Swiss Re, UBS Lead Stocks Lower

123jump.com Staff
06 May, 2008
New York City

Stocks in Europe closed lower after UBS reported a loss of 11.5 billion francs and Swiss Re missed its target. UBS also decided to elimiate 5,500 positions and raise caiptal to bolster its weak tier-1 capital ratio. NYSE Euronext earnings rose sharply on higher derivative revenues. Adidas first quarter earnings rose after the purchase of rival Reebok.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – European markets fell sharply after UBS reported a loss of 11.5 billion francs and a plan to lay-off 5,500 people.[/R]

Global Markets Update

Stock markets across the region fell after UBS reported sharply higher losses and announced a plan to eliminate 5,500 jobs.

The Swiss bank reported a loss of Sfr 11.5 billion compared to net income of Sfr 3.03 billion. Tier 1 ratio at the end of the quarter fell to 6.9 from 11.6 at the end of the first quarter 2007 and 8.7 from the end of the year 2007. The tier 1 ratio at the end of the first quarter includes mandatory convertible note offering of Sfr 13 billion. The ratio would jump to 11.8% after taking into account additional capital of Sfr 15 billion approved during the annual general meeting.

The bank will have 2,600 fewer employees totaling 19,000 at the end of this year and will have 1,900 fewer people by the mid-2009.

Swiss Re reported first quarter profit declined 53% to Sfr 624 million on mark to market losses of Sfr 819 million. Earnings per share fell 52% to CHF 1.84 over the same period of last year. Return on equity was equivalent to an annualized rate of 8.5% compared to 17.1% in the first quarter 2007.Operating income in property and casualty segment fell 6% and in life and health segment plunged 45%. Swiss Re stock fell 4.8%.

U.S. stocks fell in the morning trading after the release of earnings from Fannie Mae and UBS. Fannie Mae swung to first quarter 2008 loss of $2.2 billion compared to profit of $961 million. The mortgage lender also cut its dividend to 25 cents per share and announced a plan to raise $6 billion to meet capital requirements. Separately, Swiss bank UBS reported a loss of SFr 11.54 billion and a plan to eliminate 5,500 jobs.

U.S. stocks rebounded from the morning slump after investors focused on reduced capital requirement for Fannie Mae and a steady rise in crude oil and natural gas prices. Fannie Mae will be allowed to operate with capital control ratio of as low as 10% by the third quarter of this year. Crude oil traded above $122. NYSE Euronext Group reported a sharp rise in revenue and earnings on higher derivative products revenues. The home builder D R Horton revenue slumped 65% on the continued weakness in the housing market.

UK stocks closed nearly unchanged after the service index in April fell to a five year low. Of the 102 FTSE 100 stocks 26 gained, 74 declined and 2 were unchanged. Tullow Oil led advancers in the index shares with a rise of 24% after crude oil prices jumped to $122 per barrel, boosted by further supply disruptions. British Land fell after Morgan Stanley lowered its rating on the company.

Hong Kong stock indexes ended fractionally up in volatile trading as rising oil prices dragged stocks of airlines and oil refiners. Hang Seng Index rose 0.30% to 26,262.13, and the China Enterprises Index of Hong Kong-listed mainland companies, or H shares, increased 0.18% to 14,651.29. In Shanghai trade, CSI 300 Index fell 1.1% to 4,010.89.

European Markets indexes

In London FTSE 100 Index closed lower 0.30 or 0.00% to 6,215.20, in Paris CAC 40 Index decreased 22.44 or 0.44% to close at 5,040.92 and in Frankfurt DAX index lower 34.98 or 0.50% to close at 7,017.10. In Zurich trading SMI decreased 114.59 or 1.50% to close at 7,543.67.

North American Markets indexes

Dow Jones Industrial Average fell 51.29 or 0.40% to a close of 13,020.83, S&P 500 closed up 10.77 or 0.77% to 1,418.26, and Nasdaq Composite Index increased 19.19 or 0.78% to close at 2,483.31. In Toronto TSX Composite closed up 142.75 or 1.00% to 14,417.09.

Of the 30 stocks in Dow Jones Industrial Average, 19 closed higher, 11 closed lower, and none was unchanged.

Alcoa led gainers in the Dow Jones index with a rise of 2.7% followed by gains in AIG of 2.5%, in Microsoft of 2.4%, in Intel of 1.7%, in JP Morgan Chase of 1.33%, and in Chevron of 1.3%. Wal-Mart Stores led decliners in the Dow Jones index with a loss of 1% followed by losses in General Motors of 0.7%, in McDonalds of 0.5%, in J&J of 0.4% and in AT&T of 0.4%.

Of the stocks in S&P 500 index, 383 stocks increased, 111 declined, and 6 were unchanged. Of the stocks in the index, 8 stocks fell more than 3% and 55 gained more than 3%.

Legg Mason led decliners in the S&P 500 index with a fall of 8.3% followed by losses in Sara Lee of 5.6%, in Tenet Healthcare of 5.6%, in Qwest Communication of 5.04% and in Sunoco of 4.7%.

Anadarko Petroleum led gainers in the S&P 500 index with a rise of 10.4% followed by gains in Fannie Mae of 9.9%, in Advanced Micro Devices Inc of 9% and in Akamai Technology of 8.5%.

South American Markets Indexes

Colombia led gainers in the Latin American markets with a rise of 1.17% followed by increases in Argentina of 1.02% and in Mexico of 0.85%. Chile declined 0.8% and Brazil fell 0.01%.

Asian Markets

In Hong Kong Hang Seng index increased 78.18 or 0.30% closed to 26,262.13. In Australia ASX 200 index lower 28.90 or 0.50% to close 5,701.40. In Malaysia KL Composite index increased 1.48 or 0.12% closed to 1,276.09. Market of Tokyo was closed today.

In South Korea Kospi Index increased 10.79 or 0.58% to close at 1,859.06, in Thailand SET index closed higher 2.68 or 0.32% to 845.83 and Indonesia JSE Index edged decreased 16.16 or 0.68% to 2,371.83. Sensex index in India decreased 117.89 or 0.67% to 17,373.01.

Commodities, Metals, and Currencies

Crude oil increased $1.89 to close at $121.86 a barrel for a front month contract, natural gas decreased 6 cents to $11.12 per mBtu, and gasoline futures increased 4.98 cents to close at 310.27 cents per gallon.

Gold increased $3.60 in New York trading to close at $877.70 per ounce, silver closed up 3 cents to $16.86 per ounce, and copper for front month delivery decreased 6.90 cents to $3.8785 per pound.

Wheat futures increased 12.50 cents in Chicago trading and closed at $8.18 per bushel. Sugar increased 34 cent to $11.82 per pound. Soybean future closed down 9.00 cents to $12.77 a bushel.

Dollar edged lower and traded near record low against euro to $1.5524 and edged lower against yen to 104.71.

Yields on U.S. bonds increased to 3.89% with 10 years of maturities and increased 4.64% with 30-year of maturities.