(Fin24) - The rand has climbed against the dollar on Tuesday, after the US Federal Reserve cut its overnight rate, and global stocks pared their losses.
Tuesday, 22 January 2008
Monday, 21 January 2008
Stocks Plummet in Germany, Hong Kong, India, Brazil in Rout
(Bloomberg) -- Stocks plunged in Germany, Hong Kong, India and Brazil, and U.S. index futures dropped on mounting speculation that the global economy is slowing and company defaults will rise.
Europe's Dow Jones Stoxx 600 Index fell the most since the Sept. 11 terrorist attacks and sank into a bear market, as Allianz SE and BNP Paribas SA slid. Hong Kong's Hang Seng Index had its biggest drop in six years after BNP Paribas said Bank of China Ltd. may write down overseas securities by $4.8 billion because of losses from U.S. subprime mortgages. Citigroup Inc. retreated in Frankfurt.
The MSCI World Index slipped 2.3 percent to 1,405.27 at 1:53 p.m. in London, extending its decline from an Oct. 31 record to 16 percent. India's Sensitive Index lost the most since 2004, while Germany's DAX slid the most since March 2003. Futures on the Standard & Poor's 500 Index sank 3.5 percent. Trading in the U.S. is closed today for Martin Luther King Day.
``It's the worst I've ever seen,'' said Johan Stein, who helps manage the equivalent of about $14 billion at Nordea Asset Management in Stockholm. ``The financial system is in terrible shape, and no one knows where this will end.''
Today's declines follow the worst week for U.S. stocks in five years after President George W. Bush's $150 billion plan to revive the economy and expectations of interest-rate cuts failed to allay recession concerns.
The risk of European companies defaulting soared to a record today on speculation credit-rating cuts at bond insurers including Ambac Financial Group Inc. may trigger forced asset sales. European Central Bank council member Nout Wellink said economic growth in the region may slow more than policy makers had expected.
Market Crisis
``This is a stock-market crisis,'' said Alberto Roldan, head of research at Inverseguros SVB in Madrid. ``Investors believe that neither a government package nor a huge rate cut is going to help evade a recession in the U.S.''
The Stoxx 600 slid 4.2 percent, extending its drop from a 6 1/2-year high on June 1 to 22 percent. A decline of more than 20 percent is the common definition of a bear market. The gauge earlier fell as much as 5.8 percent, which would have been the biggest drop in six years. France's CAC 40 lost 5.1 percent. The U.K.'s FTSE 100 sank 4 percent, and Germany's DAX slid 5.9 percent.
The VDAX-New Index, a benchmark gauge of European stock- market volatility, surged as much as 39 percent, the most since 2001. The measure of expected price swings for stocks is derived from prices paid for options on Germany's DAX.
The MSCI Asia Pacific Index lost 3.7 percent. Australia's S&P/ASX 200 Index slumped for an 11th day. Hong Kong's Hang Seng Index lost 5.5 percent. Japan's Nikkei 225 Stock Average dropped 3.9 percent as the Finance Ministry cut its evaluation of five of 11 regional economies as housing investment fell and employment worsened.
`Sharp Contraction'
The MSCI Emerging Markets Index, a global benchmark, sank 5.1 percent, extending its retreat from an October record to 19 percent.
Brazil's Bovespa index slid 6 percent, the most since February 2007. Russia's Micex Index declined 5.9 percent, the biggest drop in a year.
Allianz, Europe's biggest insurer, tumbled 8.4 percent to 122.01 euros. BNP Paribas, France's second-biggest bank, sank 6.1 percent to 65.15 euros. ING Groep NV, the biggest Dutch investment bank, declined 7.6 percent to 21.66 euros.
``The market is finally catching on to the fact that a recession will lead to a sharp contraction in earnings,'' said Jane Coffey, head of equities at Royal London Asset Management, where she helps oversee about $11 billion. ``We need to see more aggressive changes to forecasts before investors become more positive about looking through the downturn.''
Swiss Reinsurance Co. decreased 8.5 percent to 69.9 Swiss francs. UBS AG cut its share-price estimate for the world's largest reinsurer to 80 francs from 88, citing the probability of more investment losses related to credit-market problems.
Earnings Risk
``We see on-going downside risk to earnings and stock performance until we have better visibility,'' London-based analysts including Ben Cohen wrote in a report to investors.
Bank of China, which has the largest holdings among Asian banks of U.S. subprime mortgages, slid 4.7 percent to HK$3.43. The bank may write down 17.5 billion yuan ($2.4 billion) for the fourth quarter of 2007, and an equal amount for this year, Dorris Chen, a Shanghai-based analyst at BNP Paribas wrote in a note on Jan. 18.
Commonwealth Bank of Australia, the country's second largest, dropped 2.5 percent to A$51.89. National Australia Bank Ltd., the nation's largest, declined 2 percent to A$35.55.
Morgan Stanley raised its 2008 forecast for loan-loss charges at the country's major banks by 26 percent, analyst Richard Wiles wrote in a note today, citing a deteriorating global economy and ``the difficulty faced by some companies in refinancing maturing debt.''
Iron ore supply deficit seen in 2008: report
(Reuters) - A worldwide iron ore supply deficit of between 20 million and 25 million tonnes is likely in 2008, Credit Suisse forecast in a report on Monday, on the back of high demand from steel mills.
Iron ore miners are earmarking billions of dollars to expand mines, build new ore freighters and automate operations to dig faster and deeper to satisfy steel mills hungry for more ore.
Credit Suisse also said it expects annual term iron ore prices to rise by 55 percent versus a consensus forecast of a 35 percent hike.
Iron ore prices are set annually by the big three mining companies, Vale (VALE5.SA: Quote, Profile, Research)(RIO.N: Quote, Profile, Research), Rio Tinto Ltd./Plc. (RIO.AX: Quote, Profile, Research)(RIO.L: Quote, Profile, Research) and BHP Billiton Ltd./Plc. (BHP.AX: Quote, Profile, Research)(BLT.L: Quote, Profile, Research), after closed negotiations with big steel producers in Europe, Japan and more recently China.
Demand for iron ore has taken off in recent years, led by rising steel production in China, now the world's top importer.
"Despite the expected slowdowns in the U.S. and credit tightening in China, 2008 will look very similar to 2007," Credit Suisse said in a report.
It said 2007 was one of the tightest markets ever for iron ore, leaving some steel makers short of the raw material.
"We are estimating another deficit of about 20 million-25 million tonnes against seaborne trade of about 870 million tonnes," it said.
Wednesday, 16 January 2008
Oil Falls Below $90 for First Time in 4 Weeks as Supplies Rise
(Bloomberg) -- Crude oil fell below $90 a barrel for the first time in four weeks after a U.S. Energy Department report showed that supplies rose more than expected.
Inventories surged 4.29 million barrels to 287.1 million in the week ended Jan. 11, the first increase in nine weeks, the report showed. Supplies were expected to rise 1.25 million barrels, according to the median of 15 responses in a Bloomberg News survey.
``This confirms that the seasonal period of crude-oil inventory builds has begun and gotten off to a good start with a larger-than-expected build,'' said Eric Wittenauer, an analyst at A.G. Edwards & Sons Inc. in St. Louis.
Crude oil for February delivery fell $2.47, or 2.7 percent, to $89.43 a barrel at 10:56 a.m. on the New York Mercantile Exchange. Prices touched $89.35 today, the lowest since Dec. 18. Futures reached a record $100.09 a barrel on Jan. 3. Prices are up 75 percent from a year ago.
Brent crude for February settlement declined $2.09, or 2.3 percent, to $88.89 a barrel on London's ICE Futures Europe exchange. Futures touched $98.50 on Jan. 3, the highest intraday price since trading began in 1988.
Refineries operated at 87.1 percent of capacity, down 4.2 percentage points from the week before, the report showed. It was the biggest one-week drop since September 2005 when Hurricane Rita shut refineries in Texas and Louisiana after roaring in from the Gulf of Mexico.
``The big drop in refinery runs is the most shocking number inside the report,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. ``It could be that we are seeing an early start to the next round of refinery maintenance.''
JPMorgan Fourth-Quarter Earnings Fall, Miss Estimates
(Bloomberg) -- JPMorgan Chase & Co., the third- biggest U.S. bank, said profit dropped 34 percent on subprime- mortgage writedowns and higher provisions for future loan defaults.
Fourth-quarter net income declined to $2.97 billion, or 86 cents a share, from $4.53 billion, or $1.26, a year earlier, the New York-based bank said today in a statement. JPMorgan rose as much as 6.8 percent in New York trading as the $1.3 billion writedown was smaller than analysts estimated.
The profit decline, the first since Jamie Dimon became chief executive officer in 2005, came as trading revenue fell and JPMorgan prepared for what it said may be a substantial weakening in the U.S. economy. The company added $2.3 billion to credit reserves, bringing the total to $10 billion. Citigroup Inc., the biggest U.S. bank, said yesterday it added $5.2 billion to cover U.S. loan losses and took an $18.1 billion writedown.
``We remain extremely cautious as we enter 2008,'' Dimon, 51, said in the statement. ``If the economy weakens substantially from here -- for which, as a company, we need to be prepared --it will negatively affect business volumes and drive credit costs higher.''
JPMorgan gained $1.68, or 4.3 percent, to $40.85 in composite trading on the New York Stock Exchange at 10:28 a.m.
``Their diversified business model really continues to separate JPMorgan from a lot of their peers,'' said William Fitzpatrick, an analyst at Racine, Wisconsin-based Optique Capital Management, which oversees $1.7 billion including JPMorgan shares.
Revenue Increase
Revenue climbed 7 percent to $17.4 billion, compared with the average estimate of $17.2 billion in the Bloomberg survey. Profit fell short of the 92-cent average estimate of 17 analysts surveyed by Bloomberg. Last year's fourth-quarter earnings included a one-time gain of $622 million.
Net income at the investment-banking division tumbled 88 percent to $124 million in the fourth quarter, as credit-market turmoil reduced revenue from debt underwriting 39 percent, to $467 million. Fixed-income revenue tumbled 70 percent because of the writedown, to $615 million, and ``weaker trading results'' contributed to a 40 percent drop in equity market revenue, which fell to $578 million.
The retail bank's profit climbed 5 percent to $752 million, driven by increases in mortgage banking. Those gains were tempered by declines in the home-equity and auto-loan businesses. Charge-offs on home-equity loans totaled $248 million. Profit from auto loans was $49 million, a 25 percent drop from a year earlier.
Credit Costs
Dimon said on a conference call with analysts that he isn't predicting a U.S. recession, though credit costs will increase as the economy weakens.
JPMorgan earned 15 percent less from its card services business, as its provision for future losses rose 40 percent to $1.79 billion.
Return on equity from continuing operations, a gauge of how effectively the company reinvests earnings, was 10 percent, compared with 14 percent a year earlier.
JPMorgan lost 18 percent of its market value in the past 12 months, compared with 50 percent at New York-based Citigroup and 29 percent at Charlotte, North Carolina-based Bank of America Corp.
JPMorgan's Tier 1 capital ratio, which regulators monitor to assess banks' ability to withstand loan losses, remained unchanged from the third quarter at 8.4 percent.
BEA accepts $8.5 billion Oracle offer
(Reuters) - Oracle Corp (ORCL.O: Quote, Profile, Research) on Wednesday won a three-month-long campaign to buy BEA Systems Inc (BEAS.O: Quote, Profile, Research) by raising its bid for the business software maker by 14 percent to $8.5 billion.
Activist investor Carl Icahn, BEA's largest shareholder with a nearly 13 percent stake, said he supported the deal, one of last year's highest profile corporate takeover battles.
Icahn and BEA's board initially rejected Oracle, saying it undervalued the company, but no other buyers emerged even as BEA's investment bank, Goldman Sachs, solicited bids from other software makers.
The price that BEA finally agreed to, $19.375 per share in cash, represents a compromise between the $17 that Oracle offered in October and the $21 that BEA had demanded.
"It's a fair price. It's a good deal for Oracle. It's a good deal for BEA," said Trip Chowdhry, analyst at Global Equities Research.
Shares of BEA rose 19 percent to $18.59 in morning Nasdaq trade, while Oracle shares were down 2 cents to $21.29.
BEA is a maker of "middleware," which helps business computer systems interact with each other. Oracle could sell its technology alongside its own middleware, database products and business-management software.
Metorex guns for CRC control
(Fin24) - Metorex, the JSE-listed diversified mining group, said it was confident it would vacuum up the remaining 5% it needed to complete the takeover of Copper Resources Corporation (CRC), an AIM-traded company with mining prospects in the Congo.
"We already own 45% of the company," said Charles Needham, CEO of Metorex at the group's annual general meeting held in Johannesburg suburb, Rosebank. "We have approached between 7% to 8% of CRC shareholders who are outside the offer to sell us the shares on the same terms and conditions."
"What if something goes wrong?" a shareholder asked Needham.
Said Needham: "We are pretty certain about getting at least 5% of those."
Metorex bought 38.7% of CRC in July last year plus a 5% stake in its 75% held subsidiary MMK from the Forrest group for R600m. The Metorex share price stood around R24 at the time and it subsequently rose to an all-time high of 2 950c.
But by mid-January, Metorex's share price was 38% off its 12-month high and was last trading at 1 902c, another 5% decline on the day.
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