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Pension : Wall Street News.

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12-Jan-2008 11:54

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Jan 12, 2008
US trade gaps widens in Nov on higher oil
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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12-Jan-2008 11:52

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Jan 12, 2008
Citi may get investments from Saudi Prince, China Development Bank
NEW YORK - SAUDI Prince Alwaleed bin Talal, the Citigroup shareholder who came to the bank's rescue during the credit crisis of the early 1990s, might do so again now, The Wall Street Journal reported on its website on Friday, citing people familiar with the matter. The billionaire from Saudi Arabia, along with China Development Bank, is expected to invest about $2 billion (S$2.87 billion) in Citigroup, one person said, according to the Journal. The Journal also said, however, there is a chance the deal could fall apart. Asian funds have been buying up the pummeled shares of US banks in need of capital. The deals not only dilute the value of the stock, but also worry some investors who are wary about foreign ownership of US companies. The cash-strapped Citigroup, hurt by the mortgage crisis that boiled up last year, has already gotten $7.5 billion from the Abu Dhabi Investment Authority. On Nov 26, the ADIA bought a 4.9 per cent stake in Citi, becoming its largest shareholder. Alwaleed may take back that title if he makes another investment in Citi, though the report said his total stake is likely to remain below 5 per cent to avoid regulatory scrutiny. Citigroup spokesman Michael Hanretta declined to comment to The Associated Press about the report. China Development Bank, which was established in 1994 and is now preparing to become a commercial lender, got a $20 billion injection Dec 31 from China's sovereign wealth fund, China Investment Corp. In recent months, China Investment Corp. said it is investing $5 billion in Morgan Stanley; Singapore's state-run Temasek Holdings invested $4.4 billion in Merrill Lynch; and China's government-controlled Citic Securities Co. and US investment bank Bear Stearns Cos. agreed to invest $1 billion in each other for minority stakes that could be expanded. -- AP

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12-Jan-2008 00:17

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Jan 11, 2008
Wall Street hit by renewed concerns on banking, finance
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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11-Jan-2008 23:44

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Steep selloff on Wall Street

Stock market tumbles as investors mull AmEx profit warning and potential Merrill Lynch writedowns.

January 11 2008: 10:13 AM EST

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.

Merrill may writedown $15 billion

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.

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11-Jan-2008 23:41

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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.

January 10 2008: 9:29 AM EST

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.

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11-Jan-2008 23:36

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if it test 12500, then sti will test 3200.

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11-Jan-2008 23:32

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could be testing 12500 again..

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11-Jan-2008 22:56

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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.

January 11 2008: 9:03 AM EST

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.

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11-Jan-2008 22:54

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Ugly start for stocks

U.S. markets tumble at the start on talk of Merrill writedown, disappointment in Countrywide buyout details.

January 11 2008: 9:38 AM EST

NEW YORK (CNNMoney.com) -- Concerns about financial sector earnings and the details of the Bank of America-Countrywide Financial deal helped send stocks lower at Friday's open.

The Dow Jones industrial average, the Nasdaq composite index and the Standard & Poor's 500 index fell by about 1 percent..

Bank of America announced it would purchase embattled mortgage lender Countrywide Financial for $4 billion in an all-stock transaction.

Countrywide (CFC, Fortune 500) shares fell 13 percent in pre-market trading on the news after surging 51 percent in trading on Thursday. Bank of America (BAC, Fortune 500) stock fell about 3 percent in pre-market trading.

Investors were haunted by the prospect that bank losses stemming from bad mortgage bets may be even deeper than originally thought.

The New York Times reported that Merrill Lynch (MER, Fortune 500) is expected to take a $15 billion hit when it reports results next Wednesday, nearly twice its earlier estimate.

Merrill, Citigroup (C, Fortune 500) and JP Morgan Chase (JPM, Fortune 500) are all due to report quarterly results next week.

Talk of the massive writedown appeared to dim the optimism that lifted stocks on Wall Street Thursday

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11-Jan-2008 21:51

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Merrill may write down $15 billion

Broker expected to take staggering loss on bad mortgage bets when it posts results next week, paper reports.

January 11 2008: 8:36 AM EST

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.

Countrywide stock soars on BofA sale talk

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11-Jan-2008 21:46

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BofA to buy Countrywide for $4B

In much-anticipated move, Bank of America rescues lender battered by the mortgage crisis.

By David Ellis, CNNMoney.com staff writer

January 11 2008: 8:08 AM EST

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.

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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.

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11-Jan-2008 20:58

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Jan 11, 2008
Rolls-Royce to cut up to 2,300 jobs worldwide: company
LONDON - ENGINE manufacturer Rolls-Royce Group plc is to cut up to 2,300 jobs in Britain, Europe and the United States in a bid to trim costs, the company said on Friday. The projected job losses, among managerial, professional and clerical staff, would be by voluntary redundancy where possible and were 'with a view to improving productivity,' the company said in a statement to the London Stock Exchange. No exact breakdown of where jobs would be cut was given. The firm said the decision was taken because of the weak US dollar and rising cost of raw materials. Rolls-Royce chief operating officer Mike Terrett said: 'We are determined to create a leaner and more agile support structure, better suited to the global markets in which we operate. 'The investments we have already made in new management systems will help us deliver this simplified organisation. Rolls-Royce will continue to focus on ongoing cost reduction and productivity improvements as the business grows. ' The restructuring would have no impact on the group's financial performance in 2007. Instead, costs would be balanced by savings achieved over 2008, it added. Rolls-Royce provides engines to the civil and defence aerospace, marine and energy sectors. At the end of November last year, it employed 39,500 people in 50 countries. Of those, 23,300 were in Britain, 8,300 in North America, 2,300 in Germany, 3,400 in Scandinavia and about 680 in Asia. -- AFP

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11-Jan-2008 20:56

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Jan 11, 2008
Growth slows in major developing countries: OECD
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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11-Jan-2008 20:34

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Jan 11, 2008

US consumer confidence sinks to record low

WASHINGTON - US CONSUMER confidence fell to an all-time low as worries about jobs, energy bills and home foreclosures darkened people's feelings about the country's economic health and their own financial well-being.

According to the RBC Cash Index, confidence tumbled to a mark of 56.3 in early January. That compares with a reading of 65.9 in December - and a benchmark of 100 - and was the worst since the index began in 2002.

'People are anxious because everything sounds pretty awful these days,' said Bill Cheney, chief economist at John Hancock Financial Services Group.

Economists cited several factors for the gloomy mind-set of consumers.

Hiring practically stalled in December, pushing the unemployment rate to 5 percent, a two-year high, the government reported last week.

-The meltdown in the housing market has dragged down home values and made people feel less wealthy.

Harder-to-get credit has made it difficult for some to make big-ticket purchases. High energy prices are squeezing wallets and pocketbooks.

There has been much hand-ringing on Wall Street and Main Street as to whether all these problems will plunge the country into recession.

'Consumers are gloomy. The confidence reading suggests that people believe bad times are upon us,' said Mr Richard Yamarone, economist at Argus Research.

Over the past year, consumer confidence has eroded sharply as housing and credit woes took their toll.

Last January, confidence stood at a solid 95.3. The index is based on the results of the international polling firm Ipsos.

The White House is exploring a rescue plan, possibly including a tax cut, to aid the ailing economy.

Federal Reserve Chairman Ben Bernanke, criticised for not doing enough, pledged on Thursday to keep lowering interest rates. They are expected to drop by as much as one-half of a percentage point when central bank policymakers meet later this month.

The public is giving President George W. Bush low marks for his economic stewardship.

His approval rating on the economy dipped slightly to 33 per cent in January, from 36 percent in December, according to a separate Associated Press-Ipsos poll. His overall job-approval rating was 34 per cent, compared with 36 per cent last month.

Individuals' sentiments about the economy and their own financial fortunes over the next six months actually fell into negative territory in early January.

This gauge came in at a negative 8.2 per cent. That was the weakest showing since right after the Gulf Coast hurricanes in August 2005.

Another measure looking at current economic conditions dropped to 78.9 in January. That was the lowest reading since early March 2003, when US troops invaded Iraq.

Oil prices recently surged past $100 a barrel, though the price has moderated somewhat. Gasoline has topped $3 a gallon.

Those high energy costs for fueling cars and heating homes are leaving people with less money to spend elsewhere, analysts say.

In turn, prices for some other goods and services have risen.

Economists keep close tabs on confidence barometers for clues about people's willingness to spend.

A gauge of attitudes about investing, including comfort in making major purchases, dipped to 76.3 in January. That was the lowest since May 2005.

The housing slump, weaker home values, harder-to-get credit and high energy prices all 'seem likely to weigh on consumer spending as we move into 2008,' Mr Bernanke said on Thursday.

Many economists believe upcoming reports will show the economy grew at a feeble pace of just 1.5 per cent or less in the final three months of last year and will be weak in the first three months of this year.

Major retailers reported weak sales for December.

Another index tracking consumers' feelings about employment conditions fell to 106.9 in January, a two-year low.

Government and private employers last month added the fewest new jobs to their payrolls in more than four years. In fact, employment at private companies alone actually declined.

The jobless rate climbed to 5 per cent in December, from 4.7 per cent. The Labor Department's report, issued last week, stoked fears about a recession.

The RBC consumer confidence index was based on responses from 1,027 adults surveyed Monday through Wednesday about their attitudes on personal finance and the economy.

The survey was taken after the employment report but before Bernanke's comments on Thursday signalling additional rate cuts. -- AP

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11-Jan-2008 20:33

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Jan 11, 2008
UBS in shareholder plea as subprime fallout weighs
ZURICH - UBS AG said it cannot predict the final impact of the subprime crisis but that a new capital injection would strengthen its position as it called on shareholders to support its emergency capital hike. UBS's made the appeal in letter to shareholders released on Friday, and it comes after the New York Times reported Merrill Lynch is expected to suffer $15 billion (S$2145 billion) inlosses stemming from soured mortgage investments. The Swiss bank is braced for what looks set to be a stormy shareholder meeting on Feb 27 when it will seek approval for a capital increase, resulting in the sale of a 9 per cent stake to the Singapore government and around 1.5 per cent to an unidentified Middle East investor. UBS said it had decided against undertaking a rights issue to raise capital on the grounds of cost, complication and time. 'During 2008, the environment for financial markets, especially in the US, is uncertain, and we need to manage through this period from a position of financial strength,' the bank said in a letter to shareholders, dated Jan 10 and released to media on Friday. Shares in the bank were indicated to open some 0.4 per cent higher. UBS has been one of the biggest casualties of the collapse in the US subprime mortgage market, which resulted in billions of dollars in writedowns by banks in the value of their securities portfolios. In December, UBS announced a new $10 billion writedown on its subprime-related exposures, which came on top of an earlier charge of $4.4 billion on UBS's risky subprime exposures. 'We cannot, at this time, accurately predict the future development of US residential mortgage markets and therefore the ultimate impact on our positions in sub-prime mortgage related securities,' the letter said. Shot across the bow Analysts at bank Wegelin said the letter was a likely 'shot across the bow of those who wish to put up resistance to the capital-raising measures'. Landsbanki Kepler analyst Dirk Becker said the UBS letter was likely an attempt to explain matters to shareholders and not an attempt to send a new message. 'They are saying that if there are further declines they won't need further capital and this is reassuring. But you would expect this in such a letter,' Mr Becker said. 'We should not read anything into this. The next message will be on Feb 14 when UBS posts its results,' he said. Last month, the Government of Singapore Investment Corporation (GIC) and a Middle East investor pumped 13 billion Swiss francs (S$16.7 billion) of fresh capital into UBS by agreeing to subscribe to a mandatory convertible bond. UBS said it was confident its capital position would now remain strong even if the US housing market continued to deteriorate. In December, shareholder advocacy group Ethos urged more clarity from UBS over its subprime losses and said it would call for an independent probe if UBS's answers to a list of questions it has put to the bank were unsatisfactory. -- REUTERS

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11-Jan-2008 20:31

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Jan 11, 2008
Emirates Airlines denies interest in BA stake
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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11-Jan-2008 20:28

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Northern Rock sells assets to JP Morgan for 2.25 billion pounds

AFP - 1 hour 4 minutes ago

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.

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11-Jan-2008 17:06

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Li Ka-Shing Rushes Into China Where Bond Angels Fear‏

Jan. 9 (Bloomberg) -- The bond market is telling Li Ka-shing, Asia's richest man, he's sitting on a Chinese property bubble that's bigger than the one deflating in the U.S.

Bonds of China's Agile Property Holdings Ltd. yield 7.17 percentage points more than U.S. Treasuries, double the premium in July and 1.79 percentage points more than the debt of Los Angeles-based KB Home, which has the same credit ratings. Agile, a housing developer in the southern province of Guangdong, and Country Garden Holdings Co., China's most-profitable builder, canceled debt sales in November when borrowing costs climbed.

As China's government attempts to cool property prices with limits on lending, developers are in a land grab. Li, who made his fortune in Hong Kong real estate, Chinese billionaire Xu Rongmao, who owns Shimao Property Holdings Ltd., and hundreds of local developers boosted investment 29 percent in the first eight months of 2007, the National Bureau of Statistics said.

``If the government decides to impose further restrictions, most if not all of the developers will go bankrupt, depending on the severity of the restrictions,'' said Eugene Kim, chief investment officer of Hong Kong-based Tribridge Investment Partners Ltd., a $200 million hedge fund. ``That makes us very selective in terms of which bonds we buy and the spreads we require to compensate for risk.''

Kim said he has trades set up that would profit from a decline in prices. New York-based Merrill Lynch & Co., the world's biggest brokerage, rates China property companies ``underweight,'' meaning investors should own a smaller percentage of the debt than contained in benchmark indexes.

Home Prices

Home prices in Shenzhen, a city north of Hong Kong, were 18.6 percent higher in November than a year earlier, according to a National Development and Reform Commission survey. They rose 14.9 percent in the capital city of Beijing and 16.4 percent in Beihai, in Guangxi province.

The People's Bank of China last month raised its benchmark one-year lending rate to a nine-year high and increased reserve requirements to the most since at least 1998. The government increased the minimum down payments on apartments to 40 percent from 30 percent in September.

Signs of a shift are already emerging. The nation's largest publicly traded developer, Shenzhen-based China Vanke Co., sold property worth 4.23 billion yuan ($582 million) in November, 18 percent less than in October.

Most Vulnerable

Chinese developers are among the most vulnerable of any group in Asia to downgrades because a slowdown in home sales would deplete cash, said Clara Lau, an analyst at Moody's Investors Service in Hong Kong.

``They have been growing aggressively, with the view that if they don't buy now, it will be more expensive for them later'' to acquire land, Lau said.

Standard & Poor's cut the credit ratings of Greentown China Holdings Ltd., the largest builder in Zhejiang province, one level to BB- on Dec. 3 due to ``increasingly aggressive land acquisitions.'' Its $400 million of 9 percent bonds yield 11.2 percent, up from 9.6 percent in November.

The risk of Shimao and Agile defaulting on their debt rose to a record today, credit-default swaps show. The cost of protecting the bonds of Shimao and Agile against default increased by as much as 80 basis points, the contracts' biggest rise, to 560 basis points and 650 basis points, respectively, at 5:13 p.m. in Hong Kong, according to BNP Paribas SA.

Higher Cost

Each basis point, or 0.01 percentage point, on a contract protecting $10 million of debt from default for five years adds $1,000 to the annual cost.

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

Bond sales by developers rated at least BB, or one to three levels below investment grade, may rise 10-fold to more than $15 billion, Todd Schubert, a Singapore-based credit analyst at Deutsche Bank AG, said in a Dec. 7 report. Developers issued $1.4 billion of dollar-denominated debt in 2007, compared with about $5.5 billion from their U.S. counterparts, according to data compiled by Bloomberg.

`Window of Opportunity'

``Each company knows that the window of opportunity is small and they want to be the one to fit through the window,'' Schubert said in the report.

Agile pulled a $400 million debt sale in November after its borrowing costs surged to a record. The spread on the company's $400 million of 9 percent debentures due September 2013 widened to 7.17 percentage points from 3.23 percentage points on July 2. That caused the value of the bonds to fall 10 percent.

The premium on $250 million of 5.75 percent notes maturing February 2014 by KB Home, the fifth-largest U.S. homebuilder, rose to 5.38 percentage points from 2.41 percentage points, representing a loss of 5.9 percent. Agile and KB are rated BB by S&P.

After reaching a peak of 1.389 million in July 2005, sales of new homes in the U.S. fell to an annual pace of 647,000 in November, a 12-year low, as discounts failed to lure buyers and mounting foreclosures swelled the glut of unsold properties, according to the Commerce Department.

Higher borrowing costs haven't stopped developers betting China's economy, which expanded 11.5 percent in the quarter ended September from a year earlier, will continue to support the housing market.

`Huge' Demand

``Demand in China is huge,'' said Met Luk, a deputy general manager of Agile. ``Together with improvement in the economy, a lot of people are looking for a better living environment.''

Agile said it will add at least 2 million square meters (21.5 million square feet) of land this year. Country Garden Holdings Co., based in Foshan, Guangdong, tripled its land for development to 51.9 million square meters between April and August, according to an Oct. 29 Moody's report.

Cheung Kong Holdings Ltd., the property company controlled by Li, added at least 3 million square meters in the first half of last year, more than triple the acquisitions in all of 2006, its annual report shows. Li hasn't relied on debt to fund purchases in China.

`Good Year'

``2008 will be a good year for investing in the property market in China,'' Justin Chiu, executive director of Cheung Kong, Hong Kong's second-biggest developer by market value, said in an e-mail.

China real estate investments by Cheung Kong and Hutchison Whampoa Ltd., Li's largest company, were at a ``historic high'' of more than HK$10 billion ($1.3 billion), and ``would rise,'' Li said in 2006. His net worth is estimated at $23 billion by Forbes magazine.

The 79-year-old has a history of overcoming long odds to succeed. Li closed an unprofitable U.K. mobile phone operator called Rabbit in 1993. He returned a year later to start Orange Plc, which he sold in 1999 at a $15 billion profit.

Developers such as Cheung Kong and Sun Hung Kai Properties Ltd., Hong Kong's biggest, ``have been relatively prudent,'' said Hugh Young, a managing director at Aberdeen Asset Management Asia Ltd. in Singapore who oversees $50 billion. ``I don't think they just close their eyes and plunge all their money in China.''

Too Optimistic

Bondholders, wary that developers are too optimistic, say what happened in the U.S. last year and Japan in the 1990s may be repeated in China.

More than 100 U.S. mortgage lenders were shuttered, scaled back or sold in 2007 as the rate of foreclosures rose to the highest on record and home sales tumbled, according to data compiled by Bloomberg. In 1998, the Japanese government had to put 13.4 trillion yen ($122 billion) into public works as the fallout from a real estate slump lingered.

In China, a housing slump may trigger more defaults because banking laws are still being written and a consumer credit rating system doesn't exist, said Yi Xianrong, a finance specialist at the government-backed Chinese Academy of Social Sciences research institute in Beijing.

China's National Audit Office said in June it uncovered irregularities involving 15.6 billion yuan of loans in the 2005 results of three of the nation's largest banks.

``We will not know how big this problem is as long as property prices continue to rise,'' Yi said.

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11-Jan-2008 15:17

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Jan 11, 2008
Nikkei at 27-month closing low on Merrill, economy
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
Oil prices fall on US economic worries
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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