Archive for October, 2008

Rate hopes and bargain hunting lift world stocks (Reuters)

Wednesday, October 29th, 2008 | Finance News

LONDON (Reuters) –
World stock markets put in a second consecutive session of strong bargain-hunting gains on Wednesday, following a huge rally on Wall Street and amid widespread expectations of a sharp cut in U.S. interest rates.

The mood left the dollar weaker. Wall Street looked set for modest gains at the start after a rise of more than 10 percent in the Dow Jones industrial average on Tuesday.

The Fed is widely expected to cut its key rate for the ninth time since September 2007 later on Wednesday, at least by 50 basis points. That would take rates down to 1.0 percent.

Investors have also been keeping an eye out for coordinated cuts. China said on Wednesday it was cutting rates and others are in the same frame of mind with regard to easing given the deteriorating economic outlook and market turmoil.

If they do not act together, the Bank of Japan will consider lowering its policy rate at a meeting on Friday, according to sources familiar with the matter. The Bank of England and the European Central Bank are both forecast to lower borrowing costs as well next week.

How much any of these actions will turn around near-term prospects for major economies is unclear, especially since the U.S. labor market is forecast to have lost nearly 180,000 jobs this month.

But stock markets were rallying on the prospect and by a hefty bout of bargain hunting after recent losses.

MSCI's all-country world index was up 3 percent after gaining 7 percent on Tuesday, led by the 10 percent-plus Dow gains.

The emerging market counterpart was up 3.2 percent, but has still lost around 60 percent so far this year.

"The Fed doesn't have too many more rate cuts left at its disposal but there is still scope for them to ease further," said Darren Winder, an equity strategist at Cazenove.

"The market should be able to rally on from that. "We are due a significant rally from the levels we've got down to."

The pan-European FTSEurofirst was up 5.3 percent.

Earlier, Japan's Nikkei average climbed 7.7 percent or 589.98 points to finish at 8,211.90. It has gained 14.6 percent over the past two days, but is down 46 percent for the year-to-date.


The dollar was weaker with the yen climbing after suffering one of its biggest ever drops against the dollar on Tuesday.

The dollar fell 1.6 percent from late U.S. trade to 97.14 yen after having surged as high as 99.79 yen on trading platform EBS, well above the 13-year low of 90.87 yen struck last week.

On Tuesday the dollar soared more than 6 percent against the yen -- the biggest one-day gain since 1974 and the second-biggest since being allowed to trade freely in 1973, according to data from Reuters Ecowin.

The euro gained 0.7 percent against the dollar to $1.2802.

"We've seen a significant reversal of risk aversion and those currencies which were sold against the dollar aggressively in the last month have seen a bit of a reversal," said James Shugg, an economist at Westpac.

The euro zone 2/10-year government bond yield curve rose to its steepest level since March 2005 as the short-end outperformed longer-dated paper on hopes of interest rate cuts.

The spread widened to 124 basis points from around 120 basis points late on Tuesday with the two-year yield hovering above a three-year low at 2.54 percent.


GM’s third-quarter global sales fall 11.4 percent (Reuters)

Wednesday, October 29th, 2008 | Finance News

DETROIT (Reuters) –
General Motors Corp (GM.N) said on Wednesday that its global sales fell 11.4 percent in the third quarter, hurt by weak demand in North America and growing economic pressures in Europe.

GM's global sales fell to 2.1 million vehicles in the third quarter, with sales in North America, its largest market, down 18.9 percent.

For the first nine months of the year, GM's global sales were down 5.8 percent, reflecting economic pressures in the U.S. and Western European markets, the company said.

Economic weakness has driven U.S. industrywide auto sales to nearly 15-year lows through September amid the turmoil in the financial markets, and indications are that October is as bad or worse due to a drop in consumer confidence.

GM executives said on a conference call that depressed consumer confidence was a bigger negative factor for U.S. sales than tight credit.

The automaker's third-quarter sales outside the United States accounted for about 61 percent of total sales, compared with just over 56 percent a year earlier.

Japanese rival Toyota Motor Corp (7203.T) decisively beat GM in global vehicle sales through the second quarter and first half of the year.

The slump in U.S. demand for large SUVs and pickup trucks has hit GM particularly hard as the high-margin vehicles historically account for the majority of the automaker's sales.

GM and Toyota were roughly even in 2007 for the top spot among the world's automakers, with GM slightly ahead if sales from a China business were included.

(Reporting by Kevin Krolicki, Soyoung Kim and Poornima Gupta; Editing by Lisa Von Ahn)


Morgan Stanley gathering deposits, eyes bank deals (Reuters)

Wednesday, October 29th, 2008 | Finance News

NEW YORK (Reuters) –
Morgan Stanley (MS.N), eager to secure more stable sources of funding in volatile times, said on Wednesday its brokerage division sold $3 billion in certificates of deposit during the past week as part of its broader plan to build up deposits.

In addition to offering services more common at neighborhood bank branches, Morgan Stanley said it would "explore both organic and acquisition opportunities" to accelerate deposit growth.

Following the bankruptcy of Lehman Brothers (LEHMQ.PK) last month, Morgan Stanley converted from an investment bank to a Federal Reserve-regulated bank holding company and said it would deploy its 8,500 advisers and brokerage offices to amass deposits.

The firm reported $36 billion in deposits as of August 31, but that is not nearly enough to support a company with nearly $1 trillion in assets.

Morgan Stanley said it will introduce new savings accounts and global currency accounts, increase international banking through a Swiss bank unit, and expand banking services for smaller businesses. It already offers checking accounts, ATMs and credit cards for broker clients.

Morgan shares have been punished by investors who worried it did not have enough capital and cash to survive a worsening financial crisis. Converting to a bank, selling a 21 percent stake to Mitsubishi UFJ Financial Group (8306.T) and scooping up deposits were supposed to allay those fears.

The shares continue to come under pressure -- down 71 percent for the year -- and the price of its default insurance remains lofty at $415,000 for every $10 million of debt.

(Reporting by Joseph A. Giannone; editing by John Wallace)