Tuesday, January 29, 2008

Home price index posts record drop

Home prices in 10 major metropolitan areas fell by a record 8.4 percent in the year through November.
The decline topped the 6.7 percent annual drop for October, according to the S&P/Case-Shiller Home Price Indices.

CFC posted a $422 million fourth-quarter loss on Tuesday, hurt by mounting defaults in a sinking housing market.

American Express on Monday said fourth-quarter profit dropped 10 percent, and its revenue missed analyst forecasts as customers defaulted more often. Results for the fourth quarter included a $438 million charge, or $274 million after taxes, to boost reserves for soured U.S. credit card loans.

Spanish banks are issuing mortgage securities and asset-backed bonds on a massive scale to park at the European Central Bank, using them as collateral to raise money at favourable rates from the official credit window in Frankfurt.

The reason this crunch will be so much worse, Stephen Roach said, is that the chunk of the economy which is shuddering to a halt - homebuilding and housing dependent consumption - is six times bigger than the spending on IT, which triggered the last one.

Mr. Bush acknowledged that "we can all see that growth is slowing." He emphasized the benefits of a recent fiscal-stimulus deal with lawmakers to help fight off recession, terming it "a good agreement that will keep our economy growing,"

U.S. Treasury Assistant Secretary Anthony Ryan said on Monday there were signs that market liquidity was starting to return.

Regulators are talking to banks about providing back-up credit lines for the bond insurers. They are also speaking with other parties, including Wilbur Ross and Warren Buffett, about providing fresh equity capital.

JPMorgan disclosed on Monday that it has raised its stake in bond insurer AMBAC to 7.7 percent from 5.4 percent.

"The Fed is going to have to keep slashing rates, probably below inflation,'' said Robert Shiller who co-founded an index of house prices. "We are starting to see a change in consumer psychology.'' Skewing incentives toward spending, away from saving, typically lead to asset bubbles.

Global growth may decelerate close to the 3 percent pace economists deem a worldwide recession, from a 4.7 percent rate in 2007.

Emerging equity markets may fall another 12 percent from current levels because of the worsening outlook for earnings, according to UBS AG strategist Oussama Himani.

Goldman Sachs and Morgan Stanley said they are responding to requests from regulators for information related to subprime-mortgage securities.

Prime Minister Gordon Brown will seek support from France, Germany and Italy for rules that would force banks to increase the transparency of their operations.

The European Commission may "slightly'' lower its forecast for economic growth this year when it issues new projections next month, commission President Jose Barroso said.

California Governor Arnold Schwarzenegger's $15 billion plan to provide health insurance for everyone in the most populous U.S. state was rejected by a Senate committee on concerns it would cost too much.

3M Co. said fourth-quarter profit fell 28 percent as consumer spending slowed and price discounts cut revenue from optical film.

Dow Chemical Profit Tops Estimates on Price Increases. "For 2008, there is some uncertainty in the economic outlook for the United States." The company will eliminate about 1,000 jobs to save about $180 million in annual costs.

Tousa Inc., the Florida homebuilder that lost 98 percent of its market value in the past year, sought bankruptcy protection from creditors.

Travelers Cos., the second-largest U.S. business insurer, said profit fell 11 percent in the last quarter of 2007 and forecast lower earnings this year. The company's board approved an additional $5 billion for share repurchases and reported fourth-quarter operating income of $1.63 a share, beating the $1.61 average estimate.

VMware reported fourth-quarter sales that missed analysts' estimates as competition increased. The shares fell 26 percent.

Corning Inc. said Monday its fourth-quarter profit rose 11 percent, beating Wall Street expectations, on heavy demand for auto pollution filters and glass used in flat-screen televisions and computers.

Sumitomo Mitsui Financial third-quarter profit fell after Japan's second-largest bank by market value wrote down the value of U.S. mortgage investments by more than it predicted two months ago and as provisions for bad loans surged.

Nondefense capital goods orders excluding aircraft, a proxy for business investment, rose a much greater than-expected 4.4 percent. It was the first rise in that category since September.

Consumer confidence in France dropped to a record low in January as accelerating inflation squeezed purchasing power.

U.K. CBI Retail Sales Index Fell to 14-Month Low in January. Sales were still better than retailers expected, the CBI reported today. The index for expectations came in at minus 5 for January in last month's survey and rose to 10 for February.

Japan's unemployment rate stayed at 3.8 percent in December, the government statistics bureau said today. The ratio of jobs available to each applicant fell to a two-year low of 0.98.

The Swiss trade balance unexpectedly fell to a two year low, as the surplus narrowed in December to 0.1981 billion francs from 1.810 the month prior. Conditions in the Swiss economy remain fairly resilient as the UBS Consumption Indicator is still well above its average of 1.50.

The Euro-zone current account showed a 0.7 billion surplus, which was greater than expected but down from November, which was revised higher from 1.3 billion to 3.1 billion. An increase in the services surplus keep the current account from approaching a deficit.

Iran and Switzerland are expected to sign a natural-gas agreement "soon,'' Iran's foreign minister, Manouchehr Mottaki, said in Tehran today.

"Because of these unanticipated and extraordinarily high corn and soybean meal costs, we have no choice but to raise prices substantially," Tyson boss Bond said.

Stocks rose in Europe and Asia, led by industrial and mining shares, as investors speculated lower U.S. borrowing costs will spur economic growth and JPMorgan Chase & Co. recommended European equities. France's CAC 40 gained 1.4 percent and the U.K.'s FTSE 100 rose 1 percent. Germany's DAX advanced 1 percent. Japan's Nikkei 225 Stock Average added 3 percent, the biggest advance among benchmarks tracked by Bloomberg worldwide. Hong Kong's Hang Seng Index gained 1 percent.

U.S. overnight and premarket:

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