Goldman Sachs Invests $3 B in Hedge Fund

Elena
13 Aug, 2007
New York City

U.S. market averages rebounded Monday after the Fed Reserve and other central banks injected more cash into global financial systems, easing concerns about credit tightness. The Federal Reserve added only $2 billion in liquidity into the market, far below the $52 billion requested by banks. Goldman Sachs Group added 1% after it said it invested additional $3 billion in its troubled Equity Opportunities hedge fund.

[R]11:30AM Market averages traded higher amid easing credit concerns.[/R]

U.S. market averages rebounded Monday after the Fed Reserve and other central banks injected more cash into global financial systems, easing concerns about credit tightness. The Federal Reserve added only $2 billion in liquidity into the market, far below the $52 billion requested by banks. Economic data also generated optimism, as July retail sales rise 0.3% following June's 0.7% decrease.

In corporate news, Goldman Sachs Group ((GS)) added 1% after it said it invested additional $3 billion in its troubled Equity Opportunities hedge fund. Among stocks driven by analyst comments, J.P. Morgan Chase Co. ((JPM))gained 1% after Deutsche Bank upgraded its stock to buy from hold.

By sector, telecommunication stocks advanced, led by Telephone Data Systems ((TDS)) whose shares jumped 11%. Strength was also visible among technology stocks. Wireless, computer hardware, and networking stocks posted significant gains.

However, housing stocks continued their recent downward trend. Accredited Home Lenders Holdings ((LEND)) dropped 30% after private equity firm Lone Star Funds said it abandoned plans to complete its tender offer for the mortgage lender due to the company's weakening financial position. Lone Star said that Accredited no longer met the conditions of its $400 million buyout offer. Accredited warned that it is likely to face bankruptcy without a deal.

In late morning trading, the Dow Jones industrial average rose 60.40, or 0.46%, to 13,299.94. The Standard & Poor's 500 index advanced 9.28, or 0.64%, to 1,462.92, and the Nasdaq composite index rose 15.94, or 0.63%, to 2,560.83.


[R]11:00AM New York, 9:00PM Mumbai – Sensex in Mumbai fell sharply on the last day of trading, third weekly loss.[/R]

Sensex in Mumbai trading gained 148.96 points or 1.0% to close at 15,017.21 in volatile trading. In the broader market 807 stocks fell, 1,915 increased, and 47 were unchanged. Rupee in international trading weakened to 40.63 against one dollar from 40.53.

Daily turnover on the Bombay Stocks Exchange increased to 4,126 crore rupees from 5,221 crore rupees. Of the thirty stocks in index, 3 lost ground while 27 increased in value.

Recently listed Everonn Systems soared 15% to 592 rupees and was the most active stock in the BSE trading followed by Orbit Corporation, IFCI and Tata Steel. Orbit is reported to be in talks with Reliance Industries to sell its land holdings.

IDBI jumped 10% to 126 rupees on the news report that the company subsidiary is likely to push in retail brokerage business in the coming months.

Transport Corporation of India declined 2% to 112 rupees after it place 50,00,000 or 5 million shares, or 7% stake in the company to a FID Funds.

Saurashtra Cement jumped 10% to 63.40 after the company said that it will convert part of its convertible debt issued to India Debt Management or sell 14% stake in the company. The company plans to discuss and finalize this transfer in the board meeting on August 16th.

Shobha Developers fell 2.2% to 795 rupees after reporting first quarter earnings of 40 crore rupees, an increase of 140% on sales rise of 31% to 269 crore rupees.

India Hotels jumped 3% after the company decided to issue two rights issues and raise 844 crore rupees.

Bajaj Auto rose 2.5% to 2,377 rupees ahead of shareholder meeting. Consumer stocks jumped with defensive stocks climbing. Hindustan Unilever jumped 4% to 203 rupees followed by 3% rise in Godrej Consumer, 2.6% increase to 1,260 in Nestle India, and 1.2% increase in ITC.

Software exported fell led by 1.13% decline in Tata Consulting Services to 1,132 leading all the stocks in the Sensex. Infosys gained 0.2% to 1,955, and Wipro closed down 0.1% to 479 rupees.

NTPC, the power generation company, jumped 2% to 168 rupees on induction in Nifty index.


[R]09:45AM Wall Street opened higher. Nasdaq rallied 1%.[/R]

Wall Street opened Monday session in the positive after the Fed said that it would add liquidity, following a move by the Bank of Japan to inject $5 billion into the markets and an addition by the ECB of $65.3 billion. Commerce Department''s report showing a 0.3% increase in July retail sales also generated positive sentiment.

In corporate news, Goldman Sachs ((GS)) posted steep losses at its Global Equity Opportunities fund but said the firm made a $3 billion investment in it. Company''s shares added 1.4%. Sears Holding ((SHLD)) warned on Q2 profit but added $1.5 billion to its stock buyback authorization plan. The stock rose 4%.

Hovnanian Enterprises ((HOV)) added 1.8% after it said it delivered 31% fewer homes in Q3. The home builder also said it would take pre-tax charges of $90 million to $110 million on land impairment and development cost write-offs.

Blackstone Group ((BX)) was another notable gainer, rising 4% on a stronger-than-expected Q2 profit. In its first quarterly report as a public company, Blackstone posted revenue of $975.3 billion, below analyst estimates of $1.06 billion. The company''s IPO in June raised about $4 billion, but the stock fell short of expectations.

In the opening minutes of trading, the Dow Jones industrial average rose 82.27, or 0.62%, to 13,321.81. The Standard & Poor''s 500 index rose 10.12, or 0.70%, to 1,463.76, and the Nasdaq composite index rose 26.97, or 1.06%, to 2,571.86.


[R]09:00AM U.S. stock futures indicated a higher opening after recent steep declines.[/R]

U.S. stock futures pointed to recovery Monday, following a week of steep declines amid worries about the impact of subprime-mortgage defaults over the economic growth. However, overseas central banking injections helped relieve tensions. Banks are expected to release updates on the hits they have taken from the subprime crisis. Citigroup ((C)) reportedly lost more than $700 million in credit business in recent weeks.

In other corporate news, home builder Hovnanian Enterprises ((HOV)) added 1.4% in pre-market trading after it said it delivered 31% fewer homes in Q3. Sears Holdings ((SHLD)) warned on Q2 profit but added $1.5 billion to its stock buyback authorization plan. Sears shares rose 1.4%.

Among pre-market highlights, Blackstone Group ((BX)) jumped 6% after it posted a stronger-than-expected Q2 profit. The private-equity house also posted a loss of $52.3 million during the last 11 days of Q2 and warned that challenging financial market conditions continue.

On the economic news front, the Commerce Department said that U.S. retail sales rebounded in July, with total sales rising 0.3%, slightly below expectations of an increase by 0.4%. Stock futures accelerated throughout the morning. S&P 500 futures rose 17.1 points at 1,468.10 and Nasdaq 100 futures climbed 22.5 points at 1,951.50. Dow industrial futures rose 128 points.


[R]8:30AM New York, 8:30 PM Hong Kong – Asian markets corrected sharply on weakness in European and New York markets.[/R]

Asian markets rebounded after a volatile day of trading. Shanghai led the region with a gain of 1.5% followed by 1.2% advance in Korea, 1.0% rise in India and Australia, 0.65% addition in Singapore, and 0.45% increase in Hong Kong.

In Hong Kong trading stocks fell sharply at the opening but regained in the afternoon. Daily turnover on the main board dropped to HK$63.1 billion from HK$ 65.2 billion and volume on GEM market was reported at HK$0.7 billion, a decline of 20% from the previous session. Hang Seng Index at mid-day trading fell in the negative zone but attempted several rebounds in the afternoon trading and closed higher. Banks led the decliners. HSBC dropped 2% and Bank of East Asia fell 3%.

July consumer price index, a measure of inflation, jumped 5.6% on a sharp increase in food prices of 15.4% and meat price surge of as much as 45%. The inflation in June gained 4.4%. Expenses for food form 33% of basket of consumer spending. The rising food and energy prices have fueled the inflationary pressure and kept the inflation level above the target level for the last three of the six months. Inflation has been hovering around 3.5% for the first six months of the year and is likely to jump higher in the coming months. Inflation in non-food items jumped to 0.9%, lower than 1% in prior three months.

China reported July trade surplus of $24.4 billion, 67% jump from a year ago, and declined from $26.9 billion from June. The elevated surplus is fueling sharp rise in bank deposits, real estate prices, and stock market valuations. The rising demand is also fueling inflation in energy and food prices above the target set by the central bank. The People’s Bank of China said that the broadest measure of money supply, M2, rose 18% in July. Outstanding local currency loans in the month surged 16.6% and deposits in the local currency increased 16%. The foreign direct investment in the first seven months jumped 13% to $37 billion and keeping the economic growth rate at 12%.

Shanghai Composite Index led the region with a rise of 1.5% to close at 4,820.06, record high.

In Sydney trading ASX 200 gained 75.60 or 1.3% to 6,011.60. Of the total 201 stocks in the index, 136 gained, 55 declined, and 10 remained unchanged. Banks led the rising stocks after the Reserve Bank of Australia added liquidity in the system for the third day.

St. George Bank led the banking sector with a rise of 4% followed by Commonwealth 2.6% in National Bank of Australia, and 2.3% rise in Commonwealth Bank of Australia.

Leighton Holdings led the index stocks with a rise of 7.30% followed by 6.8% gain in Flight Centre, and 6% increase in Bradken, Crane Group, and SIMS Group. Perilya Ltd added 5.4% after falling 13.6% Energy Developers led the decliners in the index stocks with a fall of 9% followed by 5% loss in Queensland Gas, Arrow Energy, and 3% decline in Adelaide Bank and Sunland Group.

Crane Group Ltd. increased 6% after reporting annual income before one time charges rose 14.5% on 7% increase in sales to A$2.2 billion.

Qantas Airways said that it will set aside $40 million to cover charges from air freight price fixing.

For the third day in a row, the Reserve Bank of Australia added liquidity in the market to stem the rising interest rates and worries that credit crunch may stem economic growth. The bank added close $1.25 billion, lower than the money injected in the previous two trading days. The global injection of liquidity in local markets was carried out by the Federal Reserve Bank in Washington, the European Central Bank in Europe, and Central Bank in Japan.

In its quarterly policy, the bank also raised it inflation forecast to 3%, near the top of its range, and said that the inflation is likely to stay there during the next year. The bank also said that the economic growth is likely to increase to 4.5% at the end of the June of next year. The bank raised its target for cash rate to 6.5% last week, and forecasted today that the inflation will accelerate to 2.5% by the end of 2007 and will increase further to 3% in the year 2008.


[R]8:00AM Akzo Nobel agreed to acquire ICI for $16.2 billion.[/R]

Akzo Nobel ((AKZOY)), Dutch chemicals group, announced on Monday an agreement to acquire U.K. rival Imperial Chemical Industries in a cash deal worth 8 billion pounds ($16.2 billion) , or 670 pence a share. The transaction represents a 22% premium on the share price before the U.K. group announced it had received an approach in June. Akzo Nobel said that in addition to the bid price, ICI shareholders will also receive a second interim dividend of 5 pence a share.

Akzo''s previous offers of 7.2 billion pounds and then 7.8 billion pounds had been rejected by ICI. The acquisition of the maker of Dulux paints is expected to boost its coatings industry, enabling it to increase its global market share, as well as its presence in emerging markets, where ICI makes roughly a third of its sales.


[R]7:00AM New York, 8:00PM Tokyo – Market indexes in Tokyo rebounded as investors shrugged off U.S. mortgage market problems. Commodities, real estate, and financials led the rebound.[/R]

Nikkei 225 index plunged 35.96 or 0.2% to 16,800.95 at close with financial and brokerage stocks leading the decliners. Topix index dropped 1.29 to 0.1% close at 1,632.64.

The government reported economic growth in Japan in the second quarter slowed to an annualized rate of 0.5% from a revised 3.2% in the first quarter. The nominal economic growth rate was recorded at 0.3% and the measure of price changes, GDP deflator, fell 0.3% and domestic demand deflator gained 0.2%. Consumer spending continued to grow but at a slower pace of 0.4% in the second quarter. Another report showed that current account surplus rose to 1.52 trillion yen in June, 48% from a year ago. Japan is enjoying low unemployment rate of 3.7% but wages are still falling, keeping consumer spending weak.

The central bank in Japan added $5 billion of liquidity to keep interest rate below its target rate. The third injection of liquidity in as many days calmed the markets in the region. European markets also traded higher before Tokyo close. The Reserve Bank of Australia added $1.25 billion for the third day. While the amount of capital needed to maintain liquidity in the system was much lower than in the last two days of the last week.

According an analyst report cited by Nikkei News, nine largest Japanese financial groups have combined exposure to the U.S. subprime market of 1 trillion yen. The relatively light exposure in the Japanese banking system to the troubled mortgage market in the U.S. did not prevent investors selling stocks last week.

Of the 225 stocks in the index, 110 declined, 111 gained, and 4 were unchanged. Nisshinbo Industries, maker of textile products led the index stocks with a gain of 14.4% followed by rise if 11.4% in Mitsubishi Paper, 10.5% in Tokyo Dome Corporation, and 9.8% in Mitsubishi Materials. Fuji Electric, Comsys Holdings, Nippon Soda, and Hino Motors jumped 9%. Japan Tobacco, Olympus, and Nippon Express added 7%. Casio Computer led the decliners in the index with a loss of 9.4% followed by 9% loss in Nippon Meat, Odakyu Electric, and Tokyu Corp. Nitto Boseki, Toto, and Yokogawa dropped 7%.

Credit Saison dropped 5% on the news that the expenses from unpaid loans rose to 20.1 billion, up 41% from a year ago.

Energy and metal stocks rebounded from a sharp loss in Friday trading. Mitsubishi Materials surged 10%, Nippon Soda soared 8%, Nippon Oil up 4%, and Mitsui Mining & Smelting jumped 4%.