Lehman Struggles, Merrill 10-Year Low

123jump.com Staff
12 Sep, 2008
New York City

U.S. stocks fell in the morning trading after Lehman Brothers searches for a buyer. The potential buyers are looking for a guarantee or assitance of the Fed in evaluating Lehman assets. The acqusition price increasingly looks at or below current market price as the stock has declined 80% this week. Japan economy shrank at 3% rate in the second quarter. U.S. retail sales in August fell 0.3% but in China rose 23.2%.

[R]10:15AM New York – U.S. stock traded lower as Lehman Brothers struggles to find a buyer.[/R]

U.S. stocks fell in the morning trading as financials declined. Lehman Brothers fell for the fifth day of this week and declined 11% or 47 cents to $3.75. Merrill Lynch dropped 10% or $2.02 to $17.40.

Lehman Brothers is in final stages of discussion with several potential bidders who are looking for a guarantee of the Federal Reserve Bank on its financial assets that are hard to evaluate.

The media speculation suggests that the leading contenders for the deal are Bank of America and Barclays but several other European large banks may not be ruled out. Banks in Japan and China are not in the race to acquire Lehman as they avoid the repeat of late eighties style Japan banking crisis and late nineties banking crisis in Asia.

World Economic News

Retail sales in the U.S. declined 0.3% in August from July sales and rose 1.6% from a year ago. Total sales in the three months ending in August rose 2.3% from a prior year period. July retail sales were revised lower to a decline of 0.5% from a decline of 0.1%. In the month, gasoline stations sales were up 22% from a year ago and sales of food and beverages were up 6.9%.

Gross domestic products in Japan for three months ending in June was revised lower to a decline at annual rate of 3% compared to 2.4% decline in the previous estimate. Domestic demand was lowered from a decline of 0.6% to 0.7% and private residential investment was estimated at a decline of 3.5% from 3.4% loss in the preliminary estimate.

However, retail sales in China in August surged 23.2% from a year ago according to the latest statistics from the National Bureau of Statistics. The sales of automobiles were up 19%, of grain and oil was up 23.1% and that of meat, poultry and eggs were 26.7%. Petroleum and related products sales were up 60%. For the period between January and August total retail sales of consumer goods were up 21.9%.

July Industrial production in India rose 7.1% from June production when I increased at 5.4%. Volatile capital goods production in the month surged 21.9% from 12.3% increase in June. Industrial production includes output of manufacturing, mining and power sectors. Manufacturing accounting for 80% of total rose 7.5% in the month, mining output increased 5% and electricity generation increased 4.5%.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 112.26 or 0.93% to 12,214.76, Hang Seng index in Hong Kong decreased 35.82 or 0.18% closed to 19,352.90.ASX 200 index in Australia increased 89.60 or 1.86% to close 4,903.80. The KL Composite index in Malaysia increased 2.96 or 0.28% closed to 1,044.03.

The Kospi Index in South Korea increased 34.68 or 2.40% to close at 1,477.92, SET index in Thailand closed higher 7.54 or 1.17% to 654.34 and JSE Index in Indonesia decreased 66.07 or 3.53% to 1,804.06. The Sensex index in India decreased 323.48 or 2.26% closed to 14,000.81.

Europe Markets Review

In London FTSE 100 Index traded higher 44.30 or 0.83% to 5,362.70, in Paris CAC 40 Index increased 40.91 or 0.96% to 4,289.98 and in Frankfurt DAX index traded higher 24.01 or 0.39% to 6,202.91. In Zurich trading SMI increased 69.91 or 0.99% to 7,141.12.