Friday, December 21, 2007

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%).

No comments: