Bank rout raises new fears The new Obama administration on Tuesday came under immediate pressure to rescue the battered financial sector as bank stocks plunged amid growing fears over their capital needs, reports the FT. The S&P Financials index lost nearly 17%, leading a 5.3% retreat in the overall US stock market. Among big banks, Citigroup fell 20% to $2.80; Wells Fargo lost 24%; and Bank of America 29%. State Street plunged nearly 60% after reporting a 71% fall in Q4 profits. Bank shares also slid in the UK after the government's decision to pump billions of dollars into RBS, which revived talk that the US government might rescue Citi for the third time in three months. The WSJ looks at rescue options being considered by the government. See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51451/bank-rout-raises-new
| Sterling continues to tumble Sterling continued its slide on currency markets on Tuesday, dropping 2.7% on a trade-weighted basis amid uncertainty about the terms of the government insurance for toxic assets held by banks and fears of creeping nationalisation of the sector. Analysts said sterling had been trading with strong correlation with UK bank stocks, which suffered fresh falls. The likelihood that the Bank of England would soon create money to buy assets has intensified speculation that sterling's value will be progressively eroded. This week, it has fallen 4.5% against the euro, 5.8% against the yen and 6.1% against the dollar, retreating about 34% against the dollar from highs in November 2007. More FT reports here. See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51450/sterling-continues-t
| Bank of England to buy up corporate bonds The Bank of England will start to buy corporate bonds in large quantities within weeks to increase liquidity and reduce the spread of corporate bond yields over government bonds, Mervyn King, its governor, said Tuesday night, as he outlined what he called "unconventional, unconventional measures" to limit the severity of the recession. See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51449/bank-of-england-to-b
| Uneasy start for Lloyds Banking Group Shares in the new Lloyds Banking Group, created on Monday through Lloyds' takeover of mortgage lender HBOS, plunged 31% on Tuesday to close at 44.8p. The huge sell-off in UK bank stocks this week was triggered by news on Monday that Royal Bank of Scotland would announce a 2008 loss of up to £28bn. But investors' concerns on Tuesday centred on Lloyds, and fears that it risks having to raise more capital to absorb losses from HBOS's corporate loan book. There was little new information to explain such a large fall. Indeed, Lloyds made clear on Monday it had "traded satisfactorily" since it updated the market in mid-December. See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51448/uneasy-start-for-llo
| Overseas lenders shun UK banks Funding difficulties for UK companies are being made worse by a sharp reduction in lending to British banks by overseas institutions. Outstanding loans to UK banks by overseas institutions fell about 20% in the four months to November alone, and was particularly sharp from banks in other EU member states, according to Bank of England data. The fall highlights the extent of the government's challenge to increase the flow of funds to companies. Market loans and holdings of certificates of deposit have roughly halved in that time, as have deposits at UK building societies, while European bank holdings of UK bank commercial paper are off by a third. See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51447/overseas-lenders-shu
| UK banks welcome FSA steps Amid the blizzard of measures unveiled by the UK government and financial regulators this week, one of the least-noticed might turn out to be among the most significant in easing the pressure on Britain's banking sector. Bank executives on Tuesday hailed the Financial Services Authority's statement on bank capital as a clear signal that the regulator is seeking to ease the strains on banks' balance sheets caused by the credit crunch and subsequent economic crisis. But it remains to be seen whether investors and credit ratings agencies will follow the FSA in allowing banks to reduce their capital ratios significantly during the coming economic downturn. See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51446/uk-banks-welcome-fsa
| State Street stokes bank fears State Street, one of the world's biggest asset managers, deepened fears about the US financial sector on Tuesday as it reported a 71% in quarterly net profits and its share price halved. Investors were rattled by a surge in unrealised losses on State Street's investments and concerns that the custody bank might have to raise more capital. Net unrealised losses on State Street's investments rose to $6.3bn at Dec 31, almost twice the level of three months before, helping drive down Q4 net income to $65m from $223m a year ago. The quarterly results were worse than analysts had expected, although the bank tried to brace investors last week. See Lex on State Street's plight. See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51445/state-street-stokes-
| Chrysler hopes Fiat to boost aid bid Chrysler declared its new alliance with Fiat would enhance its long-term viability in an apparent bid by the Detroit carmaker to strengthen its case for billions of extra dollars in US government aid. The partnership, under which Fiat will acquire a 35% stake in Chrysler, has also fuelled speculation about the future of Chrysler's relationship with Japan's Nissan. Chrylser and Nissan have production deals involving two small cars and a pick-up truck. Nissan said Tuesday that it remained open to "other potential product-sharing agreements". Bob Nardelli, Chrysler's chief executive, said in a note to stakeholders that its new alliance would give it access to all Fiat vehicle platforms, except Ferrari. See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51444/chrysler-hopes-fiat-
| France taps US investors for funds A French state-controlled agency is looking to US investors for the first time to help raise several billion dollars of bail-out funding for the country's banks. Société de Financement de l'Economie Française – the French agency created to raise funding in the bond markets using a government guarantee for its banks – said selling dollar-denominated bonds would help diversify its investor base. It plans to sell up to €70bn in bonds this year - the first time France has sold government guaranteed bonds in dollars, highlighting moves by European banks and agencies to diversify funding sources ahead of a surge of issuance that could weigh on the market. See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51443/france-taps-us-inves
| State aid for French car industry The French government said Tuesday it would earmark up to €6bn ($7.8bn) for a rescue plan for its car industry hit by plunging demand and a decline in competitiveness. Much of the money is likely to come in the form of loan guarantees and soft loans – mainly for Renault and PSA Peugeot Citroën – for which France still needs the approval of the European Commission. Francois Fillon, prime minister, said state aid to Europe's car industry had to be "totally co-ordinated" at an EU level, particularly on the issue of loans. But he expressed growing frustration with the length of the Commission's approval processes. See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51442/state-aid-for-french
| China braces for bleak data Chinese leaders have called for rapid action to reverse the economic slowdown as Q4 GDP figures due Thursday are expected to record the slowest pace of growth in almost a decade. After years of rapid expansion, the economy has been hit by a housing slump and the impact of the global slowdown on its export markets. Economists predict GDP grew at an annual rate of 6 to 7.5% in the fourth quarter last year, down from 9% the year before and 13% annual growth in 2007. Amid expectations of further deterioration in the months ahead, Wen Jiabao, prime minister, will visit Europe next week to discuss responses to the crisis. See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51441/china-braces-for-ble
| Singapore's 'worst ever' recession Singapore's economy shrank more than expected in the fourth quarter, prompting the government to declare the nation was in its worst ever recession and fanning expectations that the central bank will let its currency weaken, reports Reuters. The Singapore economy shrank 16.9% in the fourth quarter, far exceeding forecasts of a 12.5% contraction, detailed government data showed on Wednesday. The government said it now expected Singapore's economy to contract 2 to 5% percent this year, slashing its forecast further from an already downgraded outlook of a range of minus 2% to plus 1% published just three weeks ago. See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51440/singapores-worst-eve
| BHP Billiton to axe 6,000 jobs In Categories: People Posted at 05:32 by Gwen Robinson BHP Billiton, the world's biggest mining group, on Wednesday said it would axe 6,000 employees and contractors from its global operations. The Anglo-Australian group added it would shelve operations at its Ravensthorpe nickel mine and cut production at its Mount Keith nickel mine, both in Western Australia, due to the sharp fall in nickel prices. The moves will result in a $1.2bn impairment charge, on top of a $2.1bn provision announced at last year's annual meeting. Job cuts affecting operations in Australia, the US, and Chile will result in one-off costs of $500m, said Alex Vanselow, BHP's CFO, who spoke as BHP announced it Q2 production figures. See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51439/bhp-billiton-to-axe-
| Schapiro replaces Cox at SEC Christopher Cox stepped down as US SEC chairman, leaving behind a demoralised agency that failed to spot Bernard Madoff's alleged fraud and had its role diminished by the collapse of Bear Stearns and Lehman Brothers, reports Bloomberg. Cox, whose resignation took effect Tuesday, will be replaced by Mary Schapiro, who was CEO of the Financial Industry Regulatory Authority. See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51438/schapiro-replaces-co
| SEC to review Apple disclosures on Jobs US regulators are examining Apple 's disclosures about CEO Steve Jobs's health problems to ensure investors weren't misled, reports Bloomberg. A review by the SEC does not mean investigators have seen evidence of wrongdoing, said a person familiar with the matter. Bloomberg reported last week that Jobs is considering a liver transplant as a result of complications after treatment for cancer, according to people who are monitoring his illness. Investors have been pressing for information on Jobs's health since June, when he appeared noticeably thinner at an Apple event. See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51452/sec-to-review-apple-
| Overnight markets: Downward Asian stocks continued their decline on Wednesday, led by financial companies and metals producers, on concern that mounting bank losses worldwide will deepen the global recession and squeeze demand for the region's commodities. Asian markets (Wed)
05:26am GMT
Nikkei down 121.50 (-1.51%) to 7,944.29
Topix down 14.90 (- 1.85%) 790.13
Hang Seng down 233.67 (-1.80%) at 12,726.10 US markets (Tues)
DJIA down 332.13 (-4.01%) at 7,949.09
Nasdaq down 88.47 (- 5.78%) at 1,440.86
S&P500 down 44.90 (-5.28%) at 805.22 European markets (Tues)
FTSE100 down 17.07 (-0.42%) at 4,091.40
Eurofirst 300 down 16.75 (-2.12%) at 774.48 Currencies
05:24 GMT
€/$ 1.2966 (1.2993)
$/¥ 89.85 (90.19)
£/$ 1.3948 (1.4177) Commodities
05:21 GMT
Brent Crude (Mar09) up $0.13 at $43.75
Light Crude (Mar09) up $0.44 at $41.28
100 Oz Gold (Feb09) down $2.90 at $852.30
Copper (Mar09) up 30.00 at $3,330.00 10-year government bond yields (%)
US 2.41 (2.36)
UK 3.44 (3.43)
Germany 2.98 (2.99)
Japan 1.21 (1.23) Sources: FT, Reuters See this article online.
http://ftalphaville.ft.com/blog/2009/01/21/51437/overnight-markets-do
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