31/12/07

Stocks rallied early morning on a report of possible asset sales in the financial services sector. But gains were quickly pared by news of a steep decline in the number of new homes sold in November. The US Department of Commerce said new home sales fell by 9 percent in November, their largest drop in more than 12 years. Markets slumped immediately following the report as investors fretted over how the troubled housing market will impact the overall economy. Meanwhile, the Chicago purchasing managers index came in stronger than expected, signalling some economic growth.

On the financial services front, the Wall Street Journal reported Friday that US and European banks, including Citigroup and HSBC are considering the sale of a number of branches and units. The report follows a Goldman Sachs analyst report Thursday saying Citi could write down as much as $18.7bn in the fourth quarter and may have to cut its dividend by 40 percent.

In other news, the Wall Street Journal reported that Warren Buffet is preparing to enter the bond insurance business. Other bond insurers, including MBIA and Ambac Financial Group have been battered by the fallout of the subprime mortgage meltdown. Anticipation of Buffet's entry into the bond insuring industry is enough to send shares of MBIA and Ambac down roughly 13 percent in afternoon trade.

US light crude for January delivery fell 56 cents to $96.60 on NYMEX.

Treasury prices rose, with the yield on the 10 year note falling to 4.10 percent, down from 4.19 percent on Thursday.

COMEX gold for February delivery rose 20 cents to $839.60 an ounce.

Tokyo stock market is closed today. For the year, the Nikkei average fell 11 percent, its first annual decline in five years, making it the world's worst performing major stock market, as Tokyo shares were overshadowed by booming markets and vibrant economies elsewhere in Asia.

UK stocks fell on Friday, breaking a six day stretch of gains as concerns about the impact of the credit crunch and a slowing economy weighed on banks. The FTSE100 closed 20.9 points lower at 6476.9, on the last full trading session before the end of the year, but still rallied for a second week in a row.

Banks were the biggest weight on the index after another round of weak US data, and warnings from Goldman Sachs on Thursday of more write downs on Wall Street heightened investor concern for this sector. Barclays, RBS, HSBC, HBOS, Standard Chartered and Alliance and Leicester were down between 0.3 and 1.1 percent. The Wall Street Journal said on it website that US and European banks including Citigroup and HSBC were mulling sales of parts of their businesses, from branches to entire units, to prepare for crunch times ahead.

Among other decliners, Astrazeneca closed 0.8 percent lower, after a Finnish court dismissed the company's request for precautionary measures against Finnish rival Orion over infringements of its patents.

Oil stocks were mixed despite firmer crude prices. BG Group, Cairn Energy and Tullow Oil were higher, while BP and Royal Dutch Shell eased. A State Judge ruled that the state of Alaska acted property when it rejected as inadequate a development plan for the long languishing Point Thomson oil and gas field on the North Slope. That 2005 rejection led to the State's December 2006 revocation of the Point Thomson unit's lease to operator Exxon Mobil Corp and its partners BP, Chevron Corp and ConocoPhilips.

Miners were mixed, with Anglo American, Vedanta Resources and Antofagasta trading higher, while Xstrata, Kazakhmys and Rio Tinto fell.