Weak European Markets, UBS Record Loss

123jump.com Staff
10 Feb, 2009
New York City

European Stocks decline for the second day on the worries that the U.S. economic stimulus may not be enough and bank bailout efforts may fall short of expectations. UBS posts record 13 billion euro loss and cuts additional staff. After the close, U.S. indexes dropped more than 4%.

[R]1:00PM New York, 6:00 Frankfurt – European Stocks decline for the second day on the worries that the U.S. economic stimulus may not be enough and bank bailout efforts may fall short of expectations. UBS posts record 13 billion euro loss and cuts additional staff.][/R]

Stocks in Europe declined for a second day after US President Barack Obama admitted that his intervention plan alone will not be enough to ease the crisis in the world’s largest economy.

UBS, Switzerland’s largest bank, reported a fourth-quarter loss of Sfr 8.1 billion and a full-year loss of 19.7 billion francs or 13 billion euros.

Net revenue and profit from two of its key business units improved in January. The company also revealed plans to cut 2,000 more jobs in addition to 1,782 laid off in the fourth quarter of 2008.

Clients withdrew nearly Sfr 84 billion from its wealth management unit last year but the bank said in January net assets under management rose.

Market sentiment

In Frankfurt trading the DAX Index lost 0.8% or 36.64 to 4,630.18. Of the Dax index shares, 11 gained and 19 declined.

Deutsche Bank advanced 2.8% followed by gains in Deutsche Postban of 2.2%, in Commerzbank of 1.7%, in Merck KGAA of 1.6% and in RWE AG of 1.3%.

Infineon Tech led decliners with a loss of 3.1% followed by losses in Man AG of 2.9% in Daimler AG of 2.8%, in Deutsche Boerse of 2.7% and in Allianz SE-REG of 2.6%.

In Paris the CAC-40 Index closed 0.9% lower to 3,098.87 after reaching an intra-day high of 3,124.05. Carmakers advanced after the French government yesterday unveiled a 6 billion euro financial support to the industry. However, the gains were not enough to lift the market index.

GDF Suez the advancers with a gain of 1.5% followed by gains in Air France of 4.5%, in Alcatel-Lucent of 1.3%, in BNP Paribas 1.3% and in Sanofi-Aventis of 1.3%.

Dexia led fallers with a decline of 5.5% followed by losses in Arcelormittal of 4%, in Eads of 3.5%, in Alstom of 3.1% and in Unibail-Rodamco of 3%.

UBS record loss]

UBS reported the biggest ever loss in the history of the company in spite of a government bailout in October last year. The financial rescue package included a net income tax benefit of CHF 1,727 million.

The bank revealed that losses were mainly a result of drop in prices of fixed income, currencies and commodities and weakness in investment banking. The investment bank alone suffered a loss of 7.5 billion francs.

The company said its business forecast for 2009 was positive, but warned that financial conditions “remain fragile” as companies and households will continue to face cash flow problems.

U.S. Senate Votes on Economic Stimulus Bill

The U.S. President Barack Obama admitted that the U.S. economy had reached “full blown crisis” and warned of a possible economic “catastrophe” if the $800 billion federal government intervention takes long to pass.

Later today, Treasury Secretary, Timothy Geithner, was expected to unveil details of rescue package for the financial sector to restore “market confidence.”