Thursday, December 6, 2007

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%).

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