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Overnight Briefing

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U.S. equities fell for a second day

Wed, Sep 24 2008, 06:22 GMT
by Jyske Bank Team

Jyske Bank

• FBI probing Fannie, Freddie, Lehman & AIG

• Buffet to invest USD 5 billion in Goldman

• The yen sagged against a number of currencies

Today’s main events:

• DEM IFO Business Climate

• NOK Rate Decision from Norges Bank

• USD Existing Home Sales

American Time Zone:

U.S. equities fell for a second day

U.S. stocks fell for a second day on concern Congress will hold up a USD 700 billion bank bailout that Federal Reserve Chairman Ben S. Bernanke said is critical to keeping the economy out of recession.
Citigroup Inc. and Bank of America Corp. tumbled more than 3 % after members of the Senate Banking Committee expressed scepticism about Treasury Secretary Henry Paulson's plan. General Electric Co., the world's third-biggest company, retreated 5 % as Merrill Lynch & Co. downgraded the stock on “growing fundamental pressures”.
ConocoPhillips and Newmont Mining Co. slumped more than 2 % as oil retreated following a record advance and gold and copper prices decreased.

USD recovered

The dollar rose against the euro for the first time in five days as crude oil prices declined and traders speculated the dollar's biggest drop since January 2001 yesterday was too big to sustain.
Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in Senate testimony that failure to pass the U.S. financial bailout would threaten the economy. The dollar fell yesterday on speculation the USD 700 billion rescue will inflate the budget deficit.

Oil declined

Crude oil fell for the first time in a week on scepticism that a U.S. government bailout plan for financial companies will bolster economic growth and fuel consumption.

Far East Time Zone:

FBI probing Fannie, Freddie, Lehman & AIG

The FBI is investigating Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc and insurer American International Group Inc and their senior executives for potential mortgage fraud, CNN reported on Tuesday.

The FBI did not provide specifics but said the inquiries were part of a broader probe, CNN said.

The bureau is trying to determine whether anyone in those financial institutions, including their senior executives, had any responsibility for providing "misinformation," CNN reported.

A federal law enforcement official confirmed the FBI is now looking at 26 cases of potential corporate fraud related to the collapse of the U.S. mortgage lending industry.

Buffet to invest USD 5 billion in Goldman

Warren Buffett's Berkshire Hathaway will invest USD 5 billion in Goldman Sachs Group Inc, in a major boost for the Wall Street bank from perhaps the world's best-known investor.

"It's a vote of confidence which is gold plated," said Michael Holland, a money manager at Holland & Co in New York. "You don't get better than this."

Shares of Goldman rose 8.1 % after the announcement, while Standard & Poor's 500 futures gained 15 points. Goldman also announced plans to sell USD 2.5 billion of common stock.

The yen sagged against a number of currencies

The yen sagged against a number of currencies on Wednesday as news of Warren Buffett's Berkshire Hathaway Inc investing USD 5 billion in Goldman Sachs Group Inc sent U.S. equity futures shooting up in after-hours trading, stemming some of the inflow that the Japanese currency had enjoyed when Wall Street fell the previous day.

The yen had gained against the dollar on Tuesday when U.S. stocks slumped on fear that congressional wrangling could delay a proposed USD 700 billion plan to rescue the financial sector, increasing worries about the struggling U.S. economy.

But U.S. financial markets were cut some slack late on Tuesday when it was revealed that Buffett, one of America's most-respected investors, bought a stake in Wall Street's most powerful firm. The news sent S&P futures jumping as high as 23 points.

The yen's losses were limited as equity markets in Asia slumped despite the Goldman news. The Nikkei stock average slipped 1.2 %, with concern over the USD 700 billion rescue plan overriding any lift from Berkshire Hathaway's investment in Goldman.

The dollar was little changed at 105.44 yen after hitting a high of 105.90 yen. The euro advanced to 155.17 yen. The Australian dollar rose to 87.98 yen

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Published on  Wed, Sep 24 2008, 06:39 GMT