Archive for November, 2008

Citigroup falls below U.S. Bancorp in market value (Reuters)

Wednesday, November 19th, 2008 | Finance News

NEW YORK (Reuters) –
Citigroup Inc (C.N), once the largest U.S. bank by market value, has fallen to fifth, dropping behind U.S. Bancorp (USB.N) -- which is one-eighth as large by assets.

The market capitalization of Citigroup fell as low as $42.2 billion early Wednesday, as the bank's shares dropped as much as 7.3 percent to a 13-year low of $7.75. U.S. Bancorp's market value was slightly below $44 billion in early trading.

Larger U.S. banks by market value include JPMorgan Chase & Co (JPM.N), Wells Fargo & Co (WFC.N) and Bank of America Corp (BAC.N). Citigroup's market value topped $270 billion in late 2006.

Citigroup has been under pressure because of mounting losses from mortgages and complex debt instruments, and on Monday announced plans to cut 52,000 jobs by early next year.

On Wednesday, a Fox-Pitt Kelton analyst said the bank could face $3 billion of writedowns in the fourth quarter. Citigroup also said it would buy $17.4 billion of assets held by structured investment vehicles it advised.

Citigroup is based in New York, and ended September with $2.05 trillion of assets. U.S. Bancorp is based in Minneapolis, and reported $247.1 billion of assets.

(Reporting by Jonathan Stempel, editing by Gerald E. McCormick)


October consumer prices and home starts plummet (Reuters)

Wednesday, November 19th, 2008 | Finance News

WASHINGTON (Reuters) –
Consumer prices dropped at the fastest rate on record in October and new home construction was at a record low, according to government reports on Wednesday that underlined how rapidly the economy was weakening.

The Labor Department said its widely watched Consumer Price Index plummeted 1 percent, exceeding forecasts by Wall Street analysts for a 0.8 percent decline and the biggest drop since the department began monthly data in 1947. Core prices, which exclude food and energy items, declined 0.1 percent in contrast to the 0.1 percent advance that had been forecast.

Analysts said earlier concern about inflation risks may soon be replaced by worry about deflation, which also has a corrosive effect on the economy's performance.

Separately, the Commerce Department said new-home starts fell 4.5 percent last month to a seasonally adjusted annual rate of 791,000 units and building permits -- which signal future building intentions -- dropped 12 percent to 708,000.

Many economists think the U.S. economy already is in recession even though one has not yet been formally declared. A severe global credit crunch that has sapped demand for commodities and hurt consumers has already driven parts of Europe and Japan into recession.

"It appears we are in a period of disinflation right now, where the actual level of inflation is trending lower," said Michael Sheldon, chief market strategist for RDM Financial, Westport, Connecticut. "The question is will the economy rebound enough with the benefit of a big stimulus plan in 2009 to prevent deflation and get consumers spending again."

Federal Reserve Chairman Ben Bernanke told Congress on Tuesday that credit markets had eased somewhat after massive injections of credit and interest-rate cuts. But slumping home prices are expected to severely pressure consumers and depress demand for a prolonged period.

U.S. stock index futures stayed in negative territory after the latest negative economic data was released. The dollar pared losses against the yen, while longer-dated government debt held on to prices gains.

The Labor Department said energy prices dropped 8.6 percent in October, after declines of 3.1 percent in August and 1.9 percent in September. October was the biggest drop since the department began keeping seasonally adjusted energy prices in 1957.

Gasoline prices plunged 14.2 percent in October, also a record drop. Gasoline prices are expected to drop again in November, with the latest weekly government data showing retail gasoline at $2.13 a gallon, sharply below the $3.54 a gallon at the beginning of October.

Food costs were up 0.3 percent in October, half the 0.6 percent rise posted in September.

On a year-over-year basis, the Consumer Price Index rose 3.7 percent, the smallest increase in a year.

(Reporting by Glenn Somerville, editing by Neil Stempleman)


BASF issues profit warning, cuts global output (Reuters)

Wednesday, November 19th, 2008 | Finance News

FRANKFURT (Reuters) –
BASF (BASF.DE), the world's largest chemicals maker by revenue, cut its profit outlook for 2008 and announced cutbacks in production, citing a "massive" decline in demand in key industries.

The previous year's earnings before interest and taxes (EBIT) before special items would not be reached, the group said on Wednesday, adding it would temporarily shut down 80 plants worldwide and reduce production at a total of about 100 plants.

BASF had said last month it would "make every effort to match" last year's EBIT before special items.

Some 20,000 employees would be affected by the production cuts, of which about 5,000 are at its main site in Ludwigshafen, southern Germany, the company said on Wednesday.

It said it was difficult to foresee how 2009 would develop and that it would prepare for "tough times."

BASF shares fell 13.1 percent to 22.10 euros by 7:35 a.m. EST, while the German blue-chip DAX index (.GDAXI) was down 2.1 percent.

(Reporting by Ludwig Burger, editing by Knut Engelmann)