NEW YORK - OIL futures fell on Thursday on growing concerns that a US economic slowdown is imminent and will depress demand.
Federal Reserve Chairman Ben Bernanke's comments that the central bank is ready to cut interest rates to help stave off a recession helped crude prices pare some of their losses, as did an attack on six oil industry ships by Nigerian rebels.
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| Jan 12, 2008 |  |
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US trade gaps widens in Nov on higher oil
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| WASHINGTON - The US trade deficit jumped in November to its highest level in 14 months as surging oil prices overpowered a ninth consecutive month of record exports, the Commerce Department said on Friday.
The trade gap widened 9.3 percent to $63.1 billion (S$90.5 billion), the largest month-to-month gain in more than two years. The trade data added to pessimism about the US economy, which many analysts believe is teetering on the edge of recession because of a severe housing market downturn. 'It's negative for fourth-quarter GDP, pushing us back below the 1 per cent level,' David Wyss, chief economist at Standard and Poor's Rating Services in New York. Federal Reserve Chairman Ben Bernanke on Thursday all but guaranteed the Fed would cut interest rates later this month, saying it stood ready to take 'substantive additional action to support growth.' The wider-than-expected deficit dragged the dollar lower against the yen, although traders remained focused on developments in the financial sector. US stocks fell on fears that mounting credit card defaults at companies such as American Express Co herald a slowdown in consumer spending, increasing the likelihood of recession. The Dow Jones industrial average fell nearly 2 percent. Government bond prices rose. Oil drives deficit higher Average prices for imported oil surged nearly 10 percent to a record $79.65 per barrel in November, lifting petroleum imports to a record $34.4 billion. Oil prices were up nearly 53 percent from November 2006. A Labour Department report on Friday showed petroleum import prices dropped 0.6 per cent in December, their first decline since August. However, oil prices topped $100 per barrel last week, a sign of future pressure on the trade gap. Although total imports of goods and services increased 3 percent in November to a record $205.4 billion, oil prices were mostly to blame for the spike in the deficit, US Commerce Secretary Carlos Gutierrez said in an interview. 'It took us off the trend we were on,' he said, acknowledging trade may not contribute as much to fourth-quarter US economic growth as it has in previous quarters. 'That's another reason we need to open up more markets,' Mr Gutierrez said, making a pitch for congressional approval of free trade pacts with Colombia, South Korea and Panama. Despite worse-than-expected December retail sales, Gutierrez said he remained hopeful December figures would show overall consumer spending remained strong. 'We're still expecting consumer spending to add to GDP growth in the fourth quarter,' he said. SpendingPulse, the retail data service of MasterCard Advisors, an arm of MasterCard Worldwide , said on Friday retail sales were flat in December despite hefty discounts and other incentives to entice shoppers to spend more on the holidays. 'Failed trade policy' Senator Sherrod Brown, an Ohio Democrat, said the data made a more compelling case for legislation to combat China's 'currency manipulation' and to help retrain workers who have lost their jobs because of imports or factories moving overseas. 'From failed trade policy to a weak dollar to dependence on foreign oil, today's report underscores just how abysmal current economic policies have been for middle class families,' he said. Imports from China slipped in November from the record set in October. But the year-to-date deficit with China totaled $237.5 billion through the end of the 11th month - topping the annual record of $232.6 billion set in 2006. US exports of goods and services hit a record $142.3 billion in November, but grew only 0.4 per cent compared with about 1 per cent in the prior two months - suggesting a slowdown in foreign demand for US goods despite the cheap dollar. 'Four-tenths of an increase is not a wonderful number,' said Oscar Gonzalez, an economist at John Hancock Financial Services In Boston. 'But I think going forward, we are going to see more on the order of 1 per cent growth.' Strong exports have helped prop up the US economy as the housing sector has sagged. Exports rose more than 12 percent in the first 11 months of 2007, while imports increased only 5.6 per cent. The trade gap through the end of November totaled $650 billion, compared with $698 billion in the same period in 2006. -- REUTERS |
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| Jan 11, 2008 | |
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Wall Street hit by renewed concerns on banking, finance
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| NEW YORK - US SHARES skidded lower at the opening on Friday as a warning from financial group American Express about a weak economy offset the impact of deal to save troubled mortgage lender Countrywide.
The Dow Jones Industrial Average dropped 103.40 points (0.80 per cent) to 12,749.69 in the first exchanges, reversing course after a two-day rally. The tech-dominated Nasdaq composite shed 20.24 points (0.81 per cent) to 2,468.28 and the Standard & Poor's 500 broad-market index retreated 11.21 points (0.79 per cent) to 1,409.12. The market was mulling a warning from American Express late Thursday that 'it is seeing signs of a weaker US economy,' with higher credit card delinquencies, forcing the firm to set aside 440 million dollars (S$630.28 million) for write-offs. The warning overshadowed a deal announced early on Friday by Bank of America to buy Countrywide Financial in a four-billion-dollar stock swap that rescues the nation's largest mortgage lender from near-bankruptcy. Fred Dickson at DA Davidson & Co. said the market is worried that the worst is not over for the banking and financial sector, and that Citigroup and Merrill Lynch will announce deeper write-offs from mortgage losses. 'As seen in the American Express announcement today, consumers now are having trouble paying their credit cards on time,' he said. 'The buyout of Countrywide does solve one major problem in the troubled home lending market, but others remain. Our sense is that there will be more bailout mergers of severely troubled mortgage lenders before this is over.' -- AFP |
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Steep selloff on Wall Street
Stock market tumbles as investors mull AmEx profit warning and potential Merrill Lynch writedowns.
NEW YORK (CNNMoney.com) -- Stocks slumped Friday morning as investors eyed American Express's profit warning and talk that Merrill Lynch may have to writedown billions more from credit market woes.
The Dow Jones industrial average (INDU) lost around 1.4 percent in the early going. The broader S&P 500 (INX) index and the Nasdaq (COMPX) composite both gave up around 1 percent.
American Express (AXP, Fortune 500) said late Thursday that it expects lower profit through 2008 because of slower spending and missed credit card payments. Shares of AmEx, a Dow component, slumped 9 percent Friday morning in active trading.
Merrill Lynch (MER, Fortune 500) may have to writedown $15 billion in bad mortgage bets when it posts results next week, The New York Times reported. Analysts currently expect the financial behemoth to take a $12 billion writedown. The company is also apparently seeking to raise $4 billion in capital. Merrill shares rose modestly.
Next week brings earnings from Merrill and four other big banks, including Citigroup (C, Fortune 500), and results are expected to be pretty dismal amid the continued fallout from the credit and mortgage market crises. (Full story).
Bank of America (BAC, Fortune 500) said Friday that it was buying Countrywide Financial (CFC, Fortune 500) for $4 billion in stock, rescuing one of the hardest-hit lenders in the housing market fallout. Countrywide shares slumped 10 percent after rising more than 50 percent Thursday on market rumors about the deal. (Full story).
Stocks pulled out a last-hour rally Thursday after reports about a potential Bank of America-Countrywide deal first surfaced, in a rare up day in an otherwise miserable start to 2008.
Fears that the economy could be sliding into a recession have dragged on stocks so far this year. On Thursday, Federal Reserve Chairman Ben Bernanke said that the central bank does not think the economy is in a recession and that the Fed is willing to keep cutting rates to keep growth from slowing too rapidly.
In other news, the government said Friday that the November trade gap swelled to its highest level in 14 months, due to record oil imports.
Treasury prices rose, lowering the yield on the 10-year note to 3.84 percent from 3.88 percent late Thursday. Treasury prices and yields move in opposite directions.
In currency trading, the dollar fell versus the yen and inched higher versus the euro.
U.S. light crude oil for February delivery fell 61 cents to $93.10 a barrel on the New York Mercantile Exchange.
COMEX gold for February delivery slipped $1.30 to $892.30 an ounce.
Capital One slashes profit outlook
Credit card issuer says it won't meet its 2007 forecast because of a rise in loan delinquencies and weakening economy.
McLEAN, Va. (AP) -- Capital One Financial Corp. said Thursday that its 2007 earnings will fall short of its previous expectations because of increased loan delinquencies and additional legal reserves in the fourth quarter.
The news from the McLean, Va.-based credit card company is the latest sign of turmoil in the nation's credit markets, and confirmed fears by some analysts that the collapse of the subprime mortgage market has hurt other credit classes.
It also renewed jitters that slowing economic growth may hurt upcoming corporate earnings reports more than previously thought.
It also drove Capital One (COF, Fortune 500) shares down almost 8 percent in premarket trading, where they fell $3.45 to $39.90, which would be below their previous 52-week low of $41.23.
Capital One, a credit card issuer that continues to expand into retail banking, issued a statement just after midnight saying it expects to report fourth-quarter profit of 60 cents per share and full-year earnings of about $3.97 per share, below its prior forecast of "about $5 per share."
The company said it is taking a $1.9 billion provision for loan losses in the fourth quarter, including about $1.3 billion in charge-offs. It is also adding about $650 million to its charge-off allowance because of recent delinquencies in its consumer lending businesses and "continued deterioration" of approximately $700 million of home equity lines of credit originated by its GreenPoint Mortgage unit, which shut down in August.
The company said it now expects charge-offs of about $5.9 billion in 2008 amid expectations that the U.S. economy will be weaker. That's up from the $4.9 billion to $5.5 billion Capital One predicted in November.
The warning comes on the heels of Countrywide Financial Corp.'s (CFC, Fortune 500) disclosure Wednesday that the percentage of borrowers who missed payments on home loans last month rose. The nation's biggest mortgage lender said some 6.96 percent of the loans in its servicing portfolio were delinquent last month, up from 5.02 percent in December 2006.
In its announcement Thursday, Capital One said it had initiated a $60 million legal reserve for possible damages in pending litigation involving the Visa credit card network, of which Capital One is a member. The company previously said it was taking a fourth-quarter pre-tax charge of about $80 million for liabilities in connection with the antitrust settlement that Visa reached in November in American Express Co. (AXP, Fortune 500)
Capital One is scheduled to report fourth-quarter results Jan. 23.
Countrywide rescue: $4 billion
In widely expected move, Bank of America steps in to buy one of the lenders hardest hit by the mortgage crisis.
NEW YORK (CNNMoney.com) -- Bank of America came to the rescue of embattled mortgage lender Countrywide Financial Corp. Friday, saying it would buy the company for $4 billion in an all-stock transaction.
Countrywide (CFC, Fortune 500) shares tumbled 11 percent in pre-market trading, while Bank of America (BAC, Fortune 500) rose 1.5 percent. Countrywide had gained 51 percent in regular trading the previous session on speculation of the deal.
Countrywide Chairman and CEO Angelo Mozilo said the sale to Bank of America was the right move as his company has endured ongoing fallout from the housing slump.
"We believe this is the right decision for our shareholders, customers and employees," Mozilo said in a statement.
The deal would extend Bank of America's reach in the mortgage business by making it the nation's largest lender.
Bank of America Chairman and CEO Kenneth Lewis suggested he was aware of the troubles that his firm was taking on, but said acquiring Countrywide was a "rare opportunity" for his company.
"Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price and to affirm our position as the nation's premier lender to consumers," Lewis said in a statement.
Under the terms of the deal, shareholders of the Calabasas, Calif.-based Countrywide would receive 0.1822 of a share of Bank of America stock in exchange for each share of Countrywide. Based on where Bank of America's stock closed Thursday, the deal is valued at $4 billion, a 7.6 percent discount to Countrywide's closing price.
Bank of America said it expects to generate $670 million in after-tax savings as a result of the deal.
The companies, however, gave no indication about what kind of management changes might occur, including whether Mozilo would continue to serve in the combined firm.
The firms said they do not plan to remain in subprime lending - the business of giving home loans to borrowers with weak credit - and said they would continue to work to keep troubled borrowers in their homes.
Last last summer, the pair struck a deal in which Bank of America would provide $2 billion in financing to Countrywide in exchange for a 16 percent stake in the company.
Talk of Bank of America buying the mortgage lender outright escalated earlier this week amid growing speculation that the firm was on the brink of bankruptcy.
Countrywide reported rising delinquencies and foreclosures within its loan portfolio in December but denied rumors of a collapse.
Last year, Countrywide did $408 billion in mortgage originations and serviced about 9 million loans worth $1.5 trillion.
Merrill may write down $15 billion
Broker expected to take staggering loss on bad mortgage bets when it posts results next week, paper reports.
NEW YORK (CNNMoney.com) -- Merrill Lynch is expected to report a bigger-than-expected $15 billion writedown when it reports quarterly results next week, according to a report in The New York Times.
The hit is bigger than the $12 billion writedown many Wall Street analysts are expecting, the report said.
Merrill is expected to post a steep fourth-quarter loss when it posts results next Thursday, due largely to bad bets made on mortgage investments.
As a result of the deep loss, the nation's largest broker is looking to raise additional capital from an outside investor, the newspaper said, citing people who had been briefed on the matter.
Sources told the Times that the company was in talks with overseas investors in Asia and the Middle East as well as American private equity firms in an effort to raise $4 billion.
This would not be the first time Merrill looked to outside investors for help. In December the company announced it had received at least $4.4 billion from Singapore's state-run Temasek Holdings.
Merrill Lynch (MER, Fortune 500) shares finished 3 percent higher in Thursday trade on the New York Stock Exchange.
BofA to buy Countrywide for $4B
In much-anticipated move, Bank of America rescues lender battered by the mortgage crisis.
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| After much speculation, Bank of America said it would acquire Countrywide in an all-stock deal worth $4 billion. |
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| With James Cayne being shown the door at Bear Stearns, Fortune's Andy Serwer looks at who is left. |
NEW YORK (CNNMoney.com) -- Bank of America came to the rescue Friday of embattled mortgage lender Countrywide Financial Corp., saying it would buy the company for $4 billion in an all-stock transaction.
Wall Street, which embraced speculation about such a deal just a day earlier, was not encouraged about the news as Countrywide (CFC, Fortune 500) shares tumbled 13 percent in pre-market trading.
Countrywide Chairman and CEO Angelo Mozilo said the sale of his company to Bank of America was the right move as his company has endured ongoing woes related to the housing market.
"We believe this is the right decision for our shareholders, customers and employees," Mozilo said in a prepared statement.
The deal, which is expected to be completed in the second half of 2008, would make Bank of the America the nation's largest mortgage lender,
Under the terms of the deal, shareholders of the Calabasas, Calif.-based Countrywide would receive 0.1822 of a share of Bank of America (BAC, Fortune 500) stock in exchange for each share of Countrywide.
Bank of America added that it expects to generate $670 million in after-tax savings as a result of the deal.
The companies, however, gave no indication about what kind of management changes that might occur, including whether Mozilo would continue to serve in the combined firm.
Last last summer, the pair struck a deal in which Bank of America would provide $2 billion in financing to Countrywide in exchange for a 16 percent stake in the company.
But Countrywide has experienced mounting woes recently, reporting rising delinquencies and foreclosures within its loan portfolio in December. Speculation also surfaced earlier this week that Countrywide was planning to file for bankruptcy itself. Countrywide later denied that rumor.
With Countrywide's shares hit hard, there had been talk about Bank of America buying the mortgage lender outright, although such a move could prove treacherous because of Countrywide's troubled loan portfolio.
Last year, Countrywide did $408 billion in mortgage originations and serviced about 9 million loans worth $1.5 trillion.
Bank of America Chairman and CEO Kenneth Lewis suggested that he was aware of the troubles that his firm was taking on, but said acquiring Countrywide was a "rare opportunity" for his company.
"Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price and to affirm our position as the nation's premier lender to consumers," Lewis said in a statement.
| Jan 11, 2008 | |
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Growth slows in major developing countries: OECD
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| PARIS - MOST of the world's leading industrialised nations are facing an economic slowdown while China, Russia and Brazil are expected to see improved or continued growth, the OECD said on Friday.
The Organisation for Economic Cooperation and Development said its leading indicators index fell by 0.5 points in November last year and was 2.2 points lower than November 2006. The indicators, it added, 'suggest that a moderate slowdown in economic activity lies ahead in the OECD area'. The OECD groups 30 of the world's most influential economies, including the Group of Seven - Britain, Canada, France, Germany, Italy, Japan and the United States. The organisation said that while the United States, Germany and Britain were not headed for a slowdown their indicators had nonetheless turned weaker, albeit remaining above the 100 level in the index. A declining reading below 100 signals a slowdown. Data from non-OECD members China and Brazil pointed to 'steady expansion,' according to the OECD, which foresaw an 'improved outlook' in Russia and weakening prospects in India. The economic activity index fell by 0.8 points in November and 1.5 points on the year in the United States, 0.3 points in November and 2.3 points on the year in the eurozone and 0.2 points in November and 6.3 points on the year in Japan. The index for China rose 0.2 points in November and was up 2.3 points compared with November 2006. For Russia the index fell 0.4 points in November but was 0.9 points stronger than the same month the previous year. The index for India rose 0.9 points in October 2007 but was 0.4 points lower than October 2006. It gained 1.0 point in Brazil in November and was 6.3 points up on November 2006. -- AFP |
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| Jan 11, 2008 | |
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Emirates Airlines denies interest in BA stake
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| BC-BRITISH AIRWAYS-EMIRATES/ (URGENT)LONDON, Jan 11 (Reuters) - Emirates airline is not planning to buy a stake in rival British Airways , a spokesman said on Friday, denying rumours that pushed BA shares as much as 6 per cent higher.
'Emirates has no interest in taking a stake in BA and is concentrating on organic growth,' said a spokesman in London. BA shares were up 4 per cent at 278.75 pence at 1059 GMT. About 11.7 million shares had earlier changed hands, equalling the average volume for a full day's trade in the last 30 days. -- REUTERS |
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Northern Rock sells assets to JP Morgan for 2.25 billion pounds
AFP - 1 hour 4 minutes ago
The troubled lender, which has been mired in a funding crisis since September, said it would use the cash towards repaying its emergency central bank loan.
"The proceeds from the sale are payable in cash and will be applied by the company to reduce its current funding from the Bank of England," Northern Rock said in a statement. The sale completes on Friday.
Group chief executive Andy Kuipers said the deal was a "positive development," adding that the premium paid by JP Morgan "illustrates the quality of our assets."
The news marks the first major disposal by Northern Rock since it was forced to seek emergency support from the Bank of England as a result of the global credit crunch in September.
That prompted thousands of worried investors to queue at branches of the mortgage lender to withdraw their savings, with a subsequent knock-on effect on consumer confidence in the banking sector.
Thus far, Northern Rock has borrowed an estimated 25 billion pounds (33 billion euros, 49 billion dollars) of British taxpayers' money at a penal rate from the BoE.
LONDON (AFP) - - Stricken British bank Northern Rock said Friday it had sold part of its mortgage book to US investment bank JP Morgan for 2.25 billion pounds (4.39 billion euros, 2.97 billion dollars) in cash.
The troubled lender, which has been mired in a funding crisis since September, said it would use the cash towards repaying its emergency central bank loan.
"The proceeds from the sale are payable in cash and will be applied by the company to reduce its current funding from the Bank of England," Northern Rock said in a statement. The sale completes on Friday.
Group chief executive Andy Kuipers said the deal was a "positive development," adding that the premium paid by JP Morgan "illustrates the quality of our assets."
The news marks the first major disposal by Northern Rock since it was forced to seek emergency support from the Bank of England as a result of the global credit crunch in September.
That prompted thousands of worried investors to queue at branches of the mortgage lender to withdraw their savings, with a subsequent knock-on effect on consumer confidence in the banking sector.
Thus far, Northern Rock has borrowed an estimated 25 billion pounds (33 billion euros, 49 billion dollars) of British taxpayers' money at a penal rate from the BoE.
| Jan 11, 2008 | |
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Nikkei at 27-month closing low on Merrill, economy
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TOKYO Japan's Nikkei fell on Friday to its lowest close since November 2005, pushed down by fears about the Japanese economy and a report that Merrill Lynch will post larger than expected losses on the subprime mortgage crisis. Retailers and property shares tumbled, with Tokyu Land Corp down 7.6 per cent, helping to make the real estate subindex the worst performer on the day. The Nikkei fell 2 per cent just before the close to touch an intraday low of 14,096.54. It finished down 1.93 per cent, its lowest close in 27 months, shedding 277.32 points. The broader Topix was down 1.70 percent at 1,377.58. SHANGHAI Most Chinese shares fell on Friday, but the main index was lifted by a strong performance from banking and airline stocks. The Shanghai Composite Index rose 0.26 per cent to 5,470.698 points at midday, although losers far outnumbered gainers, 619 to 239. KUALA LUMPUR The Kuala Lumpur Composite Index (KLCI) rose 207.19 points to 9,904.43 at midday. HONG KONG Hong Kong share prices finished the morning session little changed on Friday, as property stocks turned mixed after an early rebound driven by hopes of US interest rate cuts, dealers said. The Hang Seng index ended the morning up 27.40 points or 0.10 per cent at 27,258.26, off a low of 27,153.50 and a high of 27,593.70. -- REUTERS, AFP |
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| Jan 11, 2008 | |
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Oil prices fall on US economic worries
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| NEW YORK - OIL futures fell on Thursday on growing concerns that a US economic slowdown is imminent and will depress demand.
Federal Reserve Chairman Ben Bernanke's comments that the central bank is ready to cut interest rates to help stave off a recession helped crude prices pare some of their losses, as did an attack on six oil industry ships by Nigerian rebels. But prices stayed in negative territory after a tepid unemployment claims report and weak holiday sales at many large retailers, data that compounded the market's growing fears of an economic downturn. An Energy Information Administration report that demand for crude oil and petroleum products fell last week for the third week in a row contributed to the price declines. 'Without US demand and without stronger economic growth, crude oil can't stay in the US$90s (S$100s),' said Mr James Cordier, president of Liberty Trading Group in Tampa, Florida. Light, sweet crude for February delivery fell US$1.96 (S$2.80) to settle at US$93.71 a barrel on the New York Mercantile Exchange, after dipping as low as US$93.30 earlier. Mr Bernanke's comments raised chances the Fed will cut rates by a half percentage point when it meets at the end of January. Lower rates tend to weaken the dollar, giving investors reason to buy oil. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling. Many analysts believe the weakening dollar helped draw speculative investors into oil markets this fall and winter, driving oil prices above US$100 a barrel last week. Separately, the Movement for the Emancipation of the Niger Delta (Mend), a group whose attacks have crippled oil production in Africa's top exporter, said it fired on oil ships on the Bonny River. The rebels provided no further details, but threatened further attacks that will cause an 'economic tsunami' in world oil markets. Last week, oil prices sold off sharply after a report showed employers created far fewer jobs last month than expected. -- AP |
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