U.S. Indexes Higher; French Banks Confirm Capital Access

Bikram Pandey
13 Sep, 2011
New York City

U.S. stocks struggled to inch higher and banks and financial services faced the brunt of selling. European markets rebounded but Italian bond auction drew tepid demand. UK inflation stayed above the target of central bank for the third month in a row.

[R]4:00 PM New York – U.S. stocks struggled to inch higher and banks and financial services faced the brunt of selling. European markets rebounded but Italian bond auction drew tepid demand. UK inflation stayed above the target of central bank for the third month in a row.[/R]

Stocks struggled in New York as nervous traders stayed away from banks linked to the euro zone. The growing list of worries included the bank’s exposure to the bonds of Greece and other peripheral nations in the region after Italian auction drew tepid demand.

Societe Generale chief executive in a television interview said that the bank has alternative channels to finance its needs even if the access to the U.S. market funds disappears completely. BNP Paribas also confirmed that it is facing no difficulty in accessing short term funds to meet its dollar denominated liquidity.

However, both banks are on the drive to sell assets and lower their short term debt.

The U.S. median household income declined 2.3% in 2010 to $49,445, the first year in which Americans made less than $50,000 a year since 1997. The inflation adjusted income decreased 7.1% from the peak in 1999.

The poverty rate, household earning less than $22,314, increased to 15.1% in 2010 from 14.3% in the previous year and jumped from 12.5% in 2007.

The number of people living in poverty increased by 2.6 million in 2010 to 46.2 million, the highest in the 52 years the U.S. Census Bureau has been monitoring the data.

Bank of America confirmed its plans to cut 30,000 jobs and $5 billion in costs annually till 2014. The news, first reported by 123jump.com a week ago, confirmed that the integration and grow at any strategy of the previous management failed to deliver returns.

Bank of America went on a spree of $100 billion of acquisitions in the decade to 2007 than culminated to two disastrous purchases, Countrywide Financial and Merrill Lynch.

In the earnings news, Best Buy second quarter net income declined 30% to $177 million. Intersil revised lower guidance for revenues in third quarter. IHS reiterated 2011 revenue in the range of $1.31 billion to $1.34 billion. Spansion updated its business outlook for the third quarter.

The European indexes extended losses as French banks face difficulty in rolling over loans in the U.S. However BNP Paribas and Soc Gen confirmed it has alternative channels for funding.

Italy held talks with Chinese officials for possible bank stake sale. The Italian Treasury sold €3.8 billion in 5-year debt.

The jobless rate in the OECD area remained steady in July. Swedish unemployment rate dropped in August. Inflation in France, Hungary, and Sweden rose but Spanish inflation slowed in August.

The UK indexes closed higher but inflation accelerated in August and exports and imports rose to a record high in July. Mitchells & Butlers rebuffed takeover bid by Piedmont citing that it significantly undervalues the company.

Stocks in Japan rebounded after a steep selloff in the last five days. The benchmark index is still down 16% for the year and hovered above the low last seen in March. The euro dropped to a 10-year low against the yen.

The benchmark index in Australia rebounded nearly 0.9% a day after it plunged more than 3.5%. The latest survey from a private bank showed manufacturing is conditions that are similar to a recession.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield increased to 1.98% and 30-year U.S. bond rose to 3.31%.

The U.S. dollar decreased at $1.3696 to one euro and closed lower against the Japanese yen to 76.88 yen.

Immediate delivery futures of Texas crude oil increased $1.69 to $89.88 a barrel and futures of natural gas increased 0.09 cents to $3.98 per mbtu and gasoline price rose 0.15 cents to 273.97 cents a gallon.

In metals trading, copper increased 0.25 cents to $3.96 per pound, gold rose $25.30 to $1,838.60 per ounce and silver added $0.91 to $41.12.