Monday, January 7, 2008

Headed for a fall?

Harvard University economist Martin Feldstein, head of the group that dates U.S. economic cycles, said the odds of a recession have risen to more than 50 percent after a report showing unemployment jumped in December.

In another sign of a weakening job market, employers are cutting hours for more workers to below the 35-hour-per-week threshold for full-time work because of slowing demand, or "slack work," according to government data.

The current mortgage crisis will probably enter the U.S. record book as the second-worst in the past 100 years. The crux of the crisis is a loss of confidence by the investors who purchase mortgage-backed securities and their retreat to the sidelines. When investors stop buying, the secondary market system grinds to a halt.

Jefferies Group projected a surprise fourth-quarter loss, hurt by trading losses, weak results in its high-yield and asset management businesses, and higher compensation costs.

Credit Suisse fell 2.2 percent to 64.25 Swiss francs. Switzerland's second-biggest bank expects additional writedowns of 2.5 billion Swiss francs ($2.3 billion) for the fourth quarter of 2007, Sonntag reported, without saying where it got the information.

Deutsche Bank, Germany's largest bank, slid 1 percent to 86.38 euros after Credit Suisse downgraded the stock to "underperform'' from "outperform,'' saying it remains "cautious'' on European banks in 2008.

Banks may be required to set aside more capital to offset the risk of losses on new collateralized debt obligations and other complex securities, according to Moody's Investors Service.

Gordon Brown on Sunday warned Britain’s economy faces a “dangerous” year ahead as he battled against rising energy prices and higher pay awards that he fears could undermine his pledge to “break the back of inflation”. Mr Brown told the Observer, the British Sunday newspaper: “This is a difficult and dangerous situation for the world economy.”

J Sainsbury Plc, Britain's third- biggest supermarket chain, dropped the most in two months in London trading after a report that the company may have missed internal sales and profit goals over Christmas.

ppraisal values fell at a record rate in November and commercial real estate derivatives contracts indicate owners of British offices, shopping malls and warehouses may suffer their biggest annual losses in more than a quarter century. Building owners may record losses of at least 11 percent in 2008.

European Aeronautic, Defence & Space Co., parent of Airbus SAS, dropped the most in four months after Deutsche Bank AG recommended selling the stock, saying airliner orders may decline this year.

SAP AG fell the most in almost a year in Frankfurt trading after analysts at UBS AG and Societe Generale lowered their price estimates, citing risks related to the acquisition of Business Objects SA.

Nokia Siemens Networks, the world's second-biggest maker of wireless networks, won a contract in Saudi Arabia valued at $935 million, among its biggest deals since the venture started in April.

Gordon Brown's plane will have barely departed New Delhi's Indira Gandhi International Airport this month before Nicolas Sarkozy's arrives with another contingent of executives seeking opportunities in India's rapidly opening markets.

Last Year's Losers Levkovich, Cohen See 14% Advance for S&P 500. Cohen, 55, the New York-based chief investment strategist at Goldman, agrees that the benchmark for U.S. equities will rise 14 percent from its 2007 close. She says stocks will rally because profits will rebound as the economy keeps growing. The S&P 500 fell short of the average 9.3 percent gain expected by forecasters last year after financial companies plunged the most since 1990.

"There's not much return there,'' said
Bill Gross in an interview with Bloomberg Television. Newport Beach, California-based Pimco is buying "anything but Treasuries,'' and prefers mortgage-related securities backed by Fannie Mae and Freddie Mac, he said.

European Central Bank President Jean-Claude Trichet said central bankers are "very satisfied'' with their efforts to calm money markets and they remain in close contact regarding further action. Companies' costs to borrow in the short term have fallen to a 22-month low, and issuance of commercial paper backed by collateral increased last week for the first time since August.

The three-month euro interbank offered rate, or Euribor, dropped 2 basis points to 4.61 percent, the lowest since Nov. 16, the European Banking Federation said today. It was 4.95 percent on Dec. 17, the day before the European Central Bank injected a record $500 billion into the banking system. The equivalent dollar rate fell 8 basis points to 4.54 percent, the British Bankers' Association said today.

Options to buy oil for $200 on the New York Mercantile Exchange rose 10-fold in the past two months to 5,533 contracts, a record increase for any similar period. World consumption will rise to 87.8 million barrels a day this year, 2.1 million more than in 2007 according to the Paris-based IEA. Demand from China alone will increase 5.7 percent to 8 million barrels a day.

State oil giant Saudi Aramco is on track to hit its oil production capacity target of 12 million barrels per day (bpd) in 2009, an Aramco official said on Sunday. Aramco aims to increase the recovery rate of oil from its fields to 70 percent from 50 percent through the use of advanced technology. That would help add around another 80 billion barrels to recoverable reserves in the next 20 years.

Copper extended last week's gain in London on speculation that China, the world's largest user of the metal, is replenishing domestic stockpiles. Nickel rose and tin declined. Copper inventory tracked by the Shanghai Futures Exchange fell to an 11-month low of 24,148 metric tons.

PPI in the Euro-zone rose more than expected during the month of November at a rate of 0.8 percent, pushing the annual rate up to an 11-month high of 4.1 percent. The ECB is widely expected to leave rates steady on Thursday but Trichet is unlikely to let up his staunchly hawkish bias.

European economic confidence fell in December to the lowest in almost two years as orders weakened and soaring prices for food and energy pushed up inflation. An index of executive and consumer sentiment in the euro area slipped to 104.7, the lowest since March 2006, from 104.8 in November, the European Commission in Brussels said today.

Japanese stocks dropped, sending the Topix index below 1,400 at the close for the first time in two years, on concern the U.S. economy is heading for a recession. The Nikkei 225 Stock Average lost 190.86, or 1.3 percent, to 14,500.55 at the close of trading in Tokyo. The broader Topix fell 19.20, or 1.4 percent, to 1,392.71, finishing below 1,400 for the first time since Oct. 25, 2005. In Hong Kong the Hang Seng index closed down 340.20 pts (1.24%). On the mainland the Shanghai Composite index closed up 31.77 pts (0.59%). National benchmarks decreased in eight of the 18 western European markets. The U.K.'s FTSE 100 climbed 0.4 percent. France's CAC 40 added 0.5 percent and Germany's DAX gained 0.6 percent. The Stoxx 50 increased 0.7 percent, while the Euro Stoxx 50, a measure for the euro region, added 0.5 percent.

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