Tuesday, January 15, 2008

Citis kitchen sink Quarter

Citigroup posted the biggest loss in the U.S. bank's 196-year history as surging defaults on home loans forced it to write down the value of subprime-mortgage investments by $18 billion. The bank also cut its dividend by 41 percent, announced 4,200 job cuts and said it will receive $14.5 billion from outside investors to shore up depleted capital.

The risk of Citigroup defaulting fell after the U.S. bank posted the biggest loss in its history and wrote down the value of subprime-mortgage investments by $18 billion.

Opposition from the Chinese government may stop Citigroup's plan to raise capital by selling a stake worth $2 billion (1.3 billion euros) to a Chinese bank, the Wall Street Journal reported on its Web site Monday.

Merrill Lynch raised $6.6 billion by selling preferred shares to a group including the Kuwaiti Investment Authority and Japan's Mizuho Financial Group Inc.

Municipal borrowers sold $4.2 billion of bonds during the first full week of 2008, after last year's weekly pace of $6.5 billion, according to data compiled by Bloomberg that excludes variable-rate demand notes and auction-rate securities. Municipal issuance is poised to remain below last year's weekly average for a fifth week.

State Street Corp., the world's largest money manager for institutions, said fourth-quarter
earnings fell 28 percent after setting aside $618 million to settle legal claims stemming from losses on subprime mortgages.

U.S. Bancorp reported a
21% drop in fourth-quarter net income as the bank-holding company was hit with charges while trying to navigate amid the credit crisis.

M&T Bank said on Monday that
profit tumbled 70 percent, hurt by debt write-downs and turmoil in residential real estate markets.

Sovereign Bancorp, the second-largest U.S. savings and loan, said on Monday it expects to take $1.58 billion in
fourth-quarter charges, hurt by worsening credit quality and a tough mortgage environment.

Foreclosure has become a top priority for the U.S. Conference of Mayors which is holding its winter meeting in Washington Jan. 23-25. "The federal government response has been anemic," said Mayor John DeStefano of New Haven, Connecticut, where foreclosures rose 80 percent in 2007. "Mayors are talking to each other about this," DeStefano said. "No one else is going to help these homeowners."

Futures contracts on the Chicago Board of Trade showed a
50 percent chance the Fed will reduce its benchmark rate by three- quarters of a percentage point at its Jan. 30 meeting to prevent rising U.S. home foreclosures and bank writedowns from triggering a recession.

U.S. recession poses a bigger threat to the global economy than a slowdown in China, according to
Burton Malkiel, the Princeton University economics professor who wrote "A Random Walk Down Wall Street.''

HSBC Holdings Plc, Europe's biggest bank by market value, set up a collateralized debt obligation to repackage so-called surplus notes sold by insurance companies to bolster capital, according to Standard & Poor's.

Senate investigators, stepping up scrutiny of tax-cutting maneuvers, are examining whether Wall Street firms improperly structured transactions that helped hedge funds sidestep dividend taxes, say people familiar with the situation.

Regulators are now conducting a
broad review of pre-deal trades by investment banks to determine if they were coincidences, or something else. It isn't clear what deals they're looking at.

Hypo Real Estate Holding, the German commercial-property lender that acquired Depfa Bank, said
pretax profit fell in 2007 and that it will cut its dividend. The shares tumbled more than 27 percent, their most ever. "....a 390 million-euro charge taken during the fourth quarter to account for the impairment of U.S. exposure of collateralized debt obligations,''

Centro Properties Group, the Australian owner of 700 U.S. shopping malls, said Chief Executive Officer
Andrew Scott resigned and asked lenders to extend a Feb. 15 deadline to refinance A$3.9 billion ($3.5 billion) of debt.

Northern Rock's "principal challenge'' is to repay at least 25 billion pounds ($49 billion) owed to the Bank of England, Chairman Bryan Sanderson said today.

The Bank of Japan
cut its evaluation of regional economies for the first time after four of its nine branches said conditions in their areas were worsening.

Williams-Sonoma Inc., the U.S. gourmet-cookware retailer, reduced its fourth-quarter profit forecast as holiday sales declined on the worst housing slump in 27 years. Sales at Williams-Sonoma's stores open more than a year fell 0.4 percent for the nine weeks through Dec. 30, the company said.

Tesco's U.K. Holiday Sales Slow, Missing Estimates. The supermarket company's shares fell to a four-month low after Tesco said sales at U.K. stores open at least a year rose 3.1 percent, excluding gasoline, in the six weeks ended Jan. 5. That was below the third quarter's 4.1 percent growth and the 4 percent.

Northern Foods Plc, the U.K. maker of Fox's cookies, said third-quarter sales strengthened after it raised prices of frozen pizzas and baked goods to reflect higher ingredient costs. sales rose 3.5 percent at continuing businesses in the 13 weeks ended Dec. 29 excluding currency movements. That beat the first half's 2.7 percent gain.

Beiersdorf, the German maker of Nivea skin creams, reported 2007 profit that beat analysts' estimates on growth in emerging markets.

Nokia Oyj, the world's biggest maker of mobile phones, will
close a factory in Germany and cut about 2,300 jobs as it shifts production to locations with lower costs.

Chancellor Angela Merkel said Germany may have difficulties this year in repeating its success in balancing the 2007 budget as global risks including inflation pressures and the impact of the subprime mortgage crisis grow.

George Soros's hedge-fund firm named BlackRock Inc. co-founder Keith Anderson as its new chief investment officer, according to a letter sent to shareholders. The $17 billion fund returned 32 percent, outpacing the average hedge- fund gain of 10.4 percent.

Samsung Electronics said Tuesday that its fourth-quarter
net profit fell 6.6 percent amid sharp declines in prices for computer memory chips, though sales of mobile phone handsets surged to a record. Results beat expectations and the shares surged in early morning trading.

The media industry is braced for an
advertising downturn after news that marketing budgets were revised down for the first time in a year during the last quarter of 2007.

In the latest effort to right EMI Group Ltd., the record company announced Tuesday that it is laying off as much as one-third of its employees, slashing marketing expenditures and dropping artists as part of a radical restructuring.

General Motors top finance
executive said Sunday he doesn't see the subprime mortgage mess spreading into auto loans at the company's former credit arm, GMAC financial services. GMAC's auto loan delinquencies rose from 2.4 percent in the third quarter of 2006 to 2.6 percent in the same period of 2007.

Oil prices have
disconnected from demand in rich countries, showing how the global oil market has become unmoored from some of the factors that steered it in the past.

Chile, the world's biggest copper producer, said the value of its exports of the metal rose 19 percent in December as mines expanded production. Chile produces 35 percent of the world's mined copper.

The risk of default by retailers including Sears Holdings and Saks rose on concern that a slowdown in consumer spending will make it tougher for the companies to repay debt.

Sales at U.S. retailers
unexpectedly fell in December, capping the weakest year since 2002. Sales dropped 0.4 percent, the first decline since June, following a revised 1 percent gain in November, the Commerce Department said today in Washington. Purchases excluding automobiles also decreased 0.4 percent.

Investor Confidence Dropped to 15-Year Low. The ZEW Center for European Economic Research said its index of investor and analyst expectations fell to minus 41.6 from minus 37.2 last month, the eighth straight decline.

U.K. Inflation Holds Above Bank of England Target.
Consumer prices rose 2.1 percent from a year earlier, the same as in November, the Office for National Statistics said in London today.

A U.S. court crackdown on punitive damages resulted in the second consecutive year of declines and reversals of earlier verdicts, a trend working in favor of companies like Ford Motor Co.

Money-market rates fell before a series of central bank auctions aimed at defusing the logjam in short-term credit markets. The three-month euro interbank offered rate, or Euribor, dropped 2 basis points to 4.54 percent, the European Banking Federation said today, the lowest since Aug. 15. It was at a seven-year high of 4.95 percent on Dec. 12, when policy makers announced a plan to counter a global squeeze on lending. Dollar and pound rates also dropped.

The Nikkei 225 Stock Average declined 138.16, or 1 percent, to close at 13,972.63, dropping below 14,000 for the first time since Nov. 10, 2005. The Topix index slid 27.38, or 2 percent, to 1,350.20, the lowest close since Sept. 16, 2005. More than 11 stocks fell for each that gained. Japan's markets were closed yesterday for a public holiday. In Hong kong the Hang Seng index closed down 630 pts or 2.38 percent. The Shanghai Composite index closed down 54 pts or 1 percent.

European stocks declined, led by retailers and financial companies, after Tesco Plc reported holiday sales that trailed analysts' estimates and Hypo Real Estate Holding AG's profit dropped. National benchmarks slid in all of the 18 western European markets. France's CAC 40 sank 1.3 percent, and the U.K.'s FTSE 100 fell 1.6 percent. Germany's DAX slipped 0.9 percent.

U.S. overnight and premarket:

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