ECB Offer 6-month Loans, Pound Declines

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

European markets were on the decline after money markets remained tight and pound fell against euro to a new low. ECB plans to offer, for the first time, 100 billion euros for six months loan in two separate auctions next month. UK March consumer confidence fell to a fifteen-year low and home prices in February rose at 1.1%. Punch Taverns pulled its 2 billion pounds offer to buy Mitchells & Butlers on comments from Lehman Brothers.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – U.S. stocks traded lower after personal spending in February rose at anemic level and retailers declined. Tech stock rebound in the morning lost its momentum in the afternoon.[/R]

Global Markets Update

European money markets continue to remain tight as banks are unwilling to lend to each other. ECB today, for the first time decided to offer €50 billion in six month loans at two separate auctions beginning next week and also renew €100 billion in loans for three months.

Money markets in Europe on Friday were seized, and rates that bank charge rose, near recent highs today. Libor rate in pound rose to 6% from 5.73% at the end of February and Euribor rate jumped to 4.728% from 4.38%. The Swiss National Bank also offered additional liquidity by providing three month rate 2.2% reverse purchase securities to stem the rising rate for Swiss-franc 3-month Libor rate at 2.85%.

Pound continued its slide against euro after the March month consumer confidence in the UK declined to fifteen year low and home prices rose at 1.1% in March after rising 2.7% in February, the slowest pace in the last decade.

British Airways canceled 20% of flights from newly opened terminal 5. The terminal delayed for two decades and built at a cost of £4.3 billion had luggage system that failed to operate for the second day of operation.

EU regulators opened investigations in the planned purchase of Navteq by Nokia and Tom Tom’s merger with TeleAtlas.

U.S. stocks traded lower after the release of anemic personal consumption in February and a lowered earnings expectations from JC Penney. Personal consumption in the month rose 0.1% from January when it added 0.4%. The Fed’s preferred measure of inflation rose 0.1% in February after increasing 0.3% in January. The seasonally adjusted data from a year ago in February rose 3.4% in February, at a slower pace than a rise in January.

It is widely believed that the government inflation data are lagging and do not capture the total inflation that most families experience. The sharp rise in food and energy costs are still not reflected in the inflation measures.

JC Penney closed 7.5% lower after it lowered its same store sales expectations for the month and for the quarter and slashed its earnings outlook to 50 cents from 75 cents to 80 cents. Accenture jumped after it reported better than expected earnings of 64 cents compared to 47 cents a year ago. Williams-Sonoma, retailer of kitchen goods reported fourth quarter earnings of $1.15 compared to $1.06 a year ago. Apollo Group tumbled and led the decliners in the S&P 500 index after it reported a wider than expected loss. In the second quarter the education company reported a loss of $32 million compared to a gain of $60 million a year ago.


European Markets indexes

In London FTSE 100 Index closed lower 24.60 or 0.43% to 5,692.90, in Paris CAC 40 Index decreased 23.61 or 0.50% to close at 4,695.92 and in Frankfurt DAX index closed lower 18.16 or 0.28% at 6,559.90. In Zurich trading SMI decreased 25.61 or 0.35% to close at 7,239.35.

North American Markets indexes

Dow Jones Industrial Average declined 86.06 or 0.70% to a close of 12,216.40, S&P 500 closed down 10.54 or 0.80% to 1,315.22, and Nasdaq Composite Index decreased 19.65 or 0.86% to a close at 2,261.18. In Toronto TSX Composite closed down 171.99 or 1.28% to 13,233.79.

Of the 30 stocks in Dow Jones Industrial Average, 7 closed higher, 22 closed lower, and one was unchanged.

Citigroup led the decliners in the Dow with a loss of 4.4% followed by declines in American Express to 3.75%, in General Motors of 3.06%, in AIG of 1.52%, and in Bank of America of 1.5%. Alcoa led the gainers in the index with a rise of 2.06% followed by increases in 3M and Chevron of 0.12%, in DuPont of 0.09 and in Caterpillar of 0.08%.

Of the stocks in S&P 500 index, 128 stocks increased, 365 declined, and 7 were unchanged. Of the stocks in the index, 67 stocks fell more than 3% and 10 gained more than 3%.

Apollo Group led the decliners in the index with a plunge of 27% followed by losses in National City of 13%, in Liz Claiborne of 9.1%, in JC Penney of 7.5%, in SLM Corp of 7.4%, and in Fannie Mae of 7%. Jones Apparel, Freddie Mac, MGIC and First Horizon lost more than 6%.

Tenet Healthcare led the gainers in the index with a rise of 4%, followed by gains in US Steel of 3.4%, in Yahoo of 3.2% and in ConAgra of 2.7%. L3 Communications Holdings, CIT Group, Murphy Oil, and Alcoa gained more than 2%.

South American Markets Indexes

In Latin Markets Venezuela led the gainers in the region with a rise of 0.74% followed by increases in Mexico of 0.34%, and in Argentina of 0.29%. Brazil led the decliners in the region with a loss of 0.51% followed by losses in Peru of 0.16%.

Jamaican market surged 4.36% after the government released budget expenditure for the fiscal year. The $7 billion budget shows 23% increase in spending compared to a year ago but after adjusting for 18% inflation there is little money left for infrastructure development. More than 50% of the budget is allocated to paying interest on debt and the government may have to seek $300 million from the international credit markets. Jamaica is one of the few countries in the Caribbean region which has a history interest payment on debt, but has accumulated debt at a higher interest than the current rates in the market.

Asian Markets

In Tokyo Nikkei 225 Index closed higher 215.89 or 1.71% to 12,820.47, in Hong Kong Hang Seng index increased 621.73 or 2.74% closed to 23,285.95. Australia ASX 200 index lower 20.50 or 0.38% to close 5,351.10. In Malaysia KL Composite index increased 4.38 or 0.35% closed to 1,258.41.

In South Korea Kospi Index increased 25.59 or 1.53% to close at 1,701.83, in Thailand SET index closed higher 2.21 or 0.27% to 825.17 and Indonesia JSE Index edged increased 26.24 or 1.07% to 2,477.59. Sensex index in India increased 355.73 or 2.22% to 16,371.29.

Commodities, Metals, and Currencies

Crude oil decreased $2.39 to close at $105.19 a barrel for a front month contract, natural gas increased 15 cent to $9.83 per mBtu, and gasoline futures decreased 1.58 cents to close at 269.95 cents per gallon.

Gold decreased $17.50 in New York trading to close at $936.50 per ounce, silver closed down $0.61 cents to $17.94 per ounce, and copper for front month delivery decreased 4.15 cents to 383.15 per pound.

Wheat futures decreased 25.00 cents in Chicago trading and closed at $9.89 per bushel. Sugar decreased 40.00 cent to 11.73 cents per pound. Soybean future closed down 60.00 cents to $12.67 a bushel.

Dollar edged lower and traded near a record low against euro to $1.5798 and edged lower against yen to 99.29.

Bond Yields increased for 10-year U.S. bonds and closed at 3.44% and on 30-year bonds increased to close at 4.32%.