MBIA Comments, MasterCard Lift Stocks

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

U.S. stocks rebounded from morning losses after unemployment claims rose at the end of the last review. Stocks made about turn in the afternoon, MasterCard reported sharply higher earnings and the bond insurer MBIA in a earnings conference call asserted that it has adequate capital to retain its AAA rating. Hedge fund Pershing Square has asserted that the company may not have capital to fund its future losses. MBIA estimated $3 billion of future losses, half of what Pershing has estimated.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – U.S. stocks rallied after earnings from MasterCard surged and MBIA company assertion that it has sufficient capital to retain its AAA rating.[/R]

European Markets

In London FTSE 100 Index closed higher 42.50 or 0.73% to 5,879.80, in Paris CAC 40 Index decreased 3.78 or 0.08% to close at 4,869.79 and in Frankfurt DAX index lower 23.60 or 0.34% to close at 6,851.75. In Zurich trading SMI decreased 1.37 or 0.02% to close at 7,670.44.

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, 30 closed higher, 2 closed lower, and none were unchanged.

American Express led the gainers in the index with a rise of 5% followed by increases in McDonalds of 4.7%, in Home Depot of 4.5%, and in Caterpillar of 4.35%. Altria Group led the only two decliners with a fall of 0.8% and Merck fell 0.5%.

Of the stocks in S&P 500, 400 closed higher, 95 fell, and 5 were unchanged.

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

Marathon Oil led the decliners in the index with a fall of 7% followed by losses in Cameron International of 6.8%, in Altera of 6.11%, in National Oilwell Varco of 5.8%, in Tesoro of 3.7%, and in Baker Hughes of 3.6%. Pulte Homes led the gainers in the index with a rise of 21% followed by increases in Lennar Corp of 13%, in IMS Health of 13%, in Snap-On of 12%, and MBIA Inc of 11%.


South American Markets Indexes

In Latin Markets Peru led the advancers in the region with a gain of 3.18% followed by increases in Mexico of 1.58%. Argentina led the decliners in the region with a loss of 1.43% followed by declines in Brazil of 1.33%, and in Venezuela of 1.17%. Colombia fell 0.13% and Chile declined 0.22%.

Asian Markets

In Tokyo Nikkei 225 Index closed higher 247.44 or 1.85% to 13,592.47, in Hong Kong Hang Seng index decreased 197.95 or 0.84% closed to 23,455.74, in Australia ASX 200 index higher 31.60 or 0.56% to close 5,650.30.

In South Korea Kospi Index increased 35.62 or 2.24% to close at 1,624.68, in Thailand SET index closed higher 20.75 or 2.72% to 784.23, and Indonesia JSE Index edged increased 16.89 or 0.65% to 2,627.25. Sensex index in India decreased 109.93 or 0.62% to 17,648.71.

Bond Yields decreased on 10-year U.S. bonds to 3.61% and on 30-year bonds gained to 4.34%.

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

Crude oil gained $0.67 to close at $91.66 per barrel for a front month contract, natural gas increased 2 cents to $8.06 per mBtu, and gasoline futures increased 2.49 cents to close at 230.91 cents per gallon.

Gold increased $5.30 in New York trading to close at $931.60 per ounce, silver closed up 9 cents to $16.89 per ounce, and copper for front month delivery increased 8.250 cents to 330.90 per pound and in London copper futures decreased $141.00 to $7,163.00.

Dollar edged lower and reached near record against euro to $1.4866 and edged higher against yen to 106.36.


[R]3:00PM New York, 8:00PM London - U.K. house prices fell fractionally by 0.1% in January.[/R]

Stocks in London recovered from a 1.5% decline by mid-day to close up after bargain hunters returned to the market.

In London trading FTSE 100 rose 0.73% or 42.5 to 5,879.80.

Of the 102 FTSE 100 stocks 67 gained, 32 declined, and 3 were unchanged. Carphone Warehouse led gainers with a rise of 8.06%.

U.K. mortgage lender Nationwide reported today on its website that house prices fell for the third straight month by a modest 0.1% in January from 0.4% in December and the annual rate of house price inflation slipped from 4.8% to 4.2%.

According to the lender the average price of a house has fallen from £182,080 to £180,473 in December.

Nationwide Senior Economist Martin Gahbauer said key indicators such as mortgage approvals and sales-to-stock ratio have fallen similar or even below the trough reached in 2004. Falling demand for houses has been prompted by “rising interest rates and worsening affordability”.

Commented Gahbauer: “Although prices have now fallen for three consecutive months, the price of a typical house is still 4.2% higher than a year ago. However this figure is down from 4.8% in December and represents the lowest rate of annual price inflation since December 2005.”

Bloomberg news reported today that Virgin Group Limited will submit a bid for troubled lender Northern Rock on Monday next week.

Bids for Northern Rock are supposed to be submitted before the cut-off date of February 4. The U.K., in turn, has to forward its recommended deal to the EU regulators by March 17.

Virgin Group Limited intends to rebrand the financial institution and merge it with Virgin Money unit.

Of the FTSE 100 stocks Car Warehouse led advancers with a rise of 5.26% followed by rises in BG Group Plc of 5.26%, in Liberty International Plc of 4.80%, in Tullow Oil of 4.74%, and in Carnival of 4.43%.

Friends Provident Plc led decliners in the FTSE 100 stocks with a fall of 10.57% followed by declines in Old Mutual Plc of 5.62%, in Persimmon of 3.93%, in Standard Life of 3.79% and BAE Systems of 3.12%.

Financial also fell after Deutsche Bank said it expected conditions to worsen in the sector which is currently plagued by subprime mortgage losses. Royal Bank of Scotland shed 0.84%, Alliance & Leicester slipped 2.83% and Barclays plunged 1.78%.

Homebuilders also declined on a report by Nationwide that house prices fell for the third consecutive month. Taylor Wimpey tumbled 2.82%.

Vodafone reported today that third quarter service revenue rose 4.2% to £8.39 billion from £7.23 billion buoyed by strong growth in both Turkey and India. Vodafone Essar, the company’s unit in India, added 4.2 million customers at the end of the quarter.

The total customer base reached 112.0 million in Middle East, Africa and Eastern Europe, surpassing Europe for the first time, and included 39.9 million customers in Vodafone Essar in India, making it the largest operator by customers within the Vodafone Group.

The stock closed down 0.90%.

Royal Dutch Shell reported today that fourth quarter profit was at $5.72 billion and net income rose 60% to $8.47 billion from $5.28 billion realized in same period last year but missed the analysts’ estimate of $6.03 billion.

Output was mainly affected by disturbances in Nigeria and the disposal of a stake in Russia.

The company added that profits derived from refining declined 40% and forecasted that the margins will remain weak this year. Shell shared were however unchanged at the close of trade.


[R]1:00PM New York – MBIA stock rebounded in the afternoon trading after comments from the management and lifted market sentiment.[/R]

MBIA ((MBI)) reported fourth quarter net loss of $2.3 billion on write-down in its credit derivatives portfolio.

Fourth quarter revenue for direct premium declined 38% to $262 million from $412 million from a year ago on a sharp decline in structured finance revenues. For the year 2007 direct premium rose 45% to $1.49 billion from a year ago.

Earnings per share in the year fell to a loss of $15.22 from a profit of $5.99 per share. For the quarter earnings per share fell to a loss of $18.61 from a profit of $1.32 a year ago.

The press release explained the losses resulting from CDO and other leveraged loans.

The decline in net income for the year was primarily due to the previously announced pre-tax net loss which amounted to $3.5 billion, or on an after-tax basis, $2.3 billion or $18.04 per share, on financial instruments at fair value (“mark-to-market”) and foreign exchange. Significantly wider spreads and ratings downgrades of securities backing Collateralized Debt Obligations during the fourth quarter adversely affected the mark-to-market valuation of the Company’s insured credit derivatives portfolio. As MBIA previously announced on January 9, 2008, the Company estimates a credit impairment of $200 million included in the pre-tax net loss of $3.5 billion on its insured credit derivatives portfolio for three CDO-squared transactions on which the Company expects to incur actual losses in the future.

Gary Dunton, MBIA Chairman and Chief Executive Officer, said, “We are disappointed in our operating results for the year, as the performance of our insured prime, second-lien mortgage portfolio and three insured CDO-squared transactions led to unprecedented loss reserving and impairment activity. The effect of these reserving and impairment activities on our capital position will be more than offset by the successful completion of our capital plan, which will increase our capital position by well over $2 billion.

We have raised $1.5 billion to date through our $1 billion surplus notes offering and the Warburg Pincus’ $500 million investment in MBIA common stock, which closed yesterday. Additionally, we have a commitment from Warburg Pincus to backstop a $500 million rights offering, and we are considering this and other steps to raise equity.

We believe that these steps, along with reduced capital requirements resulting from slower business growth, will result in our capital position surpassing rating agency Triple-A requirements as currently articulated and will allow us to continue serving the needs of our clients and investors.”



[R]12:30AM New York – U.S. stocks recover from earlier losses after worries related to subprime losses at MBIA hurt the sentiment.

U.S. stocks fell sharply at the opening after MBIA, bond insurer, reported huge losses related to subprime loans and credit derivatives. A rise in unemployment claims also hurt the market sentiment at the opening.

Sharply higher earnings and stable spending through MasterCard payment processing helped market to recover its footing on the hopes that consumer spending is likely to hold up in the coming months.

Earnings from MasterCard ((MA)) rose to $304 million or $2.26 per share including $1.37 per share gain from the sales of investment securities. Net revenue rose 28% to $1.07 billion and gross dollar volume increased 15.2% and purchase volume gained 16.1%.

Jobless claims at the end of the week ended January 26 increased 69,000 to 375,000, according to the Department Labor. Personal consumption in December rose 0.2% and November spending was revised lower to an increase of 1% from 1.1% rise, according to a report from the Commerce Department.

[R]10:00AM New York, 7:30PM Mumbai – Fiscal deficit in December fell on 9% rise in tax receipts.[/R]

Economic News

December fiscal deficit declined sharply to $19.7 billion on 9% rise in tax collection. The deficit at the end of nine months ending in December 2007 stood at 51.4% of the target of 1.51 trillion rupees. Government expenditures in the period were at 4.74 trillion rupees and revenues were 3.97 trillion rupees with a fiscal deficit of 775.78 billion.

The sharp decline in deficit will improve government’s ability to increase its infrastructure spending and repay external debts.

Market Sentiment

Stocks in India closed weak on Thursday with the Bombay Stock Exchange benchmark index sliding 0.6% or 109 to 17,648. In the broader markets, Nifty fell 0.6%. The 50-share index closed at 5,137 levels.

The market had opened on a firm note after the US Federal Reserve slashed the key interest rate by 50 basis points on Wednesday but it lost ground during the late trading session. It had recovered in the afternoon trade but failed to sustain higher levels as European markets were trading lower after a positive start. Buying was evident in oil and gas stocks while selling was visible realty, banking and healthcare shares.

Of the BSE 1,760 shares declined, 989 stocks advanced while 40 shares remained unchanged. Of the index shares 16 fell while the rest advanced.

ONGC, Hindustan Unilever, Bajaj Auto and HDFC Bank led the positive sentiment in the BSE index with a rise of 2% or more.

Of the NSE-50 stocks, Nalco, Zee Entertainment, Wipro and Idea Cellular were among key gainers with a rise of 4.3% or more.

Hindalco, GlaxoSmithKline, ACC and Punjab National Bank were among key draggers in the broader index with each falling 3.6% or more.

Trading turnover on the BSE was recorded at 5,152 crore rupees while on the National Stock Exchange was at 21,087 crore rupees.

Reliance Industries was the most active stock recording a turnover of 304 crore rupees followed by Reliance Natural Resources, Reliance Energy, Reliance Petroleum and Essar Oil.

International Markets

The U.S. Federal Reserve lowered interest rates by 0.5% to 3%, a second rate cut in eight days. Eight days ago, the Fed had lowered rate by 0.75% ahead of the regular scheduled meeting to calm jittery international markets.

Elsewhere in the Asian region, South Korea rose 2.3%, Japan added 1.9%, Hong Kong fell 0.8%, but Thailand increased 2.7%.

Market Gainers and Losers

Of the BSE shares, Hindalco Industries led the decliners in the Sensex index. The company fell 6% to 165.5 rupees.

Hindustan Unilever led the advancers in the Sensex index with a rise of 5.3% to 207 rupees.

DLF fell 5.2% to 817, ICICI Bank shed 3.1% to 1,148 rupee, and State Bank of India shed 2.8% to 2158.75 rupees.

Infosys surged 1.6% to 1,516 rupees. Wipro and TCS gained 1.7% each to close at 418.9 and 880.3 rupees respectively. Satyam Computers however declined 0.4% to 393.1 rupees.

Bharti Airtel gained 2.7% to 875 rupees and HDFC Bank surged 1.9% to 1,560 rupees. Reliance Industries rose 0.7% to 2,487 rupees.

Earnings News

Bajaj Auto rose 4.7% to 2,375 rupees. Bajaj Auto posted 5.32% fall from a year ago in net profit to 326.81 crore rupees in the third quarter of December 2007.

Reliance Communications slipped 0.5% to 605 rupees after it posted 48.5% rise in consolidated net profit to 1,372.83 crore rupees on 29.8% from a year ago rise in consolidated total income to 4,874.2 crore rupees in the third quarter of December 2007.

Tata Steel gained 0.9% to 730 rupees on reporting 0.5% rise in net profit to 1,068.58 crore rupees on 10.3% rise in total income to 5,040.95 crore rupees during the third quarter of December 2007 over the third quarter December 2006.

Hindalco Industries net profit declined 16% to 542 crore rupees on 1.44% fall in total income to 4,646 crore rupees during the third quarter of December 2007 over the third quarter of December 2006.

National Thermal Power Corporation was down 2.1% to 197.55 rupee. The company announced on Wednesday that it will invest about 4375 crore rupees of $1.1 billion in setting up a power plant in north-east India.

Oil & Natural Gas Corporation advanced 2.53% to 993 rupees on reports that the Director-General of Hydrocarbons has conceded ONGC''s may not be able to meet its drilling schedule on the difficulty of securing rigs.


[R]6:00PM New York, 6:00AM Hong Kong- Hong Kong Monetary Authority cuts rate to 4.5%. Yue Yuen plans to list its retail subsidiary in Hong Kong.[/R]

In Hong Kong trading Hang Seng Index slipped 0.8% or 195.95 to 23,455.74, while the Hang Seng China Enterprises Index dropped 2.1% to 12,485.07. Market index losses are running as high as reached during the Asian market crisis in 1997.

Of the 43 Hang Seng Index shares, 26 gained and 16 declined.

Daily turnover on main-board soared to HK$110.7 billion compared to 105.1 billion yesterday.

The Hong Kong Monetary Authority today lowered its key rate to 4.5% after the U.S. Federal Reserve slashed in benchmark rate from 3.5% to 3% yesterday.

HSBC and Standard Chartered also cut their lending rate by a quarter percentage point and cut interest rates paid on deposits for sums below HK$150,000 by 0.25%.

China People’s Daily online edition reported today that Hong Kong secretary for Commerce and Economic Development Frederick Ma yesterday spurned calls to introduce “group loss relief” and “loss carry back” provisions may lead to widespread tax evasion.

Under the “group loss relief” the losses of one or more companies can offset the profits of others in the same group, while under the “loss carry back” system profits can be offset by profits made in the previous year so that the company can get a tax refund on tax paid.

Shipping lines rallied after the Baltic Dry Index, which is used as a measure of freight charges, rose 5.1% yesterday. China Cosco Holdings Limited advanced 12% to HK$1.86 and Pacific Basin Shipping Limited soared 13% to HK$1.26.

Lenovo Group Limited climbed 13% to HK$5.37 after reporting third quarter profit rose to $172 million. The company also announced plans to sell its mobile phone business for $100 million and concentrate on PC’s.

However financial stocks declined after U.S. credit rating agency Standard & Poor said yesterday it might cut ratings on $534 billion mortgages and collateralized debt obligations. Brokerage BNP Paribas also cut its rating on China’s financial services sector from “neutral” to “underweight”.

China Construction Bank shed 32% to HK$5.39 after BNP Paribas also cut rating on the stock to “buy” from “hold”.

Coal companies also fell as well. China Coal slipped 9.2% to HK$1.80 and Yanzhou Coal Mining tumbled 5.5% to HK$13.06.

Retailer Esprit reported today that first half net profit jumped 37.3% from HK$2.4billion a year ago to HK$3.3billion. Turnover climbed 27% to HK$18.5billion from HK$14.6 a year earlier.

About half of the company’s turnover was in Germany after a tax reduction. Furthermore, the company plans to spend HK$500 million to open 60 new stores globally.

The Standard news online reported today that Yue Yuen, which makes shoes for Nike and Timberland, said it will spin off its retail business arm Pou Sheng International for $800 million and list the company in Hong Kong after it receives shareholder approval.


[R]5:00AM New York, 7:00PM Tokyo - Japan’s average monthly wages per regular employee declined 1.9% in December from a year earlier.[/R]

Stocks in Japan rallied on strong corporate earnings especially from carmakers and a weakening yen, including news that the U.S. Federal Reserve slashed its key rate by 0.5% yesterday to 3.5%.

In Tokyo trading Nikkei 225 climbed from a 1.4% drop in the morning trading to close up 1.85% or 247.44 to 13,592.47, and the broader Topix Index also rose from a 1.8% decline to a gain of 26.20 to 1,346.31.

In the first section of the Tokyo Stock Exchange 10 billion shares worth 1.2 trillion yen were traded and in the second section 729 million shares valued at 5.2 million yen changed hands.

Of the Nikkei 225 stocks 177 gained, 44 declined, and 4 were unchanged. Yahoo Japan Corporation led advancers with a rise of 11.68% after reporting a 13% increase in profit in the third quarter yesterday.

Japan’s Ministry of Health, Labor and Welfare reported in its provisional report of monthly labor survey that average cash earnings per regular employee declined 1.9% in December from a year ago to 596,895 yen, while contractual cash earnings rose 0.3% to 271,495 yen.

Also scheduled cash earnings jumped 0.5% to 250,995 yen. However the real wage index fell 2.7%.

The labor ministry further added that total hours worked per regular employee fell 1.5% from a year ago to 150.6 hours in December and non-scheduled hours worked in manufacturing gained 0.5% to 17.3 hours.

The statistics also show that number of regular employees was increased by 1.7% in December year-on-year, while full-time and part time employees rose 1.7% and 1.9% respectively.

Nikkei news online reported today that Japan’s five biggest banks-Mitsubishi UFJ, Mizuho Financial Group, Sumitomo Mitsui Financial Group, Sumitomo Trust & Banking-may face combined subprime losses of 500 billion yen.

Already Sumitomo Trust yesterday revealed subprime losses amounting to 29.9 billion yen and Sumitomo Mitsui also booked 99 billion yen in losses over 9 months.

According to the online news service, Mitsubishi UFJ Financial Group may report 50 billion yen in losses in the nine months to December 2007 and that the losses might be increased to 90 billion yen for the full year ending in March 2008.

In addition, analysts have now projected sub-prime losses at Mizuho Financial Group may reach 300 billion yen.

The yen weakened from 106.58 to 106.60 against the dollar.

Of the Nikkei 225 index shares Yahoo Japan Corporation led advancers with a rise of 11.68% followed by gains of 11.13% in Terumo Corporation, of 8.70% in Matsushita Electrical Industries, of 8.22% in Alps Electrical Company Limited, and of 7.58% in Sanyo Electric.

Yahoo Japan Corporation rose after reporting yesterday that the company’s third quarter profits jumped 13%.

Terumo Corporation also advanced on strong earnings results.

Carmakers were also buoyed by strong sales in Asia and Europe that helped offset shrinking demand in Japan and in the U.S. Honda Corporation reported yesterday that net profit in the third quarter jumped 35% to 347billion yen from 276billion yen a year earlier.

According to Honda, strong demand from Brazil, Russia, India and China is expected to drive sales in 2008.

Hino Motors rose 6.21% and Toyota Motor Corporation soared 5.43% as a result.

Chugai Pharmaceutical led decliners of the Nikkei 225 stocks with a drop of 17.60% followed by losses of 13.83% in Chiyoda Corporation, of 7.92% in Nippon Soda Company, of 3.23% in Aeon Company Limited, and of 2.46% in Dowa Holdings.

Chugai Pharmaceuticals fell after reporting yesterday profit for the year will decline as the cut in pharmaceutical prices ordered by the government and shrinking sales of Tamiflu and Epogin took their toll on earnings.

Sales of Tamiflu and Epogin are forecasted to drop 81% to 7.3 billion yen and 14% to 47billion yen correspondingly.

Seiko Epsom reported on its website today that net sales in the nine months to December 2007 is estimated to rise 3.4% from a year ago to 1.037 trillion yen, while net income increased 59.5% to 22.2 billion yen in the same period from a year ago.

The company also reported that demand in the inkjet market was flat as growth in Europe and Asia offset contraction in Japan and the U.S, adding that demand for 3G phones is also robust in Europe and North America.

Canon reported that net income for the year will rise 6.5% to 520 billion yen, below the 531.5 billion yen forecasted by economists.

In addition the company also said annual sales are expected to slump the most since 1999. Canon closed down 2.35%.

Mitsui O.S.K. Lines reported today that profit for the quarter to December 31 climbed from 39.8 billion yen to 58.9 billion yen. The company also raised its full year net income projection to 190 billion yen for the year ending March 2008 from 185 billion yen that the company had previously forecasted.