FTSE 100	3915.64, +69.66	Dow	7182.08, -88.81
FTSE 250	6123.75, +81.6	Nasdaq	1391.47, -33.96
FTSE All Share	1970.18, +32.37	S&P 500	752.83, -12.07
Nikkei	7568.42, +110.49	Hang Seng	12811.57, -83.37
Oil (Crude)	$45.22	Gold	$942.60
Base Rate	1%	10 Yr Gilt	3.604%
£/$	1.4205	£/€	1.1213
1 month LIBOR	1.412	3 month LIBOR	2.058

 

Markets

London - UK stocks closed higher on Thursday, on stronger financials, which were bolstered by government measures to support RBS, while falling energy stocks capped gains. The FTSE100 closed 66.66 points higher at 3915.64. RBS rose 25.5 percent, despite reporting a loss of £24.1bn for 2008, the biggest loss in British corporate history. Investors took comfort from the fact the Treasury will inject £13bn to help RBS pay for a new scheme that will transfer most of the risk from £325bn in toxic assets and risky loans to the taxpayer. Analysts remained sceptical about whether the recovery in equity markets is sustainable. Lloyds added 30.7 percent to top the FTSE leaderboard. Barclays and HSBC both added 7 percent, while Standard Chartered rose just 0.9 percent.

Insurers were also in demand, with RSA Insurance gaining 11.5 percent after it posted a 7 percent rise in its 2008 operating profit, ahead of market expectations, and hiked its dividend by 10 percent.
Legal and General added 27.5 percent, with traders saying an apparent resolution of banking problems has led hedge funds to exit short positions, after worries on its capital structure eased. Legal and General is planning to cut between 250 and 450 jobs, in response to changing business demand. Prudential, Aviva, Friends Provident and Old Mutual gained between 12 percent and 15.8 percent.

Miners recovered after recent falls, with Rio Tinto, BHP Billiton, Anglo American and Xstrata up between 1.1 percent and 4.3 percent.
Energy companies, however, ran out of steam after a recent rally, although the price of crude gained ground. BP, Royal Dutch Shell and Tullow Oil lost between 0.1 percent and 1.2 percent.
BG Group added 0.1 percent after acquiring a 29 percent stake in Australian coal steam gas producer Pure Energy Resources Ltd.

In economic news, The Nationwide reported that house prices fell by a bigger than expected 1.8 percent in February for a record annual decline of 17.6 percent.

New York - US stocks fell on Thursday erasing early gains, as investors digested the health care and banking initiatives in President Obama’s federal budget amid continued worries about the economy. After the close, Dell reported quarterly sales and earnings that missed analysts’ earnings forecasts, sending the stock 3 percent lower in extended hours trading. Financials propelled the market through the late morning. But the advance lost steam as the session wore on and stocks closed in the red. Banking stocks held on to gains on hopes for the government’s various rescue plans. But technology transportation, retail and health care stocks all declined. Health care stocks fell in response to the overhaul of the sector described in the President’s fiscal budget. The DJIA closed 88.81 points lower at 7182.08, the Nasdaq fell 33.96 points to close at 1391.47 and the S&P500 fell 12.07 points to close at 752.83.

In Washington, President Obama outlined his plans for the federal budget for the next ten years, with a more detailed account due in April. The plan includes making some permanent tax breaks from the stimulus plan, ending certain tax breaks for the wealthy and moving closer to a universal health care system. The budget includes an additional $250bn to stabilize the financial system, which Obama’s economic team says would be the net cost of buying up to three times as much in bad assets. That would be on top of the $700bn bank bailout plan already in existence. The plan calls for $3.6trn in spending in fiscal 2010, which begins in October. The government is forecasting a $1.75trn deficit for the 2009 fiscal year and a $1.17trn deficit for the 2010 fiscal year. Obama has said he plans to cut the deficit inherited from George Bush in half by 2013.

In company news, JPMorgan Chase said it expects steeper home equity loan losses this year and that it will cut up to 14,000 jobs, more than it said previously. Citigroup is close to finalising a deal for the government to increase its stake in the bank to as much as 40 percent. A deal was expected to be announced shortly. Citi shares fell as mush as 2.4 percent.
UBS has named Oswald Gruebel, the former head of Credit Suisse, as its new CEO, replacing Marcel Rohner. GM reported a massive $9.6bn quarterly loss in the fourth quarter, in a period in which its sales plunged and it needed a deferral bailout to stay afloat. The stock fell 6.7 percent.
Humana, United Health Group and Aetna all slipped in response to the overhaul of health care detailed in President Obama’s budget, in particular the smaller Medicare payments to private insurers.
Yahoo gained on news that CFO Blake Jorgensen is leaving as part of a broader reorganisation initiated by new CEO Carol Bartz.

In economic news, new home sales plunged to an annual rate of 309,000 in January, the worst level since the government began keeping records in 1963. Economists thought sales would fall to 324,000 in the month. Sales stood at an 344,000 annual unit rate in December. An earlier report showed that weekly jobless claims rose to a fresh 26 year high last week of 667,000 versus forecasts for a drop to 625,000. Claims stood at a revised 631,000 in the prior week. Durable goods orders fell to a 6 year low in January, falling for the sixth straight month. Orders fell 5.2 percent in January, versus forecasts for a drop of 2.5 percent. Orders dropped a revised 4.6 percent in December.

Treasury prices fell, raising the yield on the 10 year note to 2.99 percent from 2.92 percent Wednesday.

US light crude for April delivery rose $2.72 to settle at $45.22 a barrel on NYMEX.

COMEX gold for April delivery fell $23.60 to close at $942.60 an ounce.

Tokyo - The Nikkei average closed higher today, rising on defensive stocks such as KDDI Corp with banks getting a brief boost on news of a likely agreement between the US government and Citigroup. The Nikkei average closed 110.49 points higher at 7568.42. After the close, Sony Corp said company President Ryoji Chubachi would step down and CEO Howard Stringer would double up as president. The move comes about a month after the company warned it would post a record annual operating loss. A person familiar with the Citigroup deal said that under its terms, up to $25bn in US government held preferred shares will be converted to common stock and the deal will give the government a stake of 30 to 40 percent. Banks briefly jumped on the news before paring gains in tandem with the Nikkei, which fell from highs in late afternoon trade as U.S. stock futures edged lower. Additional pressure may have come from the yen’s rebound from a three-month low against the dollar as speculators pocketed their dollar profits after the currency’s steep run up against the yen.

The market received support from data showing Japan’s industrial output in January was in line with a median market forecast, even though the 10.0 percent fall from the previous month was the biggest drop on record.

Economics

US GDP (Q4, prelim) 13.30 gmt

The Q4 GDP growth rate could be revised lower to -5.4 percent, down from the initial estimate of -3.8 percent. Residential and non residential investment, as well as the contributions from inventories and net trade, may all be reduced. Data released over the past month ahs shown downward revisions to construction spending, capital goods shipments, and business inventories, along with a wider trade deficit in real terms. The price deflator may remain at -0.1 percent.

US Chicago PMI (Feb) 14.45 gmt

The 12.5 points decline in the Empire Index (to an all-time record low of -35) and the 17 point fall in the Philadelphia Fed to -41 suggest that other manufacturing surveys may also soften further this month. The Chicago PMI has averaged 34 for the past three months, down from 55.9 as recently as last September. The sharp pull back in auto sector activity has likely contributed to the weakness. A drop to 30 is expected, down from 33.3 in January.

Corporate

Charter International beat expectations with an 11 percent increase in full-year profit to £197.7m and said it remained confident for both its units, despite the global downturn. Analysts were expecting on average full-year pre-tax profit of £192.5m, compared with £178.1m pounds in 2007. Charter has two units - ESAB, which makes welding and cutting equipment, and Howden, which makes gas-handling equipment.
It last month announced the loss of 940 jobs at ESAB after the slump in global steel demand hit the unit’s end markets, particularly in the automotive sector.

"These results reflect the extreme challenges faced by our markets during the period. We have responded with a progressive and radical programme of cost reductions," Chief Executive Geoff Wilmot said in a statement. The firm issued a profit warning last week, saying full-year results would likely be significantly below forecasts due to the drop in advertising revenue.

Lloyds Banking Group said it had not yet finalised details of its plan to put billions of pounds of assets into a UK government-backed insurance scheme, as it unveiled a massive loss for 2008. Lloyds said HBOS suffered a 2008 statutory loss of £10.8bn as it was hit by £9.9bn on bad loans. HBOS’s loss was in line with guidance it gave two weeks ago in a shock profit warning. Lloyds said the former Lloyds TSB business reported a statutory profit of £807m, down from £4bn, as its impairments jumped to £3bn. It said talks with the UK government on an asset insurance scheme "are progressing and are well advanced", but there was no certainty about the outcome. The bank had been expected to announce it was putting over £250bn of assets into the plan.

Serco Group said today its pre-tax profit rose 19 percent in 2008 to £136m, while good visibility and long term contracts helped it reiterate guidance through 2012. The company said revenue climbed 11 percent last year to £3.1bn, and that it expected the figure to rise to £5bn in 2012. The results were in line with analyst forecasts.

The above details are provided for information only and are not intended to be construed a solicitation for the sale or purchase of any particular investment nor as specific investment advice.

 

 

Posted: February 27th, 2009 under Asset Management.
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