ECB Adds Liquidity, Stocks Rise

123jump.com Staff
18 Mar, 2008
New York City

European markets surged higher ahead of the U.S. rate decision and after the release of earnings from Goldman Sachs and Lehman Brothers. Goldman and Lehman reported lower earnings but beat the expectations. UBS sliced pay of its chairman Marcel Ospel by 94% in 2007 to SFr2.6 million from 2006.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – Volatile bank stocks rallied today after Lehman Brothers and Goldman Sachs reported lower but better than expected earnings in the U.S.[/R]

Global Markets Update

European markets surged led by a rise in banks and insurance companies. UBS, Credit Agricole, HSBC, Barclays, and Societe Generale led the gainers in the region. BMW also participated in the rally after it estimated higher earnings in the current year. European country based stock indexes surged more than 3.4%.

Metro AG fell 7% after it reported 10% rise in sales in 2007 and estimated a sales growth of 6% and operating earnings rise between 6% and 8%. Store chain Real in Germany with a new leader is likely to close to non-performing stores with a loss of between 40 and 50 million euros in 2007.

French opinion research company, Ipsos SA reported 2007 net income increased to 46.7 million euros from 38.9 million euros a year ago. The French discount apparel retailer Vet’Affaires SA reported 2007 net income increased to 2 million euros from 1.2 million euros in 2006 and estimated 2008 revenues of more than 100 million euros.

Better than expected earnings from Goldman Sachs and Lehman Brothers lifted the mood in the morning trading hours in the U.S. Stocks dipped before the interest rate decision in the afternoon and surged after the Fed lowered its benchmark rate by 0.75% to 2.25%. The second rate cut in as many days lifted market indexes. However the Fed sounded cautionary note on inflation.

U.S. stock averages surged nearly 4% after a string of good news on earnings and the Fed decision to lower interest rate. The Fed lowered the benchmark rate by 0.75% to 2.25%. The sharp decline lifted stocks that were already up in the morning, higher. Nasdaq and S&P surged above 4% and Dow added more than 3%. Goldman Sachs and Lehman Brothers earnings fell but beat the estimates. Visa prices its IPO at $44 per share and raised $17.9 billion to begin trading tomorrow.

Goldman Sachs reported first quarter revenue decline of 35% to $8.34 billion and net income fell 53% to $1.47 billion. Weaknesses were in investment banking and trading gains using its own capital. Asset management and trading execution revenue edged higher on rising net fund flows.

Lehman Brothers reported a decline in revenue of 31% to $3.5 billion and net income fall of 57% to $489 million. Earnings per share declined to 81 cents from $1.96 a year ago. Steady rise in asset management, equity offering fees and prime brokerage services helped the bank to overcome losses in fixed income related revenues. Lehman has been a subject of intense speculation in the last few days after a sudden demise of Bear Stearns as it lacked liquidity.

European Markets

In London FTSE 100 Index closed higher 191.40 or 3.54% to 5,605.80, in Paris CAC 40 index increased 151.55 or 3.42% to close at 4,582.59 and in Frankfurt DAX index closed higher 211.09 or 3.41% to close at 6,393.39. In Zurich trading SMI increased 239.61 or 3.54% to close at 7,013.87.

North American Markets indexes

Dow Jones Industrial Average surged 420.41 or 3.51% to a close of 12,392.66, S&P 500 closed up 54.14 or 4.24% to 1,330.74, and Nasdaq Composite Index soared 91.25 or 4.19% to a close at 2,268.26. In Toronto TSX Composite closed up 184.55 or 1.42% to 13,136.70.

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

Citigroup led the gainers in the index with a rise of 11% followed by increases in AIG of 9.7%, in General Motors of 8.9%, in Bank of America of 8.3%, in JP Morgan Chase of 5.95%.

Of the stocks in S&P 500 index, 489 stocks increased, 11 declined, and none were unchanged. Of the stocks in the index, 10 stocks fell more than 3% and 48 gained more than 3%.

Lehman Brothers led the gainers in the index with a surge of 46% to $46.94 followed by increases in Fannie Mae of 27%, in Freddie Mac of 26%, in Countrywide Financial of 24%, in Bear Stearns of 22.9%, in CIT Group of 21%. Morgan Stanley and Goldman Sachs soared 17%.

Newmont Mining led the decliners in the index with a loss of 4.7% followed by declines in Amgen of 4.4%, in Humana of 3.2%, in Autodesk of 2.5%, and in WellPoint of 2.45%.

South American Markets Indexes

In Latin Markets Brazil led the gainers in the region with a rise of 3.20% followed by increases in Mexico of 1.6%, in Peru of 1.5%, in Argentina and Colombia of 1.20%, and in Venezuela of 0.65%. Chile edged up 0.16%.

Asian Markets

In Tokyo Nikkei 225 Index closed higher 176.65 or 1.50% to 11,964.16, in Hong Kong Hang Seng index increased 300.00 or 1.42% closed to 21,384.61. Australia ASX 200 index increased 0.90 or 0.02% to close 5,086.10. In Malaysia KL Composite index increased 2.49 or 0.21% closed to 1,180.02.

In South Korea Kospi Index increased 14.31 or 0.91% to close at 1,588.75, in Thailand SET index closed higher 5.58 or 0.69% to 806.74 and Indonesia JSE Index edged increased 27.47 or 1.19% to 2,339.80. Sensex index in India increased 23.97 or 0.16% to 14,833.46.

Bond Yields for 10-year U.S. bonds closed at 3.50% and on 30-year bonds at 4.375%.

Commodities, Metals, and Currencies

Crude oil decreased $0.62 to close at $108.80 a barrel for a front month contract, natural gas increased 3 cent to $9.44 per mBtu, and gasoline futures decreased 2.00 cents to close at 264.00 cents per gallon.

Gold decreased $21.00 in New York trading to close at $983.30 a ounce, silver closed down 10.5 cents to $19.85 per ounce, and copper for front month delivery decreased 2.05 cents to 372.60 per pound.

Wheat futures increased 32.50 cents in Chicago trading and closed at $11.64 per bushel. Sugar decreased 19.00 cent to 12.28 cents per pound. Soybean future closed up 4 cents to $13.07 a bushel.

Dollar edged lower and traded near a record low against euro to $1.5648 and edged higher against yen to 100.24.