The key benchmark indices extended losses in mid-morning trade on a
deteriorating global outlook as Japan joined the list of economies
in recession. The BSE 30-share Sensex was down 335.74 points, or
3.58%. Measures announced by the Reserve Bank of India (RBI) during
the weekend to shield the Indian economy from the global economic
slowdown and pledges from leaders of the Group of 20 nations to
stimulate growth and reform the financial system, failed to avert
the slide.
Japan slid into its first recession in seven years in the third
quarter as the financial crisis curbed demand for Japanese exports.
Despite the weak data, the the Nikkei rose 0.7% in a choppy trade,
with buying by pension funds lifting the market. Stocks elsewhere
were mixed. Key benchmark indices in Hong Kong, Singapore and China
were up by between 0.27% to 0.43%. Key benchmark indices in South
Koera, Taiwan fell by between 0.3% to 0.52%.
The G20 political leaders agreed Saturday, 15 November 2008, to a
host of fiscal and monetary steps to rescue the global economy but
it was left to individual governments to tailor their response to
their particular circumstances and troubled industries.
RBI on Saturday, 15 November 2008, announced measures to improve
money market liquidity and help exporters. The measures include
extension of a special repurchase facility to provide liquidity for
mutual funds and non-banking finance companies till March 2009,
increase in the limit on export credit refinance available to
banks, allowing housing finance companies to raise funds through
short-term overseas borrowings, reduction in provisioning on
standard assets of banks to a uniform level of 0.4%, and reduction
in risk weights for banks on commercial real estate and on unrated
claims on corporates.
The central bank also said it would consider proposals from local
firms to buy back foreign currency convertible bonds early.
At 11:33 IST, the BSE 30-share Sensex was down 335.74 points, or
3.58%, to 9,049.68. At the day's high of 9,435.89 hit in early
trade, the Sensex gained 50.47points. The Sensex fell 369.08 points
at the day's low of 9,016.34 in mid-morning trade.
The S&P CNX Nifty fell 100.15 points, or 3.56%, to 2,710.20.
The market breadth, indicating the overall health of the market,
was weak. On BSE, 407 shares rose as compared with 1607 that
declined. 51 shares remained unchanged.
Among the 30-member Sensex pack, all the stocks were in red.
India's largest private sector company by market capitalization and
oil refiner Reliance Industries (RIL) slipped 4.4% to Rs 1,098. The
government on Friday, 14 November 2008, said RIL cannot sell gas to
anybody at a price less than $4.20 per British Thermal Units
without its approving the pricing formula.
Sterlite Industries (down 8.93% to Rs 206.90), Reliance
Infrastructure (down 5.34% to Rs 489) and Hindalco Industries (down
4.95% to Rs 53.80) were the losers from the sensex pack.
PSU OMCs were mixed as crude oil prices fell. BPCL and HPCL rose
between 1.12% to 2.23%. Indian Oil Corporation fell 1.38%.
Realty shares dropped on concerns banks may not raise lending to
realty firms despite the latest Reserve Bank of India measures to
ease lending to the cash-stripped sector. Realty majors, Indiabulls
Real Estate, Parsvnath Developers, Unitech, DLF fell by between
4.94% to 8.52%.
RBI reduced risk weights for commercial real estate to 100% from
the earlier 150%. This measure is expected to encourage banks to
lend more to the fund-starved sector. In order to ensure more
liquidity for the real estate sector, RBI also allowed the
registered housing finance companies to raise short-term funds from
overseas markets.
Despite the measures, experts doubt whether banks will raise
lending to the realty sector given the severe slowdown and
increasing risk of non performing assets (NPAs).
Banking stocks extended losses as weak American Depository Receipts
(ADRs) offset Reserve Bank of India's steps to augment both rupee
and dollar liquidity in the banking system. India's largest private
sector bank by net profit ICICI Bank fell 7.72% as ADR lost 6.56%
on Friday, 14 November 2008. India's second largest private sector
bank by net profit HDFC Bank fell 6.98% as ADR slumped 6.39% on
Friday. India's largest commercial bank State Bank of India (SBI)
lost 2.77%.
IT stocks were down on weak ADRs and stronger rupee. India's third
largest IT exporter by sales Satyam Computer Services fell 3.8% as
its American depository receipt (ADR) fell 9.68% on Friday, 14
November 2008.
India's second largest IT exporter by sales Infosys slipped 3.23%,
as ADR fell 5.68%. India's fourth largest IT exporter by sales
Wipro lost 2.43% as ADR slipped 13.36%. India's largest IT exporter
by sales Tata Consultancy Services lost 1.87%.
The Indian rupee strengthened on Monday buoyed by the central
bank's measures to encourage foreign deposits, but gains were
capped as a fall in the stock market raised concerns of further
capital outflows. The partially convertible rupee was at 48.87/90
per dollar, 0.3% stronger than 49.01/03 at the close on Friday 14
November 2008. A stronger rupee impacts operating margins of IT
firms as they earn most of their revenue in dollar terms.
Cement stocks slipped even as the government announced incentive to
cement exports. ACC, Grasim Industries, Ultratech Cement, Birla
Corporation, Ambuja Cements fell between 1.59% to 3.56%.
According to a government notification, exporters of cement and
several steel items will be entitled for tax refunds through duty
entitlement pass book scheme. The government also announced that
the two sectors cement and steel have been included in the Focus
Market Scheme which will enable these distressed industries to
boost their exports to the third world.
India's largest engineering and construction firm by sales Larsen &
Toubro slipped 1.58% despite reports of the company in talks with
Antwerp Port Authority to establish a greenfield port in the west
coast of the country. The venture will initially invest Rs 2000
crore into the port.
Godrej Consumer Products rose 1.55% after a block deal of 17.20
lakh of equity shares was struck on the counter on BSE at Rs
116.50.
United Breweries moved up 5.15% after a block deal of 5.30 lakh of
equity shares was struck on the counter on BSE at Rs 93.
Godawari Power & Ispat was up 4.01% after the company said it will
re-consider a share buyback proposal that was approved on 27
October 2008.
Apollo Tyres gained 2.02% on reports it plans to invest Rs 3000
crore in the next five years for expansion.
Showing posts with label Market Crisis. Show all posts
Showing posts with label Market Crisis. Show all posts
Monday, November 17, 2008
Friday, October 31, 2008
Ugly October ends with an upbeat day on Wall St
U.S. stocks ended one of their worst months on record, but signs of further thawing in credit markets lifted battered shares on Friday.
Hammered by worries over the extent of the damage the credit crunch has inflicted on the global economy, the Dow Jones industrial average logged its biggest monthly decline in a decade, while the S&P 500 had its worst month since the October 1987 market crash.
Financial shares, led by a gain of almost 10 percent in JPMorgan Chase, lifted Wall Street as the interest rate that banks charge each other for short-term loans continued to ease.
The decrease in overnight interbank borrowing costs prompted hopes that global efforts to bolster confidence in credit markets are taking hold following the Federal Reserve's interest-rate cut earlier this week and spurred investors to search for bargains.
"It seems like you have some continued mild improvement in the credit markets and that seems to be buoying hopes but people should know, conditions may have improved, but they're improving slowly," said Chip Hanlon, president of Delta Global Advisors Inc, in Huntington Beach, California.
The Dow Jones industrial average gained 144.32 points, or 1.57 percent, to 9,325.01. The Standard & Poor's 500 Index rose 14.66 points, or 1.54 percent, to 968.75. The Nasdaq Composite Index climbed 22.43 points, or 1.32 percent, to 1,720.95.
Friday's rally resulted in stocks clocking in a higher finish for two sessions in a row -- the first consecutive gains in over a month.
For the week, the Dow gained 11.3 percent, its best one-week percentage gain since October 1974. The S&P 500 rose 10.5 percent, its best weekly percentage gain since at least January 1980. The Nasdaq advanced 10.9 percent, its best weekly percentage gain since April 2001.
October, though, was a different story. The Dow lost 14.06 percent, its worst one-month percentage drop since August 1998, while the S&P 500 lost 16.83 percent, its worst one-month percentage slide since October 1987.
Pension funds bought stocks to rebalance their portfolios, also lending support to the market, traders noted.
JPMorgan said it is making changes to about $110 billion in mortgages and is temporarily halting foreclosures while it alters the loans. The bank's stock, a Dow component, shot up 9.7 percent, or $3.63, to $41.25 on the New York Stock Exchange.
Among other financial shares, Morgan Stanley rose 8.6 percent to $17.47., while the S&P Financial Index gained 5.5 percent.
But economic data on Friday that showed U.S. consumers are tightening their belts offered more evidence of a deep slowdown, though the market appeared to shrug it off.
U.S. consumers cut their monthly spending for the first time in two years during September, according to a U.S. Commerce Department report.
On Nasdaq, video game publisher Electronic Arts Inc shed 17.9 percent to $22.78 after it chopped its full-year profit forecast due to slowing demand.
After trading on both the up and down side of Friday's ledger, Chevron Corp ended up 0.6 percent at $74.60 on the NYSE after it reported quarterly profit that beat expectations. The price of oil, which had slipped earlier and pressured the stock, also rebounded. U.S. crude gained $1.85 to settle at $67.81 a barrel on the New York Mercantile Exchange, but recorded its biggest monthly drop ever. In October, the price of NYMEX crude fell a record 32.62 percent.
Shares of Express Scripts Inc jumped 5.3 percent to $60.61 on Nasdaq after the pharmacy benefit manager reported quarterly profit that beat expectations after Thursday's closing bell.
In other economic news, an index of consumer sentiment suffered its steepest monthly drop on record, according to the Reuters/University of Michigan Surveys of Consumers' final reading for October.
And the Chicago Purchasing Management Index showed that business activity in the Midwest came to a halt in October as production and new orders plummeted.
Trading was moderate on the New York Stock Exchange, with about 1.57 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 2.50 billion shares traded, above last year's daily average of 2.17 billion.
Advancing stocks outnumbered declining ones on both the NYSE and the Nasdaq by a ratio of nearly 3 to 1.
Hammered by worries over the extent of the damage the credit crunch has inflicted on the global economy, the Dow Jones industrial average logged its biggest monthly decline in a decade, while the S&P 500 had its worst month since the October 1987 market crash.
Financial shares, led by a gain of almost 10 percent in JPMorgan Chase, lifted Wall Street as the interest rate that banks charge each other for short-term loans continued to ease.
The decrease in overnight interbank borrowing costs prompted hopes that global efforts to bolster confidence in credit markets are taking hold following the Federal Reserve's interest-rate cut earlier this week and spurred investors to search for bargains.
"It seems like you have some continued mild improvement in the credit markets and that seems to be buoying hopes but people should know, conditions may have improved, but they're improving slowly," said Chip Hanlon, president of Delta Global Advisors Inc, in Huntington Beach, California.
The Dow Jones industrial average gained 144.32 points, or 1.57 percent, to 9,325.01. The Standard & Poor's 500 Index rose 14.66 points, or 1.54 percent, to 968.75. The Nasdaq Composite Index climbed 22.43 points, or 1.32 percent, to 1,720.95.
Friday's rally resulted in stocks clocking in a higher finish for two sessions in a row -- the first consecutive gains in over a month.
For the week, the Dow gained 11.3 percent, its best one-week percentage gain since October 1974. The S&P 500 rose 10.5 percent, its best weekly percentage gain since at least January 1980. The Nasdaq advanced 10.9 percent, its best weekly percentage gain since April 2001.
October, though, was a different story. The Dow lost 14.06 percent, its worst one-month percentage drop since August 1998, while the S&P 500 lost 16.83 percent, its worst one-month percentage slide since October 1987.
Pension funds bought stocks to rebalance their portfolios, also lending support to the market, traders noted.
JPMorgan said it is making changes to about $110 billion in mortgages and is temporarily halting foreclosures while it alters the loans. The bank's stock, a Dow component, shot up 9.7 percent, or $3.63, to $41.25 on the New York Stock Exchange.
Among other financial shares, Morgan Stanley rose 8.6 percent to $17.47., while the S&P Financial Index gained 5.5 percent.
But economic data on Friday that showed U.S. consumers are tightening their belts offered more evidence of a deep slowdown, though the market appeared to shrug it off.
U.S. consumers cut their monthly spending for the first time in two years during September, according to a U.S. Commerce Department report.
On Nasdaq, video game publisher Electronic Arts Inc shed 17.9 percent to $22.78 after it chopped its full-year profit forecast due to slowing demand.
After trading on both the up and down side of Friday's ledger, Chevron Corp ended up 0.6 percent at $74.60 on the NYSE after it reported quarterly profit that beat expectations. The price of oil, which had slipped earlier and pressured the stock, also rebounded. U.S. crude gained $1.85 to settle at $67.81 a barrel on the New York Mercantile Exchange, but recorded its biggest monthly drop ever. In October, the price of NYMEX crude fell a record 32.62 percent.
Shares of Express Scripts Inc jumped 5.3 percent to $60.61 on Nasdaq after the pharmacy benefit manager reported quarterly profit that beat expectations after Thursday's closing bell.
In other economic news, an index of consumer sentiment suffered its steepest monthly drop on record, according to the Reuters/University of Michigan Surveys of Consumers' final reading for October.
And the Chicago Purchasing Management Index showed that business activity in the Midwest came to a halt in October as production and new orders plummeted.
Trading was moderate on the New York Stock Exchange, with about 1.57 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 2.50 billion shares traded, above last year's daily average of 2.17 billion.
Advancing stocks outnumbered declining ones on both the NYSE and the Nasdaq by a ratio of nearly 3 to 1.
Thursday, October 30, 2008
Sebi to probe stock market crash
The Securities and Exchange Board of India (Sebi) is conducting an inquiry into the stock market crash on October 24 and October 27. The equity benchmarks BSE Sensex and NSE Nifty fell nearly 20 per cent during these two trading sessions.
According to sources in the regulatory agency, trading pattern last Friday aroused suspicion. "Short sellers on Friday took extra care of not letting the markets fall by 10 per cent before 1 pm, which would have triggered the circuit filter and resulted in closure for an hour. Today also there were similar trends. It could be a coincidence but it needs to be looked into," said a source.
After 1 pm, the circuit filter is triggered only if the markets fall by 15 per cent. Sources said apart from a few participatory note (PN) issuing FIIs, activities of some stock brokers is also being looked into.
Sebi Chairman C B Bhave could not be reached for comments.
On Friday, Sensex fell 1,100 points or 11 per cent and the fall in share prices was intense in the last couple of hours of the trading sessions on extremely thin volumes. Even today, the markets witnessed a roller coaster ride as Sensex staged a sharp recovery of over 800 points from its days low of 7,697 to close at 8,509.
Market players said short sellers are exploiting the cash settled derivative segment of the markets and bear operators are taking advantage of the situation by forming a cartel.
Stock brokers have mainly blamed the overseas lending of stocks by FIIs as the real reason behind the fall. Even while the finance ministry has informed that FIIs have been asked to cover their short positions through borrowed stocks, FIIs have not entirely covered positions.
Market players are seeking that Sebi probe the developments during October. The Sensex and Nifty have declined by over 35 percent since October 1 and the Indian stock markets have been the worst performer globally during the period.
While Sebi is seeking detailed data from stocks exchanges, its Integrated Market Surveillance System (IIMSS) system is capable of detecting fraudulent trading practices, including violations such as synchronisation / wash sales; market domination, marking the open, marking the close, and stock-option manipulation.
The sophisticated alert engines also helps Sebi to detect insider trading ahead of the public release of price sensitive information regardless of its source and also identify potential fraud by misrepresentation, including violations such as making public announcements with the intent of moving the price of an instrument either up or down.
According to sources in the regulatory agency, trading pattern last Friday aroused suspicion. "Short sellers on Friday took extra care of not letting the markets fall by 10 per cent before 1 pm, which would have triggered the circuit filter and resulted in closure for an hour. Today also there were similar trends. It could be a coincidence but it needs to be looked into," said a source.
After 1 pm, the circuit filter is triggered only if the markets fall by 15 per cent. Sources said apart from a few participatory note (PN) issuing FIIs, activities of some stock brokers is also being looked into.
Sebi Chairman C B Bhave could not be reached for comments.
On Friday, Sensex fell 1,100 points or 11 per cent and the fall in share prices was intense in the last couple of hours of the trading sessions on extremely thin volumes. Even today, the markets witnessed a roller coaster ride as Sensex staged a sharp recovery of over 800 points from its days low of 7,697 to close at 8,509.
Market players said short sellers are exploiting the cash settled derivative segment of the markets and bear operators are taking advantage of the situation by forming a cartel.
Stock brokers have mainly blamed the overseas lending of stocks by FIIs as the real reason behind the fall. Even while the finance ministry has informed that FIIs have been asked to cover their short positions through borrowed stocks, FIIs have not entirely covered positions.
Market players are seeking that Sebi probe the developments during October. The Sensex and Nifty have declined by over 35 percent since October 1 and the Indian stock markets have been the worst performer globally during the period.
While Sebi is seeking detailed data from stocks exchanges, its Integrated Market Surveillance System (IIMSS) system is capable of detecting fraudulent trading practices, including violations such as synchronisation / wash sales; market domination, marking the open, marking the close, and stock-option manipulation.
The sophisticated alert engines also helps Sebi to detect insider trading ahead of the public release of price sensitive information regardless of its source and also identify potential fraud by misrepresentation, including violations such as making public announcements with the intent of moving the price of an instrument either up or down.
Friday, October 10, 2008
Dow plunges 679 for 6th triple-digit loss in a row on runaway train of an afternoon sell-off
NEW YORK (AP) -- A runaway train of a sell-off turned the anniversary of the stock market peak into one of the darkest days in Wall Street history Thursday, driving the Dow Jones industrials down a breathtaking 679 points and deepening a financial crisis that has defied all efforts to stop it.
Stocks lost more than 7 percent, $872 billion of investments evaporated, and the Dow fell to 8,579. When the average crashed through the 9,000 level for the first time in five years in the final hour of trading, sellers had only begun to hit the gas pedal.
As bad as the day was, even worse was the cumulative effect of a historic run of declines: The Dow suffered a triple-digit loss for the sixth day in a row, a first, and the average dropped for the seventh day in a row, a losing streak not seen since 2002.
"Right now the market is just panicked," said David Wyss, chief economist at Standard & Poor's in New York. "Nobody wants to take on any risk. Everybody just wants to get their money and put it under the mattress."
It all took place one year to the day after the Dow closed at its record high of 14,164. Since that day, frozen credit, record foreclosures, cascading job losses and outright fear have seized the market and sapped 39 percent of its value.
Paper losses for the year add up to an staggering $8.3 trillion, according to figures measured by the Dow Jones Wilshire 5000 Composite Index, which tracks 5,000 U.S.-based companies representing almost all stocks traded in America.
It was the second straight day that Wall Street was rocked by a final-hour sell-off, but this one was particularly shocking.
Most of the day was relatively calm, and the trading floor was quieter than usual because of the Jewish holiday of Yom Kippur. Wall Street awoke to news the federal government was brandishing a new weapon against the financial crisis -- considering seeking an equity stake in major U.S. banks in order to stabilize them.
But that step appeared to be as ineffectual as the others Washington has rolled out in recent weeks, including a $700 billion bailout of the financial industry, a coordinated interest rate cut by central banks around the world and direct lending by the Federal Reserve to private companies to provide them with short-term cash.
Acquiring a stake in the banks would be yet another startling intervention by the government in the free market, but economists said President Bush was left with little choice because of the credit markets, where tight lending has choked off the everyday cash that is the lifeblood of the economy.
"In normal times, this would be out of the question, but in the present dire situation, I think the government should be employing all the powers that it can," said Sung Won Sohn, an economics professor at California State University, Channel Islands.
After the closing bell, shellshocked traders and bankers gathered at Bobby Van's Steakhouse and downed beers and drinks to chase the ghastly numbers. One Wall Streeter joked things had gotten so bad that he should apply for a job as a waiter.
"It was an ugly day, there's no ways to put it," said another customer, Alan Valdes, director of floor operations for Hallard, Lyons. "Guys were frustrated, just fed up. ... We're in an area no one has been in since 1930."
Wall Street has been teetering on the brink of panic for a month now, vulnerable to any bad news. Thursday's sell-off was triggered when a major credit rating agency put General Motors Corp. and its finance affiliate under review to determine whether it should be downgraded.
Stock in GM, one of the 30 components of the Dow Jones industrials, lost 31 percent of its value and closed at $4.76 -- its lowest in more than half a century, since the Korean War began.
For the Dow, it has been nothing short of a free fall:
--The average is down 2,338 points, or 21 percent, in the last four weeks, since the Lehman Brothers bankruptcy escalated a long-running credit crunch into a full-fledged crisis.
--The point decline Thursday was the third-worst in Dow history. The worst, 778 points, came less than two weeks ago.
--Of the last 19 trading days, there have been 11 triple-digit losses -- including the unprecedented six straight. The six gains have all been triple-digits, and only one of them was enough to make up the losses of the day before.
--The Dow now stands only about 1,300 points above its lowest close of the bear market that followed 9/11. In a market as volatile as this, that gap can be closed in a couple of trading days, or less.
In fact, triple-digit declines can happen almost in an instant.
On Thursday, the Dow was above 9,200 after 1:30 p.m. and still above 9,000 after 3 p.m. The pressure to sell was so intense that the Dow kept dropping precipitously for 10 minutes after the 4 p.m. closing bell as the day's losses were tabulated.
In percentage terms, the drop in the Dow exceeded the day the markets reopened after the Sept. 11, 2001, terrorist attacks. It was not close to the 22.6-percent decline on Black Monday in 1987, the last stock market crash.
Still, it is becoming increasingly clear that Washington has ever fewer places to reach in its toolbox to stop, or perhaps even slow, the crisis. Among the options still left are buying up foreclosed properties and making direct loans to homeowners, both of them hard for free-market supporters to swallow.
Speaking in the afternoon before the market closed, President Bush told an audience on the South Lawn of the White House that the economy was going through a "very tough stretch." But, he said: "I'm confident in our economy's long-term prospects."
After the market closed, the White House said Americans should remain confident despite the market plunge, and Bush planned to speak from the Rose Garden on Friday morning -- though he was not expected to unveil any new policy proposals.
House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid asked Bush on Thursday to call an emergency meeting of the G-8 industrial nations' heads of state to address the continuing global credit freeze and instability in world markets. The G-8 comprises France, Germany, Italy, Great Britain, Japan, the United States, Canada and Russia.
In the markets Thursday, the broader stock indicators registered similar declines to the Dow's. The Standard & Poor's 500 index fell 7.6 percent to the 909 level, and the Nasdaq composite index fell 5.5 percent to 1,645.
Meanwhile, the credit markets remained stubbornly locked-up. The benchmark rate that banks charge each other for loans, known as Libor, rose to 4.75 percent from 4.52 percent a day earlier, signaling banks are still afraid to make loans because they worry they won't be paid back.
"The story is getting to be like that movie Groundhog Day," said Arthur Hogan, chief market analyst at Jefferies & Co. "Everything we're seeing is historic. The problem is historic, the solutions are historic, and unfortunately, the sell-off is historic. It's not the kind of history you want to be making."
Adding to Wall Street's nervousness, a ban on short selling -- a process in which investors borrow shares of stock and essentially bet the value will fall -- expired.
With three and a half weeks before voters elect Bush's successor, there was also no immediate comment on the Wall Street action from the presidential candidates, Democratic Sen. Barack Obama and Republican Sen. John McCain.
Earlier in the day in Dayton, Ohio, Obama took aim at McCain's plan to have the government absorb the full cost of renegotiating mortgages for borrowers under strain from the dramatic decline of the values of their homes.
McCain rolled out the idea at the second presidential debate earlier this week, a forum in which he also told voters it was important to have a steady hand in the White House during a time of economic crisis.
AP Economics Writer Martin Crutsinger reported from Washington. Associated Press writers Tom Raum in Washington and Patrick Rizzo in New York contributed to this story.
Stocks lost more than 7 percent, $872 billion of investments evaporated, and the Dow fell to 8,579. When the average crashed through the 9,000 level for the first time in five years in the final hour of trading, sellers had only begun to hit the gas pedal.
As bad as the day was, even worse was the cumulative effect of a historic run of declines: The Dow suffered a triple-digit loss for the sixth day in a row, a first, and the average dropped for the seventh day in a row, a losing streak not seen since 2002.
"Right now the market is just panicked," said David Wyss, chief economist at Standard & Poor's in New York. "Nobody wants to take on any risk. Everybody just wants to get their money and put it under the mattress."
It all took place one year to the day after the Dow closed at its record high of 14,164. Since that day, frozen credit, record foreclosures, cascading job losses and outright fear have seized the market and sapped 39 percent of its value.
Paper losses for the year add up to an staggering $8.3 trillion, according to figures measured by the Dow Jones Wilshire 5000 Composite Index, which tracks 5,000 U.S.-based companies representing almost all stocks traded in America.
It was the second straight day that Wall Street was rocked by a final-hour sell-off, but this one was particularly shocking.
Most of the day was relatively calm, and the trading floor was quieter than usual because of the Jewish holiday of Yom Kippur. Wall Street awoke to news the federal government was brandishing a new weapon against the financial crisis -- considering seeking an equity stake in major U.S. banks in order to stabilize them.
But that step appeared to be as ineffectual as the others Washington has rolled out in recent weeks, including a $700 billion bailout of the financial industry, a coordinated interest rate cut by central banks around the world and direct lending by the Federal Reserve to private companies to provide them with short-term cash.
Acquiring a stake in the banks would be yet another startling intervention by the government in the free market, but economists said President Bush was left with little choice because of the credit markets, where tight lending has choked off the everyday cash that is the lifeblood of the economy.
"In normal times, this would be out of the question, but in the present dire situation, I think the government should be employing all the powers that it can," said Sung Won Sohn, an economics professor at California State University, Channel Islands.
After the closing bell, shellshocked traders and bankers gathered at Bobby Van's Steakhouse and downed beers and drinks to chase the ghastly numbers. One Wall Streeter joked things had gotten so bad that he should apply for a job as a waiter.
"It was an ugly day, there's no ways to put it," said another customer, Alan Valdes, director of floor operations for Hallard, Lyons. "Guys were frustrated, just fed up. ... We're in an area no one has been in since 1930."
Wall Street has been teetering on the brink of panic for a month now, vulnerable to any bad news. Thursday's sell-off was triggered when a major credit rating agency put General Motors Corp. and its finance affiliate under review to determine whether it should be downgraded.
Stock in GM, one of the 30 components of the Dow Jones industrials, lost 31 percent of its value and closed at $4.76 -- its lowest in more than half a century, since the Korean War began.
For the Dow, it has been nothing short of a free fall:
--The average is down 2,338 points, or 21 percent, in the last four weeks, since the Lehman Brothers bankruptcy escalated a long-running credit crunch into a full-fledged crisis.
--The point decline Thursday was the third-worst in Dow history. The worst, 778 points, came less than two weeks ago.
--Of the last 19 trading days, there have been 11 triple-digit losses -- including the unprecedented six straight. The six gains have all been triple-digits, and only one of them was enough to make up the losses of the day before.
--The Dow now stands only about 1,300 points above its lowest close of the bear market that followed 9/11. In a market as volatile as this, that gap can be closed in a couple of trading days, or less.
In fact, triple-digit declines can happen almost in an instant.
On Thursday, the Dow was above 9,200 after 1:30 p.m. and still above 9,000 after 3 p.m. The pressure to sell was so intense that the Dow kept dropping precipitously for 10 minutes after the 4 p.m. closing bell as the day's losses were tabulated.
In percentage terms, the drop in the Dow exceeded the day the markets reopened after the Sept. 11, 2001, terrorist attacks. It was not close to the 22.6-percent decline on Black Monday in 1987, the last stock market crash.
Still, it is becoming increasingly clear that Washington has ever fewer places to reach in its toolbox to stop, or perhaps even slow, the crisis. Among the options still left are buying up foreclosed properties and making direct loans to homeowners, both of them hard for free-market supporters to swallow.
Speaking in the afternoon before the market closed, President Bush told an audience on the South Lawn of the White House that the economy was going through a "very tough stretch." But, he said: "I'm confident in our economy's long-term prospects."
After the market closed, the White House said Americans should remain confident despite the market plunge, and Bush planned to speak from the Rose Garden on Friday morning -- though he was not expected to unveil any new policy proposals.
House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid asked Bush on Thursday to call an emergency meeting of the G-8 industrial nations' heads of state to address the continuing global credit freeze and instability in world markets. The G-8 comprises France, Germany, Italy, Great Britain, Japan, the United States, Canada and Russia.
In the markets Thursday, the broader stock indicators registered similar declines to the Dow's. The Standard & Poor's 500 index fell 7.6 percent to the 909 level, and the Nasdaq composite index fell 5.5 percent to 1,645.
Meanwhile, the credit markets remained stubbornly locked-up. The benchmark rate that banks charge each other for loans, known as Libor, rose to 4.75 percent from 4.52 percent a day earlier, signaling banks are still afraid to make loans because they worry they won't be paid back.
"The story is getting to be like that movie Groundhog Day," said Arthur Hogan, chief market analyst at Jefferies & Co. "Everything we're seeing is historic. The problem is historic, the solutions are historic, and unfortunately, the sell-off is historic. It's not the kind of history you want to be making."
Adding to Wall Street's nervousness, a ban on short selling -- a process in which investors borrow shares of stock and essentially bet the value will fall -- expired.
With three and a half weeks before voters elect Bush's successor, there was also no immediate comment on the Wall Street action from the presidential candidates, Democratic Sen. Barack Obama and Republican Sen. John McCain.
Earlier in the day in Dayton, Ohio, Obama took aim at McCain's plan to have the government absorb the full cost of renegotiating mortgages for borrowers under strain from the dramatic decline of the values of their homes.
McCain rolled out the idea at the second presidential debate earlier this week, a forum in which he also told voters it was important to have a steady hand in the White House during a time of economic crisis.
AP Economics Writer Martin Crutsinger reported from Washington. Associated Press writers Tom Raum in Washington and Patrick Rizzo in New York contributed to this story.
Trouble ahead? Top bank borrows Rs1,000 cr @ 20%
A large Indian commercial bank borrowed Rs1,000 crore from another major domestic bank at more than 20% interest rate earlier this week, a desperate move that underscores the gravity of the liquidity scarcity for some Indian banks, notwithstanding assurances to the contrary by regulators and politicians alike.
The short-term money was raised through certificates of deposits, or CDs, essentially a promissory note that bears a maturity date and a specified fixed interest rate.
It appears that this is the highest interest rate charged by any Indian bank on a 45-day loan given to another bank since the mid-1990s, when liquidity was scarce and interest rates soared, following a tight monetary policy by the central bank against what was then a backdrop of rising inflation.
This time around, the root of the problem is global liquidity crunch and banks’ sudden and growing aversion to lend to each other as the general confidence level in the banking system has declined sharply in the past one month.
Banker’s Trust is unable to name the banks involved because that was a precondition to confirming details of this sensitive transaction.
While the structural stability of the Indian banking system hasn’t come in question in the global meltdown that has already taken down several banks, even Indian banks that can afford to lend now don’t want be stuck just in case there is another bank collapse and would rather keep as much cash as possible in case they, too, have to deal with any large withdrawals by depositors, especially companies and funds.
The good news is Indian banks can still find money within their ranks, unlike those in the US and UKIn this particular case, the borrower of the money was desperately looking for funds to tide over short-term asset-liability mismatches in its overseas operations. Most of the large Indian banks, both state-run as well as private ones, have overseas presence. The aggressive ones have been building assets overseas by rolling over their liabilities, raised from the inter-bank market.
But these money lines are now fast drying up and it is difficult to replenish them as overseas banks are not rolling over the credit any more even though the London interbank offered rate, or Libor, an international benchmark for interest rate, is soaring. Libor is now much higher than the yield on three-month US treasury bill, and this illustrates the risk perception of financial institutions about each other. If they have money, they would lend to the US government and not to a fellow institution.
So, if an Indian bank faces a liquidity crunch abroad, it is now being forced to borrow from India, convert the money into foreign currency, and then quickly export the funds to support the bank’s overseas operations.
The short-term money was raised through certificates of deposits, or CDs, essentially a promissory note that bears a maturity date and a specified fixed interest rate.
It appears that this is the highest interest rate charged by any Indian bank on a 45-day loan given to another bank since the mid-1990s, when liquidity was scarce and interest rates soared, following a tight monetary policy by the central bank against what was then a backdrop of rising inflation.
This time around, the root of the problem is global liquidity crunch and banks’ sudden and growing aversion to lend to each other as the general confidence level in the banking system has declined sharply in the past one month.
Banker’s Trust is unable to name the banks involved because that was a precondition to confirming details of this sensitive transaction.
While the structural stability of the Indian banking system hasn’t come in question in the global meltdown that has already taken down several banks, even Indian banks that can afford to lend now don’t want be stuck just in case there is another bank collapse and would rather keep as much cash as possible in case they, too, have to deal with any large withdrawals by depositors, especially companies and funds.
The good news is Indian banks can still find money within their ranks, unlike those in the US and UKIn this particular case, the borrower of the money was desperately looking for funds to tide over short-term asset-liability mismatches in its overseas operations. Most of the large Indian banks, both state-run as well as private ones, have overseas presence. The aggressive ones have been building assets overseas by rolling over their liabilities, raised from the inter-bank market.
But these money lines are now fast drying up and it is difficult to replenish them as overseas banks are not rolling over the credit any more even though the London interbank offered rate, or Libor, an international benchmark for interest rate, is soaring. Libor is now much higher than the yield on three-month US treasury bill, and this illustrates the risk perception of financial institutions about each other. If they have money, they would lend to the US government and not to a fellow institution.
So, if an Indian bank faces a liquidity crunch abroad, it is now being forced to borrow from India, convert the money into foreign currency, and then quickly export the funds to support the bank’s overseas operations.
Wednesday, October 8, 2008
Nikkei dives 9.4 percent, biggest 1-day fall since '87
TOKYO (Reuters) - The Nikkei average plunged 9.4 percent on Wednesday, its biggest drop since the 1987 stock market crash, as growing fears of a global recession led investors to wipe $250 billion off the value of Tokyo shares.
Toyota Motor Corp (Tokyo:7203.T - News) tumbled more than 11 percent on growing expectations that the crisis would bite deeper into its profits, while the yen hit a six-month high against the dollar, adding to the pressure on exporter shares.
Panic over the fast-spreading financial crisis dragged down markets across Asia, with Japanese steelmakers such as Nippon Steel Corp (Tokyo:5401.T - News) sliding, as the Nikkei set another five-year closing low. It has lost 19 percent in the past five days.
"The deteriorating outlook for the economy and the deepening financial crisis are pushing fear to its limit," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
"Investors want to dump shares as their willingness to take risks has shrunk, but no one wants to buy even if stocks are valued cheaply."
The yen climbed to a six-month high against the tumbling U.S. dollar, as investors stampeded away from stocks and risky positions. (FRX/)
The Nikkei posted its biggest one-day fall since a 14.9 percent drop on October 20, 1987, the day after Black Monday, and logged the third-largest one-day drop ever.
The Indonesia Stock Exchange halted trading on Wednesday after the benchmark composite index (Jakarta:^JKSE - News) dropped more than 10 percent, while Hong Kong's main stock market index (HKSE:^HSI - News) dropped more than 5 percent.
The benchmark Nikkei (Osaka:^N225 - News) slid 952.58 points to 9,203.32, its lowest close since June 2003.
The broader Topix (^TOPX - News) lost 8.0 percent to 899.01.
Trade picked up on the Tokyo exchange's first section, with 2.86 billion shares changing hands, compared with last week's daily average of 2.08 billion.
Declining stocks outnumbered advancing ones by more than 37 to 1.
The value of the Tokyo exchange's first section finished Wednesday at 287 trillion yen ($2,835 billion), down $250 billion. (.MV1.T)
Analysts said that even at lower valuations, investors would still shun stocks as more companies were expected to cut their earnings forecasts.
"Investors are not selling because Japanese stocks are good or bad, but because of the credit squeeze," said Kenichi Hirano, operating officer at Tachibana Securities.
"I see around 9,300 as the possible bottom for the Nikkei average, considering projected corporate earnings for the year ending March 2009."
The projected price-earnings ratio of the Nikkei stock average tumbled to a 37-year low at 12.5 times on Tuesday, according to the Nikkei business daily.
Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp, said the Nikkei was likely to see further declines due to a lack of policy responses from Japanese authorities, such as additional fiscal spending steps to support the economy.
He added it was also hard to expect any major initiatives from the meeting of Group of Seven finance ministers on Friday.
"If there was something they could do, I think they would have already done it," Uno said.
Still, Prime Minister Taro Aso said on Wednesday the fall in Japanese shares was abnormal.
EXPORTERS BATTERED
"Toyota is such a symbolic issue in Japan's manufacturing sector, and the fact that the company is likely to post an earnings decline of this scale, has got to have a severe impact on investor sentiment," said Mizuho Asset Management fund manager Yoshihisa Okamoto.
Shares of Toyota tumbled 11.6 percent to 3,280 yen. The automaker is considering cutting its annual earnings forecasts due to sluggish demand in industrialized nations, slowing sales in emerging markets and a firmer yen, a company source said.
Among other exporters, Advantest Corp (Tokyo:6857.T - News), the world's No.1 maker of chip testers, tumbled 14.9 percent to 1,538 yen, while Honda Motor Corp (Tokyo:7267.T - News) sank 10.3 percent to 2,305 yen.
Shares of Nippon Steel lost 11.9 percent to 281 yen, while shipping firm Mitsui OSK Lines (Tokyo:9104.T - News) shed 12.8 percent to 622 yen.
Financial shares also fell but many outperformed the overall market. Top lender Mitsubishi UFJ Financial Group (Tokyo:8306.T - News) dropped 5.9 percent to 763 yen, and No.2 Mizuho Financial Group (Tokyo:8411.T - News) slid 7.7 percent to 361,000 yen.
Investors punished stocks with earnings worries.
Hitachi Construction Machinery Co (Tokyo:6305.T - News), Japan's second-biggest earth-moving equipment maker, plunged 16.5 percent to 1,516 yen.
The Nikkei business paper reported that Hitachi Construction could see a first profit decline in seven years in the year to March 2009 due to a sharp fall in demand in Europe and signs of weakening sales in countries such as India and Russia.
Toyota Motor Corp (Tokyo:7203.T - News) tumbled more than 11 percent on growing expectations that the crisis would bite deeper into its profits, while the yen hit a six-month high against the dollar, adding to the pressure on exporter shares.
Panic over the fast-spreading financial crisis dragged down markets across Asia, with Japanese steelmakers such as Nippon Steel Corp (Tokyo:5401.T - News) sliding, as the Nikkei set another five-year closing low. It has lost 19 percent in the past five days.
"The deteriorating outlook for the economy and the deepening financial crisis are pushing fear to its limit," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
"Investors want to dump shares as their willingness to take risks has shrunk, but no one wants to buy even if stocks are valued cheaply."
The yen climbed to a six-month high against the tumbling U.S. dollar, as investors stampeded away from stocks and risky positions. (FRX/)
The Nikkei posted its biggest one-day fall since a 14.9 percent drop on October 20, 1987, the day after Black Monday, and logged the third-largest one-day drop ever.
The Indonesia Stock Exchange halted trading on Wednesday after the benchmark composite index (Jakarta:^JKSE - News) dropped more than 10 percent, while Hong Kong's main stock market index (HKSE:^HSI - News) dropped more than 5 percent.
The benchmark Nikkei (Osaka:^N225 - News) slid 952.58 points to 9,203.32, its lowest close since June 2003.
The broader Topix (^TOPX - News) lost 8.0 percent to 899.01.
Trade picked up on the Tokyo exchange's first section, with 2.86 billion shares changing hands, compared with last week's daily average of 2.08 billion.
Declining stocks outnumbered advancing ones by more than 37 to 1.
The value of the Tokyo exchange's first section finished Wednesday at 287 trillion yen ($2,835 billion), down $250 billion. (.MV1.T)
Analysts said that even at lower valuations, investors would still shun stocks as more companies were expected to cut their earnings forecasts.
"Investors are not selling because Japanese stocks are good or bad, but because of the credit squeeze," said Kenichi Hirano, operating officer at Tachibana Securities.
"I see around 9,300 as the possible bottom for the Nikkei average, considering projected corporate earnings for the year ending March 2009."
The projected price-earnings ratio of the Nikkei stock average tumbled to a 37-year low at 12.5 times on Tuesday, according to the Nikkei business daily.
Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp, said the Nikkei was likely to see further declines due to a lack of policy responses from Japanese authorities, such as additional fiscal spending steps to support the economy.
He added it was also hard to expect any major initiatives from the meeting of Group of Seven finance ministers on Friday.
"If there was something they could do, I think they would have already done it," Uno said.
Still, Prime Minister Taro Aso said on Wednesday the fall in Japanese shares was abnormal.
EXPORTERS BATTERED
"Toyota is such a symbolic issue in Japan's manufacturing sector, and the fact that the company is likely to post an earnings decline of this scale, has got to have a severe impact on investor sentiment," said Mizuho Asset Management fund manager Yoshihisa Okamoto.
Shares of Toyota tumbled 11.6 percent to 3,280 yen. The automaker is considering cutting its annual earnings forecasts due to sluggish demand in industrialized nations, slowing sales in emerging markets and a firmer yen, a company source said.
Among other exporters, Advantest Corp (Tokyo:6857.T - News), the world's No.1 maker of chip testers, tumbled 14.9 percent to 1,538 yen, while Honda Motor Corp (Tokyo:7267.T - News) sank 10.3 percent to 2,305 yen.
Shares of Nippon Steel lost 11.9 percent to 281 yen, while shipping firm Mitsui OSK Lines (Tokyo:9104.T - News) shed 12.8 percent to 622 yen.
Financial shares also fell but many outperformed the overall market. Top lender Mitsubishi UFJ Financial Group (Tokyo:8306.T - News) dropped 5.9 percent to 763 yen, and No.2 Mizuho Financial Group (Tokyo:8411.T - News) slid 7.7 percent to 361,000 yen.
Investors punished stocks with earnings worries.
Hitachi Construction Machinery Co (Tokyo:6305.T - News), Japan's second-biggest earth-moving equipment maker, plunged 16.5 percent to 1,516 yen.
The Nikkei business paper reported that Hitachi Construction could see a first profit decline in seven years in the year to March 2009 due to a sharp fall in demand in Europe and signs of weakening sales in countries such as India and Russia.
Wall Street heads for higher open after Federal Reserve emergency rate cut
NEW YORK (AP) -- Wall Street turned around early Wednesday, with stock index futures rising in response to emergency interest rate cuts by the Federal Reserve and other central banks. There was still caution in the market, however, as futures gave back some of their early pop higher.
The stock market had been heading to another sharp drop, joining world markets that were plunging in response to spiraling worries about the global financial system, when the Fed announced it was cutting rates by a half-percentage point. The central bank noted that the market turmoil posed a further threat to an already shaky economy; it was joined in the rate cut by banks including the European Central Bank and the Bank of England.
Dow Jones industrial average futures rose 102, or 1.05 percent, to 9,640. Standard & Poor's 500 index futures added 21.60, or 2.812 percent, to 1,028.10, while Nasdaq 100 futures rose 2.41, or 2.41 percent, to 1,368.75.
But futures came off their highs and were fluctuating, a sign that while the markets are happy about the rate cut, investors realize that the stagnant credit markets and the economy remain extremely troubled and are likely to remain so for some time.
"With all of this occuring as a coordinated effort is showing that everybody out there is trying to fight this thing, and that should bring some confidence back to the market," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group. "But, the big question now is can the credit market open for business."
In Asia, the Nikkei 225 closed 9.38 percent lower and Hang Seng tumbled 8.17 percent hours before the rate cuts were announced; their declines showed the extent of the worldwide gloom. European indexes, which were down about 5 percent before the rate cut, pared their losses. In Britain, the FTSE-100 fell 0.65 percent, Germany's DAX dropped 2.15 percent, and France's CAC-40 gave up 1.87 percent.
Investors had been extremely anxious in recent days for a rate cut, and while the Fed had taken other steps this week to try to ease the stagnant credit markets, including buying commercial paper, the short-term debt used by companies, its moves weren't enough to stanch losses that have taken the Dow Jones industrials down 875 points in just two days this week.
It is very likely that stocks won't begin to recover for good until investors are certain the credit markets are functioning in a more normal fashion. But there are also severe economic problems including heavy job losses and high unemployment that will also need to show improvement.
Credit has all but dried up in the weeks after the failure of Lehman Brothers Holdings Inc. Banks have been reluctant to lend for fear they won't be paid back. That in turn has been stifling the economy, and led to the huge plunges on Wall Street in recent weeks.
Demand for short-term Treasurys remained high because of their safety after the rate cut; investors are willing to take extremely low returns just to have their money in a secure place. The yield on the three-month Treasury bill, which moves opposite its price, dropped to 0.72 percent from 0.81 percent late Tuesday.
Investors also were buying longer-term Treasury bonds, which don't draw as much demand as shorter-term debt in times of fear. The yield on the 10-year note fell to 3.46 percent from 3.51 percent late Tuesday.
The first third-quarter earnings reports are showing signs of strain on companies, and that is adding more uncertainty to the stock market. After the close Tuesday, Alcoa Inc. said it would conserve cash by suspending its stock buyback program and all non-critical capital projects. The aluminum company's earnings fell 52 percent.
The stock market had been heading to another sharp drop, joining world markets that were plunging in response to spiraling worries about the global financial system, when the Fed announced it was cutting rates by a half-percentage point. The central bank noted that the market turmoil posed a further threat to an already shaky economy; it was joined in the rate cut by banks including the European Central Bank and the Bank of England.
Dow Jones industrial average futures rose 102, or 1.05 percent, to 9,640. Standard & Poor's 500 index futures added 21.60, or 2.812 percent, to 1,028.10, while Nasdaq 100 futures rose 2.41, or 2.41 percent, to 1,368.75.
But futures came off their highs and were fluctuating, a sign that while the markets are happy about the rate cut, investors realize that the stagnant credit markets and the economy remain extremely troubled and are likely to remain so for some time.
"With all of this occuring as a coordinated effort is showing that everybody out there is trying to fight this thing, and that should bring some confidence back to the market," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group. "But, the big question now is can the credit market open for business."
In Asia, the Nikkei 225 closed 9.38 percent lower and Hang Seng tumbled 8.17 percent hours before the rate cuts were announced; their declines showed the extent of the worldwide gloom. European indexes, which were down about 5 percent before the rate cut, pared their losses. In Britain, the FTSE-100 fell 0.65 percent, Germany's DAX dropped 2.15 percent, and France's CAC-40 gave up 1.87 percent.
Investors had been extremely anxious in recent days for a rate cut, and while the Fed had taken other steps this week to try to ease the stagnant credit markets, including buying commercial paper, the short-term debt used by companies, its moves weren't enough to stanch losses that have taken the Dow Jones industrials down 875 points in just two days this week.
It is very likely that stocks won't begin to recover for good until investors are certain the credit markets are functioning in a more normal fashion. But there are also severe economic problems including heavy job losses and high unemployment that will also need to show improvement.
Credit has all but dried up in the weeks after the failure of Lehman Brothers Holdings Inc. Banks have been reluctant to lend for fear they won't be paid back. That in turn has been stifling the economy, and led to the huge plunges on Wall Street in recent weeks.
Demand for short-term Treasurys remained high because of their safety after the rate cut; investors are willing to take extremely low returns just to have their money in a secure place. The yield on the three-month Treasury bill, which moves opposite its price, dropped to 0.72 percent from 0.81 percent late Tuesday.
Investors also were buying longer-term Treasury bonds, which don't draw as much demand as shorter-term debt in times of fear. The yield on the 10-year note fell to 3.46 percent from 3.51 percent late Tuesday.
The first third-quarter earnings reports are showing signs of strain on companies, and that is adding more uncertainty to the stock market. After the close Tuesday, Alcoa Inc. said it would conserve cash by suspending its stock buyback program and all non-critical capital projects. The aluminum company's earnings fell 52 percent.
Thursday, September 25, 2008
US Stocks rise on bailout hopes; credit remains tight
NEW YORK (AP) -- Financial markets were mixed Thursday as lawmakers moved closer to hammering out a deal aimed at reviving the crippled financial system. The Dow Jones industrial average rose more than 200 points on optimism about the deal but a credit market squeeze remained as doubts about the proposed plan's effectiveness drove demand for short-term, safe-haven assets.
To help ease credit markets, the Federal Reserve early Thursday issued more than $20 billion in collateral such as Treasury bills in exchange for dollars to help meet demand for safe assets.
Meanwhile, disappointing readings on employment and demand for big-ticket manufactured goods, as well as a sobering forecast from General Electric Co., were underscoring the broad effects of the more than year-old credit crisis.
But stock investors were hopeful that a $700 billion bailout plan would win approval, albeit with some important changes, following two days of testimony on Capitol Hill by the country's top economic leaders. The momentum intensified Thursday as President Bush summoned congressional leaders to a meeting aimed at securing the legislation.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke urged lawmakers on Tuesday and Wednesday to quickly sign off on the plan, which would help prop up the economy by removing billions of dollars in risky mortgage-related assets from financial firms' balance sheets. The president highlighted the urgency in a national address Wednesday night.
White House officials have yielded to a key demand by congressional leaders, agreeing to include widely supported limits on pay packages for executives whose companies benefit. Major elements are still being worked out, including how to phase in the mammoth cost of the package and a plan to let the government take an ownership stake in troubled companies as part of the rescue.
Strained credit markets tightened, suggesting investors are waiting to see the details.
Demand remained high for the 3-month Treasury bill, considered the safest short-term investment, with the yield trading at 0.47 percent, down from 0.49 percent late Wednesday. That means investors are still willing to earn the slimmest of returns in exchange for a safe place to put their money. The yield on the benchmark 10-year Treasury note rose to 3.84 percent from 3.81 late Wednesday.
In another sign of credit market tightness, the benchmark three-month London Interbank Offered Rate, a bank-to-bank lending rate known as LIBOR, jumped 0.29 percentage point to 3.77 percent.
In midmorning trading, the Dow Jones industrial average rose 236.80, or 2.19 percent, to 11,061.97. The Dow fell 563 points, or 4.95 percent, in the first three sessions this week.
Broader stock indicators also rose Thursday. The Standard & Poor's 500 index rose 22.86, or 1.93 percent, to 1,208.73, and the Nasdaq composite index rose 38.32, or 1.78 percent, to 2,194.00.
The dollar was mixed against other major currencies, while gold prices fell slightly.
Light, sweet crude for November delivery fell 6 cents to $105.67 on the New York Mercantile Exchange.
Meanwhile, the Labor Department said the number of people requesting jobless benefits increased by 32,000 to a seasonally adjusted 493,000 last week, the highest level in seven years and much greater than analysts' expectations of 445,000. Hurricanes Ike and Gustav added about 50,000 new claims in Louisiana and Texas, the department said.
The Commerce Department said sales of new homes fell sharply in August to the slowest pace in 17 years. The average sales price also fell by the largest amount on record. New homes sales fell by 11.5 percent in August to a seasonally adjusted annual sales rate of 460,000 units, the slowest sales rate since January 1991.
The department also said orders for manufactured goods sank in August by the largest amount in seven months as demand for both airplanes and cars sank. Durable goods orders fell by 4.5 percent last month, far worse than the 1.6 percent decline that economists expected and the biggest drop since a 4.7 percent fall in January.
GE fell 74 cents, or 3 percent, to $23.85 after lowering its forecast for third-quarter and full-year earnings, citing unprecedented weakness and volatility in the financial services markets.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 103.9 million shares.
The Russell 2000 index of smaller companies rose 5.34, or 0.77 percent, to 703.10.
Overseas, Japan's Nikkei stock average was down 0.90 percent. Britain's FTSE 100 rose 0.27 percent, Germany's DAX index rose 1.31 percent, and France's CAC-40 added 1.60 percent.
To help ease credit markets, the Federal Reserve early Thursday issued more than $20 billion in collateral such as Treasury bills in exchange for dollars to help meet demand for safe assets.
Meanwhile, disappointing readings on employment and demand for big-ticket manufactured goods, as well as a sobering forecast from General Electric Co., were underscoring the broad effects of the more than year-old credit crisis.
But stock investors were hopeful that a $700 billion bailout plan would win approval, albeit with some important changes, following two days of testimony on Capitol Hill by the country's top economic leaders. The momentum intensified Thursday as President Bush summoned congressional leaders to a meeting aimed at securing the legislation.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke urged lawmakers on Tuesday and Wednesday to quickly sign off on the plan, which would help prop up the economy by removing billions of dollars in risky mortgage-related assets from financial firms' balance sheets. The president highlighted the urgency in a national address Wednesday night.
White House officials have yielded to a key demand by congressional leaders, agreeing to include widely supported limits on pay packages for executives whose companies benefit. Major elements are still being worked out, including how to phase in the mammoth cost of the package and a plan to let the government take an ownership stake in troubled companies as part of the rescue.
Strained credit markets tightened, suggesting investors are waiting to see the details.
Demand remained high for the 3-month Treasury bill, considered the safest short-term investment, with the yield trading at 0.47 percent, down from 0.49 percent late Wednesday. That means investors are still willing to earn the slimmest of returns in exchange for a safe place to put their money. The yield on the benchmark 10-year Treasury note rose to 3.84 percent from 3.81 late Wednesday.
In another sign of credit market tightness, the benchmark three-month London Interbank Offered Rate, a bank-to-bank lending rate known as LIBOR, jumped 0.29 percentage point to 3.77 percent.
In midmorning trading, the Dow Jones industrial average rose 236.80, or 2.19 percent, to 11,061.97. The Dow fell 563 points, or 4.95 percent, in the first three sessions this week.
Broader stock indicators also rose Thursday. The Standard & Poor's 500 index rose 22.86, or 1.93 percent, to 1,208.73, and the Nasdaq composite index rose 38.32, or 1.78 percent, to 2,194.00.
The dollar was mixed against other major currencies, while gold prices fell slightly.
Light, sweet crude for November delivery fell 6 cents to $105.67 on the New York Mercantile Exchange.
Meanwhile, the Labor Department said the number of people requesting jobless benefits increased by 32,000 to a seasonally adjusted 493,000 last week, the highest level in seven years and much greater than analysts' expectations of 445,000. Hurricanes Ike and Gustav added about 50,000 new claims in Louisiana and Texas, the department said.
The Commerce Department said sales of new homes fell sharply in August to the slowest pace in 17 years. The average sales price also fell by the largest amount on record. New homes sales fell by 11.5 percent in August to a seasonally adjusted annual sales rate of 460,000 units, the slowest sales rate since January 1991.
The department also said orders for manufactured goods sank in August by the largest amount in seven months as demand for both airplanes and cars sank. Durable goods orders fell by 4.5 percent last month, far worse than the 1.6 percent decline that economists expected and the biggest drop since a 4.7 percent fall in January.
GE fell 74 cents, or 3 percent, to $23.85 after lowering its forecast for third-quarter and full-year earnings, citing unprecedented weakness and volatility in the financial services markets.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 103.9 million shares.
The Russell 2000 index of smaller companies rose 5.34, or 0.77 percent, to 703.10.
Overseas, Japan's Nikkei stock average was down 0.90 percent. Britain's FTSE 100 rose 0.27 percent, Germany's DAX index rose 1.31 percent, and France's CAC-40 added 1.60 percent.
Tuesday, September 23, 2008
Lehman bond holders likely to lose $100 billion: Report
London: Bondholders of the beleaguered Lehman Brothers may lose $110 billion (Rs5 trillion) due to the decline in the asset values of the fourth-largest investment bank in the US, media reports say.
The value of the bonds of Lehman Brothers saw a major fall after the investment bank filed for bankruptcy protection, the Financial Times report said adding, “Further losses on its derivatives positions, which are still being unwound, could leave even less on the table for bond investors.”
According to the FT report, Loomis Sayles vice-chairman Dan Fuss has said, “I don’t know how this will play out for bondholders, but I doubt if its going to be good.”
Loomis Sayles has a small holding in Lehman bonds.
The losses would have a far-reaching effect on ordinary investors, FT said as Lehman bonds were widely held by investors such as pension funds and mutual funds.
Meanwhile, those who sold protection against a default or Lehman bankruptcy will possibly recover 18 cents on the dollar when the contracts settle in a complicated auction 10 October, the report added.
Before Lehman filed for bankruptcy, its $110-billion of senior bonds were quoted around 95 cents on the dollar. Bond prices then plunged to 35 cents a week ago. They are now trading at about 18 cents to the dollar.
Quoting Kathleen Shanley of Gimme Credit, an analyst from a credit research firm, FT said, “Lehman bonds are trading in the high teens, which reflects the bankruptcy filing, in which a large number of creditors are competing for a shrinking pool of assets of uncertain value”.
Last week, Lehman inked a deal to sell the North American investment banking business to Barclays for $1.75 billion. “Even though approval of the deal was rushed through court, lawyers for Lehman Brothers said asset values then dropped to $47.4 billion from about $70 billion,” the report said.
In its bankruptcy filing, Lehman listed total debts of $613 billion, making it the largest ever US bankruptcy with $128 billion in debt securities, including $110.69 billion unsecured debt, $17.6 billion in unsecured, subordinated obligations, the media report said.
Further, FT quoted creditors as saying that Lehman can be involved in the government’s plan to set up a $700-billion fund to buy distressed mortgage assets.
So far, there had been no formal discussions among the creditors about this, said a person involved in the bankruptcy case. The facility could boost recoveries for various creditors.
The value of the bonds of Lehman Brothers saw a major fall after the investment bank filed for bankruptcy protection, the Financial Times report said adding, “Further losses on its derivatives positions, which are still being unwound, could leave even less on the table for bond investors.”
According to the FT report, Loomis Sayles vice-chairman Dan Fuss has said, “I don’t know how this will play out for bondholders, but I doubt if its going to be good.”
Loomis Sayles has a small holding in Lehman bonds.
The losses would have a far-reaching effect on ordinary investors, FT said as Lehman bonds were widely held by investors such as pension funds and mutual funds.
Meanwhile, those who sold protection against a default or Lehman bankruptcy will possibly recover 18 cents on the dollar when the contracts settle in a complicated auction 10 October, the report added.
Before Lehman filed for bankruptcy, its $110-billion of senior bonds were quoted around 95 cents on the dollar. Bond prices then plunged to 35 cents a week ago. They are now trading at about 18 cents to the dollar.
Quoting Kathleen Shanley of Gimme Credit, an analyst from a credit research firm, FT said, “Lehman bonds are trading in the high teens, which reflects the bankruptcy filing, in which a large number of creditors are competing for a shrinking pool of assets of uncertain value”.
Last week, Lehman inked a deal to sell the North American investment banking business to Barclays for $1.75 billion. “Even though approval of the deal was rushed through court, lawyers for Lehman Brothers said asset values then dropped to $47.4 billion from about $70 billion,” the report said.
In its bankruptcy filing, Lehman listed total debts of $613 billion, making it the largest ever US bankruptcy with $128 billion in debt securities, including $110.69 billion unsecured debt, $17.6 billion in unsecured, subordinated obligations, the media report said.
Further, FT quoted creditors as saying that Lehman can be involved in the government’s plan to set up a $700-billion fund to buy distressed mortgage assets.
So far, there had been no formal discussions among the creditors about this, said a person involved in the bankruptcy case. The facility could boost recoveries for various creditors.
Subscribe to:
Posts (Atom)
