Stocks slump after US retail sales
Shareprices moved sharply lower in New York yesterday, on poor retail sales figures and concern over the future of banking giant Citigroup. The benchmark Standard & Poor’s 500 Index fell 3.35 per cent and the negative moves continued in Asia this morning, with the MSCI Asia Pacific Index slumping 4.2 per cent to its lowest close since December 8th. Japan’s Nikkei 225 Index fell 4.9 per cent and in South Korea the Kospi Index declined six per cent. In London the FTSE 100 Index opened half a per cent lower, after a nearly five per cent drop yesterday.
Fresh concerns hit banking sector
More “turmoil” hit the banking sector as Deutsche Bank issued a profit warning and analysts said that HSBC might need a “massive injection” of capital, reported the Independent. Deutsche said it would post a net loss of €3.9bn for 2008, its first loss for fifty years. The news alarmed many in the markets as the bank had previously been “unscathed” by the credit crunch, and its shares fell eight per cent, triggering declines in the rest of the banking sector. HSBC also fell eight per cent, with some analysts predicting the need for up to $30bn of new capital.
The recession is worse than we are being told 
ECB set to cut interest rates
The European Central Bank is set to cut interest rates later today, amid increasing worries that the eurozone could “implode” as the recession hits home, said the Guardian. The ECB is expected to reduce borrowing costs from 2.5 per cent to two per cent as inflationary concerns give way to worries over deflation and recession. The bank has been seen as slow to react to the deteriorating situation in comparison with the US Federal Reserve and UK Bank of England, which are both moving rates towards zero.
Nortel files for bankruptcy
Nortel Networks, the Canadian telecoms equipment-maker, filed for bankruptcy protection on Wednesday, to become “the sector’s first big victim”, reported the Financial Times. The company had been Canada’s biggest by market value at the peak of the technology boom but is now expected to be broken up and sold off in parts to its rivals. The filing came just one day before it was due to make a $107m interest payment on its $4.47bn long-term debt-pile. It could also face a pension deficit of as much as $2.8bn.
US repossessions jump 81%
Reposessions in the US soared 81 per cent last year as a result of falling house prices and tighter mortgage lending, reported Bloomberg.com. According to housing data company RealtyTrac more than 2.3m properties received a default notice or were repossessed by lenders. Programmes offered by banks and laws designed to slow the process have had little success in slowing the repossession “tsunami”, according to the company. House prices in the US have fallen every month since January 2007 and the 18 per cent decline last October was the “fastest rate on record”.
Equitable victims to get payout
Victims of the near-collapse of insurance group Equitable Life are set to receive taxpayer compensation, but face “delays” and stand no chance of receiving the full £5bn claimed, said the Financial Times. The “eight-year wrangle” over compensation is likely to continue, however, as Treasury chief secretary Yvette Cooper sets up a study to determine the extent of the taxpayer’s responsibility. The insurer “came close to collapse” in 2000, when it was closed to new business and left with a £1.5bn shortfall.
...in brief..................
Apple chief takes leave and oligarch close to Evening Standard purchase
Apple chief Steve Jobs announced yesterday that he was taking six months medical leave, “prompting concern” for the company he heads, said the Financial Times. Apple shares were halted ahead of the news, then fell 10 per cent to $76.88 in after-hours trading…………
DSG, the UK’s biggest electrical retailer, announced a 10 per cent drop in sales in the 12 weeks to January 10th, reported the Daily Telegraph. The fall came as shoppers “cut back discretionary spending” and held off purchasing televisions and computers ahead of further price-cuts…………
Primark enjoyed a successful Christmas period, with sales “soaring” by more than a fifth as customers continued to flock to its cut-price stores, said the Guardian. Parent Associated British Foods said that total sales at the chain rose 21 per cent in the last 16 weeks of the year…………
Man Group, the biggest hedge-fund management group in the world, is looking at legal action to recover its losses from the Bernard Madoff scandal, said the Independent. The group said last month that it had about $360m invested in funds directly or indirectly advised by Madoff…………
Mitsubishi UFJ Financial Group, Japan’s biggest bank, is to book Y288bn, or $3.2bn, in charges for losses on stock market investments, reported Bloomberg.com. The group’s retail bank lost Y257bn on equity investments in the third quarter but no changes have been made to earnings forecasts…………
Alexander Lebedev, the Russian oligarch and former KGB agent, is “close to taking control” of UK newspaper the London Evening Standard, reported the Times. If the sale goes through it would mark a “seismic shift” in the industry. An announcement is expected later today…………
Posts
