AIG Raises $11.9 Billion, Bond Insurers Drop

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

MBIA and Ambac fell after the bond rating agency Moodys raised concerns on the capital adequacy at the insurance companies. MBIA, only a day ago asserted at the time of earnings release that it does not need additional capital and has a significantly higher book value than GAPP accounting would suggest. Moodys suggested that fallng home values and continued decline in loans values in the secondary market may force the insurance companies to raise more capital.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – HP agreed to buy EDS for $25 per share or at 33% premium from the closing price at the end of the last week.[/R]

Global Markets Update

AIG, the troubled insurance company completed its offering of $11.9 billion yesterday. The offering raised $6.5 billion through a sale of common stocks at $38 per share, a 1% discount to the closing price of $38.37 and raised $5.4 billion through equity linked units. The company is in the midst of raising $5 billion through bond offering and raise $3 billion through a sale of stock and equity units to meet higher demand. AIG is likely to raise $17 billion through various offering and may exceed its target of $12.5 billion after recording loss of nearly $19.5 billion in the last two quarters.

Hewlett Packard agreed to pay $25 per share or $13.9 billion for technology service company EDS. The purchase price is at 33% premium from the last trading price on Friday. HP with the acquisition of EDS hopes to bolster its service business from $17 billion in 2007 to nearly $40 billion in 2009. The deal is expected to GAAP earnings accretive in 2010.

Wal-Mart Stores, Inc. reported net sales for the first quarter 2008 increased 10.2% to $94.12 billion from $85.4 billion for the first quarter of fiscal year 2007. First quarter net income was increased 6.9% to $3.02 billion or $0.76 per diluted share compared to $2.83 billion or $0.68 per diluted share in the same quarter of 2007.

U.S. April retail sales fell 0.2% to $378 billion from March and rose 2% from a year ago. April retail sales in China rose 812 billion yuan, a 22% rise from a year ago. Retail sales in the urban area rose 23% to 556 billion yuan and in smaller town areas rose 20% to 258 billion.

UK inflation measure CPI jumped in April to 3% from 2.5% in March and Retail Price Index inflation rose to 4.2% from 3.8% in March. Rising food, alcohol and tobacco prices contributed to the index gains.

European Markets indexes

In London FTSE 100 Index closed lower 8.70 or 0.14% to 6,211.90, in Paris CAC 40 Index increased 22.46 or 0.45% to close at 4,998.67 and in Frankfurt DAX index higher 24.24 or 0.34% to close at 7,060.19. In Zurich trading SMI increased 94.35 or 1.26% to close at 7,578.32.

North American Markets indexes

Dow Jones Industrial Average fell 44.86 or 0.35% to a close of 12,831.45, S&P 500 closed down 0.54 or 0.04% to 1,403.04, and Nasdaq Composite Index increased 6.63 or 0.27% to close at 2,495.12. In Toronto TSX Composite closed down 50.96 or 0.35% to 14,615.11.

Of the 30 stocks in Dow Jones Industrial Average, 16 closed higher, 14 closed lower, and none was unchanged.

Hewlett Packard led the decliners in the Dow Jones Industrial Average with a loss of 5.5% followed by losses in JP Morgan of 3.9%, in Citigroup of 2.7%, in General Motors of 2.65%, in Bank of America of 2.2%, and in Wal-Mart Stores of 2.2%. AIG led the gainers in the index with a rise of 1.6% followed increases in Alcoa of 1.1%, in IBM of 0.85%, and in Exxon Mobil of 0.7%.

Of the stocks in S&P 500 index, 242 stocks increased, 253 declined, and 5 were unchanged. Of the stocks in the index, 18 stocks fell more than 3% and 22 gained more than 3%.

Ambac Financial Group led the decliners in the S&P 500 index with a loss of 7.6% followed by losses in MBIA of 6.2%, in Hewlett Packard of 5.4%, in State Street Corp of 5.2% and in WaMu Inc of 4.3%.

Fluor Corp led the gainers in the S&P 500 index with a rise of 15% followed by gains in Constellation Group of 12%, in Peabody Energy of 6%, in Jacobs Engineering of 5.7%, and in McGraw Hill of 5.5%. Yahoo, SanDisk, Clear Channel and Moody’s added more than 4%.

South American Markets Indexes

Mexico led the gainers in the Latin American markets with a rise of 0.82% followed by increases in Peru of 0.65% and in Colombia of 0.32%. Venezuela led the decliners in the index with a loss of 1.6% followed by losses in Chile of 0.34% and in Argentina of 0.9%. Brazil added 0.12%.

Asian Markets

In Tokyo Nikkei 225 Index closed higher 210.37 or 1.53% to 13,953.73, in Hong Kong Hang Seng index increased 489.60 or 1.95% closed to 25,552.77. In Australia ASX 200 index lower 15.80 or 0.27% to close 5,812.70. In Malaysia KL Composite index decreased 6.55 or 0.51% closed to 1,286.54.

In South Korea Kospi Index increased 19.10 or 1.05% to close at 1,842.80, in Thailand SET index closed lower 2.94 or 0.35% to 839.28 and Indonesia JSE Index edged increased 40.90 or 1.72% to 2,418.90. Sensex index in India decreased 108.04 or 0.64% to 16,752.86.

Commodities, Metals, and Currencies

Crude oil increased $1.64 to close at $125.87 a barrel for a front month contract, natural gas increased 11 cents to $11.41 per mBtu, and gasoline futures increased 3.68 cents to close at 320.10 cents per gallon.

Gold decreased $15.30 in New York trading to close at $869.60 per ounce, silver closed down 39 cents to $16.83 per ounce, and copper for front month delivery decreased 1.80 cents to $3.73 per pound.

Wheat futures decreased 9.75 cent in Chicago trading and closed at $7.95 per bushel. Sugar decreased 49 cent to $11.16 per pound. Soybean future closed up 11.70 cents to $13.79 a bushel.

Dollar edged higher and traded near record low against euro to $1.5476 and edged higher against yen to 104.77.

Yields on U.S. bonds increased to 3.90% with 10 years of maturities and increased to 4.62% with 30-year of maturities.