U.S. Stocks Gain; Basel Softens Reforms

Arthi Gupta
27 Jul, 2010
New York City

U.S. stocks trade higher after European banks reported better-than-expected earnings. BP Plc appointed Robert Dudley as its chief executive replacing Hayward and $30 billion worth of assets sale. The Basel Committee finalized capital and liquidity reform only after watering down stringent proposals.

[R]9:35 AM New York – U.S. stocks trade higher after European banks reported better-than-expected earnings. BP Plc appointed Robert Dudley as its chief executive replacing Hayward and $30 billion worth of assets sale. The Basel Committee finalized capital and liquidity reform only after watering down stringent proposals.[/R]

US markets gain on the rise in banks and positive earnings data, Asian markets traded mixed and European markets gained on encouraging earnings and economic data. DuPont second quarter profit surges.

EI DuPont de Nemours & Co. reported second-quarter net sales rose 26% to $8.616 billion compared to $6.858 billion in the prior-year quarter. Net income surged 202% to $1.159 billion or $1.26 per diluted share as against $417 million or 46 cents per share in the same quarter last year.

UBS AG, the Swiss bank reported profit in its second quarter, helped by strong gains in its investment banking and trading profits.

German financial services firm Deutsche Bank reported a higher profit for the second quarter, helped by a sharp decline in provision for credit losses and strong revenue growth in its asset management and trading businesses.

BP Plc announced today that Tony Hayward is to step down as group chief executive from October 1 and replaced by fellow executive director Robert Dudley. However, the company stated Hayward will remain on the BP board until November 30 and plans to nominate him as a non-executive director of TNK-BP.

The company further plans to sell assets worth $30 billion over the next 18 months, primarily in the upstream business. The planned asset sale includes the recently announced $7 billion worth asset disposals in the U.S., Canada and Egypt to oil and gas producer Apache Corp.

BP Plc reported total revenue and other income for the second quarter increased to $75.87 billion from $56.56 billion in the comparable period. Net loss in the period was $17.15 billion or 91.29 cents per diluted share versus a profit of $4.38 billion or 23.16 cents last year hurt by a hefty charge on the costs of the massive oil spill in the Gulf of Mexico.

The oil giant said it is taking a charge of $32.2 billion in the second quarter to reflect the impact of the Gulf of Mexico oil spill, including costs to date of $2.9 billion for the response and a charge of $29.3 billion for future costs, including the funding of the $20 billion escrow fund.

A committee of global central bankers and regulators came to agreement on Monday over a series of new rules for banks so that they can withstand future shocks in the financial sector.

The Basel Committee said the new measures, including a mandatory capital buffer for banks, must be implemented over a period of five years from 2013 to 2018.

Those measures include increasing the quality and quantity of capital at banks, strengthening liquidity standards, discouraging excessive risk taking, and reducing procyclicality.

However, the committee watered down some of the draft proposals, saying they could have ""potentially adverse consequences for particular business models and provisioning practices.""

""Many banks have already made substantial strides in strengthening their capital and liquidity base. The phase-in arrangements will enable the banking sector to meet the new standards through reasonable earnings retention and capital raising,"" said Nout Wellink, Chairman of the Basel Committee.