U.S., European Stocks Fall on Banks Downgrade

123jump.com Staff
06 Apr, 2009
New York City

U.S. stocks edged lower on worries that banks may have to face more write-offs. IBM and Sun may have ended their exclusive talks seeking a merger. Banks in Japan are likely to take higher charges. European stocks declined. EU investigators send a list of charges to Visa Europe regarding its fees.

[R]10:20 AM New York – U.S. stocks edged lower on worries that banks may have to face more write-offs. IBM and Sun may have ended their exclusive talks seeking a merger. Banks in Japan are likely to take higher charges. European stocks declined.[/R]

U.S. stocks in the morning traded lower after the negotiations between IBM and Sun Microsystems ended with no deal, weak banking stocks on analyst downgrade and Treasury Secretary Geithner comments.

The governments around the world are still promising more money to industries or banks to support the local economies. Russia is planning to provide 3 trillion ruble and Japan is working on a stimulus plan of $99 billion.

Sun is looking for more than $10 a share, at least 10% more than what IBM is prepared to pay. IBM also lowered its earlier offer of $9.55 a share from $9.40 a share but Sun demanded certain assurances and conditions that IBM was not prepared to abide by.

Tech stocks were weak on the news.

Banks traded sharply lower after an influential analyst estimated that more losses at banks for the rest of the year. Mike Mayo, analyst with Calyon Securities suggested that losses may exceed during the Great Depressions as mortgage bonds and other loan markets are still undergoing corrections. The analyst comments were first reported on Bloomberg News.

Mayo assigned his lowest rating of “sell” to U.S. Bancorp, SunTrust, Fifth Third Bancorp and BB&T Corp.

SunTrust Banks, Inc ((STI)) dropped 8% to $12.72, JP Morgan Chase ((JPM)) declined 3% to $28.44 and Wells Fargo ((WFC)) fell 5% to $15.47. BB&T Corp dropped 5% to $17.25 and US Bancorp dropped 5% to $15.13.

Over the weekend Treasury Secretary Geithner said that the Treasury is prepared to remove executives at banks that received TARP funds may be removed if they fail to perform to the Treasury’s expectations.

Banks in Japan fell at close in Tokyo trading. Nikkei News estimated that Sumitomo Mitsui may take 60 billion yen of losses related to its investment in Barclays, Mizuho Financial Group is likely to take 80 billion charge linked to its failed investment in Merrill Lynch.

Visa Europe, ((V)) the target of EU investigation was sent formal list of objections concerning fees. The one year old investigation is only focused on the European operation that is not part of the recently listed public company in the U.S.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 108.09 or 1.24% to 8,857.93, Hang Seng index in Hong Kong increased 452.35 or 3.11% closed to 14,998.04.The ASX 200 index in Australia increased 21.00 or 0.56% closed to 3,756.60. The KL Composite index in Malaysia higher 16.76 or 1.85% closed to 923.77.The Markets of China were closed today.

The Kospi Index in South Korea increased 14.10 or 1.10% to close at 1,297.85.The JSE Index in Indonesia increased 16.28 or 1.09% closed to 1,516.64. The Sensex index in India increased 186.04 or 1.80% closed to 10,534.87. The Markets of Thailand were closed today.

Europe Markets Review

In London FTSE 100 Index traded higher 22.59 or 0.56% to 4,052.26, in Paris CAC 40 Index increased 23.68 or 0.80% to 2,982.42 and in Frankfurt DAX index traded higher 28.99 or 0.66% to 4,413.98. In Zurich trading SMI decreased 0.92 or 0.02% to 5,042.07.