15/02/08

The Dow Jones dropped 175.3 points to close at 12,377, the S&P 500 lost 18.35 points to end at 1,348.85. The Nasdaq tumbled 2,332.54

Financials were at the forefront of losses again. FGIC Corp, the fourth largest bond insurer, raised new concerns in the credit market after Moody's Investor Service cut its rating on the company. FGIC is owned by a group including private equity firm Blackstone Group, whose shares were off 4.7% to a record low of $16.83.

Swiss bank UBS was one of the biggest losers of the day, dropping 8.3% to $33.94. The company reported a quarterly loss of $11.3 billion on a write-down of $13.7 billion related to bad mortgage debts. Also going lower, JPMorgan Chase fell 3.4% to $42.61 and Bank of America Corp slid 2.5% to $42.24.

Elsewhere, Intel Corp declined 3.5% to $20.46 after Goldman Sachs removed the chip maker from its "conviction buy" list. Clothing retailers tumbled after Liz Claiborne Inc forecast a large shortfall in fourth quarter profit. The company itself plummeted 18.4% to $18.31, while Jones Apparel Group Inc fell 9.9% to $15.45 in sympathy.

Treasury prices slipped, raising the on the benchmark 10 year note to 3.8% from 3.72% late Wednesday.

US light crude oil for March delivery climbed $2.19 to $94.46 a barrel. COMEX gold for April delivery rose $0.60 to settle at $910.80 an ounce.

The Nikkei finished almost unchanged this morning, down 3.9 points at 13,622.6. The index trimmed almost all of its morning losses on late futures-led buying. Mitsubishi Corp jumped to a two month high, while Showa Shell Sekiyu (the Japanese unit of Royal Dutch Shell) soared the most in six years after UBS AG recommended investors buy the stock.

The Hang Seng is currently 118.8 points higher at 24,140.4 this morning. Cnooc ltd led oil producers higher on speculation the US economy won't fall into recession and will support crude prices. Great Eagle Holdings Ltd jumped the most in four years after selling a mall to unit Champion Real Estate Investment Trust.

London's FTSE 100 Index slipped yesterday after fresh fears over the US economy affected trading on both sides of the Atlantic. London's blue-chip index closed 0.8 points lower at 5879.3. It had been nearly 60 points up earlier in the day.

Banks were the main losers in London, as Swiss giant UBS confirmed full-year losses of £2bn and mortgage lender Bradford & Bingley's poor results from yesterday continued to knock sentiment. Mortgage giants HBOS and Alliance & Leicester were hit for 34p (631p) and 15.5p (543.5p) respectively. Barclays was also in the red, down 10.75p at 443p, and Royal Bank of Scotland also joined the slide, off 8.25p to 361p. Meanwhile, FTSE 250 stock Bradford & Bingley failed to recover from Wednesday's 23% fall, losing another 0.5p to 186.5p.

US-reliant building supplies company Wolseley also lost ground amid the weak trading, losing 17.5p to end the day at 680p. The gloom also spread to several retailers, with Home Retail Group off 11p at 264.5p, and Kingfisher retreating 3.5p to 132.1p. Losses among banks were countered by advances for heavyweight mining stocks as takeover talk buoyed shares. Metals group Vedanta Resources was the leading beneficiary - up 50p to 2004p - as the sector accounted for three of the top five risers. Xstrata lifted 72p to 3852p and Lonmin rose 79p to 3359p.

Blue-chip drinks giant Diageo was also among gainers, up 47p to 1081p, after the group posted healthy interim profits and maintained full-year forecasts. The group cheered the results of a concerted advertising push for its Guinness stout with news of a 3% gain in European sales volumes.

Elsewhere, nuclear power plant firm British Energy gained 9p to 542p on speculation that the company could be broken up. Meanwhile insurer Standard Life made advances after announcing that it had reinsured half of its total annuity liabilities in a move that should add at least £100m to operating profits this year. Shares rose 3.5p to 210.75p.

January import prices are seen rising 0.4 percent as crude oil prices increased a bit. The year on year rate would rise from 10.9 percent to 12.7 percent, but ex-petroleum import prices should be more contained at about 3 percent year on year.

US Empire manufacturing (Feb) 13.30 gmt

The Empire index slowed to 9 in January, still a respectable reading. If the index can stay around this level this month (HSBC est 11), it will increase the odds that ISM manufacturing can stay above breakeven, following the latest rebound to 50.7. One concern is that new orders slowed to 0 in last months Empire report, while employment was also soft, falling to 2.4 from 5.

US Net long term TIC flows (Dec) 14.00 gmt

Cross boarder security flows (bpth sales and purchases) declined sharply in September following the liquidity crunch in August. Total transactions increased in October and November, but it is expected to be partly reversed in December. Net foreign purchases of US securities could slow to USD40bn. However, US residents might be net sellers of foreign securities for a second straight month, which had not previously occurred since 2004. Net long term flows are expected to total USD60bn.

US Industrial production (Jan) 14.15 gmt

Aggregate manufacturing hours were flat in January, There was a 0.2 percent increase in durable manufacturing hours worked, but this was offset by a 0.8 percent decline in non durable manufacturing hours. Textiles, printing, apparel, and plastics were particularly weak. A 0.1 percent decline in manufacturing production is expected, but an increase in electricity output may boost total IP up to 0.1 percent.

US University of Michigan confidence (Feb, prelim) 15.00 gmt

This weekly, ABC Washington Post consumer comfort survey has dropped 10 points over the last two weeks, hitting a new cycle low of -33. This is a negative development for confidence, and Michigan sentiment is expected to drop back down to 76.

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