Thursday, January 17, 2008

Danger is looming in the monoliners

Moody's and S&P are starting new reviews one month after affirming ratings on New York-based Ambac and MBIA Inc., the two largest bond insurers.

Investors gave a thumbs down to Ambac Financial Corp.'s $1 billion capital-raising plan after it warned of a big fourth-quarter loss.

Merrill Posts Record Loss on $15 Billion Writedown. Merrill also reduced the value of bond insurance contracts by $3.1 billion, saying the providers' credit ratings had been slashed below investment grade, making them less reliable counterparties.

Federal Reserve Chairman Ben Bernanke is expected to offer his support for an economic-stimulus package in his testimony today before Congress.

Fund managers across the world have turned "super-bearish" over the last month, abandoning hope that Europe and Asia can escape contagion from the US housing crisis. Most now think the dollar is poised to rally as the trouble shifts increasingly to Europe.

Bank of New York Net Falls After Year-Ago Sale Gain. Results included a writedown of $118 million, or 10 cents a share, to reflect a decrease in the value of collateralized debt obligations.

CIT Group, the largest independent commercial finance company in the U.S., reported a fourth-quarter loss because of bad home mortgages and the declining value of its student loan business.

PNC Financial Services Group Inc., Pennsylvania's biggest bank by assets, said fourth-quarter profit fell 53 percent on writedowns tied to commercial mortgages and costs related to its stake in BlackRock.

HSBC may slow dividend growth as losses from its U.S. home-loan operations and other pressures threaten its balance sheet, Goldman Sachs Group Inc. said.

Discount stockbroker Charles Schwab reported on Wednesday a 36 percent rise in earnings from continuing operations as revenue increased despite heightened market volatility and economic uncertainty.

TD Ameritrade Holding Corp., the third-largest discount brokerage by customer assets, said fiscal first-quarter profit rose 65 percent to a record, as trading and asset-management fees increased.

Las Vegas Default Highlights Commercial-Property Crunch. Yesterday, Ian Bruce Eichner, the developer of a twin-tower casino resort in the heart of Las Vegas, defaulted on a $760 million loan from Deutsche Bank AG after he failed to get refinancing.

Quebecor World Inc.'s stock and bonds plunged after the company missed a deadline to raise funds and failed to make a payment on $400 million of debt, boosting concern banks may force the second-largest North American printer into default.

The most widely credited reason for yesterday's selloff in the Euro was the dovish comments from ECB member Mersch. He said that the Euro’s gains were dampening growth and he urged the ECB to be cautious given uncertainties and look through temporary inflation jumps. Mersch is traditionally a hawk, which means that he has shifted his stance.

Today Trichet said his Jan. 10 statement, in which he said the ECB will act "preemptively'' to contain inflation, remains the view of the governing council. Asked about "other comments,'' Trichet said: "They were misinterpreted.''

India's Bombay Bullion Association said on Tuesday the country's imports of gold in 2007 could have fallen by 20 percent due to a surge in prices. In 2006, India imported about 715 metric tons of gold.

Remy Cointreau SA, France's second- largest liquor maker, fell 12 percent in Paris trading, the most since September 2001, after unexpectedly reporting that sales stagnated as U.S. distributors ordered less Remy Martin cognac.

HMV Group, the U.K.'s largest music retailer and the owner of Waterstone's bookstores, said Christmas sales were the strongest since its 2002 initial public offering on demand for video games and Nintendo Co.'s Wii console.

Delhaize Group, the owner of U.S. supermarket chain Food Lion, rose the most in three years in Brussels trading after reporting "strong'' holiday sales. Sales at U.S. stores open at least a year increased 3.7 percent in the fourth-quarter and 3.8 percent for all of 2007, the fastest pace in at least 10 years.

Goldenport Holdings, the Athens-based container ship company, rose the most of any member of the FTSE All-Share Index in London trading after it secured 94 percent of its bulk-carrier business for the year, shielding itself from a record plunge in rental rates.

U.K. real estate stocks rose in London trading after a Morgan Stanley analyst said the group may gain at least 20 percent in the first half as the Bank of England cuts interest rates in order to avert a recession.
Barratt Developments, the U.K.'s second-largest house builder by volume, rose the most in more than 15 years in London trading after saying first-half home sales rose 26 percent, beating its own forecasts.

Global oil-field output is declining at a rate of about 4.5% a year, a new study concludes. But projects in the works could make up for the decline.

Swiss investor confidence fell in January, as the ZEW survey of sentiment in the next six months fell to -32.7. This is the third consecutive month that the index has fallen, as fears of a global economic slowdown this year continue to mount.

The Euro-zone's trade surplus narrowed in November to 2.6B euros amidst a slowdown in both export and import growth.

Builders in the U.S. broke ground in December on fewer houses than forecast, making last year's decline in homebuilding the worst in almost three decades.
Housing Starts dropped 14 percent to an annual rate of 1.006 million, the lowest since 1991, followed a 1.173 million pace the prior month.

The risk of Japanese companies defaulting on their debt rose to a record today, according to traders of credit-default swaps. Contracts in Australia and the rest of Asia fell.

Japanese stocks rose for the first time in five days, as investor bet recent declines were excessive. The Nikkei 225 Stock Average advanced 278.94, or 2.1 percent, to 13,783.45 at the close in Tokyo, halting a four-day, 7.5 percent slide. The Hang Seng closed up 664 points reversing part of yesterdays sharp losses. The Shanghai Composite closed down 2.63 percent.
Most European stocks advanced after SAP AG said it doesn't expect an economic slowdown to hurt sales and Alstom SA reported revenue that beat analysts' estimates. National benchmarks advanced in 14 of the 18 markets in western Europe. Germany's DAX rose 0.2 percent, and France's CAC 40 added 0.1 percent. The U.K.'s FTSE 100 dropped 0.2 percent.

U.S. overnight and premarket:

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