Wednesday, March 26, 2008

Top Stories

Goldman forecasts global credit losses to hit $1.2 trillionGoldman Sachs
estimates the current market turmoil will result in $1.2 trillion in global credit losses and that Wall Street will bear 40% of the losses. "U.S. leveraged institutions have written off less than half of the losses associated with the bursting of the credit bubble," Goldman Sachs economists said in a research note. "There is light at the end of the tunnel, but it is still rather dim." Reuters (25 Mar.)

Global turmoil makes China even more cautious
With global markets in turmoil, corporate China is moving gingerly to balance the risk and reward of international investment. The caution was evident in the decision of Citic Securities, one of the largest brokerages in China, to back away from a $1 billion investment deal with Bear Stearns. MarketWatch (25 Mar.)

JPMorgan to absorb Bear's prime brokerage, clearing
JPMorgan Chase executives say Bear Stearns' prime brokerage and trade processing businesses, which employ about 800, will be integrated into JPMorgan's current operations. Bear's clearing business generated net revenue of $1.2 billion in the last fiscal year. Reuters (26 Mar.)

Brazil's Vale says merger with Xstrata failed
Merger negotiations between Brazilian iron ore producer Vale and Swiss rival Xstrata have failed and Vale says it plans to consider other takeover targets. Vale CEO Roger Agnelli said the deal collapsed over marketing rights, but another source said the two sides were unable to agree on a price. Analysts had valued the Swiss company as high as $90 billion. The Sydney Morning Herald (26 Mar.)

India's Tata Motors to buy Jaguar, Land Rover from Ford
Tata Motors, the largest automaker in India, has agreed to buy Jaguar and Land Rover from Ford Motor Co. in a deal estimated to be worth as much as $2.5 billion. The purchase has been in the works for nearly nine months while Ford and Tata hammered out retrenchment, pension liability, and parts supply, among other issues. ClipSyndicate/Bloomberg (25 Mar.) , Business Standard (India) (26 Mar.)

Banks apprehensive about Clear Channel buyout
The banks that had agreed to finance the $19.5 billion takeover of Clear Channel Communications are now balking. Bain Capital and Thomas H. Lee Partners, the private equity buyers, and Clear Channel may take the banks, including Citigroup, Morgan Stanley, Deutsche Bank, Credit Suisse and Wachovia, to court to force the deal, sources say. The New York Times (registration required) (26 Mar.)

M&A likely in technology sector as valuations fall
With valuations of technology companies falling, the major players see attractive takeover opportunities while the targets have few options. The tech bellwethers are taking advantage of the credit crunch, which has limited the options of their private equity competitors, by using their billions to make deals. Executives at eBay predict they will make as many as nine acquisitions in 2008, about twice as many as usual.
(25 Mar.)

Market Activity

Little movement in Asian markets, but panic eases
Japanese shares dropped on exporter losses while stronger commodity prices helped boost resource stocks to prop up Hong Kong and Australian markets Wednesday. The Nikkei 225 Average slid 0.9% while Singapore's Straits Times Index and Taiwan's Weighted index inched down 0.1%. The Hang Seng Index gained 0.6% as Australia's S&P/ASX 200 and China's Shanghai Composite advanced 0.5%. MarketWatch (25 Mar.)

Thornburg plans to sell $1.4 billion in bonds
Thornburg Mortgage Inc. plans to sell $1.4 billion in bonds in a private placement as it attempts to avert bankruptcy. Shares of the troubled jumbo mortgage lender soared following the announcement. The company is awaiting approval from the New York Stock Exchange to issue new securities. ClipSyndicate/Bloomberg (25 Mar.) , Financial Times (25 Mar.) , CNBC/Reuters (25 Mar.)

Bank revenues drop on fewer IPOs in Asia
Investment banks, including Morgan Stanley, Credit Suisse, Goldman Sachs and UBS, have seen their revenues from equity capital markets plummet in Asia as fewer companies opt to go public. Bank fees from Asia, not including Japan, have dropped by as much as
70.9% so far this year, according to data from Thomson Financial. Financial Times (25 Mar.)


Treasury, Fed efforts may leave taxpayers liable for billions
Efforts by the Treasury and the Federal Reserve to curb the financial crisis may put American taxpayers on the hook for billions of dollars, despite White House opposition to using public funds for a bailout. Experts say taxpayers could be liable if the emergency action to save
Bear Stearns
and the push to allow government-sponsored enterprises to buy more mortgage bonds run into trouble. Bloomberg (26 Mar.)

Euro rises against dollar, yen
A survey showing German business confidence rose in March caused the euro to rise against the dollar Wednesday. Europe's single currency also rose against the yen. Bloomberg (26 Mar.)
U.S. consumer confidence hits lowest level since 1973

The Conference Board's measure of consumer confidence plunged to 64.5 in March, the lowest level in about 35 years. Since December, the index has dropped 29% or 26.1 points. "Confidence in the state of the economy continues to fade," said Lynn Franco of the Conference Board Consumer Research Center. "Looking ahead, consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon." ClipSyndicate/Bloomberg (25 Mar.) , FinancialWeek (25 Mar.)

Japan's exports up in February, but U.S. slowdown a threat
Despite an economic slowdown in the U.S., exports from Japan were up 8.7% in February compared with the same month the previous year. Solid shipments of goods to Europe and Asia helped make up for reduced demand from U.S. "The biggest risk to Japan's exports is the United States," said Junko Nishioka, a Japan economist at ABN Amro. "If a U.S. slowdown continues to an extent that cannot be offset by demands from Asia and Europe, Japan could no longer rely on decoupling." International Herald Tribune/Reuters (26 Mar.)


FSA to propose tougher scrutiny of top U.K. banks
The Financial Services Authority is expected to propose greater scrutiny of major British financial institutions in the wake of the Northern Rock meltdown. The watchdog has been harshly criticized for its supervision of the bank. The FSA's report, due out today, will recommend that the regulator bolster its supervision teams and increase direct contact with the banks. ClipSyndicate/Bloomberg (26 Mar.) , Financial Times (25 Mar.)

Central banks unable to keep banks from hoarding cash
The central banks have tried to inject liquidity into the financial system, but they have not persuaded banks to relax their credit standards. In the U.S., U.K. and eurozone, bank borrowing costs actually rose, despite optimism in the stock markets and the efforts of the Federal Reserve, Bank of England and European Central Bank. Financial Times (25 Mar.)
Financial Products

Amex launches Bear Stearns actively managed ETF
The American Stock Exchange has launched what it says is the first actively managed exchange traded fund on the market, the Bear Stearns Current Yield Fund. "We are excited to mark another important milestone in the development of the ETF industry," said Scott Ebner, senior vice president of Amex ETF Marketplace. "YYY provides investors with access to a transparent, professionally managed portfolio of short-term fixed income securities." InvestmentNews (25 Mar.)

Israeli bank rolls out structured dollar deposit
Bank Leumi of Israel recently launched a structured dollar deposit that is designed to offer exposure to agricultural commodities, including soybeans, corn and wheat. Structured Products (25 Mar.)

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