Banks Report More Loan Losses, UBS Fell

123jump.com Staff
30 Jan, 2008
New York City

Surprise sub-prime loan write-down at UBS and BNP jolted markets in the morning and stocks closed lower ahead of the U.S. rate cut in the late afternoon. UBS reported a loss after it reported a larger than expected write-down of $14 billion and BNP Paribas profit declined 42% in the fourth quarter on 590 million euro loss related to credit market turmoil. Vivendi fourth quarter sales rose 8.5%. Department store chain Arcandor rose on profit outlook in Frankfurt trading.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – The Federal Reserve lowered the fed funds rate by 0.5% to 3%. Market rallied after the rate cut, but quickly lost all the gains at the close.[/R]


European Markets

In London FTSE 100 Index closed lower 47.90 or 0.81% to 5,837.30, in Paris CAC 40 Index decreased 67.88 or 1.37% to close at 4,873.57 and in Frankfurt DAX index lower 17.61 or 0.26% to close at 6,875.35. In Zurich trading SMI decreased 32.58 or 0.42% to close at 7,671.81.

North American Markets indexes

Dow Jones Industrial Average fell 37.47 or 0.30% to a close of 12,442.83, S&P 500 closed down 6.49 or 0.48% to 1,355.81, and Nasdaq Composite Index traded down 9.06 or 0.38% to a close of 2,349.00.

In Toronto TSX Composite closed down 48.22 or 0.37% to close at 12,998.21.

Of the 30 stocks in Dow Jones Industrial Average, 13 closed higher, 17 closed lower, and none were unchanged.

Boeing led the gainers in the index with a rise of 2.36% after adding 4.33% in yesterday’s trading followed by increases in Disney of 2.1%, in Intel of 0.9%, in General Motors of 0.9%, and in Procter & Gamble of 0.6%. AIG led the decliners in the index with a loss of 4.1% followed by losses in Merck of 2.75%, in AT&T of 1.4%, and in Coca Cola of 1.3%.

Of the stocks in S&P 500, 178 closed higher, 319 fell, and 3 were unchanged.

Nineteen stocks rose more than 3% and fifty stocks fell more than 3%.

Ambac Financial Group led the decliners in the index with a fall of 16% followed by losses in MBIA of 12.6%, in International Flavors & Fragrances of 10%, and in Centex of 8.9%. Robert Half led the gainers in the index with a rise of 12% followed by increases in E*Trade of 10%, in Range Resources of 7%, in Dover Corp of 6.9%, and in CH Robinson of 6.2%.


South American Markets Indexes

In Latin Markets Peru led the advancers in the region with a gain of 2.67% followed by increases in Chile of 1.89%, in Argentina of 1.61%, in Brazil of 1.28%, and in Mexico of 0.12%. Colombia fell 1.1% and Venezuela declined 0.6%.

Asian Markets

In Tokyo Nikkei 225 Index closed lower 133.83 or 0.99% to 13,345.03, in Hong Kong Hang Seng index decreased 638.11 or 2.63% closed to 23,653.69, in Australia ASX 200 index lower 97.80 or 1.71% to close 5,618.70.

In South Korea Kospi Index decreased 48.85 or 2.98% to close at 1,589.06, in Thailand SET index closed higher 8.61 or 1.14% to 763.48, and Indonesia JSE Index edged increased 2.52 or 0.10% to 2,610.36. Sensex index in India decreased 333.30 or 1.84% to 17,758.64.

Bond Yields decreased on 10-year U.S. bonds to 3.67% and on 30-year bonds gained to 4.38%.

[R]Commodities, Metals, and Currencies[/R]

Crude oil gained $0.21 to close at $91.85 per barrel for a front month contract, natural gas increased 11.00 cents to $8.05 per mBtu, and gasoline futures increased 0.45 cents to close at 232.50 cents per gallon.

Gold increased $4.20 in New York trading to close at $935.00 per ounce, silver closed up 9 cents to $16.89 per ounce, and copper for front month delivery decreased 6.50 cents to 323.40 per pound and in London copper futures increased $240.50 to $7,304.00.

Dollar edged lower against euro to $1.4863 and edged higher against yen to 106.15.


[R]1:00PM New York, 6:00PM London- UK Mortgage approvals in December slumps the most since January 1999. Mervyn King reappointed as the Bank of England Governor.[/R]

London Stock indexes traded in negative territory after the Bank of England said today that loans for home purchase in December fell the most since records began in January 1999.

In London trading FTSE 100 declined 0.81% or 47.9 to 5,837.30.

Of the 102 FTSE 100 stocks 21 rose, 79 dropped, and 2 were unchanged. Experian Group led advancers with a rise of 5.75%.

Bank of England released in its Lending to Individuals Report today that loans granted for purchase to individuals plunged from 81,000 in November to 73,000 in December. Economists expected the figure to slow to 79,000.

The increase in total net lending to individuals in December (£9.1 billion) was below the increase in November and the previous six-month average. The twelve-month growth rate fell to 9.3% and the three-month annualized growth rate fell by 0.6% points to 8.3%.

Also the Bank said lending on personal loans and overdrafts tumbled to a 15-year low at £265 million, while net consumer credit plunged to £557 million.

The U.K. Treasury said in a statement listed on its website today that it is currently consulting on proposals for strengthening the framework for financial stability and protecting depositors.

Prime Minister Gordon Brown spokesman Michael Ellam announced today that Mervyn King has been reappointed as the Governor of the Bank of England effective June when the current term expires.
The Home Office announced today in a press statement on its website new fees for companies willing to get employees outside the EU, adding that the new system will help ensure “workers with the skills to benefit Britain economy to come to the U.K.”.
Under the new system companies will pay a fee of 1,000 pounds to secure licenses that will allow them to hire workers outside the EU.

Experian Group led advancers in FTSE 100 stocks with a rise of 5.75% followed by gains in Enterprise Inns of 4.35%, in TUI Travel Plc of 3.37%, in Rio Tinto Plc of 3.19%, and in Smith & Nephew of 2.75%.

TUI extended yesterday’s rally after raising its prediction of cost savings to £150 million from £100 million pounds and added that it will merge its airline unit with Deutsche Lufthansa and Albrecht Knauf subsidiary Hapag-Llyod Express, Germanwings, and Eurowings.

SABMiller led decliners in FTSE 100 stocks with a fall of 4.65% followed by losses in Home Retail Group of 4.55%, in Friends Provident Plc of 4.37%, in Alliance & Leicester of 4%, and in Shire Plc of 3.85%.

Shire fell after being downgraded by Goldman Sachs and removed from the “conviction buy” list.

Thomas Cook Group Plc reported today that revenue fell 1.3% to 11.7 billion euros in the year ended in December 2007. However profit from operations climbed 26.1% to 375.3 million euros. The stock closed up 1.15%.


[R]11:00AM New York – U.S. stocks opened weak ahead of rate decision, weak earnings from Yahoo and UPS, and larger than expected sub-prime loss at UBS and BNP.[/R]

U.S. stocks opened lower ahead of the rate decision from the Fed. European markets fell after the renewed worries related to subprime losses and Asian markets closed lower with a loss of 1% in Japan.

UPS reported lower earnings due to one-time contribution to pension plan and overnight Yahoo reported lower than expected earnings. Yahoo fell 10% after its chief executive said that company faced ‘headwinds’ in the near future. Yahoo also plans to lay-off 1,000 people to cut costs.

UBS in Switzerland reported fourth quarter write-down of $14 billion, $4 billion higher than the previous estimate, related to sub-prime lending in the U.S.

UBS reported fourth-quarter loss of Sfr12.5 billion and for the year a loss of Sfr4.4 billion compared to a profit for the full year in Sfr11.25 billion.

UPS ((UPS)) today reported adjusted diluted earnings per share of $1.13 for its fourth quarter, an 8.7% increase over last year. Revenue improved 6.1% driven by a double-digit increase in international export volume.

During the quarter, the company announced the ratification of a new five-year agreement with the International Brotherhood of Teamsters, eight months before expiration of the existing contract. As a result, $6.1 billion was paid to withdraw approximately 45,000 UPS employees from the Central States multi-employer pension plan and expensed to the U.S. Package segment in the quarter.

Including the impact of that charge, diluted earnings per share fell to a loss of $2.46 for the three-month period.

Average daily package volume rose by 359,000 to 17.7 million pieces.

For the full year, the company delivered a record 3.97 billion packages, an average of 15.8 million per day. Consolidated revenue climbed 4.5% to $49.7 billion. Adjusted diluted earnings per share were $4.17, an increase of 8% compared to 2006 and at the midpoint of UPS’s earnings guidance for 2007. Before adjustments, operating profit equaled $578 million and diluted earnings per share totaled $0.42.

Operating margins in the quarter, excluding one-time adjustment for the pension contribution fell to 13.8% from 14.3%.



[R]10:00AM New York – Yahoo stock fell 10% in the early morning trading after it reported lower than expected rise in sales and earnings.[/R]

Yahoo fell in the early morning trading after weak financial revenue and earnings projection. Yahoo continues to face challenges from Google and from decline in revenues in the international markets.

Yahoo ((YHOO)) Revenues were $1,832 million for the fourth quarter of 2007, an 8% increase compared to $1,702 million for the same period of 2006. Revenues excluding traffic acquisition costs were $1,403 million for the fourth quarter of 2007, a 14% increase compared to $1,228 million for the same period of 2006.

Net income for the fourth quarter of 2007 was $206 million or $0.15 per diluted share compared to $269 million or $0.19 per diluted share for the same period of 2006.

Gross profit for the fourth quarter of 2007 was $1,130 million, a 12% increase compared to $1,012 million for the same period of 2006. Operating income for the fourth quarter of 2007 was $191 million, a 38% decrease compared to $308 million for the same period of 2006.

Operating income before depreciation, amortization, and stock-based compensation expense for the fourth quarter of 2007 was $527 million, a 2% decrease compared to $540 million for the same period of 2006.

United States segment revenues for the fourth quarter of 2007 were $1,313 million, a 15 percent increase compared to $1,145 million for the same period of 2006. International segment revenues for the fourth quarter of 2007 were $519 million, a 7 percent decrease compared to $558 million for the same period of 2006.

For the full year revenues were $6,969 million for 2007, an 8% increase compared to $6,426 million for 2006. Marketing services revenues were $6,088 million for 2007, an 8% increase compared to $5,627 million for 2006.

Net income for 2007 was $660 million or $0.47 per diluted share compared to $751 million or $0.52 per diluted share for 2006.


[R]6:00AM New York, 6:00PM Hong Kong - China’s domestic consumption contributed the most to the economic growth in 2007. CNOOC sets aside $5.24 billion capital expenditure.[/R]

Stocks fell in Hong Kong on profit taking ahead of the U.S. Federal Reserve decision on interest rates today and as chairman of Henderson Land Development Lee Shau-kee lowered his forecast for the rise in Hang Seng by 22%. Chairman Lee’s comments are widely followed by investors.

In Hong Kong trading Hang Seng Index dropped 2.6% or 638.11 at 23,653.69, while the China Enterprises index of H shares declined 4.7% or 623.77 to 12,755.41.

Daily turnover on main-board was HK$105.1 billion compared to HK$92.6 billion yesterday.

Xinhua News Agency reported today that National Bureau of Statistics spokesman Li Xiaochao announced in Beijing that consumer spending replaced investment as the largest contributor to the economic growth in 2007. Of the 11.4% annual rise in GDP, consumer spending contributed 4.4%, investments weighed in with 4.3% and net exports contributed 2.7%.

Consumer spending rose 16.8% to Rmb8.9 trillion in 2007.

Xiaochao said, “Our policy is to push up domestic consumption by raising the income of citizens, especially that of the low income group. And the figure shows the policy is beginning to yield results.”

The Standard online news reported today that Chairman of Henderson Development, who is considered as the “Godfather of Stocks”, has lowered his forecast for the rise in Hang Seng Index between 27,000 points to 30,000 by March and slow in the second quarter.

Insurance companies fell after Bear Stearns cut earnings forecast for insurance on volatile stocks in China. China Life declined 7.4% to HK$29 after the brokerage cut its rating to “underperform”, citing that returns on investment will slow to 7.7% this year from 11% in 2007.

Bear Stearns also said Ping An Insurance Company investment income will fall 20% from the previous estimate to Rmb41.9 billion.

Hong Kong Exchanges and Clearing slipped 6.4% to HK$166.5.

Steelmakers also plunged as the snowstorms have cut deliveries of fuel and coal. Angang fell 5.9% to HK$13.98 and Maanshan Iron & Steel Company tumbled 3.7% to HK$4.20.

CNOOC Limited declined 0.7% after reporting yesterday that the company is planning to spend $5.25 billion on capital expenditure projection. About $1 billion will be used for exploration and $4.1 billion will be earmarked for ten development projects.

Chief Financial Officer Yang Hua said the company will raise it production target between 195 and 199 million barrels of oil and gas equivalent this year, and added that the falling U.S. dollar and global inflation will impose challenge for the business.

Separately, China Petroleum & China Corporation said yesterday it will spend Rmb16 billion to expand plants in central China and double daily refining capacity at Changling refinery to 200,000 barrels by 2010.

ZTE Corporation rose 4% to HK$41.60 after Lehman Brothers Holdings raised its rating on the stock from “underweight” to “overweight”.

Hong Kong Electric gained 1% to HK$44.15. CLP Holdings 1.8% to HK$61.75 and China Oilfield Services Limited increased 6.3% to HK$13.


[R]5:00AM New York, 7:00PM Tokyo – Japan forecasted manufacturing to fall 0.4% in January and 2.2% in February. Sumitomo Mitsui estimated 99 billion in subprime related losses. [/R]

Stocks in Japan reversed earlier gains in the morning session to close down after a government report showed December industrial production rose below market expectations.

In Tokyo trading Nikkei 225 fell from a 0.3% gain in the morning session to close down 0.99% or 133.83 to 13,345.03 while the broader Topix Index reversed a 0.8% gain to drop 0.7%to 1,320.11.

Of the Nikkei 225 stocks 61 gained, 151 declined, and 13 were unchanged.

In the first section of the Tokyo Stock Exchange 10.9 billion shares worth 1.2 trillion yen were traded and in the second section 1.1 billion shares worth 7.6 billion yen changed hands.

The Ministry of Economy Trade and Industry reported today in its indices of industrial production preliminary report for December that industrial production rose for the first time in two months to 1.4% in December from November and gained 0.7% from the previous year to a seasonally adjusted 111.9.

Economists had forecasted that production index rise of 2%.

Industries that contributed to a rise in production included electronic parts and devices, general machinery and plastic products. Production of large passenger cars, flat panel display equipment and lithium ion storage batteries also significantly impacted on the increase.

METI also reported that shipments increased in December for the first time in two months by 1.6% from the previous month and 3.12% from a year ago to a seasonally adjusted figure of 116.9 buoyed by transport equipment, general machinery and iron and steel in that order.

Inventories however declined 0.5% from a month earlier for the first time in five months and 0.7% from the previous year dragged down by transport equipment, information and communication electronics equipment and chemicals.

According to the survey of production forecast, manufacturing expected to fall 0.4% in January weighed down by transport equipment, fabricated metals and chemicals respectively.

In addition production is expected to drop in February by 2.2% due to falls in electronic parts and devices, electrical machinery and general machinery.

The IMF forecasted yesterday in the World Economic Outlook Update report that global growth is expected to decelerate to 4.1% this year from 4.9% in 2007, a 0.3% decline from the October forecast.

The U.S. economic growth projection was revised downwards from 2.2% in 2007 to 1.5% in 2008, while China is expected to slow from 11.4% in 2008 to 10% and Europe to 1.6%. Latin America will grow at a slow pace at 4.3% in 2008 from 5.4% in 2007.

Of the Nikkei 225 index shares Electrical Industries led advancers with a rise of 8.55% followed by gains in Chiyoda Corporation of 6.83%, in Hino Motors Limited of 6.46%, in Mitsui OSK Lines of 5.93%, and of Advantest Corporation of 5.63%.

Shipping lines rose as well. Kawasaki Kisen jumped 2.47% and Mitsui Engineering and Shipbuilding climbed 3.60%.

Consumer credit companies gained after Promise Company reported yesterday that third quarter net income rose to 13 billion yen from a 9.4 billion yen loss recorded a year ago in the same period. Credit Saison rose 2.64% and Mitsubishi UFJ Nicos soared 4.03%.

Sumco Corporation led declining Nikkei 225index shares with a drop of 7.82% followed by losses in Nisshin Seifun of 5.21%,in Hokuetsu Paper of 5.10%, in Toto Limited of 4.99%,and in Shin-Etsu Chemical of 4.79%.

Domestic related shares fell after METI reported that industrial production will decline in January and February.

Citigroup and Nikko Cordial announced in joint statement yesterday that Citigroup has completed the acquisition of Nikko through a share swap deal worth $4.8 billion at a rate of 0.602 Citigroup stock for each of the Japanese brokerage share. Also Douglas Peterson was announced as the new Chief Executive Officer and President.

The Nikkei news online reported today that Mizuho Securities Company will likely book a loss that is twice its November projections at 250 billion yen.

Sumitomo Mitsui Financial Group reported yesterday that the company’s profit fell from 319.4 billion yen in the nine months to December from 396.05 billion yen the same time a year earlier. The company recorded a 99 billion loss in subprime related investments.

However it maintained its forecast for the fiscal year profit ending March 2008 at 570 billion yen. The stock closed up 2.66%.

Daihatsu Motors, which is 51% owned by Toyota, reported in a trading update that the company’s net income rose 42% to 7.9 billion yen in the quarter ended December 31 from 5.58 billion a year ago and raised its full year profit forecast 3.7% to 1.7 trillion yen.


[R]3:00AM New York, 7:00PM Sydney- ASX 200 index fell 1.7% as banking stocks fall.[/R]

ASX 200 index declined 1.7% or 97.8 to close at 5,618.70.

Mining giant, BHP Billiton today signed an agreement with China''s leading steelmaker Baosteel to supply an additional 94 million tons of iron ore.

BHP will supply Baosteel with 10 million tons of iron ore each year for 10 years at a price to be agreed each year with the first shipment under the new contract expected in April.

Baosteel vice president Dai Zhihao said the contract would enhance the long-term cooperation between Baosteel and BHP Billiton. BHP Billiton has been a long time partner to Baosteel through the supply of carbon steel materials products. It also supplies nickel for Baosteel''s expanding stainless steel production.

BHP Billiton stock was up 1.1%.

Australia''s biggest retailer, Woolworths Ltd reported 8.3% increase in sales to $12.3 billion (US$11 billion) in the three months ended December 30. The results were however short of analyst estimates of a median estimate for a 10% increase. Rising fuel prices and interest rates curbed growth at Woolworth''s supermarket and discount stores.

Woolworth''s shares fell 4.2%. The stock fell 13% this year compared with an 11% decline in the benchmark index. Wesfarmers fell 5.1%, David Jones Ltd fell 7.2% and Harvey Norman Holdings Ltd declined 4.8%.

PT Aneka Tambang and its Chinese partner today upstaged its Indonesian rival in its bid to gain control of Herald Resources Ltd''s lead and zinc project by offering $505 million (US$449 million) in cash for the project.

Herald today disclosed that the Indonesia based PT Aneka Tambang and Chinese partner Shenzhen Zhongjin Lingnan Company offered for its Indonesian project was equivalent to $2.50 a share, 25 cents more than Indonesian company, PT Bumi Resources'' bid of $2.25.

Herald waited for two years for the approval for the $192 million Dairi mine. The joint bid by Antam, which is owned by the Indonesia''s government, and Zhongjin Lingnan might ensure the project goes ahead to meet rising metals demand from China.

Herald''s share rose 3.2%. Antam is Indonesia''s second-largest nickel mining company by market value, and Zhongjin Lingnan is China''s fourth-biggest zinc producer.

Embattled finance group, MFS today froze $770 million worth of investments belonging to more than 10,000 of its investors as it moved to save itself from collapse.

The company froze $770 million held in its Premium Income Fund for six months to halt a run on redemptions as investors rushed to recover their money fearing that the company might fail to source $150 million of debt due within weeks.

While MFS has maintained that the move does not affect its other funds, investors with $5.4 billion of investment in various funds have been nervous with the ongoing volatility in the stock. MFS uses the money raised from investors to lend to property developers in first mortgage loans.

MFS last week suspended its shares from trading after shedding more than $1.5 billion in value. MFS shares, which were trading at about $5 last month, slumped to 99 cents after MFS two weeks ago called for a $550 million cash injection.

Lihir Gold''s annual gold production rose to a record after jumping 7.7% to 701,091 ounces. The company estimates additional increase in production in the current year.

The performance was in line with expectations, and included strong production of 168,370 ounces in the December quarter. The company, which operates the Lihir Island mine in Papua New Guinea, expects output to rise between 740,000 and 820,000 ounces in the current year.

Managing Director Arthur Hood said Lihir Island was expected to produce a range of 700,000 to 770,000 ounces while Ballarat was expected to produce 40,000 to 50,000 ounces. Lihir said the final outcome at the PNG mine depended on ore grade and normal operating variability.

The company achieved annual sales of 708,428 ounces of gold last year at an average price of US$666 an ounce. The cash gold price received for the December quarter increased to US$794 an ounce, from US$677 in the September quarter. Total cash costs were US$301 an ounce for the year, up from US$297 in the previous year.

The dollar closed marginally weaker today, encountering resistance at US$0.8900 for the second day running, as traders held their positions ahead of the US interest rate decision.

At the close the dollar was trading at US$0.8877/83, down marginally from yesterday''s close of US$0.8880/84. Dollar traded between a low of US$0.8872 and a high of US$0.8894 in the session.

Of the ASX 200 index shares, Aquarius Platinum led the gainers with a rise of 6.3% followed by increases in Alesco Corp Ltd of 4.3%, in Alumina Limited of 4%, in Newcrest Mining of 3.7%, and in Onesteel Limited of 3.5%.

Of the ASX 200 index stocks, Emeco Holdings L led the decliners with a fall of 24.5% followed by losses in Allco Finance Group of 10.5%, in Roc oil Company of 8.9%, in Riversdale Minin of 8.5% and in Tower Australia of 7.4%.