Businesswire Overnight Wrap: 25 Nov 08
While you were sleeping: BusinessWire overnight wrap
Nov. 25 – Citigroup Inc. got a US$20 billion injection of government aid and protection from losses on US$306 billion of toxic, mortgage-related assets. Shares of the No. 2 U.S. bank by assets soared more than 50%.
The new funds add to the US$25 billion the bank got last months under the US$700 billion Troubled Asset Relief Program. The federal government will received US$27 billion of preferred shares in Citigroup that pay an 8% dividend in exchange.
The Citigroup rescue and a pledge by Democratic lawmakers to pass an economic stimulus plan by January helped stocks on Wall Street gain for a second day.
The Dow Jones Industrial Average gained 4.3% to 8397.03. Citigroup led financials higher, rebounding to US$5.74. Bank of American advanced 22% to US$13.95 and JPMorgan Chase rose 17% to US$26.60. Retailer Home Depot advanced 9% to US$21.09 and General Electric gained 7% to US$15.01.
The Standard & Poor’s 500 Index rose 5.8% to 846.35 and the Nasdaq Composite rose 5.4% to 1458.65.
Stocks gained even after a National Association of Realtors report showed home resales in the U.S. fell last month and prices had a record slump.
Sales of existing homes fell to a lower-than-expected annual rate of 4.98 million and the median house price tumbled 11.3%.
U.S. Treasuries fell after a record US$36 billion sale of two-year notes and as news of the Citigroup rescue helped stocks to rally, reducing demand for debt’s fixed payments. The yield on two-year notes gained 10 basis points to 1.21% while 10-year yields climbed 9 basis points to 3.33%.
The U.S. dollar rounded out a two-day decline against the euro as the Citigroup plan reduced demand for the currency as a haven. The yen weakened against both the U.S. dollar and the euro on speculation allying stocks will encourage investors to seek higher-yielding assets funded with loans in Japan’s currency. The dollar fell to $1.2872 against the euro in New York, from $1.2587 on Friday. It strengthened to 96.84 yen from 95.94.
The Citigroup announcement and additional U.K. measures to revive its economy, including a cut to sales tax and 20 billion pounds of support for small businesses, the poor and households helped lift stocks in Europe. The Dow Jones Stoxx 600 jumped 8.4%. Germany’s Dax 30 jumped 10% to 4554.33 as Deutsche Bank soared 24%, Hypo Real Estate and Allianz gained 21%,
Shares in Germany rose even after a report showed business confidence fell to the lowest level in almost 16 years. The Munich-based Ifo institute’s business climate index fell to 85.8 from 90.2 in October, the lowest since 1993.
France’s CAC 40 rose 10% to 3172.11 as steelmaker Arcelor-Mittal climbed 19% and Alstom rose 15%. In the U.K., the FTSE 100 index rose 9.8% to 4152.96. Stocks including Xstrata, BHP Billiton, Anglo American and Prudential all rallied more than 20%.
The U.K. announced the biggest round of tax cuts and fiscal spending in 20 years to help haul its economy out of recession. The budget deficit is forecast to balloon out to 118 billion pounds by 2010 as a result of the measures, which include 25.6 billion pound of financial support over two years.
“I want to take fair and responsible steps to protect and support businesses and people now,” Chancellor of the Exchequer Alistair Darling said.
Commodities also rallied on the Citigroup rescue and weaker dollar against the euro. Crude oil for January delivery rose 9.2% to US$54.50 a barrel on the New York Mercantile Exchange.
Copper rose more than 7% on optimism the global economy will climb out of its slump. Copper futures for March delivery rose 7.4% to US$1.696 a pound in New York.
The Reuters/Jefferies CRB Index of 19 raw materials rose as much as 4.1 percent.