Europe’s major stock markets hovered around the break-even point Tuesday even as lingering concerns over the credit crisis continued to haunt world markets and financial institutions.
Nearly three hours into the trading day, London’s FTSE 100 was down 0.2%, the CAC 40 in Paris gained half a point, and the XETRA DAX in Frankfurt was off 0.6%.
Russia’s two main stock exchanges — the RTS and MICEX — reopened several hours late on Tuesday, a day after suffering steep plunges. The RTS index fell about 20% Monday. The RTS exchange resumed normal trading at 1 p.m. (5 a.m. ET) and was up 2.6% to 889.1 points as of 2 p.m (6 a.m. ET). The MICEX, where most trading takes place, rose by 3% to 774.5 points. It opened at 1:15 p.m. (5:15 a.m. ET)
Meanwhile, Iceland intervened Tuesday to shore up its banking industry after it halted trading of six bank stocks a day earlier. The Kaupthing Bank said it had received a 500-million euro ($692 million) loan from the Icelandic Financial Supervisory Authority to "facilitate" its operations. Early Tuesday, the government said it was taking over operations at the Landsbanki bank but that it would be "business as usual.".
Also, the Central Bank of Iceland said Tuesday that it has fixed the interbank exchange rate of the country’s currency, the krona, at 175. The central bank’s decision follows huge falls in the value of the krona as the financial crisis spreads.
Other European banks were being battered on Tuesday as nervous investors sold their stocks. Share in the Royal Bank of Scotland were off more than 30%. Barclays had dropped about 9%by late morning (payday loan).
The developments came as European Union finance ministers were meeting in Luxembourg in emergency session.
Other world markets. After staggering out of the gates to start the week, some Asian and Pacific markets rebounded Tuesday.
South Korea’s KOSPI was up about half a percent and Australia’s All Ordinaries index gained 1.2%. The Taipei Weighted was up about a third of a point, but Bombay’s BSE SENSEX was off about 2%.
Japan’s Nikkei Exchange sported the biggest losses in Asia — the Nikkei closed down 3%, after being down 5% and below the 10,000 mark for the first time in nearly five years. Japan’s central bank rate held its main lending rate steady, disappointing investors looking for a cut coordinated with other central banks.
Chines and Hong Kong markets were closed for a holiday.
But Australia’s ASX-100 index finished up 1.8% after that nation’s central bank lowered its key lending rate by one full percentage point..
Latin American markets took a solid beating Monday. Argentina’s MerVal sloughed off 5.9% of its value. Both Brazil’s Bovespa and Mexico’s IPC slipped 5.4%.
In the United States, the Dow Jones industrials plunged by as much as 800 points on the day, falling below 10,000 for the first time since October 2004. The Dow erased more than half those losses, finishing the day down 3.6%.
– The Associated Press contributed to this report.
Personal spending stagnated in August as the slowing economy continued to weigh on consumers, according to a government report released Monday.
The Commerce Department reported Monday that personal spending was virtually unchanged in August. Economists had forecast a 0.2% increase in personal spending.
Spending has not been this weak since February, when it was also flat.
Personal income, meanwhile, increased by 0.5% in August after a revised 0.6% decline in July. Economists surveyed by Briefing.com were expecting income to have grown by 0.2% last month.
After adjusting for taxes and certain price changes, however, real disposable income contracted 0.9%, according to the report.
"With the labor market remaining very weak, slow to negative growth in disposable income will most likely plague the consumer for at least the next six months," said Adam York, an economist at Wachovia Economics Group.
Consumer spending increased in May and June thanks to billions of dollars in payments sent to Americans as part of the Economic Stimulus Act of 2008.
The stimulus package was aimed at boosting consumer spending, which makes up the bulk of economic activity. But that spending waned as the stimulus program wound down http://fcrwizard.com.
The government said Friday that gross domestic product, the broadest measure of the nation’s economic health, expanded at an annual rate of 2.8% in the April-June quarter, down from the 3.3% growth rate previously estimated.
With consumer spending accounting for two-thirds of the nation’s GDP, "it’s pretty clear now that were looking at a negative GDP number this quarter," said Bob Brusca, an economist at Fact and Opinion Economics.
Brusca noted that energy prices were subdued in August and that contributed to the income growth registered in the month. But he warned that "with weakness creeping into the economy, the outlook for income growth is not very good."
Monday’s report comes as Congress prepares to vote on a controversial $700 billion bailout of the financial system.
The plan would use tax dollars to buy up bad mortgage-related assets from Wall Street companies in a effort to stabilize the financial markets and prevent further damage to the economy.
The ruptured U.S. financial system faces an unprecedented shakeup with Lehman Brothers filing for bankruptcy, Bank of America buying Merrill Lynch and the Federal Reserve saying for the first time it will accept stocks in exchange for cash loans.
On a black Sunday for Wall Street, 10 of the world’s biggest banks also agreed to establish a $70 billion emergency fund, with any one of them able to tap up to a third of that.
Separately, troubled insurer American International Group asked the Fed for a lifeline, according to news reports.
The events, which followed three days of talks between bank CEOs and regulators at the Fed’s fortress-like Manhattan building, indicate that Wall Street and Washington were accepting that massive triage is needed in the face of the credit crisis and U.S no teletrack payday loans paydayloans. housing bust.
“The U.S. financial system is finding the tectonic plates underneath its foundation are shifting like they have never shifted before,” said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.
“It’s a new financial world on the verge of a complete reorganization.”
Lehman will become Wall Street’s highest profile bankruptcy since junk bond specialist Drexel Burnham Lambert succumbed in 1990.
S&P500 share futures were down 3.4 percent after Lehman announced it filed for Chapter 11 bankruptcy protection, indicating the stock market will open sharply lower on Monday, and the dollar tumbled.
U.S. stocks jumped Monday morning, with the Dow up more than 300 points, as investors hailed the government’s announced takeover of mortgage giants Fannie Mae and Freddie Mac.
The Dow Jones industrial average (INDU), the broader Standard & Poor’s 500 (SPX) index and the Nasdaq composite (COMP) all rallied in the early going.
Fannie-Freddie: On Sunday, Treasury Secretary Henry Paulson and James Lockhart, director of the new Federal Finance Housing Agency, said the agency was placing Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) under a "conservatorship" and that the Treasury would extend $200 billion worth of support.
While the markets perceive this as good news overall, it could wipe out individual stock owners. Fannie-Freddie’s $36 billion worth of shares are owned by a plethora of financial institutions including JPMorgan Chase (JPM, Fortune 500) and Sovereign Bancorp (SOV, Fortune 500), according to Keefe, Bruyette & Woods.
Shares of the two companies fell more than 80% in early trading.
World markets: Asian markets finished sharply higher in reaction to the Fannie-Freddie bailout, with Japan’s Nikkei index gaining 3.4%. European stocks rallied in midday trading, with Britain’s FTSE rising 3.8% and German’s DAX gained 3.4% instant payday loan cash advance.
The dollar rose versus the euro and the British pound, but slipped against the yen.
Boeing strike The strike by 27,000 Boeing (BA, Fortune 500) workers extended into its third day. For each day that the union members refuse to assemble airplanes, Being loses $100 million.
M&A: Tobacco giant Altria Group (MO, Fortune 500) said it would buy UST (UST), maker of dip products including Skoal and Copenhagen, for nearly $10 billion.
Economy: At 3 p.m. ET, the Federal Reserve will announce the level of consumer debt for July. A consensus of analysts projects $8.5 billion, down from the prior month’s total of $14.3 billion.
Oil: Crude futures rose $1.68 a barrel in electronic trading to $107.91, fueled by anxiety over Hurricane Ike. The hurricane is expected to enter the Gulf of Mexico - home to 4,000 drilling platforms, 32 refineries and 33,000 miles of pipeline - when it’s finished tearing through Cuba.
Also, Iran’s oil minister Gholam Hossein Nozari said OPEC is considering cutting oil production to reduce supply in a bid to bring up prices, which have declined in recent weeks.
Nokia Oyj (NOK1V.HE: Quote, Profile, Research, Stock Buzz), the world’s biggest cellphone maker, said it expects to lose market share in the third quarter as it fights to maintain profit margins, sending its shares as much as 14 percent lower.
Nokia warned its third-quarter market share would fall from the 40 percent notched up in the second three months of the year, compared with a steady market share it forecast earlier.
It said it expected the mobile device market in 2008 to be hit by weak consumer confidence in many markets and also cited tough competition in developing markets, its stronghold.
“Most alarming for me is that they’re saying they’re seeing more pressure in the low end of the market,” said analyst Neil Mawston at Strategy Analytics.
“That really defines their profits, volumes; they get a lot of their economies of scale out of it fast cash loans guaranteed payday loans. They really dominate that area,” he said.
Analysts said Nokia and some other top vendors were likely to be losing ground to small vendors who are cutting prices in the hope of winning increased orders in the competitive business.
Nokia said it would ramp up one mid-range model more slowly than planned, with analysts saying the comments were likely related to the 5320 music phone.
Due to the confluence of negative factors, Nokia said margins at its core Devices & Services unit would fall below 20 percent in the third quarter.
When Merrill Lynch announced last month that it would sell back its long-held stake in financial data provider Bloomberg L.P., chief executive John Thain was praised for moving aggressively to restore the firm’s capital position and slim its bloated balance sheet.
But a look at new Merrill (MER, Fortune 500) SEC filings suggests that enthusiasm for the $4.43 billion deal is misplaced, as the transaction adds virtually no cash to Merrill’s depleted pocketbook.
According to Merrill’s quarterly earnings report, filed Tuesday, the giant brokerage received just $110 million in cash in the sale of its 20% stake in Bloomberg back to its parent company, which is owned by New York City mayor Michael Bloomberg.
That means Merrill is getting less than 3% of the value of its Bloomberg stake in cash, despite the widely-held belief on Wall Street that the investment was increasingly profitable and - unlike so many assets on Merrill’s balance sheet - posed little risk to the firm.
In addition to the paltry cash payment, Merrill will receive $4.3 billion in 10-year and 15-year notes. Thain had indicated on Merrill’s quarterly earnings conference call last month that Merrill would be financing the sale of the Bloomberg stake, though he didn’t describe the terms.
Merrill has been under intense pressure since last fall’s disclosure that the firm stood to take huge losses on its holdings of collateralized debt obligations, which are risky debt tied in many cases to the imploding U.S. mortgage market.
Since then, Merrill has raised some $30 billion in new capital to fill holes created by more than $40 billion in writedowns. Share issuances tied to various capital-raising moves have diluted the stake of existing shareholders by more than 30%.
The disclosure of the Bloomberg financing terms comes as the market continues to puzzle over another deal Merrill struck last month to reduce its CDO exposure payday loan. The company sold securities once valued at $30.6 billion to Lone Star Funds for $6.7 billion, or 22 cents on the dollar.
Merrill agreed to finance 75% of that transaction, meaning it got $1.7 billion in cash while extending $5 billion in loans to Dallas-based Lone Star.
While some investors have criticized Merrill for agreeing to finance the sale of the CDO portfolio - they argue the deal’s structure essentially gives Lone Star the upside on a recovery in the CDO market, while potentially saddling Merrill with any losses beyond the cash payment - it’s striking that the broker is receiving more cash upfront in its CDO distress sale than it is in the sale of an appreciating, safe asset.
Why Merrill agreed to finance so much of the Bloomberg deal isn’t immediately apparent. A Merrill spokeswoman declined comment, and a Bloomberg representative didn’t return an e-mail seeking comment.
Merrill purchased a 30% stake in Bloomberg in 1985 for just $30 million, then later sold a third of that back to Bloomberg at a substantial premium. Since then, Bloomberg has become the leading provider of financial data to Wall Street and has branched into television and magazine publishing.
One common criticism of Merrill’s asset transactions - that because of Merrill’s financing involvement, the deals don’t effectively insulate the firm from losses and therefore aren’t truly sales - doesn’t seem to hold water.
Merrill "relinquished control of the assets to the buyer, who now bears the risk of loss and who has the right to pledge or re-sell the assets as they wish," notes accounting consultant Robert Willens. Accounting rules, he adds, "don’t say this has to be a good deal for the seller."
The private sector gained 9,000 jobs in July, primarily among small businesses and the service sector, according to a report payroll manager ADP released Wednesday.
While job growth was modest, it was much better than forecasts. A consensus of economists surveyed by Briefing.com had expected a loss of 60,000 non-farm jobs.
The gain in jobs was driven by the addition of 74,000 jobs in the service sector. Growth was also helped by 50,000 jobs added by small businesses. By contrast, large businesses shed 32,000 positions.
The construction industry lost 16,000 jobs, marking the 20th consecutive month of declines for that sector no fax payday loan. The construction industry has lost 350,000 jobs since August of 2006, according to ADP.
Meanwhile, the hard-hit financial sector gained 4,000 jobs in July, the report said.
The July report is a dramatic improvement from June, when the private sector shed a revised 79,000 jobs on a seasonally adjusted basis, according to ADP.
But the employment market is still weak, according to ADP’s three-month average for May, June and July, which shows a monthly decline of 14,000 private-sector jobs.
Japan's consumer prices rose at the fastest pace in a decade as food and gasoline costs climbed, squeezing household budgets and slowing economic growth.
Core prices, which exclude fruit, fish and vegetables, increased 1.9 percent from a year earlier after gaining 1.5 percent in May, the statistics bureau said today in Tokyo.
Higher prices are forcing consumers and companies to cut spending, threatening the economy's longest postwar expansion. Bank of Japan board member Atsushi Mizuno said yesterday that the benchmark interest rate should stay at 0.5 percent for now because growth is slowing.
“The BOJ isn't concerned with the inflation rate itself, they're concerned about the impact of prices on growth,'' said Hiroshi Shiraishi, an economist at Lehman Brothers in Tokyo. “They're not going to raise rates. They're going to be patient and wait to see if global growth or wages pick up.''
The gain in core prices matched the median estimate of economists surveyed by Bloomberg News.
The yen traded at 107.14 per dollar as of 12:19 p.m. in Tokyo from 107.33 before the report. The yield on Japan's 10- year bond fell 7 basis points to 1.58 percent after slumping U.S. home sales and German business confidence intensified concern that global growth will falter.
Soaring Across Asia
Inflation is soaring across the Asia-Pacific region, reports showed this week, complicating policy for central banks as economic growth cools. Malaysia's consumer prices rose at the fastest pace in 26 years in June. In Australia, the inflation rate surged to a two-year high in the second quarter.
The Bank of Japan is unlikely to raise rates even if inflation exceeds 2 percent, the higher end of the policy board's range for price stability, said Masaaki Kanno, chief economist at JPMorgan Securities Japan Co. in Tokyo.
“Core prices will exceed the range's higher end soon,'' said Kanno, who used to work at the Bank of Japan. “Even so, there's little chance for the central bank to raise rates because wages are barely growing and price gains aren't spreading to the overall economy.''
Governor Masaaki Shirakawa and his colleagues will keep the key rate, the lowest among major economies, on hold at least for the rest of the year, according to 31 of 33 economists surveyed by Bloomberg this month.
“I'm concerned about the combination of slower growth and high prices,'' Economic and Fiscal Policy Minister Hiroko Ota said. “Consumers are increasingly conscious of inflation and we're concerned about the effect that's having on sentiment.''
Consumers Pessimistic
Consumer confidence fell in June to the lowest level in at least 26 years because prices of daily necessities are rising faster than wages fast cash advance. Goods purchased at least 15 times a year climbed 4.2 percent in June, almost twice the pace of the previous month. Wages rose 0.8 percent in May.
Household spending dropped 2.8 percent in June, a fourth monthly decline, economists estimate a government report to show next week. Weaker consumption and exports probably caused the economy to shrink last quarter, according to economists.
Core prices in Tokyo, a harbinger of nationwide inflation, advanced 1.6 percent in July from a year earlier, also the steepest gain in 10 years. Prices in the capital increased 1.3 percent in June.
Crude oil, corn and wheat all reached records this year. Japan imports more than 60 percent of its food requirements, the highest among developed countries. It imports almost all of oil. Gasoline prices surged to a record 181.5 yen a liter ($6.41 a gallon) earlier this month.
Corporate Service Prices
Prices companies pay for services such as transportation and rent climbed 1.2 percent in June from a year earlier, the central bank said today. That's the fastest pace this year.
Core consumer inflation will probably accelerate further in July as utilities and processed food makers raise retail prices.
Tokyo Electric Power Co. and nine other power companies increased charges on July 1, as did four gas providers including Tokyo Gas Co. Tokyo Electric also plans to adopt a new pricing system in September to better reflect higher fuel costs, a sign that electricity charges will climb further later this year.
Board member Mizuno said he expects core price gains to reach about 2.5 percent in “the autumn.'' Still, he added, inflation isn't spreading because wage growth is moderate.
Excluding food and energy, a measure of inflation similar to that used in the U.S., Japan's consumer prices rose 0.1 percent in June from a year earlier. That's only the second time in the past 10 years that they have increased. The U.S. equivalent climbed 2.4 percent in June.
Japan's core prices will probably climb 1.8 percent in the year ending March 2009 and ease to 1.1 percent next fiscal year, the central bank said last week.
Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz) said on Monday it would be willing to reopen talks to buy all or part of Yahoo Inc (YHOO.O: Quote, Profile, Research, Stock Buzz), but only if a new Yahoo board is elected — a big boost for financier Carl Icahn’s board slate.
Microsoft, which broke off months-long talks in early May to buy the Internet company for $47.5 billion, said it would resume talks immediately if a new board were elected at Yahoo’s August 1 stockholder meeting. Yahoo shares leapt 12 percent.
The Microsoft statement came after Icahn, a billionaire who owns more than 4 percent of Yahoo, issued an open letter saying he had “spoken frequently” to Microsoft CEO Steve Ballmer over the last week. Previously, the two had not spoken.
“This is the first concrete confirmation we have that Microsoft is willing to come back to the table,” UBS analyst Ben Schachter said. “It gives Icahn a much stronger hand going into the shareholder vote. It significantly raises his profile and his likelihood for success.”
Ballmer told Icahn that a big impediment to any Yahoo deal was his concern that the current board could “mismanage” the company while the deal awaits regulatory approval, a process that could take nine months or more, according to Icahn.
In an interview, Icahn argued that his proposed dissident board slate would make Microsoft feel more secure in risking a large sum of capital to complete the deal during the regulatory approval process.
“You don’t have to be Sherlock Holmes to realize there is no great comfort zone between the current Yahoo board and Microsoft,” Icahn said guaranteed cash advance. “During this waiting period for regulatory approval, any acquirer — not just Microsoft — would want a steward they would feel comfortable with.”
In response, Yahoo issued a statement saying it continues to be willing to reopen talks with Microsoft, but “we feel strongly” that any deal negotiated between Icahn and Microsoft “would not lead to an outcome that would be in the best interests of Yahoo stockholders.”
Rates on 30-year mortgages eased this week, but remained above 6%, as signs that the overall economy is recovering helped offset ongoing weakness in the housing market, mortgage backer Freddie Mac said Thursday.
Freddie Mac said 30-year fixed-rate mortgages averaged 6.01% this week with an average of 0.6 point, down from 6.05% last week. Last year at this time, the 30-year loan averaged 6.15%.
"Despite the bleak housing market, there was positive news on the overall state of the economy," said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement.
Nothaft said comments made Tuesday by Federal Reserve officials, including Chairman Ben Bernanke, bolstered optimism that financial markets will recover later this year and "helped mortgage rates ease up a little this week."
A number of economic reports released this week also helped support the perception of recovery.
The Commerce Department said Tuesday that total retail sales fell 0.2% in April, meeting economists’ expectations and reversing a gain of 0.2% in March. But minus volatile auto sales, retail sales rose 0.5% last month, topping the consensus forecast of a 0.2% increase.
On Wednesday, the Labor Department said its Consumer Price Index, a key measure of inflation, rose at a slower-than-expected pace in March low fees payday loan. The overall index rose 0.2% last month, compared to the 0.3% increase recorded the month before.
But the component that measures food prices rose to an 18 year high, while the component that measures seasonally adjusted energy prices held steady.
Rates on other types of mortgages were unchanged or lower.
Freddie Mac said 15-year fixed-rate loans averaged 5.60% with an average 0.6 point, unchanged from last week. A year ago, the 15-year rate averaged 5.87%.
Rates on five-year adjustable-rate mortgages (ARMs) averaged 5.57% this week, with an average 0.6 point, down from last week when it averaged 5.67%. A year ago, the 5-year ARM averaged 5.89%.
One-year Treasury-indexed ARMs averaged 5.18% this week with an average 0.7 point, down from last week when it was 5.29%. At this time last year, the 1-year ARM averaged 5.48%.
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