since Q1 2000 - highlighting how export growth to the Euro-zone has helped support expansion in the Swiss economy

December flash estimates for Euro-zone PMI reflect broad slowing throughout the economy. Indeed, manufacturing PMI slipped to 52.5 from 52.8, while services PMI eased to 53.2 from 54.1. Meanwhile, the composite index also took a hit, falling to a two year low of 53.3 from 54.1.

Global food prices were under further pressure on Monday as benchmark prices for cereals at much higher levels came into operation, making it almost inevitable that a second wave of food price inflation will hit the world’s leading economies.

Copper dropped $135, or 2.1 percent, to $6,410 a ton as declining equities in the U.S., Asia and Europe revived speculation that slower economic growth may crimp demand for metals.

The dollar rose to the highest levels in more than a month against the euro and yen as accelerating inflation reduced speculation that the Federal Reserve will lower borrowing costs next year.

Moody's Investors Service put FGIC Corp. and XL Capital Assurance Inc. on notice that they may have their Aaa credit ratings lowered and said MBIA Inc. still needs to prove it deserves its top ranking as part of a review of the world's top bond insurers.

Merrill Lynch & Co., the securities firm that reported a record $2.24 billion third-quarter loss, told fixed-income managers to cut 2007 bonuses by an average of 40 percent.

Representatives of five of Wall Street's dominant investment banks gathered around a blonde wood conference table on a February night almost three years ago. Their talks over take-out Chinese food led to the perfect formula for a U.S. housing collapse.

Russia began nuclear fuel shipments to Iran, putting the Persian Gulf country within eight months of starting electricity production at its first reactor.

Australia's Centro Properties Group, which manages U.S. malls with tenants from TJ Maxx to Wal-Mart, warned it is having trouble refinancing A$1.3 billion ($1.1 billion) in debt and may have to restructure because of fallout from the U.S. subprime crisis.

Weak sales at malls and shopping centers over the weekend led the head of America's Research Group, a consumer marketing firm, to lower his holiday sales growth forecast to 1.8 percent from 2 percent.

Ingersoll-Rand agreed early Monday to buy Trane Inc.for a combination of cash and stock valued at about $10.1B, including fees and the assumption of $150M of debt.

Lehman Brothers (LEH) faces potential litigation by municipal councils in Australia, due to a local subsidiary's sales of high-risk collateralized debt obligations (CDOs), according to a report by the Financial Times.

OPEC may increase output quotas when it meets Feb. 1 because stronger demand is expected during the winter season, Algerian Oil Minister Chakib Khelil said.

Asian markets were down sharply Monday. The Nikkei dropped -1.71%. The Hang Seng plunged -3.51%. China's Shanghai Composite index fell -2.62%. Financial stocks were among the hardest hit, after recent data showed U.S. inflation was higher than expected, reducing the likelihood the Fed will move to further cut interest rates in the near future.
European stocks fell on concern the combination of faster inflation and losses related to the collapse of U.S. subprime mortgages will sap economic growth. National benchmarks fell in all 18 western European markets except Portugal. France's CAC 40 dropped 1.2 percent, while Germany's DAX lost 1.3 percent. The U.K.'s FTSE 100 slipped 1.4 percent. The Stoxx 50 decreased 1.2 percent and the Euro Stoxx 50, a measure for the euro region, retreated 1.3 percent.

What keeps mortgage industry afloat? - FHLB

A collection of 12 banks owned by over 8100 financial institutions from all 50 states in the U.S. , known as the Federal Home Loan Banking system (FHLB), is providing hundreds of billions of dollars to the mortgage industry at a time when banks are reluctant to make loans available to many lenders.

This might be one reason why:
In this recent dramatic credit crises the U.S. has not experienced a bank run so far.
European financial institutions and lenders are in bigger trouble than its U.S. counterparts because there is no such organization in Europe.

Article in the FT:
The Federal Home Loan Banks are pumping hundreds of billions of dollars into the mortgage industry in the form of loans against mortgage collateral at a time when purely private sources of finance are offered only at punitive terms for many lenders. In doing so they have cushioned the impact of the credit squeeze and ensured that mortgage lending in the US has not come to a sudden stop. The scale of the cash infusion by the FHLBs vastly exceeds the few billion dollars of cash lent to banks by the Federal Reserve through its direct lending facility. By making vast amounts of cash available on a routine basis against a wide range of mortgage securities, with none of the stigma associated with going cap in hand to the Fed, the FHLBs have reduced the risk of a liquidity crisis at the most stressed institutions. Analysts say this is one reason why the US has avoided a bank run of the kind that crippled Northern Rock, the crisis-hit UK mortgage lender. The FHLB move is attracting intense interest in Europe, where policymakers are waking up to the fact that the securitised market-based model of US housing finance was imported without the quasi-public safety valves of the US system.

The latest Fed flow of funds data shows that FHLBs issued new loans at an unprecedented annualised rate of $746bn (€508bn, £366bn) in the third quarter, up from practically nothing in the second quarter. FHLB loans helped depository institutions ramp up their acquisition of mortgages by almost $190bn, annualised to $312bn. This – along with record purchases of mortgages by better-known government sponsored enterprises Fannie Mae and Freddie Mac – offset a large part of the $512bn annualised decline in mortgage purchases by special investment vehicles (SIVs) conduits and other issuers of asset-backed securities at the epicentre of the crisis.

Scary Infaltion data

The U.S. consumer price index increased 0.8 percent, the most since September 2005, after a 0.3 percent gain in October, the Labor Department said today in Washington. Prices excluding food and energy, known as the core rate, climbed 0.3 percent, also more than anticipated.

German inflation accelerated in November to the fastest pace in 12 years, led by surging oil and food costs. Consumer prices, measured using a harmonized European Union method, rose 3.3 percent from a year ago after increasing 2.7 percent in October.

A survey from the Bank of England showed that Britons expect prices to rise next year at the fastest rate since comparable records began eight years ago. consumers expect prices to rise by 3pc over the next 12 months- the highest rate since the report started in 1999.

Citigroup said on Thursday that it plans to take $49 billion of structured investment vehicles onto its balance sheet, after ratings agencies' threats to downgrade the SIVs debt. Shares of Citigroup Inc dropped 2 percent to $30.40 before the bell on Friday after Moody's Investors Service cut its ratings on the largest U.S. bank by a notch.

Money markets failed to respond for a second day to the biggest effort by central banks in six years to restore confidence in the world financial system. The euro interbank offered rate banks charge each other for three-month loans stayed near a seven-year high, falling 1 basis point to 4.94 percent.

Earlier on Thursday, Greenspan said he raised his view of chances of a U.S. recession to 50 percent from 30 percent, according to CNBC television.

A shareholder sued UBS, contending the Swiss bank misled investors about write-downs related to securities linked to U.S. subprime mortgages.

Current turbulence on financial markets is a "serious" test for the global financial system and will have an impact on growth in the euro zone and in Germany, said Bundesbank vice president Franz-Christoph Zeitler in a speech.

The International Monetary Fund has called for a rapid assessment of the amount of losses involved by global banks in the US housing crisis to help end the credit squeeze.

Assured Guaranty Ltd. agreed to insure $29 billion of Ambac Financial Group Inc.'s bond insurance policies, the financial guaranty company said Thursday.

Bond insurer Security Capital Assurance Ltd. said Thursday it is reviewing multiple options to improve its capital position, after Fitch Ratings warned it had six weeks to raise money or face a catastrophic downgrade.

The amount of U.S. asset-backed commercial paper outstanding fell to the lowest since October 2005 as borrowing costs rose to the highest in three months and structured investment vehicles reorganized and shrank. Debt maturing in 270 days or less and backed by mortgages, credit-card loans and other holdings declined $10.3 billion, or 1.3 percent, to a seasonally adjusted $791 billion for the week ended Dec. 12.

U.S. Internet holiday sales are growing at the slowest pace on record as shoppers put off purchases ahead of year-end bargains. Sales from Nov. 1 through December 11 increased 19 percent to $20.5 billion, Reston, Virginia-based ComScore Inc. said yesterday. The slowdown contrasts with government data that showed retail sales in November rose at twice the rate anticipated by economists.

Morgan Stanley, Deutsche Bank AG, and other investment banks are on track to sell a record amount of bonds tied to real estate in Japan, where rising property prices have created a safe haven from the subprime concerns afflicting other markets.

Negotiators at United Nations climate talks agreed to U.S. demands, dropping specific targets on greenhouse-gas emissions from a draft document in order to salvage an agreement that will guide discussions on a global-warming treaty over the next two years.

Goldman Sachs bet that securities backed by risky home loans would fall in value brought nearly $4 billion of profits in the year ended November 30, the Wall Street Journal reported on its Web site on Thursday, citing people familiar with its finances. The company is expected to report a "record" net annual income of more than $11 billion, the Journal said.

Shares of Black & Decker slid more than 10 percent to $72 before the bell on Friday after the tool maker warned about its fourth-quarter and full-year profit outlook.

U.S. senators reached a deal to vote on a measure that would make Federal Housing Administration loans available to subprime borrowers facing foreclosure after a Republican senator dropped his objections.

Asian indexes were a mixed bag Friday. The Nikkei fell 0.14%. The Hang Seng fell 0.65%. The Shanghai Composite rose 1.01%. Bank stocks were lower in Europe as traders failed to perceive a noteworthy change in credit-market liquidity. European markets were flat as of 6:00 a.m. EST. The FTSE was down 0.02%. The CAC fell 0.3%. The Dax gained 0.01%.

Lehman's earnings drop!

Lehman Brothers Holdings Inc., the largest U.S. underwriter of mortgage-backed bonds, reported a smaller profit decline than analysts estimated after limiting losses from the collapse of the subprime market. Lehman's so-called Level 3 assets, which are harder to value because market prices have become scarce, jumped 57 percent to $34.7 billion in the third quarter. The increase wasn't due to CDOs or other structured products the company said.

Interest rates on loans in euros stayed at a seven-year high, a day after global central banks teamed up in an attempt to thaw a freeze in money markets. The three-month borrowing cost was at 4.95 percent, its highest level since December 2000 and up from 4.18 percent at the start of July.

The three-month dollar London Interbank Offered Rate, a benchmark for borrowing, climbed as high as 5.15 percent last week from 4.87 percent a month before. The rate dropped to 4.99 percent today.

The Swiss Natiaonal Bank left interest rates unchanged for the first time in two years. The SNb expects Swiss GDP growth to be around 2% in 2008 showing little affects of the current turmoil in the international finacial markets.

An investors' group trying to restructure C$34 billion ($33.6 billion) in Canadian asset- backed commercial paper will probably meet its deadline tomorrow, though note holders may have to wait several weeks for all the details, a banker involved in the talks said.

The risk of European companies defaulting on their debt rose on concern the Federal Reserve's coordinated response to the global credit crisis won't be enough to prevent an economic slowdown damaging profits.

Federal Reserve Bank of New York President Timothy Geithner said central bankers are looking at "additional instruments'' to provide funds to banks in times of stress.

Brazil's central bank said that a recent rise in consumer prices increases the odds that inflation may accelerate into next year, fueling speculation policy makers may keep interest rates unchanged longer than analysts expected.

Goldman Sachs Group Inc., TCW Group Inc. and New York Life Capital Partners are raising more than $30 billion to increase their investments in leveraged buyouts. At least 32 firms are starting mezzanine debt funds as investors shun bonds and loans used to finance LBOs.

Landesbank Baden-Wuerttemberg, Germany's biggest state-owned bank, and smaller rival Landesbank Sachsen Girozentrale reached an agreement on covering risks from U.S. subprime investments, paving the way for a takeover.

HBOS Plc, the U.K.'s biggest mortgage lender, said writedowns and higher funding costs will hurt earnings this year, while an investment gain of about 1 billion pounds ($2 billion) probably won't recur in 2008.

Munich Re, the world's second-biggest reinsurer, is proving slow and steady wins the race after faster- growing Swiss Reinsurance Co. ran into a subprime trap.

Red Kite Metals, the hedge fund that almost tripled investors' money last year, lost about 22 percent last month as copper prices fell, according to two investors in the fund.

U.K. real-estate agents and surveyors became the most pessimistic about house prices since at least 1998 last month as a property-market decline spread to London, the Royal Institution of Chartered Surveyors said. An index of expected house prices fell to minus 47 in November, from minus 35.3 the previous month, London-based RICS said today, citing a survey.

European Union leaders signed a new governing treaty, with most countries planning parliamentary ratification to escape the popular votes that doomed the EU constitution.

Countrywide Financial said on Thursday that mortgage loan funding tumbled 40 percent to $23 billion in November, sending its shares down nearly 4 percent before the market opened.

Top U.S. tax preparer H&R Block said on Thursday the borrowing capacity under its committed lines of credit might not be sufficient to meet its financing needs and it might need to issue added debt or equity securities to meet future requirements.

Bill Gross, manager of the world's biggest bond fund, said a plan by the Federal Reserve and European central banks to alleviate a global credit crunch will help break the reluctance among banks to lend.

Japan's Nikkei 225 Stock Average lost 2.5 percent to close at 15,536.52, the biggest decline since Aug. 17. The Hang Seng declined 776.61 points or 2.72% to close at 27,744.45. The Shanghai Composite also declined 137.50 points or 2.70% to close at 4,958.043.
The DAX declined 67.89, or 0.8 percent, to 8,008.23 in morning trading, its biggest one-day loss in three weeks. DAX futures expiring in December sank 71, or 0.9 percent, to 8,017. The CAC 40 Index dropped 129.08, or 2.3 percent, to 5,614.24. The benchmark FTSE 100 Index sank 144, or 2.2 percent, to 6,415.8.

Central Banks attack LIBOR!

Treasuries declined after central banks in the U.S. and Europe announced plans to stem a surge in borrowing costs after a reduction in interest rates failed to ease concern about a contraction in credit markets. The Federal Reserve, Bank of England, Bank of Canada, European Central Bank and the Swiss National Bank will set up a term auction facility and establish swap lines.

Not all borrowers are benefiting from the Fed's moves to cut interest rates. The problem: Loans that are tied to a variety of interest-rate benchmarks -- some of which aren't necessarily moving in lockstep with Fed action. A recent report from the Federal Reserve Bank of New York shows that the six-month Libor rate will determine the reset rates for an estimated 99% of subprime ARMs and 38% of Alt-A ARMs in the U.S. that have been securitized.

Wachovia Corp., the fourth-biggest U.S. bank, may allocate twice as much money for loan losses in the final quarter than it previously forecast. The bank will set aside $1 billion in excess of charge-offs, an increase from the previous estimate of $500 million to $600 million.

Bank of America Corp. Chief Executive Officer Kenneth Lewis said fourth-quarter earnings will be "quite disappointing'' and credit markets "will probably remain challenging into next year.''

Northern Rock Plc, the U.K. bank bailed out by the Bank of England, fell 7.1 percent in London trading after the Times reported Cerberus Capital Management LP has dropped out of the running to buy the bank.

When Swiss bank UBS AG wrote down its subprime-mortgage investments by an additional $10 billion this week, an obscure and sometimes maligned credit-market index played a key role.

Citigroup Inc. named Vikram Pandit, the head of its investment banking business, as its chief executive officer Tuesday.

General Electric expects its profit to rise "at least" 10 percent in 2008 to $2.42 per share, led by gains in its infrastructure business, Chairman and Chief Executive Jeff Immelt said on Tuesday. The company also hiked its dividend and authorised a $15 billion share buy back over the next three years.

The chief executive of Freddie Mac estimated Tuesday the mortgage finance company will lose an additional $5.5 billion to $7.5 billion over the next few years as the housing crisis worsens and home-loan defaults rise.

On Tuesday, McLean, Va.-based Freddie Mac announced it was imposing a 0.25 percent fee on all new home loans it buys or guarantees with settlement dates starting March 9, matching an earlier move by Fannie Mae. Both companies have begun adding surcharges on loans to borrowers with credit scores below 680 and who are borrowing more than 70 percent of the home's value.

SAP AG, the world's largest maker of business-management software, was cut to "underperform'' from "outperform'' by Credit Suisse Group analysts, who cited slowing sales growth at the German company next year.

The amount of money managed by so-called quant funds has dropped by up to 40 per cent in the past six months, as the drawbacks of the once rapidly growing strategy have been laid bare by the credit market turmoil.

Copper is headed for the smallest gain in five years, threatening to crimp profit growth at companies including BHP Billiton Ltd., the world's biggest miner. Goldman Sachs Group Inc., the biggest securities firm by market value, cut copper and aluminum forecasts for next year by 17 percent and 9 percent respectively.

Brazil's economy expanded in the third quarter at the fastest pace in more than three years, stoking speculation that the central bank may keep borrowing costs unchanged for most of 2008 to cap inflation.

Prices companies pay for energy and raw materials climbed 2.3 percent from a year earlier, after a revised 2 percent gain in October, the Bank of Japan said in Tokyo today. The increase was faster than the 2.1 percent median estimate of 38 economists.

U.K. unemployment fell more than twice as much as forecast to the lowest since 1975 in November as the strength of the economy encouraged companies to take on more workers.

UK home affordability hits 15-year low. The Council of Mortgage Lenders on Tuesday said first-time buyers spent 20.6 per cent of their income on mortgage interest in October, up from 20.4 per cent the previous month and 17.8 per cent in January.

Industrial production in the Euro-zone was stronger than expected in October, as solid demand for goods within Europe and from emerging markets like China keeps output growth resilient.

Asian indexes fell Wednesday across the board after traders were spooked by the dropoff in U.S. markets when the Fed dropped its target rate 0.25%, disappointing those who had hoped for a more robust 0.5% cut. The Nikkei fell 0.7%. The Hang Seng plunged 2.41%. Shanghai's Composite Index fell 1.54%. European markets followed US futures higher. In afternoon trading The CAC 40 was up 29.56 points or 0.52%. The DAX was up 92.54 points or 1.16%, and the FTSE 100 was higher 27.40 points or 0.42%.

All eyes on the FED

The Federal Reserve will probably cut interest rates today and lay the groundwork for more to prevent the economy from sliding into recession.

Shares of Washington Mutual fell 3.9 percent to $19.10 in extended trade on Monday after the thrift said it will raise additional capital, cut its dividend and lay off staff. WaMu will write down the value of its home- lending unit by $1.6 billion and cut 6 percent of the workforce.

Bond insurer MBIA Inc. said Monday it will receive a cash infusion of up to $1 billion from private equity firm Warburg Pincus to help bolster its capital reserves.

Economy may just skirt a recession according to forecasts. The closely watched panel of economists in the Blue Chip Economic Indicators survey said that the odds of a recession in the next 12 months are greater than they were a month ago....ow predict the economy will grow by an anemic 1.4 percent in the first quarter and by just 2.2 percent for all of next year. The odds of a recession in the next 12 months are nearly four-in-10 now, versus one-in-three a month ago.

H&R Block Inc., the nation's largest tax preparer, said in a preliminary earnings report Tuesday that it expected a huge second-quarter loss as it continued to wrestle with its disintegrating mortgage arm.

SIVs reduced their holdings by more than 25 percent since August to $298 billion, according to Moody's Investors Service. At least $84 billion more is being restructured by banks that set up the funds, according to data compiled by Bloomberg.

Bank of America Corp. will liquidate a $12 billion cash fund for wealthy clients and institutions, the largest investment of its type to close because of losses tied to the collapse of the subprime-mortgage market.

Freddie Mac announced yesterday a policy that will reduce the number of overdue loans it purchases from investors in mortgage securities guaranteed by the company. The move is designed to preserve capital by avoiding the large, immediate losses Freddie must recognize when it makes such purchases.

The risk of Westfield Group, the world's biggest shopping center owner, defaulting on its debt rose to a record on concern the U.S. housing recession will curb retail sales and commercial property construction.

U.S. financial and real estate companies are at "attractive valuations'' after their shares fell on the subprime mortgage crisis, said David Jackson, chief executive officer of Dubai-owned investment firm Istithmar PJSC.

China's inflation accelerated at the quickest pace in 11 years and the trade surplus swelled, underscoring government concern that the world's fastest-growing major economy is at risk of overheating. Consumer prices rose 6.9 percent in November from a year earlier after climbing 6.5 percent in October.

China's trade surplus climbed 14.7 percent to $26.3 billion in November from a year earlier, the third-biggest monthly total, the customs bureau said today. The $15.2 billion trade surplus with the U.S. pushed the 11-month total with that country to $149.2 billion.

German Investor Confidence Decline to 15-Year Low. The Mannheim-based ZEW Center for European Economic Research said its index of investor and analyst expectations fell to minus 37.2, the lowest since January 1993, from minus 32.5 last month. The euro weakened to $1.4668 from $1.4713.

China's crude oil imports rose for a 13th month in November as refiners in the fastest-growing major economy expanded production in a bid to end the worst fuel shortage in two years. Imports climbed 0.5 percent from a year earlier to 13.61 million metric tons, about 3.3 million barrels a day.

The euro interbank offered rate rose 3 basis points to 4.93 percent, the European Banking Federation said today. That's 93 basis points more than the European Central Bank's benchmark rate.

Overnight the Nikkei 225 16,044.72 2:00AM ET rose 120.33 points or 0.76% to 16,044.72. IN Hong Kong the Hang Seng closed higher up 725.74 points or 2.55%. The Shanghai Composite closed up 13.157 points or 0.25%. European stocks dropped for the first time in five days after a report showed investor confidence in Germany fell to the lowest in almost 15 years, and investors were cautios ahead of the FED's rate decision. U.S. stock futures rose after Texas Instruments Inc. boosted its sales forecast, AT&T Inc. said it will buy back up to $15.2 billion of shares and investors speculated the Federal Reserve will cut interest rates.

Big UBS write down

Swiss banking giant UBS AG said Monday it will write off a further $10 billion on losses in the U.S. subprime lending market and will raise capital by selling substantial stakes to Singapore and an unnamed investor in the Middle East.

Societe Generale SA, France's second-biggest bank by market value, will bail out its $4.3 billion structured investment vehicle after losses related to the collapse of the U.S. subprime-mortgage market. Societe Generale will take on assets including $387 million of bonds backed by subprime mortgages.

Scale of shutdown in debt markets revealed. The BIS's quarterly survey of financial markets said the value of bonds issued by businesses in the international debt markets halved between the second and third quarters of the year. The $396bn (£195bn) issued was 4pc lower than the same period last year - the first fall in two years - as banks led the charge of businesses out of the credit markets. In Germany, whose banks have been some of the biggest victims of the sub-prime mortgage crisis in the US, some $20bn more was paid back than borrowed.

JPMorgan Chase & Co , the third-largest U.S. bank, avoided most of the losses suffered by other investment banks and its growth could now "really accelerate," weekly financial publication Barron's reported on Sunday..... the risk-conscious CEO Jamie Dimon had sold most of his subprime loans originated in 2006 and early 2007, which are regarded as the most problematic.

Bankers at Goldman Sachs will share a record bonus pool this week, despite continued fall-out from the credit crisis. The investment bank is expected to reveal total compensation of around $18bn (£8.8bn), ahead of last year's $16.5bn.

In 2005, the Securities and Exchange Commission and New York state's attorney general's office launched separate investigations into whether Wall Street securities firm Bear Stearns Cos. harmed investors by improperly valuing complex mortgage securities.

Profit slump deepens recession worries. Profits, measured by the operating earnings per share of companies in the Standard & Poor's 500-stock index, fell 8.4% in the third quarter from a year earlier, according to David Rosenberg, chief U.S. economist at Merrill Lynch.

Lafarge SA agreed to buy the cement unit of Orascom Construction Industries for 8.8 billion euros ($12.9 billion), becoming the biggest producer in the Middle East.

Argentine investor Enrique Eskenazi is seeking a $2 billion loan to buy a stake in YPF SA, the Buenos Aires-based oil company owned by Spain's Repsol YPF SA, two people with direct knowledge of the deal said.

The Bush administration, which has long rejected mandatory limits on global warming pollution, opposes a United Nations draft proposal calling on developed countries to make binding emissions cuts of 25-40 percent by 2020.

McDonald's Corp., the world's largest restaurant company, said November sales increased 8.2 percent on $1 double cheeseburgers and cappuccinos in the U.S. and breakfast and chicken in Europe and Asia.

Iran has stopped selling its oil for U.S. dollars, the Iranian ISNA news agency said on Saturday, citing the country's oil minister.

China announced yesterday a long- awaited plan to expand the amount that foreign investors could invest in the domestic market. The amount of capital qualified foreign institutional investors can invest is now capped at US$30 billion.

China Petrochemical Corp. signed a $2 billion agreement to develop Iran's Yadavaran oil field, advancing prospects for a contract on the sale of liquefied natural gas to the world's fastest-growing major economy.

The German trade surplus unexpectedly widened in October to 18.7 billion euros as export demand has shown few signs of wavering amidst growth in orders from the rest of Europe and emerging markets like China.

Machine orders in Japan rocketed 12.7 percent higher during the month of October, suggesting that business investment may have improved from Q3. On the other hand, the Eco Watchers survey reflected dismal consumer sentiment as the index fell further below the 50 boom/bust level to 38.8 from 41.5.

UK producer prices rose more than expected in November, as input costs surged 10.2 percent from a year ago while output prices jumped 4.5 percent - the sharpest gain since 1991.

Asian stocks fell for the first time in four days after writedowns by UBS AG raised concern losses from U.S. subprime investments will widen. More than two stocks declined for each that gained on the MSCI Asia Pacific Index, which fell 0.6 percent to 163.59 as of 19:07 p.m. in Tokyo after a three-day, 1.4 percent rally. Japan's Nikkei 225 Stock Average retreated 0.2 percent to 15,924.39.
European stocks rose, led by construction companies and banks, after Lafarge SA shares climbed the most in at least 17 years on an acquisition in the Middle East and UBS AG said it will shore up capital by selling stakes. National benchmarks increased in 12 of the 18 western European markets. France's CAC 40 advanced 0.3 percent, and Germany's DAX rose 0.4 percent. The U.K.'s FTSE 100 was little changed. The Stoxx 50 gained 0.4 percent, while the Euro Stoxx 50, a measure for the euro region, added 0.3 percent.

BIS's quarterly survey of financial markets

The Bank for International Settlement's survey revealed the shutdown in the international debt market. The value of bonds issued by businesses halved between the second and third quarters of the year.

Borrowing in the international debt markets retreated sharply during the turmoil in financial markets in the third quarter of 2007. Net issuance of $396 billion in bonds and notes was less than half that of the previous quarter. Year-on-year growth was negative (–4%) for the first time in two years, and well below both the 18% growth the previous quarter and the 7% average since 2003. The $90 billion in new eurodenominated bonds and notes represented a year-on-year decline of 9% (compared to a 17% decrease the previous quarter), while the dollar and sterling segments sagged to 0% and 2%, respectively (from 17% and 14% the previous quarter). Perhaps reflecting the relative stability of Japanese money markets during the quarter, the issuance of yen-denominated bonds and notes appears to have been little affected by the turbulence.

The decline in euro-denominated borrowing reflected weak issuance in the euro area, particularly from French and German residents (Graph 1, left-hand panel). There was only $82 billion in new bonds and notes issued by euro area borrowers, following $392 billion the previous quarter. For the first time since the 1980s, German net issuance was negative (–$20 billion), while the $10 billion in borrowing from residents of France was significantly below the $34 billion average over the last five years. For residents of both these countries, the decrease in issuance was due to a fall in financial sector borrowing, particularly from private banks.

Although the decline was not as marked, net issuance in the United States, the United Kingdom and Australia also fell from the previous quarter. Borrowing from the United States was around $190 billion in the third quarter, which corresponded to a year-on-year growth rate of 4%, well below the previous quarter’s 22%. .....Examining gross issuance in the third quarter by credit quality class for international debt securities, the slowdown is most pronounced for non-investment grade bonds.



Here are some of the reasons why:
(source: markets hit by renewed credit woes)

The plan to prevent the foreclosure mess!

President George W. Bush's proposal to curb rising foreclosures may provide breathing room to hundreds of thousands of homeowners, but stops short of reaching the most troubled borrowers. The plan could potentially help 1.2 million homeowners, though housing-watchers such as Wharton School's Susan Wachter put the number in the "several" hundred thousands. A requirement that homeowners have at least a 3.0 percent equity stake is difficult since many loans were originated with zero down-payments, and prices in areas like Detroit have already fallen 10 percent or more in the year through September.

Federal Reserve Board Chairman Ben Bernanke endorsed the anti-foreclosure mortgage workout plan unveiled by the Bush administration in cooperation with home lending industry groups.

U.S. Treasury Secretary Henry Paulson's plan to prevent as many as 1.2 million people from losing their homes by freezing interest rates on subprime adjustable-rate mortgages will bring no benefit to the depreciating housing market. "The fundamental problem with housing is oversupply.''

Bush subprime plan limited but a step forward. Of the perhaps 2 million subprime ARMS that are expected to reset through the end of 2009, only 240,000 of those would be covered by the freeze, according to an analysis made by investment bank Barclays Capital as reported in The New York Times. The Center for Responsible Lending, a group that promotes homeownership and works to curb predatory lending, estimates that only 145,000 households will qualify for the rate freeze.

Market volatility, initially triggered by the U.S. subprime mortgage crisis, continues to spread and an uncertainty prevails due to a lack of transparency, European Central Bank Executive Board member Juergen Stark said Thursday. "Some financial institutions in Europe still don't know how the turmoil has affected their balance sheets," Stark said.

About 4.5% of auto loans made in 2006 to top-rated borrowers were at least 30 days delinquent as of the end of September, up from 2.9% the previous month, according to a Lehman Brothers survey of companies servicing these loans. That is the biggest one-month jump in at least eight years. Lehman says 12% of subprime borrowers, who have poorer credit records, were delinquent on their 2006 auto loans as of September. That is the highest level since 2002 and up from 11.1% the previous month. About $575 billion in loans for new and used cars are made annually, according to the National Automotive Finance Association.

Third quarter mortgage delinquencies rose to 5.6% . The subprime delinquencies rose to 16.3% with a 18.8% rate for adjustable rate subprime -- the biggest concern. Foreclosures started in Q3 were 0.78% -- a record high -- as the percentage of loans in the foreclosure process rose to 1.69%, also the highest recorded.

U.S. mortgage assets in collateralized debt obligations have lost so much value that the top classes of the securities may be worth as little as 20 cents on the dollar in a liquidation, Barclays Plc analysts said in a report.

Big as the potential losses from the sub-prime fallout might be, the profitability of the financial sector is so breathtakingly large that it can take the hit on the chin and move on, HSBC calculates. In 2006, US banks and brokers pulled in a combined $155bn in profits. After paying shareholders $55bn in dividends, shareholders funds rose by $100bn. Even after this year's massive writedowns, net assets could rise again. It hardly points to a serious credit contraction.

Alabama, Puerto Rico and Connecticut sold the largest of $9.5 billion in long-term offerings during the busiest week for municipal bond sales since October.

First Marblehead Corp., the third- largest securitizer of student loans, cut its dividend by more than half and said it won't package additional loans this quarter because of ``uneconomic terms'' in capital markets.

Joseph Lewis, the Bahamas-based currency trader who bought 7 percent of Bear Stearns Cos. earlier this year, increased his stake in the fifth-largest U.S. securities firm to 8 percent.

The Japanese economy expanded at a slower-than-expected pace in Q3, as business investment and domestic demand remained tepid. Annualized GDP was revised down to 1.5 percent from 2.6 percent.

National Semiconductor Corp., the maker of chips for mobile devices such as Apple Inc.'s iPhone, reported little change in second-quarter profit and gave a sales forecast that may miss analysts' estimates. Resellers of National's products may be curbing orders to make sure they aren't left with inventory in the first part of the year, when mobile-phone and personal-computer shipments typically fall.

The cost of borrowing between banks in the UK fell in the short-term, but far less than the 25 basis points shaved off by the Bank of England yesterday. The London Interbank Offered Rate (Libor) was 6.61 pct on a three-month basis, down from yesterday, but only by four points. Meanwhile, on an overnight basis, Libor rates dipped, to 5.69 pct from 5.74 pct. This still remains far above the BoE's 5.50 pct Bank rate. "Today's Libor fixing makes rather grim reading for the BoE, as one of their reasons for cutting interest rates yesterday was to alleviate liquidity concerns," said an analyst at IFR Markets, John Ratcliffe.

U.S. stock-index futures gained after the Labor Department said employers added more jobs in November than economists had forecast, easing concern that the housing slump will drag the nation into a recession.

ECB on hold, BoE cuts!

The European Central Bank left interest rates unchanged as policy makers weigh the risks of accelerating inflation against signs of slowing economic growth. The ECB kept the benchmark refinancing rate at 4 percent. The euro pared most of its losses against the dollar after European Central Bank President Jean- Claude Trichet said there remained `strong upward pressure' on inflation.

The Bank of England cut its benchmark interest rate for the first time in two years, saying inflation is likely to slow as higher credit costs hurt economic growth. The nine-member Monetary Policy Committee, led by Governor Mervyn King, reduced the bank rate by a quarter-point to 5.5 percent.

The Organization for Economic Cooperation and Development said the Federal Reserve and European Central Bank should avoid cutting interest rates, predicting the world economy will weather the fallout from the U.S. housing slump. Economic growth in the OECD's 30 members will slow to 2.3 percent in 2008, down from the 2.7 percent forecast in May, before picking up to 2.4 percent in 2009.

South Africa's central bank raised its benchmark interest rate by half a percentage point, the fourth increase this year, and forecast inflation will accelerate.

German Finance Minister Peer Steinbrueck said he's not happy about a U.S. dollar near $1.50 versus the euro and wants the Group of Seven to examine whether exchange-rate movements have become "disorderly.''

President George W. Bush today will announce a freeze on some subprime mortgages in an effort to stop a wave of foreclosures undoing the six-year expansion. The freeze will apply to mortgages issued between January 2005 and July 2007 that are scheduled to reset between January 2008 and July 2010, said the people familiar with the plan.

Defaults by speculative-grade companies will quadruple next year as the era of "easy credit'' comes to an end and economic growth slows, Moody's Investors Service said in a report. The global default rate will rise to 4.2 percent by November from 1 percent now, the lowest since 1981. The Markit iTraxx Crossover Index of 50 European companies with mostly high-risk, high-yield credit ratings jumped to 355 basis points from a low of 170 basis points in February, and peaked at 507 basis points in July.

Schools and towns in a Florida fund that lost half its assets to withdrawals last month say their finances may be squeezed by limits on how much money they can access. Participants won't be able to take more than $2 million each from the $14 billion pool, which reopened today, without paying a penalty.

The risk of Royal Bank of Scotland Plc defaulting on its debt fell after the U.K.'s second-biggest bank said earnings will exceed forecasts and subprime-related writedowns were in line with analysts' expectations. Royal Bank said operating profit is "well ahead'' of analysts' forecasts of 9.8 billion pounds ($20 billion), and it would write down 1.5 billion pounds.

Toll Brothers Inc., the largest U.S. luxury homebuilder, reported its first loss in 21 years as customers canceled purchases and the value of land slumped.

WestLB AG, the state-owned lender under investigation by German prosecutors, reported its first nine-month loss since 2003 as the U.S. subprime mortgage market crash roiled debt markets. The net loss was 148 million euros ($216 million), compared with profit of 142 million euros a year earlier. WestLB expects a full-year pretax loss ``in the low three- figure million range,'' it said.

Allied Irish Banks Plc, the country's biggest bank by market value, said full-year earnings per share will rise 13 percent, maintaining an earlier forecast, as lending increases. The shares rose.

China Shipping Container Lines Co., the second-largest in Asia, attracted 2.6 trillion yuan ($351 billion) worth of orders for a stock sale, 170 times the amount available, said people familiar with the offering.

Retailers in the U.S. including Wal- Mart Stores Inc. and Costco Wholesale Corp. reported November sales that topped analysts' estimates as consumers sought bargains the day after Thanksgiving. Wal-Mart, the world's largest retailer, said sales at stores open at least a year gained 1.5 percent, and Costco reported a 9 percent gain.

Target Corp said on Thursday that if recent soft sales trends continued, its December same-store sales would fall short of its previous forecast.

Over night Global stocks rose, led by financial companies. The MSCI World Index added 0.4 percent to 1,615.44, a four-week high, as of 11:25 a.m. in London. Stocks in Europe rose for a second day, while Asian shares rallied to the highest in a month. In Japan the Nikkei 225 closed up 265.20 points (1.70%). In HongKong the Hang Seng closed up 213.47 points (0.73%). The Shanghai Composite finished down 7.581 points (0.15%). In Europe afternoon trading the CAC 40 was down 22.28 points (0.39%), the DAX was down 28.35 points (0.36%) and the FTSE 100 was down 31.00 points (0.48%).