Archive for February, 2009

Citi explores breaking Mets deal: report (Reuters)

Tuesday, February 3rd, 2009 | Finance News

(Reuters) –
Citigroup Inc is exploring the possibility of backing out of a nearly $400 million marketing deal with the New York Mets amid concerns over how lenders are using government bailout money, the Wall Street Journal said, citing people familiar with the matter.

Officials at Citigroup have made no final decision about whether to try to void the 20-year agreement, which includes naming the Mets' new baseball stadium after the bank, the people told the paper.

The Mets deal was attacked last week as an example of misplaced spending by financial institutions that needed bailout funds, according to the paper.

A Citigroup spokesman in New York told Reuters on Tuesday that "no TARP (Troubled Asset Relief Program) capital will be used for Citi Field or for marketing purposes."

Members of the U.S. House of Representatives Dennis Kucinich and Ted Poe wrote to Treasury Secretary Timothy Geithner last Wednesday, asking him to push Citigroup to dissolve the Mets deal, the paper said.

"Citigroup is now dependent on the support of the federal government for its survival as an institution," the paper quoted the letter as saying. "As such, we do not believe Citigroup ought to spend $400 million to name a stadium at the same time that they accept over $350 billion in taxpayer support and guarantees."

If Citigroup backs out of its agreement with the Mets, it likely would not happen immediately and could involve the bank paying a break-up penalty to the Mets, the paper said, citing people familiar with the situation.

Citigroup "signed a legally binding agreement with the New York Mets in 2006," the Citigroup spokesman in New York told Reuters.

"The Mets are fully committed to our contract with Citi," Mets spokesman Jay Horwitz told the Journal.

The New York Mets could not be immediately reached for comment by Reuters.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by John Stonestreet and Hans Peters)

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Auto sales seen extending slide (Reuters)

Tuesday, February 3rd, 2009 | Finance News

DETROIT (Reuters) –
U.S. auto sales for January are expected to drop to a 27-year low, extending a 15-month downturn and adding weight to the view that the hard-hit sector will remain a drag on the economy in the current quarter.

Major automakers are scheduled to announce January sales results on Tuesday. The releases by General Motors Corp, Toyota Motor Corp, Ford Motor Co and others will represent the first indicators of the shell-shocked state of U.S. consumer confidence for 2009.

Auto executives and major dealers already have warned that sales for January showed no sign of improvement from the bleak trend that took hold in the fourth quarter of 2008.

U.S. auto sales, which typically account for about 20 percent of all retail sales, dropped by 18 percent in 2008 to a 16-year low of 13.2 million units.

The median forecast of 36 economists surveyed for Reuters is for an annualized sales rate of 10.2 million cars and light trucks for the month.

That would mark a retreat from the 10.3-million unit sales rate the market hit in December despite steep discounting by the automakers and steps intended to ease credit.

Analysts and auto executives said sales of new cars and trucks to U.S. car rental agencies took a major hit in January, reflecting the growing pressure on those companies to cut costs by keeping vehicles in their fleets longer.

"Retail (showroom) sales appear to be marginally improving, or at least stabilizing," Barclay's Capital analyst Brian Johnson said in a note for clients on Friday. "But fleet sales are showing some very sharp declines, both due to the fragile financial state that rental companies are in, and the fact that assembly plants have been idled during much of the past five to six weeks."

Johnson forecast January U.S. auto sales near 10.2 million units, saying that declines expected for Toyota and Honda Motor Co of between 25 percent and 32 percent from prior-year sales results showed the pressure on the market.

Unlike GM and Chrysler LLC, which are struggling to restructure under federal oversight and a $17.4-billion bailout program, Toyota and Honda have not been dogged by consumer concern about their survival, Johnson said.

The weak performance by the industry's stronger players points to the pressure on consumer confidence, he said.

"The story of the industry continues to be a widespread reluctance to purchase durable goods at this point," Johnson said.

CHEAP DEALS, FEW TAKERS

Chrysler Financial, the financing arm of Chrysler, rolled out zero-percent loans on a wide range of vehicles in late January after receiving a $1.5-billion loan from the U.S. Treasury.

Those incentives, combined with cash rebates and employee-level pricing, were intended to help the struggling automaker clear inventory equal to 115-days worth of sales at the start of January.

That inventory level of unsold cars and trucks on dealer lots was the highest for any of the major automakers, according to data compiled by the trade journal Automotive News.

Edmunds.com, an automotive Web site that follows the industry, forecast Chrysler's January sales would drop 48 percent from a year earlier. It forecast a 38 percent drop for GM and 30 percent fall for Ford.

David Thompkins, an Edmunds.com analyst, said although there was growing demand to replace older vehicles many Americans would turn to the cheaper used vehicles when they begin shopping again.

Some automakers, notably Ford, have held out the prospect that sales could recover toward the end of 2009 as an economic stimulus package being pushed by the Obama administration is expected to take hold.

But IHS Global Insight forecast that overall sales would drop to 9.7 million units on an annualized basis in January. That would represent the lowest monthly sales tally since 1982.

"There will be no 'Obama effect' on light vehicle sales just yet," the industry tracking service said in a note on Friday. "The winter freeze will continue in the light vehicle sales market in January."

(Reporting by Kevin Krolicki; editing by Carol Bishopric)

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European markets fall on global economic concerns (AP)

Tuesday, February 3rd, 2009 | Finance News

LONDON – European markets fell Tuesday as investors continued to worry about the sputtering global economy despite governments' efforts to boost growth with increased spending.

By noon in mainland Europe, Britain's FTSE 100 was down 0.57 percent at 4,054.54, Germany's DAX dived 0.75 percent to 4,239.16, and France's CAC 40 dipped 0.73 percent to 2,908.55.

"The markets generally are really not sure what direction to take. They are still quite depressed compared to six months ago, but the current economic news is quite discouraging," said Andrew Bell, a markets strategist at Rensburg Sheppards.

"I think we're basically treading water and opinion is very divided whether we may retest the autumn lows because there is not enough good news to take us higher, or is sentiment so bleak that if we do get news that isn't as bad as expected that will push it higher."

Shares in BP PLC fell 4 percent in London after Europe's second-largest oil company said it swung to a steep loss of $3.3 billion during the fourth quarter of 2008 as sliding oil prices hit revenues hard. In mid-July, oil prices were around $147 a barrel. Since then, fears about the global economic outlook have pushed oil prices down to around $40 a barrel.

For the full-year as a whole, BP said net profit was $21.2 billion, up slightly on 2007's $20.8 billion.

Mobile phone service provider Vodafone Group PLC saw its shares rise 6.6 percent after it said revenues rose 14 percent in the fourth quarter to 10.47 billion pounds ($15 billion), compared to the same period a year earlier. The rise was led by a 28-percent gain in its Asia, Pacific and Middle East operations.

In Asia, most Asian markets rose modestly but trimmed their early gains, as optimism over billions of dollars in new stimulus measures in Japan and Australia gave way to concerns about the state of the global economy.

Japan's Nikkei 225 stock average fell 0.6 percent to 7,825.51 after trading about 1 percent higher earlier in the session. Hong Kong's Hang Seng Index declined 0.7 percent to 12,776.89.

Elsewhere, South Korea's Kospi added 1.4 percent to 1,163.20 and Australia's key stock measure rose 0.3 percent. Markets in India, China, Singapore and Taiwan also advanced.

In Tokyo, stocks got a jolt after the Bank of Japan said it would buy 1 trillion yen ($11.2 billion) in corporate shares held by financial institutions to help shore up capital at commercial banks, who've taken a beating from volatile equities markets. But the rally soon fizzled.

Australia announced 42 billion Australian dollars ($26 billion) in fresh spending in hopes of shielding the country's resources-based economy from the global downturn. Hours after the announcement, the country's central bank slashed the benchmark cash rate by a full percentage point, sending money market rates to their lowest in 45 years.

But news of the latest government intervention was overtaken by anxiety among many investors about sinking corporate profits and signs of economic weakness in Asia and beyond.

In the U.S. overnight, new figures showed personal spending and construction spending eroded further last month in the world's largest economy. Uncertainty about the details of America's $819 billion stimulus proposal, still up for debate in the U.S. Senate, also sidelined investors.

"People are looking toward stimulus packages with cautious optimism, but I wouldn't say we're breaking the shackles that are holding us back," said Miles Remington, head of Asian sales trading at BNP Paribas Securities in Hong Kong. "I don't think the global economy has really changed on a fundamental basis."

On Tuesday, the head of the International Monetary Fund said Asia's struggling economies will likely bounce back quickly once their trading partners begin to recover, predicting a turnaround could come by late this year or early 2010.

But for 2009, the outlook is still grim: the IMF's latest forecast for world economic growth is 0.5 percent, with advanced economies contracting by 2 percent.

"Those figures are the lowest rates we have experienced in the postwar period, so they really are rather gloomy," the IMF's managing director, Dominique Strauss-Kahn, said in a Web cast.

In New York, selling in industrial, energy and financial stocks sent the Dow Jones industrial average down 0.80 percent to 7,936.83 on Monday. The Standard & Poor's 500 index slipped 0.1 percent to 825.44, but the tech-heavy Nasdaq composite rose 1.2 percent to 1,494.43.

Wall Street futures pointed to a weaker open for U.S. markets. Dow futures fell 15 to 7,872 and S&P500 futures were off 1.9 to 819.40. Nasdaq 100 futures were up 2 at 1,190.75.

Oil prices gained slightly in European trade. Light, sweet crude for March delivery rose 39 cents to $40.47 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.60 overnight to settle at $40.08.

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AP writers Jeremiah Marquez in Hong Kong, Tomoko A. Hosaka in Tokyo and Elaine Kurtenbach in Shanghai contributed to this report.

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