Subprime Loss at Merrill Drags U.S. Opening

123jump.com Staff
24 Oct, 2007
New York City

U.S. market averages opened lower after a wider than expected loss from Merrill Lynch hurt the trading sentiment. The broker reported a net loss of $2.24 billion compared to net income of $3.02 billion a year ago. Leveraged loans and fixed income trading in subprime and collaterized loans led to a loss of $7.9 billion. European markets were trading mixed at mid-day. Asian markets after a steady rise in three days settled near peak levels. Turkish airstrike puts oil traders on alert.

[R]9:35AM New York – U.S. stocks open lower on larger than expected loss at Merrill Lynch.[/R]

U.S. market averages are trading lower at the opening. Merrill Lynch reported bigger than expected loss in the subprime lending business hurting the averages at the open.

Merrill Lynch reported a net loss of $2.24 billion compared to net income of $3.02 billion from a year ago. Earnings per share were recorded at a loss of $2.82 compared to profit of $3.17.

Merrill reported third quarter loss in the fixed income trading which included losses subprime and leveraged loans of $7.9 billion. The investment banker and broker also reported losses of net $463 million for leveraged loan and corporate financing activities.

Earlier Merrill had suggested that it could lose up to 50 cents per share on write down of $4.5 billion in the mortgage and asset backed loans.

Ambac Financial Group ((ABK)) reported third quarter loss of $360 million or $3.51 per share compared to net income of $213 million or $1.98 per share. The company had earlier reported a loss from credit derivative of $743.4 million or $5.29 per share.

CME Group ((CME)) third quarter revenue increased 106% to $565 million and net income increased 94% to $202 million, and earnings per share increase 31% to $3.87 from $2.95 a year ago. The results include the merged operations of Chicago Board of Trade after July 12, 2007.

European stocks at mid-day trading were mixed ahead of the U.S. market opening. Norway led the gainers with a rise of 0.4% followed by fractional gains in UK, France, and Switzerland. Spain led the decliners with a loss of 0.9% followed by fractional declines in Germany, Belgium, and the Netherlands.

Earnings results drove stocks higher. STMicroelectronics surged 6% after reporting higher sales and earnings. UK retailer Home Retail added 4% after its earnings nearly tripled for the first half of the year. Volvo jumped 7% after reporting third quarter earnings and indicating that truck sales increased 90% in Europe.

Asian markets fell after a week of steady rise. Banks fell in Japan, Shanghai, and Hong Kong.

Singapore led the decliners in the region with a loss of 1.3% followed by losses in Indonesia of 1.1%, South Korea of 0.8%, Taiwan of 0.6%, and in Australia of 0.4%. Pakistan fell 1.83%. Philippines led the gainers in the region with a rise of 1.8% followed increases of 0.7% in Thailand. India, Shanghai, and Malaysia edged up by a fraction.