Neverending Bank Losses, Volatile Stocks

123jump.com Staff
15 Feb, 2008
New York City

U.S. stocks traded in a tight range. UBS analyst revised his estimate from total loan losses to $350 billion from $150 billion on higher losses from assset backed securities, commercal mortgage securities, leveraged loans, and credit card loans. Import price index in January rose 1.7% sparking worries that inflation may be on the rise. General business condition index for New York region manufacturers declined as reported by the NY Fed, worst reading in three years.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – U.S. stocks traded in a tight range as investors braced for more loan losses. UBS analysts raised his target of loan losses by $200 billion to $350 billion.[/R]

European Markets

In London FTSE 100 Index closed lower 91.70 or 1.56% to 5,787.60, in Paris CAC 40 Index decreased 86.86 or 1.79% to close at 4,771.79 and in Frankfurt DAX index lower 129.85 or 1.87% to close at 6,832.43. In Zurich trading SMI decreased 148.99 or 1.99% to close at 7,353.00.
North American Markets indexes

Dow Jones Industrial Average lost 28.77 or 0.23% to a close of 12,348.21, S&P 500 closed up 1.13 or 0.08% to 1,349.99, and Nasdaq Composite Index traded down 10.74 or 0.46% to a close of 2,321.80. In Toronto TSX Composite closed up 7.32 or 0.06% to close at 13,215.35.

Of the 30 stocks in Dow Jones Industrial Average, 12 closed higher, 18 closed lower, and none were unchanged.

Honeywell International led the decliners in the Dow Jones with a loss of 2.6% followed by losses in Intel of 1.7%, in Do Pont of 1.6%, in United Tech of 1.5%, and in American Express of 1.3%. JP Morgan Chase led the gainers in the index with a rise of 1.5% followed by increases in Hewlett Packard of 1.4%, in AIG of 1.4%, and in Merck of 1.3%.

Of the stocks in S&P 500, 238 closed higher, 255 fell, and 7 were unchanged. Of the index stocks, 63 rose more than 3% and equal number of 9 stocks fell more than 3%.

Clear Channel led the gainers in the index with a rise of 7.4% followed by increases in Kraft Foods of 6.9%, in Campbell Soup of 6.1%, in Cigna of 5.7%, and in Bear Stearns of 5.5%. Consol Energy led the decliners in the index with a fall of 6% followed by losses in Circuit City of 4.9%, in Pulte Homes of 4.8%, and Centex of 4.6%, and in Whole Foods of 4.2%. Discover Financial, Liz Claiborne, Amazon.com, and MEMC Electric Material gained more than 3.5%.

South American Markets Indexes

In Latin Markets Peru led the decliners in the region with a fall of 2.37% followed by decreases in Mexico of 1.31%, in Brazil of 0.89%, in Chile of 0.76%, and in Venezuela of 0.12%. Colombia edged higher by 0.06%.

Asian Markets

In Tokyo Nikkei 225 Index closed lower 3.89 or 0.03% to 13,622.56, in Hong Kong Hang Seng index increased 126.75 or 0.53% closed to 24,148.43. Australia ASX 200 index decreased 78.20 or 1.38% to close 5,606.60.
In South Korea Kospi Index decreased 2.68 or 0.16% to close at 1,694.77, in Thailand SET index closed lower 5.46 or 0.66% to 826.65 and Indonesia JSE Index edged increased 12.55 or 0.47% to 2,688.19. Sensex index in India increased 348.60 or 1.96% to 18,115.25.

Bond Yields decreased on 10-year U.S. bonds to 3.77% and on 30-year bonds fell to 4.58%.

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

Crude oil added $0.24 to close at $95.70 per barrel for a front month contract, natural gas decreased 9 cents to $8.68 per mBtu, and gasoline futures increased 1.820 cents to close at 249.40 cents per gallon.

Gold decreased $4.80 in New York trading to close at $906.00 per ounce, silver closed down 13 cents to $17.125 per ounce, and copper for front month delivery increased 3.80 cents to 353.00 per pound and in London copper futures decreased $112.00 to $7,700.00.

Wheat futures rose 1.00 cents in Chicago trading and closed at $10.42 per bushel. Sugar increased 0.16 cents to 13.79 cents per pound. Soybean future closed up 5.75 cents to $13.91 per bushel.

Dollar edged lower but traded near record lows against euro to $1.4678 and edged lower against yen to 107.78.


[R]12:00PM New York – Estimates of more losses left U.S. stocks in a lurch.[/R]

U.S. stocks fell as investors faced more credit market problems, rising estimates of losses, and worries related to the growing concerns to the wider economy.

Citigroup analysts estimated that UBS may face additional 12.5 billion francs to 20 billion francs of asset write-downs and losses related to leveraged loans and mortgage securities in 2008. The news on the losses left market uncertain and UBS fell 3%.

UBS analyst Philip Finch based in London said that more bank losses may be reported in the months to come. He estimated, and as reported on Bloomberg and Reuters, that additional losses of $120 billion in Collateralized Debt Obligations, $50 billion in structured investment vehicles known as SIVs, $18 billion in commercial mortgage securities, and $15 billion in leveraged buyouts related loans. The news sent market averages lower immediately.

The fearful market expects that similar level of losses may be reported by Citigroup, Merrill Lynch, Morgan Stanley, and other international banks. The growing uncertainty in the credit market is roiling market sentiment and stock market averages are caught in a trading range.

Separately the Federal Reserve of New York reported on its website that the economic conditions in the region have drastically changed according to the latest survey. The release stated the following paragraph.

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers deteriorated in February. The general business conditions index tumbled nearly 21 points to -11.7, falling below zero for the first time since May 2005. The new orders and shipments indexes also dropped into negative territory. The prices paid index rose for a second consecutive month, to its highest level in considerably more than a year, while the prices received index remained elevated but close to January’s level.

The U.S. Import Price Index increased 1.7% in January, the Bureau of Labor Statistics of the U.S. Department of Labor reported today, led by a 5.5% increase in petroleum prices. The overall increase followed a 0.2% decline in December. U.S. export prices advanced 1.2% in January following a 0.4% rise in December.

New York State Insurance Department said that FGIC Corp, the bond insurer requested to split its municipal bond business from the structured financing business. Of the total of $310 billion in debt insurance, $220 billion are related to municipal bonds covering schools and local government requirements.

[R]5:00AM New York, 7:00PM Tokyo – The Bank of Japan left the key interest rate at 0.5% but expresses a concern on the rising food and energy prices.[/R]

Stock indexes in Japan tumbled from a 4.27% advance yesterday to close down on resurgent fears that subprime-related losses will widen and on a government report that noted that the pace of growth seems to be slowing as a result of dropping housing investment.

In Tokyo trading Nikkei 225 slipped 0.03% or 3.89 to 13,622.56, and the Topix Index rose 0.2% or 1,334.89.

In the first section of the Tokyo Stock Exchange 9.6 million shares valued at 1 trillion yen changed hands and in the second section 300 million shares valued at 3 billion yen changed hands.

Of the Nikkei 225 stocks 122 gained, 97 declined and 16 were unchanged. Pioneer Corp led the advancers with a rise of 15.53% followed by Showa Shell gaining 9.97%.

Bank of Japan Holds Rates

The Bank of Japan announced on its website today that it had unanimously voted to keep its key interest rate unchanged at 0.5%. In the previous two votes Atsushi Mizuno had disagreed with other members.

Economy Slows on Drop In Housing Investment

Separately, the bank also reported in its recent report on economic and financial developments published today that the country’s economy seems to be slowing due to the drop in housing investment.

The bank also noted that public investment has remained sluggish and housing investment has declined substantially.

Japan''s economy is expanding moderately as a trend, although the pace of growth seems to be slowing on the downturn in housing investment, while production is expected to be flat in the short run.

BOJ forecasts that domestic corporate goods prices will continue rising as international commodity prices continues to rise.

Although the financial environment is regarded as accommodative, credit demand in the in the private sector “has been more or less flat.”

The Yen Drops

The yen fell 0.62% from 107.64 to 107.65 against the dollar.

Gainers and Losers

Pioneer Corp. led advancers in the Nikkei 225 index with a rise of 15.53% followed by gains of Showa Shell of 9.97%, in Mitsubishi Heavy Industries of 6.98%, in Sumitomo Chemical Company of 6.13%, and in Sanyo Electric of 5.85%.

Shipping lines also continued to gain on growing demand and rising prices of metals. Kawasaki rose 5.70%, Mitsui Engineering & Shipbuilding increased 5.67% and Mitsui O.S.K. Lines advanced 3.72%.

Trend Micro led decliners in the Nikkei 225 index shares with a drop of 9.76% followed by losses in Daikin Industries of 7.21%, in Tokyu Land Corp. of 4.98%, in Nikon Corp of 3.28%, and in Sumitomo Realty of 3.26%.

Financial institutions also fell after UBS AG reported full-year loss of 4.3 billion loss and a fourth quarter loss of 12.4 billion francs in line with losses from U.S. mortgage-related positions outweighing strong performance in other businesses.

Mitsubishi UFJ Financial Group increased 1.67% and Mizuho shed 0.68%.

Company News

Japan Petroleum today revised upwards its full year profit projection in the year through March from 18.2 billion yen made in November to 21.5 billion yen.

International Markets

In Tokyo Nikkei 225 Index closed lower 3.89 or 0.03% to 13,622.56, in Hong Kong Hang Seng index increased 126.75 or 0.53% closed to 24,148.43. Australia ASX 200 index decreased 78.20 or 1.38% to close 5,606.60.

In South Korea Kospi Index decreased 2.68 or 0.16% to close at 1,694.77, in Thailand SET index closed lower 5.46 or 0.66% to 826.65 and Indonesia JSE Index edged increased 12.55 or 0.47% to 2,688.19. Sensex index in India increased 348.60 or 1.96% to 18,115.25

[R]3:00AM New York, 7:00PM Sydney- ASX 200 index lost 1.4% after stocks in the U.S. closed lower.[/R]

Market Sentiment

ASX 200 index lost 1.4% or 78.2 to close at 5,606.60.

The Preliminary market turnover was 1.32 billion shares worth $6.18 billion, with 422 stocks moving up, 729 moving down, and 354 unchanged. The most actively traded stock was Resource Pacific with 103 million shares worth $329.75 million.

Market Driver

Australia-based mall owner Centro Properties Group today requested for a suspension of trade in its shares and in that of its listed retail trust ahead of today''s deadline to negotiate a refinancing deal with its Australian and U.S. creditors.

The company in its statement to the Australian Stock Exchange, without giving any reason, asked the stock trading suspension, and said that it will make an announcement on Feb 19th.
The company which owns more than 700 U.S. malls has been battling to raise money to refinance $3.9 billion in debt, most of which is short term in maturity, in the past two months has been negotiating with lenders to revise terms of its borrowings.

Centro Group’s market cap has nearly melted from its peak of $8.5 billion to the current value of $515 million, after the company could not refinance its short term debt used to acquire most of the properties in less than two years.

Gainers and losers

Of the ASX 200 index stocks, AED Oil Limited led the gainers with a rise of 43.3% followed by increases in Alumina Limited of 9.4%, in Aquarius Platinum of 7%, in ABC Learning of 4.4%, and in United Group Limited of 4%.

Of the ASX 200 index stocks, Boom Logistics led the decliners in the index with a fall of 11.8% followed by losses in West Australia Newspaper of 9.8%, in Riversdale Mining of 8.2%, in Challenger Finance of 7.9% and in Corp Express Australia of 6.7%.

OneSteel restructures mill operations

Australia''s second largest steelmaker, OneSteel today announced the restructuring of its bar mill operations to improve efficiency and focus its manufacturing efforts on securing growth within construction and resources markets.

According to the company''s website, the restructuring would include the consolidation of bar manufacture within its Laverton and Sydney bar mills and the doubling of production at the Waratah Bar Mill in Newcastle.

The Newcastle Bar Mill and the operations of OneSteel Martin Bright in Melbourne would be closed while the company would continue to produce in excess of 1 million tons of steel bar products across its reconfigured bar business.

OneSteel''s Managing Director and Chief Executive Officer, Geoff Plummer, said the closure would result in a net reduction of approximately 180 jobs within Newcastle Bar Mill and limited increases at Waratah Bar Mill. He added that additional 90 jobs would be lost at OneSteel Martin Bright.
OneSteel share fell 0.8%.

Aquarius share up 7% on rise in platinum prices

Platinum producer, Aquarius Platinum Ltd''s share shot to a record today after rising by 7% today on the back rising metal prices. Platinum prices for immediate delivery rose to a record $2,027.50 yesterday and traded at $2,004.50 at the close in Sydney, resulting in the rise in the price of the metal rising to 31% this year.

Platinum prices are expected to continue rising after South Africa, the metal''s biggest producer said at least 10% of power cuts to mines and smelters would last another four years.

Aquarius, which has interest in South Africa and Zimbabwe, said increased output and gains in the price of the metal had helped boost net profit by 25% to $106.6 million in the half-year ended December 31.

Symbion announces increase in continuing business

Symbion Health Ltd today announced a 13% increase in continuing business operating earnings to $106.3 million on 14.1% increase in sales revenue to $2,140.7 million for the six months ended 31 December 2007. Directors also declared interim dividend of 5.0 cents per share.

Net profit after tax before significant items jumped by 11.3% to $52.2 million while cash generated from operations rose by 43.7% increase, with EBITDA to cash flow conversion of 98%.

In his comments, Managing Director and Chief Executive Officer Robert Cooke said: ""It is very pleasing that Symbion Health has continued to perform strongly despite the ownership uncertainty surrounding the company for the past twelve months.

""The Pathology, Pharmacy Services and Consumer divisions delivered strong results in first half of 2008, successfully leveraging organic revenue growth into stronger earnings growth. The Imaging division, which only represents around 10% of Symbion Health''s earnings, faced a challenging period due to industry pressures,"" he said.

Symbion this week agreed to a $2.1 billion takeover from Primary Health Care Ltd.

Rio warns of coal delivery delays

The world''s third- biggest mining company, Rio Tinto Group today indicated that it may miss coal deliveries from its Hail Creek mine in Queensland due to heavy rains, adding to supply disruptions in Australia, the biggest exporter, according to a report on Bloomberg and AAP.

Rio Tinto''s coal unit spokeswoman, Alison Smith told reporters by phone that Blair Athol and Kestrel mines, which were also affected by the rains, should meet their supply commitments.

At least six Queensland coal suppliers have expressed caution on production due to the rains that affected the Bowen Basin in January. Spot prices for power-station coal and the type used in steelmaking have shot to a record as a result.

Spot prices for coal used in steelmaking have jumped to $270 a ton almost triple the annual contract price, while the power-station coal spot price climbed to $150.