Monday, January 21, 2008

World Financial Markets Plunge

Wall Street Braces for More Volatility as stocks fell sharply worldwide Monday following declines on Wall Street last week amid investor pessimism over the U.S. government's stimulus plan to prevent a recession.

^MERV MerVal Argentina 1,876.870 3:00PM EST Down 125.590 (6.27%)
^BVSP Bovespa Brazil 53,709.11 3:15PM EST Down 3,797.29 (6.60%)
^GSPTSE S&P TSX Composite Canada 12,190.59 3:02PM EST Down 546.53 (4.29%)
^MXX IPC Mexico 25,471.641 2:56PM EST Down 1,242.189 (4.65%)
^MIBTEL MIBTel Italy 25,606.0000 11:40AM EST Down 1,304.0000 (4.85%)
^GDAXI DAX Germany 6,790.19 11:45AM EST Down 523.98 (7.16%)
^AORD All Ordinaries Australia 5,630.900 12:11AM EST Down 168.500 (2.91%)
^HSI Hang Seng Hong Kong 23,818.86 4:59AM EST Down 1,383.01 (5.49%)
^SSEC Shanghai Composite China 4,914.435 2:00AM EST Down 266.079 (5.14%)
^N225 Nikkei 225 Japan 13,325.94 2:00AM EST Down 535.35 (3.86%)

U.S. stock futures point to major decline on re-open
By Steve Goldstein, MarketWatch
Last update: 11:19 a.m. EST Jan. 21, 2008

LONDON (MarketWatch) -- If futures contracts traded on a day when U.S. stocks weren't even due to open are anything near accurate, then markets will be in for a major decline on Tuesday, with concerns about bond insurers and the health of financial institutions dragging markets lower.

March contracts on the Dow Jones Industrial Average traded 482 points lower to 11,624.

Futures contract don't move in complete lockstep to the underlying indexes, but by comparison, the Dow industrials fell 382 points on Sept. 20, 2001, just days after the terrorist attack on the Twin Towers, and by 387 points on Aug. 9, 2007, shortly after the recent credit crunch first emerged.

S&P 500 futures fell 55 points to 1,270.10 and the Nasdaq 100 futures lost 72.25 points to 1,777.25. U.S. markets were closed Monday for the Martin Luther King holiday. Trading won't resume until Tuesday.

The futures declines are on the back of big drops in European and Asian stock markets. From developing markets like Shanghai -- down over 5% -- to established ones in Paris -- down nearly 6% -- financial institutions around the world sold off.

Strategists at Morgan Stanley told clients on Monday to stay in cash. "Our themes continue to be: patience, earnings recession, U.S. recession spreading global, bear market regime, don't be lured into value stocks as most are likely to be value traps, much more monetary easing. We expect flat but volatile markets just as in the 1989-92 period -- a real whipsaw environment for the market," they said.

Much of the fear stems from worries about potential ratings cuts for bond insurers, such as Ambac Financial (ABK) and MBIA (MBI) , AAA ratings are on thin ice. Fitch Ratings on Friday downgraded Ambac to AA from AAA after the bond insurer abandoned its plan to sell $1 billion in equity.

When a bond insurer is downgraded, all the securities it has guaranteed are, in theory, downgraded as well -- putting some $1.4 trillion of municipal bond securities at risk and more than $600 billion of structured finance securities at risk.

The fears were lent some support when the head of France's central bank, Christian Noyer, said that French banks "clearly, like all banks, in the world still (are) in the process of marking down assets."

In Asia, markets feared an $8 billion write off from the Bank of China, one of China's big four financial institutions. The rescue plan presented by President Bush last week in a bid to help the U.S. avoid recession also wasn't well-received by markets.

"Ambivalence over Bush's rescue plan for the U.S. economy was the trigger of this rout," said Martin Slaney, head of derivatives at GFT Global Markets. The Japanese yen surged against rivals -- up about 2% against the euro and 1% against the U.S. dollar -- with investors trimming risk by buying back the low-yielding currency.

WestLB of Germany added to concerns by saying it would lose about $1.5 billion this year and take a write-off of similar size. "Market sentiment is really sour," said Gerhard Schwarz, a strategist at UniCredit Markets. "There's been more bad news from the financial sector on top of continued recession fears," he said, speaking of Monday's equity market action.



Economic fears cuff Asia; India, Hong Kong slide
Recession fears spark heavy selling; Japan, China, South Korea also slump
By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) -- Asian markets were battered Monday, with fears the U.S. may slip into recession triggering heavy selling that dragged down the indexes in Japan, China, Hong Kong, India, South Korea and Singapore by at least 3%.

Indian stocks were hit the hardest, dropping nearly 11% at one point in afternoon trading, before recovering.

Australian shares extended their losing streak into the 11th straight session, while New Zealand stocks took losses into the 13th consecutive day.

Financials such as Sompo Japan Insurance and HSBC Holdings as well as technology shares such as Infosys Technologies and Satyam Computer Services hit new 52-week lows during the session, while mining giant Rio Tinto reversed the prior session's sharp gains.

The Japanese yen scored heavily against major currencies, as risk-averse investors reversed their yen carry trades.

Hirokazu Yuihama, regional head of strategy at the Daiwa Institute of Research in Shanghai, attributed the decline in markets to fears of an impact on exports from Asia, in the event the U.S. enters a recession.

"The decoupling between the U.S. and Asian economies is still in progress. Though the U.S. growth rate has been declining, the growth of exports from Asia is steadily growing in double digits," said Yuihama.

"It is no longer a question of avoiding recession in the U.S. any more. It is a case of damage limitation, because the damage has already been done," said Andrew Clarke, a sales trader at SG Securities in Hong Kong. "The [U.S. authorities] now have to get on and act fast."

The selling was sparked by a slump on Wall Street Friday, when the Dow Jones Industrial Average declined for the fourth day in a row on fresh concerns that U.S. bond insurers could trigger another wave of big write-downs from banks and brokerage firms.


Stocks in Europe crushed on financial-sector worries
Fears for write-downs hammer Societe Generale, Credit Agricole, BNP Paribas
By Sarah Turner, MarketWatch
Last update: 10:21 a.m. EST Jan. 21, 2008

LONDON (MarketWatch) -- Stocks in Europe sold off massively on Monday, with banks and insurance firms pacing a hasty retreat, as fears of more asset write-downs intensified amid continuing gloom over economic prospects.

"Market sentiment is really sour," said Gerhard Schwarz, a strategist at UniCredit Markets. "There's been more bad news from the financial sector on top of continued recession fears," he said, speaking of Monday's equity market action.

The pan-European Dow Jones Stoxx 600 index plunged 4.3% to 313.52, pulled down by notable losses from banks and insurance firms such as Societe Generale and Allianz. The index earlier touched a low of 308.69, marking the biggest one day drop for at least six months.

Leading national indexes were putting in an even worse performance, with the French CAC-40 index down 5% to 4,837.40, the German DAX 30 index down 6% to 6,879.17 and the U.K. FTSE 100 index down 3.6% to 5,691.90.

The sell-off came after a downbeat day on Friday for U.S. stocks cemented the worst weekly performance on Wall Street for five years and as Asian markets fell sharply on Monday.

Losses from financials were to blame in both cases, after U.S. bond insurers came under fire from a ratings agency and as a proposed economic stimulus plan from President Bush failed to generate much enthusiasm.

"Ambivalence over Bush's rescue plan for the U.S. economy was the trigger of this rout," said Martin Slaney, head of derivatives at GFT Global Markets. And technical selling may have played a part in Monday's losses in Europe, according to Bart Robenek, senior strategist at Fortis.

"I think that there is technical selling. There were stops triggered," he said.

Friday, January 18, 2008

Financial Market Summary Friday, January 19, 2008

Exchange Traded Funds Top 10 Percentage Gainers

DJIA down 59.91 points to 12099.30
NASDAQ down 6.88 points to 2340.02
S&P 500 down 8.06 points to 1325.19
10-year T-note down 1/32 at 105 02/32 yield 3.630
NYMEX Spot Crude up $0.44 at $ 90.57/bbl at close
Dollar/Euro down 0.0022 at 1.4620
Gold ETF (GLD) closed at $87.42 +0.92
Silver ETF (SLV) closed at $ 160.30 +3.13
Financial Sector ETF (SKF) closed up at $129.65 +8.15
Financial Sector ETF (XLF) closed down at $25.50 -0.30

MOST ACTIVE ETF (Symbol) LAST, NET CHG, PERCENT CHG
ProShrUSFnl SKF 129.65 +8.15 +6.7
iShrChina25 FXI 156.94 +7.92 +5.3
ProShrUSRlEst SRS 138.8 +6.80 +5.2
PwrShrDvMktTch PIZ 22.53 +0.96 +4.5
PwrShrJapan PSE PJO 44.9 +1.75 +4.1
ProShrRss2000Val SJH 113.43 +4.33 +4.0
PwrShrDynAPac PUA 24.35 +0.85 +3.6
iShrMSHK EWH 19.95 +0.68 +3.5
iPathNickelETN JJN 44.88 +1.51 +3.5
WisdmTrJpnSmCp PSE DFJ 42.25 +1.42 +3.5

The Volatility Index (VIX) market sentiment indicator spiked up today to 29, a level last seen just before the market rallied in late November 2007.

BUSH CALLS FOR STIMULUS PACKAGE OF UP TO $150 Billion
President Bush calls for tax incentives for businesses and "direct and rapid" tax relief for individuals, saying a stimulus package should be passed as soon as possible to shield the U.S. economy from a steep downturn. He also says plan should include business incentives. Treasury Secretary Paulson says that the biggest portion of the economic stimulus package should be targeted at consumers.

Economic growth will be weak this year, but a modest fiscal stimulus packageof $100 billion could lead to a rebound in the second half of 2008, an American Bankers Association panel says It puts the probability of a recession at 50%.

AMBAC LOSES AAA RATING FROM FITCH
Fitch downgrades troubled bond insurer to AA, saying decision reflects significant uncertainty with respect to its franchise, business model and strategic direction, after Ambac abandons plans to reinforce its capital base by selling $1 billion in equity.

US STOCKS DOWN ON NEW CONCERNS ABOUT BOND INSURERS
A U.S. stock rally dissipates, with equities selling off for a fourth day straight, as new concerns about bond insurers overrode cheer that came with solid results from IBM and GE. Also, President Bush calls further attention to the economic troubles roiling the globe. DJIA down nearly 100 points.

FANNIE MOVES ON PLAN TO CUT DIVIDEND 30%
Mortgage giant will proceed with a planned 30% dividend cut in the current quarter, lowering the payment to 35c a share. Firm said last month the board planned to approve the dividend cut in January. Shares fall 7%.

GE 4Q NET UP 4% ON INFRASTRUCTURE STRENGTH
Conglomerate's net income of $6.7 billion, or 66c a share, is buoyed by booming global demand for big-ticket items such as aircraft engines and wind turbines, as well as strength from its NBC Universal unit. Shares up 4%.

SPRINT SLIDES 25% ON SUBSCRIBER FIGURES
Shares plunge 25% as wireless carrier reports worse-than-expected losses in cellphone subscribers and issues a gloomy outlook for 2008. Sprint also says it will streamline operations to reflect slowing growth, beginning with 4,000 job cuts.

EMBATTLED SALLIE MAE TO LAY OFF 350
A collapsed $25 billion buyout offer and higher borrowing costs have prompted Sallie Mae, the nation's largest student lender, to lay off about 3% of its work force nationwide as part of an effort to cut costs 20% by 2010.

TROUBLED, BUT TEMPTING
With its mortgage business in turmoil and legal clouds gathering, Washington Mutual still is a tempting target, with investors sending its shares up 6% on speculation that the bank could be an acquisition target.

BOND INSURER ACA FACES DEADLINE ON PACT
At midnight, the clock runs out on a regulator demand that ACA get signed forbearance letters from clients of its financial guarantee business, allowing ACA to avoid posting nearly $1.7 billion in collateral on credit default swaps.

BROADENS EMPLOYMENT-DISPUTE REVIEW
The U.S. Supreme Court has broadened its review of employment disputes in the workplace by adding three new appeals to an already busy employment-law docket.

US CONSUMER SENTIMENT INDEX RISES
The Reuters/University of Michigan preliminary January consumer sentiment index moves to a reading of 80.5, from 75.5 in December. Forecasters surveyed by Dow Jones Newswires had expected to see a reading of 74.5.

CARLYLE CO-FOUNDER STILL SEES GOOD DEALS
With the buyout market slowing down because of the credit crisis, Carlyle Group co-founder David Rubenstein says to expect much smaller buyouts, non-leveraged deals where firms take a minority stake and overseas transactions.

US OIL FIRMS' 4Q SEEN LIFTED BY HIGH OIL PRICES
Energy ETF: XLE +0.15 closing at $68.90
Energy ETF: USO +0.051 closing at $71.54
Energy ETF: OIL +0.26 closing at $52.64

Over the next two weeks, major oil companies will report banner-headline profits for the 4Q, led by a sharp rise in oil prices. Earnings for the group are expected to be 15% above the same period last year and up 10% sequentially.

SCHLUMBERGER 4Q NET UP 22% ON GLOBAL ACTIVITY
Shares fall 7% as oilfield-services company reports net income of $1.38 billion, or $1.12 a share. Revenue, which is seen as a bellwether for the sector, climbs 17% to $6.25 billion. Analysts expected EPS of $1.13 a share on $6.1 billion in revenue.

Bond Insurers Defending Ratings Raises Fears
Investors in bond insurers' stock, who have worried for weeks industry leaders like MBIA and Ambac would lose their key AAA credit ratings, found something new to fret about: That the companies would actually try to defend them.

ANALYSIS
Firms Exposed Heavily To Bond Insurers
Merrill Lynch opens the door a crack on how seriously banks may be exposed to the spiraling decline of companies that insure bonds and complex structured securities, such as collateralized debt obligations.