BofA buys Countrywide Financial!

Bank of America Corp., the biggest U.S. bank by market value, agreed to buy Countrywide Financial Corp. for about $4 billion.

Merrill Lynch is expected to suffer $15 billion in losses stemming from soured mortgage investments, almost double its original estimate, prompting the firm to raise additional capital from an outside investor.

Credit card company American Express said on Thursday that a slowdown in cardholder spending and rising delinquencies would lead to a pre-tax charge of around $440 million for the fourth quarter. The stock plunges 5pc ah.

Given the outlook, the Fed will have to be "exceptionally alert and flexible" and be ready "to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks,"Bernanke said in a speech yesterday.

Northern Rock agreed to sell mortgages valued at 2.2 billion pounds ($4.3 billion) to JPMorgan Chase & Co. to help repay loans from the central bank.

UBS AG said 2008 will probably be another ``difficult'' year for the financial services industry. After the latest writedowns, UBS said it held about $16 billion in residential mortgage-backed securities as of Nov. 30 and about $13 billion in so-called super senior securities.

Buyout firms paid $5.4 billion to securities firms in the U.S. and Europe in the second half of 2007, 38 percent less than the first six months. The drop was steepest in Europe where fees fell 54 percent.

Using a method that extracts the forward implied dividend from options prices, Credit Suisse says that several large financials, including Citi, Countrwyide, Bear Stearns, and Merrill Lynch, as well as REITs like Equity Residential, General Growth, and Vornado, are likely to cut their dividends substantially.

The $112.7 billion Pimco Total Return Fund had 13 percent of assets in corporate debt in December, up from 12 percent the previous month. The fund's cash position dropped to 36 percent, the lowest since August 2006, from 44 percent in November.

Clients of James Simons's Renaissance Technologies Corp. withdrew $4 billion from the firm's largest hedge fund in the past four months after returns trailed peers.

Commercial paper backed by mortgages, credit-card loans and other assets rose $4.8 billion to a seasonally adjusted $778.6 billion for the week ended Jan. 9, the Federal Reserve in Washington said today. The 0.6 percent increase followed a rise of 3.5 percent in the prior period, which was the biggest gain in at least seven years. The broader commercial paper market rose $14.5 billion in the most recent week to $1.81 trillion.

The US economy will grow at a much slower pace in 2008 but certainly will not slip into a recession as the overseas operations of US companies will offset a domestic slowdown, said Markus Schomer, managing director of the global economic strategist team at AIG Investments.

The probability of the U.S. economy sliding into a recession is now over 50 percent, but it is not a sure thing, National Bureau of Economic Research President Martin Feldstein said on Thursday.

The International Monetary Fund sees the US economy avoiding recession, despite financial sector turmoil and a housing sector slump, a spokesman said yesterday.

The economy will keep slowing "for the time being" as the country's cycle of profits feeding into wages and consumer spending weakens temporarily, Bank of Japan Deputy Gov. Toshiro Muto said Thursday. Goldman Sachs Group cut its Japan economic growth estimate and said the world's second-largest economy faces a 50 percent chance of a recession.

The Baltic Dry Index, a measure of shipping costs for commodities, fell the most since 1989 in London as traders speculated about a possible recession and after a reduction in the amount of iron-ore cargoes. The index, which tracks transport costs on international trade routes, dropped 384 points, or 4.6 percent, to 7,949 points today.

Wheat futures in Chicago declined for a second day yesterday as a survey showed U.S. farmers planted more wheat to capitalize on higher prices. Corn and soybeans were little changed after falling from multiyear highs.

Copper headed for the biggest weekly gain since September as China, the world's largest user of the metal, said its imports in December rose to an eight-month high.

Commodities will be "well supported'' by rising demand and curbs on supply even as the U.S. economy slows, Goldman Sachs said.

U.S. retailers' holiday sales gained 2.2 percent, the slowest pace in five years, the International Council of Shopping Centers said today, based on results from 45 chains.

Best Buy Co., the largest U.S. consumer-electronics chain, said sales in December rose 11 percent as it gained market share from Circuit City Stores Inc. during the holidays.

Tiffany & Co., the world's second- largest luxury-jewelry retailer, said holiday sales growth shrank to 8 percent and lowered its annual profit forecast as its U.S. customers reined in spending.

J.Front Retailing Co Ltd, Japan's top department store operator, fell 10.7 percent to 833 yen after it slashed its full-year outlook on weak clothing sales.

Premier Foods Plc, the maker of Hovis bread, fell to a record in London trading on concern that the company will struggle to repay its debt if food costs continue to increase and may have to raise money by selling new shares.

Paragon Group Cos., the U.K. mortgage lender that gets all its financing from capital markets, plans to raise 287 million pounds ($560 million) in a share sale to help cover a funding shortfall.

Japan’s Eco Watchers survey fell to a nearly five year low of 36.6 in December, as sentiment on the economy becomes increasingly pessimistic, helping to raise speculation that the Bank of Japan will be forced to cut rates this year.

German wholesale prices surprisingly fell in December by 0.5 percent, which may help alleviate some of the ECB’s inflation concerns.

UK industrial production was weaker than expected at -0.1 percent, amidst weak manufacturing, mining, and oil/gas output. The manufacturing sector has already showed some cracks, as PMI pulled back throughout the fourth quarter to 52.9 in December.

The Canadian economy unexpectedly lost 18,700 job in December, marking the first time the net employment change fell negative in 8 months.

Brazilien consumer prices, as measured by the IPCA index, jumped 0.74 percent in December, the biggest increase since October 2005. The gain, fueled by food prices, was almost twice the 0.38 percent increase in November and pushed the annual rate to 4.46 percent.

The U.S. trade deficit widened more than forecast in November as Americans spent a record amount on imported oil, overshadowing gains in exports. Exports climbed 0.4 percent to $142.3 billion in November, setting a record for a ninth consecutive month.

China’s trade surplus rose by nearly 50 per cent in 2007 to a new record of $262bn, but the three straight months of the final quarter in which import growth outpaced exports suggests the contentious imbalance may finally be nearing a peak. Europe also replaced the US as China’s largest export market. Europe also replaced the US as China’s largest export market. Sales to an expanded European Union grew by 29.2 per cent in 2007, compared to just 14 per cent to the US.

The three-month euro interbank offered rate, or Euribor, dropped 1 basis point to 4.58 percent, the European Banking Federation said today. The equivalent dollar rate declined 12 basis points to 4.26 percent, the British Bankers' Association said today.

The Nikkei .N225 was down 0.8 percent at midsession after a morning of seesaw trade, falling 115.73 points to 14,272.38. The index fell 277.32, or 1.9 percent, to close at 14,110.79, the lowest since Nov. 15, 2005. The benchmark has dropped 4 percent this week. The broader Topix index lost 23.78, or 1.7 percent, to 1,377.58, taking its weekly decline to 2.4 percent. In Hong Kong the Hang Seng index closed down 360 or 1.34 percent. On the mainland the Shanghai Composite finished higher 28 or 0.52 percent.
European stocks headed for the fifth week of losses, led by L'Oreal SA, Unilever and Nestle SA, on concern profit growth will slow with consumer spending. National benchmarks retreated in 13 of the 18 western European markets. France's CAC 40 dropped 0.3 percent, and the U.K.'s FTSE 100 slid 0.1 percent. Germany's DAX rose 0.1 percent.