Bernanke calms nationalisation fears US stocks leapt on Tuesday after Fed chairman Ben Bernanke told Congress that stress tests of big US banks from this week are unlikely to see any of them nationalised outright. His remarks signalled that the government intends to support major banks as going concerns in the private markets, taking equity stakes as necessary in what would amount to partial nationalisations. Bernanke said the plan was a Treasury initiative, but offered a broad endorsement that which seemed designed to help prepare the ground for a future government request for more bail-out funds. Read his full remarks to Congress here. See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52874/bernanke-calms-natio
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Merrill hit by unseen $500m charge Ineffective internal controls at Merrill Lynch caused the firm to understate its 2008 losses by more than $500m, the investment bank said on Tuesday in its annual report. Merrill, which was acquired by Bank of America on Jan 1, shocked investors last month with the disclosure of a $15.3bn Q4 loss and full-year losses of $27.1bn. But in its revised figures, Merrill disclosed that its losses for 2008 were $27.6bn. The additional $500m loss appears to be due to Merrill's use of a flawed model for measuring the value of derivatives in its hedging strategy. See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52873/merrill-hit-by-unsee
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Citi nears deal with Treasury Citigroup and the US Treasury are nearing agreement on a deal to give the US government a stake of about 40% in the troubled bank in return for strengthening its capital base. No agreement has yet been reached and the government has yet to approve Citi's plan, which stops short of outright nationalisation. But negotiations between Citi's executives and Treasury officials have progressed since the weekend and an announcement could come as early as Wednesday or Thursday, said insiders. See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52872/citi-nears-deal-with
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Iceland ends threat to UK over assets Iceland's new government has dropped plans to take the UK government to the European Court of Human Rights over its use of anti-terror laws to freeze Icelandic assets, ending the most vicious spat between the UK and Iceland since the 1970s cod war. The previous government pledged in January to pursue legal action against the UK in Europe for its decision to use the anti-terror legislation, claiming the British move massively undermined confidence in its banking system and triggered its eventual collapse. See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52871/iceland-ends-threat-
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UK banks haggle with Treasury Two of Britain's biggest banks were engaged in last-minute haggling with the Treasury about the terms of a £500bn plan to insure toxic assets, as chancellor Alistair Darling urged them to "clean up their balance sheets and rebuild…" Darling believes his plan – dubbed "Operation Broom" – is a one-off chance for RBS and Lloyds Banking Group to restore their credibility, and hopes to strike a deal before the banks announce heavy losses in their annual results on Thursday and Friday respectively. See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52870/uk-banks-haggle-with
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Japan exports plummet - again Japan's exports plunged 45.7% in January, resulting in a record trade deficit amid collapsing overseas demand for the country's cars and electronics, reports Bloomberg. The shortfall widened to Y953bn ($9.9bn), the most since comparable records started in 1980. The January drop in exports eclipsed December's record 35% decline. GDP shrank at an annual 12.7% pace last quarter, the most since the 1974 oil shock. See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52869/japan-exports-plumme
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Tokyo eyes share scheme Japan's government could buy shares to prop up the ailing stock market in a desperate attempt to limit the economic fallout from tumbling equity prices. Kaoru Yosano, the new finance minister, said the government was examining measures including a 1960s scheme involving two consortia that spent Y400bn ($4.1bn) to shore up stock prices over two years. His comments came as Japanese share prices continued to plunge, ahead of news Wednesday that Japan's exports plunged a quarterly 46% in January. See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52868/tokyo-eyes-share-sch
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AIG may scrap strategy AIG may scrap a plan to repay a $60bn US government loan by selling businesses, after failing to find enough promising bidders, reports Bloomberg. The insurer's CEO Edward Liddy, who took charge in September, is proposing additional ways to reduce the group's public debt, including handing over stakes in some operations directly to the government. The development come as AIG prepares to disclose a Q4 loss of about $60bn and, as the FT reported Tuesday, holds talks about a fresh government bail-out. See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52867/aig-may-scrap-strate
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GE denies unit needs more cash General Electric on Tuesday disputed an analyst's suggestion that the division may need more cash, saying a recent $9.5bn equity infusion into the conglomerate's GE Capital unit would cover its obligations should the finance arm trip a fixed-charge covenant on its debt. Deutsche Bank analyst Nigel Coe had cut his target price on GE from $17 to $12 and cast doubt on the finance division's profit forecast, pushing GE's shares down nearly 6% on Monday and lifting the cost of insuring GE Capital's debt against default near a record high. See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52866/ge-denies-unit-needs
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German CDS spreads hit record The cost of bankruptcy protection on German debt has reached an all-time high on spill-over from the financial crisis in Eastern Europe and concerns about the stability of Germany's banking system, reports the Telegraph. Credit default swaps measuring risk on five-year sovereign debt touched 90bp on Tuesday and look set to rise above French debt for the first time. The spike follows a warning by Deutsche Bank that Germany's economy will contract by 5% this year as industrial exports collapse at the fastest pace since the Great Depression. See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52865/german-cds-spreads-h
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China corporate debt to gain China's unsecured corporate bonds may gain on government plans to allow insurers to buy the debt with their Rmb 3,300bn ($483bn) in assets, reports Bloomberg. The China Insurance Regulatory Commission will require insurers to set up internal credit-rating systems before allowing them to invest in debt not backed by a third party. Insurers are now only permitted to buy corporate bonds of state companies with guarantees. See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52864/china-corporate-debt
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Buyers queue for Lehman HK assets The liquidators of Lehman Brothers' Hong Kong operations have been approached by more than 250 parties interested in the bank's assets, it has been disclosed. The unexpected level of interest offers hope to thousands of creditors of the eight HK entities, which account for the bulk of the bank's Asian operations ex-Japan. The revelation came at a media briefing in HK, the first since KPMG was appointed as a liquidator after Lehman's collapse last September. See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52863/buyers-queue-for-leh
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States agree €13bn HSH bail-out Two federal states in northern Germany were on Tuesday forced to agree a €13bn ($17bn) bail-out of HSH Nordbank, the shipping financier, whose writedowns on complex structured credit products have crippled the regional lender and hit state budgets. Politicians from Schleswig-Holstein and the city-state of Hamburg, which together own 60% of HSH, met to discuss the rescue package, which requires approval by both parliaments. The deal comprised a €3bn capital injection and €10bn in guarantees on future credit risks. See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52862/states-agree-e13bn-h
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Police raid Anglo Irish HQ Irish anti-fraud officers raided the Dublin headquarters of Anglo Irish Bank on Tuesday as part of an investigation into alleged breaches of company law at the specialist property lender, which the Irish government nationalised last month. Brian Cowen, Irish prime minister, told parliament that the ODCE, the government-appointed watchdog conducting the probe, could not disclose the nature of its investigation at this stage. See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52861/police-raid-anglo-ir
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Ford chiefs accept 30% pay cut In Categories: People Posted at 04:09 by Gwen Robinson Bill Ford, chairman of Ford Motor, and Alan Mulally, the Detroit carmaker's chief executive, have agreed to cut their salaries by 30% this year in a drive to show they are sharing in the sacrifices demanded from lower-level workers. In a staff memo on Tuesday, Ford and Mulally reiterated Ford's resolve not to accept a public bail-out. Meanwhile the CEOs of Ford's key rivals, GM and Chrysler have agreed to nominal salaries as part of the conditions for $17.4bn in emergency loans they have received from Washington. See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52860/ford-chiefs-accept-3
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Overnight markets: Up and away Asian stocks rallied on Wednesday from a five-year low, led by Japanese automakers and the region's mining companies, as the yen weakened and commodity prices rose. Futures on the S&P 500 Index dropped 0.2% after the gauge jumped 4% in New York on Tuesday as Fed chairman Ben Bernanke said there was a "reasonable prospect" the current recession will end this year.
Asian markets (Wed)
03:50am GMT
Nikkei up 107.33 (1.48%) to 7,375.89
Topix up 6.54 (0.9%) 736.82
Hang Seng up 151.16 (1.18%) at 12,949.68 US markets (Tues)
DJIA up 23.16 (3.32%) at 7,350.94
Nasdaq up 54.11 (3.9%) at 1,441.83
S&P500 up 29.81 (4.01%) at 773.14 European markets (Tues)
FTSE100 down 34.29 (-0.89%) at 3,816.44
Eurofirst 300 down 10.01 (-1.37%) at 719.38 Currencies
03:43 GMT
€/$ 1.2849 (1.2713)
$/¥ 96.90 (94.92)
£/$ 1.4536 (1.4547) Commodities (updated)
03:45 GMT
Brent Crude (Apr09) down $0.25 at $42.25
Light Crude (Apr09) down $0.08 at $39.93
100 Oz Gold (Apr09) down $3.80 at $965.70
Copper (3M 24hr) down $70.00 at $3,335.00 10-year government bond yields (%)
US 2.80 (2.78)
UK 3.41 (3.45)
Germany 2.99 (3.00)
Japan 1.29 (1.26) Sources: FT, Reuters See this article online.
http://ftalphaville.ft.com/blog/2009/02/25/52847/overnight-markets-up
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