Jan. 17 — U.S. stocks gained after better- than-estimated results at JPMorgan Chase & Co. and Wells Fargo & Co. spurred confidence that banks will rebound from credit- market losses. The euro fell the most this year against the dollar after European Central Bank council member Yves Mersch cited “downside risks” to the region’s economic growth. JPMorgan Chase & Co. net falls, writedown smaller than expected.
TOP STORIES/MOST READ ON BLOOMBERG
JPMorgan Net Falls; Writedown Smaller Than Estimated
JPMorgan Chase & Co., the third-biggest U.S. bank, said profit dropped 34 percent on subprime-mortgage writedowns and higher costs 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 7.2 percent in New York trading as the $1.3 billion writedown was smaller than analysts estimated and the company reported higher earnings from consumer banking, credit cards and asset management.
While the profit decline was the first since Jamie Dimon became chief executive officer in 2005, JPMorgan’s subprime related losses were a fraction of the $18.1 billion reported yesterday by Citigroup Inc., the largest U.S. bank and Dimon’s former employer. JPMorgan said it has prepared for what may be a “substantial weakening” in the U.S. economy by adding $2.3 billion to credit reserves, increasing the total to $10 billion.
Ambac Will Cut Dividend, Raise $1 Billion in Capital
Ambac Financial Group Inc. ousted its chief executive officer, slashed the dividend 67 percent and will raise more than $1 billion to preserve its AAA credit rating after announcing the biggest-ever writedowns by a bond insurer.
Ambac, the second-largest insurer of municipal and structured finance debt, fell the most ever on the New York Stock Exchange, extending a 76 percent decline from the past 12 months. Ambac will report a loss after reducing the value of securities it guarantees by $3.5 billion, according to a statement today.
Director Michael Callen, 67, will become chairman and interim CEO, replacing Robert Genader, 60, who said three weeks ago that the dividend wouldn’t be cut. Ratings companies are threatening to lower their rankings of Ambac and larger competitor MBIA Inc. after the companies expanded away from their traditional municipal-bond businesses into guaranteeing securities linked to subprime mortgages that last year began plunging in value.
NFL Hires Goldman Sachs Top-Ranked Analyst as CFO
Goldman Sachs Group Inc. analyst Anthony Noto, a former West Point football player, is leaving the bank to become chief financial officer of the National Football League.
Noto, who joined Goldman in 1999, was the top-ranked analyst for research on the Internet industry by Institutional Investor magazine from 2003 to 2007 and runs the communications, media and entertainment team. The NFL’s CFO role has been vacant for five years, spokesman Greg Aiello said today in an e-mail.
Noto, 39, an all-American linebacker at the U.S. Military Academy, was an Army Ranger and received a Master of Business Administration degree from the University of Pennsylvania’s Wharton School. He starts at the NFL on Feb. 24 to oversee finance and strategy.
Deutsche Bank Set to Cut 250 to 300 Jobs, Person Says
Deutsche Bank AG, Germany’s biggest bank, is eliminating 250 to 300 jobs in its global markets division, according to a person with knowledge of the reduction.
The staff cuts, which began this week, are across the unit run by Anshu Jain, including equity sales and trading, debt capital markets and derivatives, said the person, who declined to be identified. The division is making “some adjustments to individual business lines to refocus resources towards areas with the greatest growth potential,” London-based spokeswoman Michelle Gathercole said, without giving further details.
Chief Executive Officer Josef Ackermann said this week that the U.S. housing crisis sparked by last year’s surge in U.S. subprime mortgage defaults may not be over and banks may have to report further writedowns. The Frankfurt-based company has announced about 2.28 billion euros ($3.3 billion) in markdowns and trading losses because of the debt market slump.
MAIN ECONOMIC RELEASES TODAY Figures are based on Bloomberg survey of economists:
N.Z. 4th-Qtr Consumer Prices Seen Rising 1% Vs Qtr Ago, 3% on Yr Australian Jobless Rate May Drop to 4.4%, Jobs Seen Up 20,000 Sri Lanka Seen Keeping Key Interest Rate Unchanged at 10.5% Japan’s Revised Industrial Production for November Is Released Singapore’s December Exports Seen Increasing 5.3% Vs Year Ago Hong Kong’s Unemployment Rate Seen Unchanged at 3.6% in December **China’s Dec. Foreign Direct Investment Report May Be Released
Reliance Industries Ltd., India’s biggest company, may say net income in the third-quarter rose on higher earnings from oil refining and chemicals.
China National Petroleum Corp. may say it aims to increase its 2008 crude oil output as energy demand rises in the world’s fastest-growing major economy.
Ranbaxy Laboratories Ltd., India’s second-biggest drugmaker, may say profit fell in the fourth quarter on a drop in sales of its generic version of Merck & Co.’s cholesterol-lowering pill Zocor in the U.S.
MAIN ANALYST UPGRADES/DOWNGRADES *CHINA MOBILE RAISED TO `BUY’ FROM `NEUTRAL’ AT DAVENPORT & CO. *RANBAXY CUT TO `NEUTRAL’ FROM `BUY’ AT UBS *TDK CUT TO `EQUALWEIGHT’ FROM `OVERWEIGHT’ AT LEHMAN BROTHERS *WORLEYPARSONS RAISED TO `BUY’ FROM `NEUTRAL’ AT UBS *TELECOM N.Z. CUT TO UNDERPERFORM FROM NEUTRAL AT CREDIT SUISSE *DONGFENG MOTOR STOCK RATING CUT TO `NEUTRAL’ AT CREDIT SUISSE *ENERGY RESOURCES RAISED TO `BUY’ FROM `NEUTRAL’ AT UBS *LI NING RAISED TO `OVERWEIGHT’ FROM `NEUTRAL’ AT JPMORGAN *MACQUARIE LEISURE RAISED TO `BUY’ FROM `NEUTRAL’ AT UBS *NIPPON OIL RAISED TO `EQUALWEIGHT’ BY MORGAN STANLEY *EXIDE INDUSTRIES RATING CUT TO `2-EQUALWEIGHT’ AT LEHMAN *SUMITOMO TRUST CUT TO `EQUALWEIGHT’ AT MORGAN STANLEY *ANHUI CONCH’S HONG KONG SHARES RAISED FROM `SELL’ AT UBS
The Nikkei 225 futures contract due in March fell 155 to 13,350. The Hang Seng Index futures for January slumped 1,0111 to 24,719. The S&P/ASX 200 Index futures due in March rose 13 to 5,830 at 6:39 a.m. in Sydney.
U.S. STOCKS GAIN, LED BY BANKS; JPMORGAN, WELLS FARGO RISE
U.S. stocks gained after better-than-estimated results at JPMorgan Chase & Co. and Wells Fargo & Co. spurred confidence that banks will rebound from credit-market losses.
JPMorgan, the third-biggest U.S. bank, posted its steepest advance in five years in New York Stock Exchange trading after writing down less for subprime mortgage defaults than analysts forecast. Wells Fargo, the biggest bank on the U.S. West Coast, climbed the most in six weeks. BEA Systems Inc. rallied to a three-month high in Nasdaq Stock Market trading after Oracle Corp. raised its offer for the software maker to $8.5 billion.
The Dow Jones Industrial Average gained 77.39, or 0.6 percent, to 12,578.5. The Standard & Poor’s 500 Index increased 6.49, or 0.5 percent, to 1,387.44. The Nasdaq Composite Index added 0.5 to 2,417.64. About eight stocks climbed for every five that fell on the NYSE as of 2:33 p.m. in New York.
TREASURIES FALL ON HIGHER-THAN-FORECAST INFLATION, PRODUCTION
Treasuries fell as higher-than-forecast reports on inflation and industrial production reduced speculation the Federal Reserve will lower borrowing costs by more than a half- percentage point this month.
Yields on benchmark 10-year notes were near the lowest level in more than four years. The housing slowdown and losses on securities linked to subprime mortgages have led investors to push the yields down in the past month by the most in more than two decades on bets the economy will fall into recession.
The 10-year note’s yield rose 3 basis points, or 0.03 percentage point, to 3.71 percent at 2:35 p.m. in New York, according to bond broker Cantor Fitzgerald LP. It touched 3.61 percent, the lowest since July 2003. The price of the 4 1/4 percent security due in November 2017 fell 9/32, or $2.81 per $1,000 face amount, to 104 3/8. The two-year note’s yield increased 2 basis points to 2.51 percent.
EURO DECLINES AS ECB’S MERSCH SAYS RISKS TO GROWTH INCREASE
The euro fell the most this year against the dollar after European Central Bank council member Yves Mersch cited “downside risks” to the region’s economic growth.
Traders sold euros as the comments fueled speculation the ECB will join the Federal Reserve in cutting interest rates this year. Yesterday, the euro rose to within one U.S. cent of a record high as traders bet the ECB would hold its target steady at 4 percent or even lift borrowing costs to control inflation.
Europe’s common currency declined 0.85 percent to $1.4678 at 2:04 p.m. in New York, from $1.4804 yesterday, when it reached $1.4922. It fell to 157.05 yen, from 158.08 yesterday, touching the lowest since September.
EUROPEAN STOCKS FALL; BHP BILLITON, SHELL, INFINEON DECLINE
European stocks slumped, led by commodity producers and chipmakers, for the biggest two-day decline since August after oil and metals prices fell and Intel Corp. forecast sales that missed analysts’ estimates.
BHP Billiton Ltd., the world’s biggest mining company, and Royal Dutch Shell Plc, Europe’s largest oil company, decreased. Semiconductor maker Infineon Technologies AG dropped to the lowest since April 2005. Prudential Plc and Aviva Plc fell after Bear Stearns Cos. downgraded the region’s insurers.
The Dow Jones Stoxx 600 Index lost 1 percent to 332.75, a 16-month low. The gauge extended its decline this year to 8.8 percent on concern an economic slowdown and credit-market losses in the U.S. will damp profit growth.
Benchmarks fell in all of the 18 western European markets except Iceland. The U.K.’s FTSE 100 slid 1.4 percent and Germany’s DAX slipped 1.3 percent. France’s CAC 40 sank 0.5 percent. Austria’s ATX lost 2.6 percent, entering a bear market.
GERMAN BUND YIELDS BELOW 4% FOR FIRST TIME IN SEVEN WEEKS
European government bonds rose, pushing the yield on the 10-year German note below 4 percent for the first time in seven weeks, on speculation the U.S. subprime-mortgage crisis will curb economic growth.
Investors bought the safest assets as global stocks fell on concern financial companies’ credit-related losses will increase. Ten-year yields slumped to the lowest in 10 months after European Central Bank council member Yves Mersch said risks to the region’s economy are increasing.
The yield on the 10-year bund, Europe’s benchmark, fell 5 basis points to 3.97 percent by 4:41 p.m. in London. The price of the 4 percent bond due January 2018 gained 0.38, or 3.8 euros per 1,000-euro ($1,482) face amount, to 100.19. Two-year note yields slipped 10 basis points to 3.54 percent.
OIL FALLS BELOW $90 FOR FIRST TIME IN 4 WEEKS AS SUPPLIES RISE
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 4.26 million barrels to 287.1 million in the week ended Jan. 11, the first increase in nine weeks, the report showed. Warm weather and a slowing economy curbed fuel demand last week. Imports jumped 6 percent to 10.4 million barrels a day, according to the department.
Crude oil for February delivery fell $1.67, or 1.8 percent, to $90.23 a barrel at 1:06 p.m. on the New York Mercantile Exchange. Prices touched $89.26 today, the lowest since Dec. 18. Futures reached a record $100.09 a barrel on Jan. 3. Oil is up 76 percent from a year ago.
GOLD, SILVER FALL AS DEMAND FOR HEDGE AGAINST INFLATION SLOWS
Gold futures fell the most in almost nine weeks after prospects for an emergency interest rate cut by the Federal Reserve faded, reducing the appeal of the precious metal as hedge against inflation. Silver also declined.
Speculation about an emergency rate cut, prompted by a 0.4 percent drop in U.S. retail sales last month, helped gold jump to a record yesterday. The Fed is now expected to cut rates at its next meeting, on Jan. 30, after gains in consumer prices slowed in December and industrial production failed to grow.
Gold futures for February delivery fell $18.50, or 2.1 percent, to $884.10 an ounce at 1:14 p.m. on the Comex division of the New York Mercantile Exchange. The price reached $916.10 yesterday, the highest ever for a most-active contract.
Silver futures for March delivery dropped 40 cents, or 2.5 percent, to $15.90 an ounce. The metal gained 15 percent last year.
HIGHLIGHTS FROM NEWSPAPERS
ArcelorMittal to Cut 600 Jobs at French Plant, Europe 1 Says
ArcelorMittal, the world’s biggest steelmaker, will cut about 600 jobs by April 2009 at its plant in Gandrange, France, radio station Europe 1 reported on its Web site today, citing the company.
VTB Group Says 2007 Profit Up 20-25 Percent, Interfax Reports
VTB Group, Russia’s second-biggest lender, said its 2007 profit was 20 percent to 25 percent higher than the year earlier, Interfax reported, citing Chief Executive Officer Andrei Kostin.