Tuesday, December 11, 2007

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.

No comments: