Friday, January 25, 2008

Private equity looks at bond insurers

Shares of Ambac Financial rose 15.1 percent in extended trade on Thursday after newspaper reported that billionaire investor Wilbur Ross is in talks to take over the bond insurer.

New York's top insurance regulator said Thursday that it will take time to implement a series of measures to prop up the bond insurance industry and that his agency won't comment on widely reported details of the plan.

The risk of European companies defaulting headed for the biggest weekly decline in almost two months amid speculation bond insurer Ambac Financial Group Inc. will be bought by billionaire Wilbur Ross.

Shares of bond insurers reversed course and fell sharply Thursday after Fitch Ratings cut the financial strength rating of Security Capital Assurance Ltd. to "A" from "AAA", after it scrapped plans to try and raise $2 billion in fresh capital.

China's insurers risk "massive'' redemptions and liquidity difficulties should markets slump, the industry regulator said. "Insurers' share prices are extremely sensitive in the short term to their equity investment results''.

The Federal Reserve was unaware of a scandal involving a rogue trader at France's Societe Generale. Policy-makers remain comfortable with their decision to cut rates aggressively.

Congressional leaders announced a deal with the White House Thursday on an economic stimulus package that would give most tax filers refunds of $600 to $1,200, and more if they have children.

Nancy Pelosi said a federal stimulus package for the economy may include a provision for a one-year increase to $729,750 from $417,000 in the size of mortgages that government-sponsored enterprises Fannie Mae and Freddie Mac may buy.

The United States is at the edge of a recession, with the odds at 50 percent or possibly higher, former Federal Reserve Chairman Alan Greenspan said on Thursday.

The United States is sliding towards a dangerous 1930s-style "liquidity trap" that cannot easily be stopped by drastic cuts in interest rates, Nobel economist Joseph Stiglitz has warned.

The world's financial institutions will have to write down a further $300bn (£152bn) of US sub-prime losses before the crisis is over, according to a study by consulting firm Oliver Wyman.

Deutsche Bank AG's co-head of investment banking Anshu Jain said financial turmoil may last another six months as banks remain reluctant to lend and economic growth slows.

The Federal Reserve kicked into high gear a rush by homeowners across the country to refinance their mortgages at today's lower rates. Thirty-year fixed-rate mortgages now carry an average interest rate of 5.57 percent, down from 5.75 percent last week and from 6.32 percent a year ago.

Bank of England rate setter Andrew Sentance said UK interest rates may be restrictive but that markets need to factor in the threat of rising inflation.

Canadian Central Bank has lowered down considerably its expectations of economic growth as well as the and the inflation pressures for this year. Canadian economy will grow 1.8% in 2008 and 2.8% in 2009, and both core and total CPI inflation decreasing to levels below 1.5%. by the middle of 2008 to grow around 2% in 2009.

Microsoft signaled confidence to a rattled stock market by raising its full-year earnings outlook above Wall Street targets and reporting a 79 percent rise in quarterly profit on Thursday. "These numbers tell me that Microsoft is seeing strength in the pipeline."

Caterpillar Inc., the world's largest maker of bulldozers and excavators, said fourth-quarter earnings rose 11 percent as demand increased from outside the U.S., where recession is "a definite threat.''

Harley-Davidson said fourth-quarter profit fell 26 percent capping its first annual earnings decline since 1993. For the first quarter, shipments will be 68,000 to 72,000 motorcycles, up from 67,761 a year earlier, Harley said.

Imperial Tobacco plans to bid 910 million euros ($1.3 billion) for full control of Compania de Distribucion Integral Logista SA, Spain's largest cigarette distributor.

L'Oreal SA, the world's biggest cosmetics maker, climbed for a second day in Paris trading after the company reported an increase in fourth-quarter revenue, prompting some analysts to raise their recommendations.

IKB Deutsche Industriebank AG, the German bank bailed out after investing in U.S. subprime loans, rose the most in 12 years in Frankfurt trading on speculation Deutsche Postbank AG may buy the lender.

Deutsche Post rose as much as 5.9 percent in German trading after Financial Times Deutschland said it may sell the unprofitable U.S. package and express-delivery unit to FedEx.

Eurohypo AG, Germany's biggest mortgage bank, booked further writedowns in the fourth quarter and forecast a "significant'' decline in new business because of the U.S. subprime mortgage crash. The market for commercial mortgage-backed securities may reopen in the second half.

South Korea's economy expanded faster than economists forecast in the fourth quarter, driven by the biggest increase in exports in four years and a pickup in business investment. Growth accelerated to 1.5 percent from the third quarter.

Consumer prices in Japan surged 0.8 percent in December from the year prior – the fastest rate in more than nine years – as rising oil and other commodity prices are passed through from producers.

German import prices, an early indicator of inflation pressure in the economy, rose the most in over a year in December, led by the cost of food. The price of imported goods gained 3.7 percent from a year earlier after increasing 3.5 percent in November.

German consumer confidence went little changed in February, as the GfK index held at a nearly two-year low of 4.5. It appears that resilient labor market conditions are helping to offset worries about mounting inflation and deterioration in the financial markets

The BOC’s core CPI measure fell more than expected in December at a rate of 0.3 percent, dragging the annual rate down to a two year low of 1.5 percent and indicating that the central bank may consider cutting rates at their next meeting in March.

Asian stocks rose, driving the region's benchmark to its biggest gain in almost a decade, after South Korea's economy expanded faster than estimated and the U.S. moved closer to approving tax rebates. The MSCI's Asian index climbed 4.5 percent to 145.73 at 7:25 p.m. in Tokyo, its steepest gain since Oct. 16, 1998, and adding to a two-day, 5.6 percent advance. Hong Kong's Hang Seng Index surged 6.7 percent, the region's biggest increase. Japan's Nikkei 225 Stock Average added 4.1 percent to 13,629.16, the biggest advance since March 2002. Europe's Dow Jones Stoxx 600 Index added 1.2 percent. France's CAC 40 also gained 1 percent. The U.K.'s FTSE 100 jumped 0.8 percent, and Germany's DAX advanced 1.8 percent.

U.S. overnight and premarket:

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