Tuesday, January 8, 2008

Cayne steps down

BSCs Cayne, 73, has begun notifying members of his board that he will step down as CEO and remain chairman of the New York-based company.

Citigroup Inc., the biggest U.S. bank, may be forced to write down $16 billion in the fourth quarter and post a larger loss than previously estimated, Merrill Lynch & Co. analyst Guy Moszkowski said.

Victoria Finance, a $6 billion structured investment vehicle managed by New York-based Ceres Capital Partners LLC, had its investment-grade ratings cut 13 levels to junk after the value of its assets slumped.

The global default rate on high- yield, high-risk bonds, which finished 2007 at a 26-year low of 0.9 percent, will jump more than fivefold by the end of 2008, according to Moody's Investors Service.

Federal Reserve Bank of Philadelphia President Charles Plosser said further interest-rate cuts may be needed should the outlook for U.S. economic growth become ``substantially weaker'' than already projected.

S&P 500 firms' fourth-quarter profits probably fell 9.8% from a year earlier after dropping 4.5% in the third, according to analysts polled by Thomson Financial. It's also a sea change from Oct. 1, when analysts forecast an 11.9% gain. Excluding financials, S&P 500 profits should rise 12%.

For the first time in four years, the national vacancy rate for office buildings rose in the fourth quarter, as an unusually large amount of new space came on the market and tenants shied way from signing new leases.

Treasury Secretary Henry Paulson said on Monday the Bush administration was considering how to give the economy a boost as it weathers a housing correction, but does not want to rush....no decision had been made on how or whether to use fiscal policy to stimulate growth.

Lenders in the UK will take a greater role in preventing mortgage defaults by contacting customers who show signs of falling into arrears, under new guidelines to be introduced in March.

Merrill, itself one of Wall Street's biggest casualties of the sub-prime crisis, is the first major bank to declare that a recession in the world's biggest economy is now underway. David Rosenberg, the bank's chief North American economist, argues that a weakening employment picture and declining retail sales signal the economy has tipped into its first month of recession.

A top French bank has warned that mounting strains within the eurozone will set off a sharp jump in spreads on Italian, Spanish, Greek, and Portuguese sovereign bonds this year, forcing major changes in government policy across the region. "This is going to create friction within the eurozone. Euro weakness will be the inevitable result."

Electronics retailer Circuit City Stores said on Monday December sales at stores open at least 12 months fell 11.4 percent as changes at U.S. stores disrupted business, and added it still expects to post a fourth-quarter loss.

Supervalu Inc., the second-largest U.S. supermarket chain, said third-quarter profit rose and lowered its forecast for full-year earnings. Sales growth at stores open at least a year, excluding fuel, was unchanged at 0.5 percent from the second quarter and fell from the 1.2 percent pace in first quarter.

Marty Whitman and Al Zucaro, stock pickers with a knack for buying low, may be dripping in sweat after they snapped up U.S. mortgage insurers that shed more than 40 percent of their value in the past three months.

Paul Singer, the founder of hedge fund firm Elliott Associates urged investors to shun subprime investments and buy credit-default swaps on mortgage-backed securities. New York-based Elliott Associates, with $9.8 billion in assets, gained more than 30 percent after fees in 2007 -- its best performance ever -- on bets that the housing boom would falter and die.

Medicare spending jumped 19 percent in 2006, the fastest rate of growth in 25 years, after a prescription drug benefit was added to the U.S. health-care program for the elderly and disabled.

Wheat prices in South Africa, the third-biggest producer in Africa, fell by their maximum daily limit on expectations that major producers of the grain will reap bigger harvests.

Australia’s Home Building approvals unexpectedly rose 8.9% in November rebounding from the previous month’s decline, fueled by its robust labor market and wage growth. The increased construction will add to inflationary pressures and increase pressure on the RBA to raise rates.

UK Housing prices as measured by the HBOS rose for the first time in four months with an average house price of 197,039 pounds. Prices rose 1.3% contradicting expert predictions of a decline of 0.5%. However, home values fell 0.8 percent in the fourth quarter, the first drop since 2000.

Euro Zone retail sales unexpectedly fell by 0.5% on a monthly basis and 1.4% yearly. Economist were expecting an increase of 0.5% monthly and 0.3% yearly but the number was weighed down by lower sales of food, drinks and tobacco.

Manufacturing orders in Germany unexpectedly surged for a second month in November as domestic companies increased spending on goods such as factory machinery.

Money-Market Rates Fall a 7th Day, Banks Ease Tension. The three-month euro interbank offered rate, or Euribor, dropped 2 basis points to 4.60 percent, the lowest since Nov. 16. The difference between what the U.S. government and banks pay for three-month money was little changed today. The so-called TED spread was at 125 basis points. The spread was 35 basis points at the start of 2007.

Asia on Tuesday: Nikkei up 0.19%, Hang Seng down 0.25%. Cathay Pacific was up and Air China down sharply after China Eastern Airlines' (CEA) minority shareholders rejected its proposed stake sale to Singapore Airlines and Temasek Holdings.
Europe this morning: FTSE up 0.61%, DAX up 0.56%, CAC up 0.79%.

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