Credit Suisse Credibility Gap, IKB Loss

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

European markets were on the decline with gold, silver, oil, and agricultural commodities trading lower. Credit Suisse loss forecast unnerved investors. Credit Suisse blamed fired employees to misprice bonds to hide losses. The string of unforeseen losses at the bank has put the management credibility in question. German state controlled bank IKB received the fourth capital injection to cover 450 million asset write-down. Silver and oil dragged the commodities markets lower.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – Nervous investors sold Credit Suisse after it forecasted a probable loss in the current quarter. German state controlled bank received fourth capital infusion to cover sub-prime losses.[/R]

Global Markets Update

European markets were on the decline with gold, silver, oil, and agricultural commodities traded lower. Credit Suisse loss forecast unnerved investors.

Credit Suisse forecasted a loss in the current quarter and blamed intentional errors by fired traders in bond prices rattled financial markets in Europe. Credit Suisse now suffers from credibility deficit as investors drove the stock down 6% and worried that the management may not have a handle on the current situation.

German state controlled bank KfW agreed to IKB lend €450 million to cover leveraged and mortgage loans write downs. IKB is expected to post wider than estimated loss in 2008 of €800 million from its previous estimate of €550 million. IKB dropped 14% in Frankfurt trading.

IT services company TietoEnator soared 40% after it received an offer valued at €15.50 per share or 1.1 billion. Spanish property company Colonia plunged 23% after Dubai controlled fund is still negotiating to arrange financing. Alitalia closed up 9% after it surged as much as 30% on the hopes of a rival bid from Air France-KLM.

Gemalto NV, smart card maker dropped 2% after it reported 4% decline in 2007 sales to €1.63 billion and net income of €89 million compared to €1.6 million a year ago.

U.S. stocks rallied on positive analyst comments covering Fannie Mae and Freddie Mac. KBW analyst suggested that the recent Fed actions and wider latitude in mortgage lending will help the two largest mortgage lenders. Financials, home builders, and brokerage stocks rallied. Dow, Nasdaq and S&P 500 rose above 2%. Credit Suisse surprised estimate in the current quarter loss kept European banks and markets in check. General Motors closed near record low.

U.S. stocks edged higher in the morning on continued weakness in crude oil and metals prices. Crude oil, gold, and natural gas fell more than 3% in the morning trading. Fannie Mae soared 11% and Freddie Mac surged 9% after analyst comments suggested wider latitude in lending will increase mortgage lending and support mortgage markets. The comments and a rating upgrade lifted financial stocks.

Silver and wheat plunged 8.5%. Futures of Cocoa plummeted 9.3%, soybeans lost 4%, zinc and lead decreased 4%.

Wal-Mart reached a 3-year high but General Motors traded near record lows. Visa ((V)) on the second day as a public company and MasterCard ((MA)) surged as retail investors snapped up stocks in two largest credit card processing companies.

FedEx reported lower earnings and guided current quarter earnings to decline. Borders Group fell 28% after reporting earnings decline and financing from activist investor Pershing Square. Visa stock rose 6% on the second day of trading.

Borders Group reached a new low after the company essentially put itself up for a sale. The news rattled investors and stock plunged.

UK retail sales in three months ending in February rose 1% from previous three months and jumped 4.7% from a year ago. The rise in sales was recorded in food stores, non-store retailing and repair services. February current budget surplus rose to £2 billion compared to £700 million in the month a year ago. Net UK debt increased to £516.4 billion.

Asian markets fell in the region on weak metals and crude oil prices. Gold fell 3%, crude oil declined 2% and copper dropped 4% in the regional trading. The sharp drop in metal prices dragged mining companies in Australia, China, and Hong Kong trading. Japan, Markets in India, Indonesia, Malaysia, Pakistan, and Philippines were closed. China Mobile and PetroChina fell after the release of earnings. BHP and Rio Tinto plunged 7%.

European Markets

In London FTSE 100 Index closed lower 50.40 or 0.91% to 5,495.20, in Paris CAC 40 Index decreased 22.23 or 0.49% to close at 4,533.72 and in Frankfurt DAX index lower 41.23 or 0.65% to close at 6,319.99. In Zurich trading SMI decreased 63.13 or 0.89% to close at 7,009.86.

North American Markets indexes

Dow Jones Industrial Average added 261.66 or 2.16% to a close of 12,361.32, S&P 500 closed up 31.09 or 2.39% to 1,329.5, and Nasdaq Composite Index increased 48.15 or 2.18% to a close at 2,258.11. In Toronto TSX Composite closed up 66.26 or 0.52% to 12,775.64.

Of the 30 stocks in Dow Jones Industrial Average, 25 closed higher, 5 closed lower, and none were unchanged.

Citigroup led the gainers in the index with a rise of 10.3% followed by increases in American Express of 9.5%, in Bank of America of 8.6%, in JP Morgan of 8.2%, and in AIG of 6.7%. Wal-Mart jumped 4.8% to a three-year high on the strength in retail stocks. General Motors traded up 2.5% but near intra-day record low. Alcoa led the decliners in the index with a fall of 2.6% followed losses in 3M Company of 1.9%, in Hewlett Packard of 0.2%, in Pfizer of 0.1%, and in DuPont of 0.04%.

Of the stocks in S&P 500 index, 417 stocks increased, 79 declined, and 4 were unchanged. Of the stocks in the index, 7 stocks fell more than 3% and 169 gained more than 3%.

CIT Group led the decliners in the index with a fall of 17% followed by losses in Public Services Enterprises of 7.6%, in Newmont Mining of 5.6%, and in Jabil Circuit of 5.3%, and ADM of 4.7%. Wamu Inc led the gainers in the index with a rise of 19% followed by National City of 16%, in General Growth Properties of 15.5% and in Lehman Brothers of 15.2%.

South American Markets Indexes

In Latin Markets Argentina led the decliners in the region with a fall of 3.3% followed by decreases in Peru of 1.87%, and in Mexico of 1.51%. Chile rose 0.16% and Colombia added 0.13% but Venezuelan markets were closed.


Asian Markets

In Hong Kong Hang Seng index decreased 758.72 or 3.47% closed to 21,108.22. Australia ASX 200 index decreased 161.60 or 3.06% to close 5,127.50. Market of Japan, India, Indonesia, Pakistan, Philippines and Malaysia were closed.

In South Korea Kospi Index increased 1.16 or 0.07% to close at 1,623.39, in Thailand SET index closed lower 9.56 or 1.18% to 798.11.

Bond Yields decreased for 10-year U.S. bonds and closed at 3.33% and on 30-year bonds declined to close at 4.16%.

Commodities, Metals, and Currencies

Crude oil decreased $1.12 to close at $101.42 a barrel for a front month contract, natural gas increased 4 cent to $9.06 per mBtu, and gasoline futures increased 4.09 cents to close at 260.12 cents per gallon.

Gold decreased $25.30 in New York trading to close at $920.00 per ounce, silver closed down $1.595 cents to $16.85 per ounce, and copper for front month delivery decreased 6.00 cents to 357.35 per pound.

Wheat futures decreased 86.50 cents in Chicago trading and closed at $9.74 per bushel. Sugar increased 13.00 cent to 11.88 cents per pound. Soybean future closed down 50.00 cents to $12.07 a bushel.

Dollar edged higher and traded near a record low against euro to $1.5414 and edged lower against yen to 99.28.