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The Overnight Express: North American Edition

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CIT Group Files for Bankruptcy Protection

Mon, Nov 2 2009, 12:15 GMT
by Erik Franco

The Overnight Express

The following is a summary of the main economic events from the Asia-Pacific and European sessions:

• CIT Group files for bankruptcy on Sunday afternoon EDT due to the failure of its various rescue attempts; the financial, with roughly $60 billion in assets, becomes the fourth largest bankruptcy in U.S. history.

• The U.S. government will get little, if any, return on its $2.3 billion bailout of CIT Group last year; the gov't received preferred stock and warrants; Treasury spokesman Andrew Williams said "recovery to preferred and common equity holders will be minimal."

• NBC’s Meet the Press: Treasury Secretary Timothy Geithner says that although the latest U.S. growth data are encouraging, the recovery will be slow and volatile; “This is going to be a different recovery than in the past because Americans are going to have to save more,” he says.

• RTRS: Several G20 sources say that foreign exchange will not figure prominently at this week’s meeting; there may be some discussion of global imbalances and strategies to correct them.

• Ford reports Q3 earnings per share of $0.26 per share blowing away forecasts for a $0.12 loss per share.

• Sunday Telegraph: UK government will announce the break-up of RBS and Lloyds TSB to produce two new banks, according to an anonymous source familiar with the matter; a third new financial will be created from part of Northern Rock.

• President Obama says in his weekly address that while the positive U.S. GDP read for Q3 was a move in the right direction, “Economic growth is no substitute for job growth”; he adds that his stimulus programs have either added or saved 1 million American jobs.

• PBOC’s Zhou says China is able to continue currency reforms despite the financial crisis; says the yuan will gradually achieve international status.

• Chinese manufacturing PMI rises to 55.2 in October from 54.3 the prior month; the result beats the consensus call for a 54.7 level; this is its eighth month in a row of increases; exports component moves up to 54.5 from 53.3 in September.

• Chinese HSBC manufacturing PMI rises to 55.4 in October from 55.0 the month prior.

• Nine more banks, all subsidiaries of Illinois-based holding company FBOP Corp, were closed on Friday; this brings the number of financials shutting down in 2009 to 115; this is the first year since 1992 that more than 100 U.S. banks have closed.

• Australian Treasurer Wayne Swan releases mid-year economic review and roughly maintains his budget deficit projection of A$57.7 billion for 2009-10; forecasts growth of 1.5% in fiscal 2009-10 and 2.75% the following year, while saying the economy will operate below capacity for some time and that sustained global recovery is not assured.

• House prices rise faster than expected in Australia as the third quarter house price index increases 6.2% year-over-year. The consensus estimate was for a 4.3% gain. Second quarter data was also revised higher to -0.7% from -1.4%.

• BOJ Deputy Watanabe tells audience in Tokyo, Japan, that the central bank plans to maintain an accommodative monetary policy; says the end of the BOJ’s credit programs should be considered separate from the exit strategy.

• SNB President Hildebrand tells an audience in London, England, that bonus culture should be adjusted for risk; notes that movements to reform the international financial system appear to have stalled.

• UK manufacturing PMI rises to 53.7 in October, above calls for an increase to 50.0 from 49.9 the month prior.

• Hometrack says UK house prices rose an annual 6.2% in Q3 above forecasts for a 4.3% gain and reversing a 0.7% slide in Q2.

• Ford’s concessions deal with United Auto Workers (UAW) is rejected by the union’s membership; UAW leader Ron Gettelfinger says the union is looking at alternatives and will not carry out a re-vote or continue bargaining with UAW members.

• London Times says Kraft plans to go hostile on its bid for Cadbury; details to be announced within the next ten days.

• FT interview: Pfizer CEO Jeffrey predicts that U.S. health-care reform legislation will be enacted by year-end.

• Denbury Resources Inc, a Texas oil and gas company, acquired Encore Acquisition Co. for about $4.5 billion, a more than 30% premium from Friday's close.

• Chinese Commerce Ministry green lights Panasonic’s acquisition of Sanyo Electric Co. on the condition that the Japan-based firm reduce its stake in its auto-battery joint venture with Toyota to 19.5% from 40%; Beijing cites antitrust concerns as its rationale.

Published on  Mon, Nov 2 2009, 12:19 GMT