Geithner Comments Lift U.S. Banks

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

U.S. Treasury Geithner comments on the health of banks suggested that banks have adequate capital for now. However, he also suggested that additional capital may be needed to restore confidence in the financial system which market ignored. India cuts rates and UK inflation falls.

5:00PM New York, 11:00PM Frankfurt, 8:00AM Sydney[R]– U.S. Treasury Geithner comments on the health of banks suggested that banks have adequate capital to weather the current crisis. However, he also suggested that additional capital may be needed to restore confidence in the financial system which market ignored.[/R]

Global Markets

Treasury Secretary Tim Geithner in a prepared testimony to the Congressional Oversight Panel suggested that banks have adequate capital to run their business and recently enacted TARP has $135 billion.

Market focused on the positive comments in the testimony and ignored the hard work ahead in his balanced testimony. The Treasury Secretary estimated that at least $25 billion may be returned from the banks that participated in the TARP program.

He noted in his prepared remarks, “Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators.

However, concerns about economic conditions – combined with the destabilizing impact of distressed ""legacy assets"" – have created an environment under which uncertainty about the health of individual banks has sharply reduced lending across the financial system, working against economic recovery.

For every dollar that banks are short of the capital they need, they will be forced to shrink their lending by eight to twelve dollars.”

Earnings at several large companies impacted trading. Tenet Healthcare Corporation surged after it offered improved outlook for the year. Brown & Brown, Inc first quarter misses street views. The Western Union Company first quarter profit edges up. Merck & Company net falls 57% but net at Schering Plough surges. Coca Cola net falls 10%. Caterpillar reported a loss.

UK consumer prices in March rise at a slower pace at 2.9% and retail price index declined in the month for the first time in five decades. The rising unemployment and fall in energy prices led to the decline in price increase growth rate. Tesco reported 15% increase in sales.

Stocks in Japan fell after hopes of earnings recoveries were dashed, a fall in commodities prices and a decline in auto stocks. Toyota led the decline in auto and parts makers stocks after production is likely to fall to 31-year low. JAL is likely to seek low interest loan of $2 billion.

China is expected to offer large stimulus package in the second quarter. Domestic earnings in the property and logistics sector drove market indexes lower. Higher bad debt provisions at Bank of America in the U.S. dragged domestic bank stocks lower.

In India, in a surprise move, the Reserve Bank of India lowered its short term lending rate and also trimmed the growth outlook for fiscal year ending in March 2009 and 2010. Rupee edged lower against dollar and euro on weaker economic growth outlook and stocks declined.

Stocks in Australia declined after the Reserve Bank governor Stevens indicated that the country is in a recession. But the country is prepared to weather the downturn better than most other countries. The direct admission of the economic health put investors on guard. A rise in gold prices lifted gold miners.

North American Markets

Dow Jones Industrial Average increased 127.83 or 1.63% to a close of 7,969.56, S&P 500 Index added 17.70 or 2.1% to 850.09, and Nasdaq Composite Index gained 35.64 or 2.2% to close at 1,643.85.

Of the stocks in S&P 500 index, 379 increased, 129 declined and 1 was unchanged.

Zions Bancorp led decliners in the S&P 500 index with a loss of 19.4% followed by losses in New York Times of 18%, in KeyCorp of 8.3%, in Apollo Group of 7.3%, in Apollo Group of 7.3% and in Broadcom Corp of 19.8%.

Tenet Healthcare led gainers in the S&P 500 index with a surge of 42% followed by gains in Qlogic Corp of 18%, in US Bancorp of 16.4%, in State Street Corp of 16.3%, in Coach Inc of 15.9% and in Aflac Inc of 14%.

South American Markets Indexes

Mexico Bolsa Index decreased 370.55 or 1.7% to 21,216.94. In Monday’s trading, Brazil Bovespa Stock Index declined 1,345.13 or 2.9% to 44,433.15.

Argentina Merval Index added 2.30%, Chile Stock Market Select index added 0.9% and Peru Lima General Index increased 0.2%. Colombia IGBC General Index edged up 0.06% and Venezuela Stock Market Index was unchanged.

Europe Markets Review

In London FTSE 100 Index closed lower 3.40 or 0.09% to 3,987.46, in Paris CAC 40 Index increased 4.54 or 0.15% to close at 2,973.94 and in Frankfurt DAX index higher 15.33 or 0.34% to close at 4,501.63. In Zurich trading SMI increased 11.54 or 0.23% to close at 5,076.72.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 213.42 or 2.39% to 8,711.33, Hang Seng index in Hong Kong decreased 465.02 or 2.95% closed to 15,285.89, CSI 300 index in China lower 32.22 or 1.19% closed to 2,675.44. ASX 200 index in Australia decreased 91.60 or 2.43% closed to 3,677.40. The KL Composite index in Malaysia lower 1.77 or 0.18% closed to 966.60.

The Kospi Index in South Korea increased 0.42 or 0.03% to close at 1,336.81 SET index in Thailand closed higher 0.10 or 0.02% to 466.38 and JSE Index in Indonesia decreased 33.00 or 1.99% closed to 1,628.85. The Sensex index in India decreased 81.39 or 0.74% closed to 10,898.11.

Commodities, Metals, and Currencies

Crude oil increased $0.63 to close at $46.51 a barrel for a front month contract, natural gas decreased 2 cent to $3.51 per mBtu and gasoline futures increased 0.42 cents to close at 141.61 cents per gallon.

Wheat futures closed up 4.50 cents in Chicago trading and closed at $5.2075 a bushel. Sugar increased 0.11 cent in trading at 13.43 cents a pound. Soybean future closed up 21.50 cent to $10.33 a bushel.

Gold decreased $4.00 in New York trading to close at $883.50 per ounce, silver closed down $0.13 to $11.97 per ounce and copper for the front month delivery decreased 2.85 cents to $2.0785 per pound.

Dollar edged lower against euro to $1.2936 and edged higher against yen to 98.73.

Yields on 10-year U.S. bonds increased to 2.90% and with 30-year maturities closed up at 3.74%.