Thursday, January 24, 2008

Doubts cast on Fed rate cut

Societe Generale uncovered a $7.14 billion fraud, one of history's biggest, by a single futures trader who orchestrated a series of bogus transactions that spiraled out of control amid roiling markets this week, the French bank said Thursday.

New York State's insurance regulators met yesterday with U.S. banks to discuss raising new capital for bond insurers, said a department spokesman. Insurers MBIA Inc. gained 33 percent in New York trading and Ambac Financial Group Inc. soared 72 percent. The infusion may be as much as $15 billion, the Financial Times reported.

The risk of companies defaulting fell after New York regulators urged Wall Street firms to bail out bond insurers. Credit-default swaps on the Markit CDX North America Investment-Grade Index dropped 1.5 basis points to 107.5. In Europe, the benchmark Markit iTraxx Crossover Index fell 33 basis points to 450 and in Tokyo the Markit iTraxx Japan index declined 8 to 67.

Massachusetts' top securities regulator on Wednesday said he issued subpoenas to a pair of municipal bond insurers, seeking information on how much the firms disclosed to cities and towns about their exposure to mortgage-related investments that have recently plunged in value.

Reactions to the US Federal Reserve’s dramatic 0.75 percentage point cut in interest rates ranged from hostile to lukewarm as policymakers, businessmen and economists gathered at the World Economic Forum on Wednesday.

ECB's Weber Dismisses Bets on Interest-Rate Cuts as "wishful thinking.''. "We have a positive economic outlook and as long as that doesn't change I would say that rates are still on the accommodative side and in no way restrictive.''

Norway's central bank kept its key interest rate on hold at 5.25 pct, as expected, in a decision economists said recognised that the oil-producing nation's economy remains very strong despite growing indications of a global economic slowdown.

Interest rate cuts in the United States will make it more difficult for the Chinese government to achieve its economic aims, a People's Bank of China official said yesterday.

Leaders of world finance told the holders of $2.5 trillion in sovereign wealth funds that they need to reveal more about their activities or risk further antagonizing American politicians.

Bank of America (BAC 39.13, +1.74) declared a regular quarterly dividend on common stock of $0.64, unchanged from the company's last dividend. That leaves its yield at an attractive 6.5%.

Bank of America Corp., the nation's second-largest bank, plans to raise $6 billion by selling preferred shares.

Banco Bilbao, Spain's second-biggest bank, said fourth-quarter profit increased almost fivefold on higher lending revenue in its home market and Mexico after the company took one-time charges a year earlier. BBVA also said it will propose a 15 percent dividend increase.

Barclays investment banking arm will "invest and grow'' this year and sees the U.S. as an "opportunity,'' President Robert Diamond said. He declined to comment on whether Barclays Capital incurred further losses on its credit-related assets last year.

Allianz said it reached its full-year profit target of 8 billion euros ($11.7 billion) for 2007 as its insurance units helped cushion writedowns at its banking division. Allianz's banking unit had an operating loss of 450 million euros in the fourth quarter amid writedowns of 900 million euros on structured products.

The announcement of Whitman's departure came as eBay reported a 53 percent gain in fourth-quarter profits due to a strong holiday season. It beat Wall Street's expectations, though its future guidance was tepid.

Capital One profit down 42 percent. The quarterly provision for loan losses rose to $1.9 billion, covering $1.3 billion in write offs and an increase to reserves of $650 million.

Sovereign Bancorp, the second-largest U.S. savings and loan, on Wednesday posted a $1.6 billion quarterly loss and canceled its dividend following a larger-than-expected write-down for consumer credit losses and a 2006 bank acquisition. Sovereign wrote down $1.58 billion of goodwill.

Centro Properties Group CEO ruled out a fire sale of assets as he seeks to persuade banks to refinance A$3.9 billion ($3.4 billion) owed by the Australian owner of 700 U.S. malls.

Enron Corp. creditors could see their original payout more than quadruple to as much as $31 billion after a trial against Citigroup.

Lennar Corp., the biggest U.S. homebuilder, reported the largest quarterly loss in its history as the deteriorating housing market led to a $1.86 billion writedown for land and falling property values.

Interest rate cuts won't necessarily translate into lower mortgage costs for some 2 million Americans with risky subprime home loans. "Home prices, at best, are going to level off. So long as home prices are not rising, the reset problem exists."

Student lending company Sallie Mae posted a fourth-quarter loss on Wednesday, citing higher provisions for loan losses due to the weakening credit markets.

The deficit for the current budget year will jump to about $250 billion, the Congressional Budget Office estimated Wednesday, citing the weakening economy. And that figure does not reflect at least $100 billion in additional red ink from an upcoming deficit-financed economic stimulus measure.

AT&T Inc., the biggest U.S. phone company, said fourth-quarter profit jumped 62 percent on savings from its $86 billion BellSouth Corp. acquisition and sales of wireless handsets such as the iPhone. AT&T reiterated its 2008 sales forecast.

Hershey said fourth-quarter profit plunged 65 percent on higher dairy costs and a decline in market share. The maker of Hershey chocolate bars unexpectedly forecast that earnings in 2008 will fall.

Pernod Ricard SA, the world's second- largest liquor company, raised its annual profit forecast after stronger demand for spirits in Asia, Latin America and France helped second-quarter sales to beat analysts' estimates.

Nintendo increased third-quarter profit 63 percent and raised its annual revenue forecast after the console outsold Sony's PlayStation 3 and Microsoft's Xbox 360.

Nokia said fourth-quarter profit rose 44 percent, exceeding analysts' estimates, as it took market share from Motorola Inc. and shipments climbed to a record.

Fiat, Italy's largest manufacturer, boosted fourth-quarter profit 26 percent as it grabbed a greater share of the European car market and sold more trucks and tractors. The shares rose the most in six years.

Deutsche Telekom AG's Hamid Akhavan, who heads the T-Mobile International unit, hasn't seen signs of a "significant'' slowdown for the U.S. wireless division and said the dollar's drop is a "bigger worry.''

TUI AG, Europe's largest travel company, rose the most in 10 months in Frankfurt trading after the company said it expects continuing earnings growth at its tourism division until 2010 and the board approved a dividend payment.

People with blocked heart arteries are less likely to die or have a heart attack if treated with bypass surgery rather than drug-coated stents, a study of patients across New York found.

The number of U.S. workers applying for jobless benefits fell unexpectedly last week to the lowest level in four months.

German business confidence unexpectedly rose in January from a two-year low. The Munich-based Ifo research institute said its business- climate index increased to 103.4 from 103 in December.

U.K. mortgage approvals dropped an annual 38 percent to the lowest in at least a decade in December as banks curbed lending. "Housing market activity is now being substantially undermined by both stretched affordability and tightening lending practices.''

Brazilian consumer prices rose 0.7 percent in the month through mid-January, the same amount as the month earlier period the government said.

Brazil's unemployment rate fell to 7.4 percent in December, the national statistics agency said, better than ecpected.

Copper gained the most in two weeks in London and nickel rose for the first day this week as China's economic growth supports demand for industrial metals.

Gold surged 2 percent to trade above $900 on Thursday and platinum hit a historic high on dollar weakness.

A cargo train arrived in Hamburg on a trial run from Beijing after making the trans-Siberian journey in 15 days, half the time it would take to transport goods by sea.

Stocks rallied in Asia and Europe as talks to bail out bond insurers, rising profits at Nokia Oyj and China's economic growth boosted expectations that equity markets will weather a slowdown. U.S. index futures gained. France's CAC 40 rallied 4.3 percent. The U.K.'s FTSE 100 jumped 4.1 percent, and Germany's DAX advanced 5.5 percent. Japan's Nikkei 225 Stock Average added 2.1 percent, as did South Korea's Kospi index gained 2.1 percent. China's CSI 300 rose 1.1 percent.

U.S. overnight and premarket:

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