While you were sleeping: Geithner on banks

Wednesday 22nd April 2009

US Treasury Secretary Timothy Geithner said most US lenders have sufficient capital though bad debts will likely slow their recovery.

The comments, made to a congressional oversight panel on the financial-rescue programme, helped soothed concern from investors awaiting results of so-called stress tests, the Treasury’s assessment of which lenders will need more aid.

“The vast majority of banks have more capital than they need to be considered well capitalised by their regulators,” Geithner said.

Banks gained on his comments, with Citigroup climbing 10% to US$3.24. Bank of America, which caused a worldwide selloff of lenders after increasing its bad loan reserves, climbed 9% to US$8.76, clawing back some of the previous days 23% slump.

The Dow Jones Industrial Average rose 1.6% to 7969.56 and the Standard & Poor’s 500 Index advanced 2.1% to 850.08. Home Depot rose 2.9% to US$25.87 and aluminium producer Alcoa Inc. gained 4% to US$8.69.

New York Times tumbled 16% to US$4.94 after the publisher reported a 27% drop in first-quarter advertising revenue, leading to a wider loss.

General Motors rose 2.4% to US$1.70 after Bloomberg reported bondholders to discuss restructuring the automaker. GM has until June 1 to restructure, to avoid bankruptcy. Bondholders may be offered equity in GM as a swap for their US$27.5 billion of claims, according to the report.

The Nasdaq Composite rose 2.2% to 1643.85, with Yahoo Inc., the No. 2 US search engine, gaining 5.3% to US$14.38 after reports it is in discussions with Microsoft about teaming up to challenge Google Inc.

Helping lift optimism that the economic slump may be easing, a report by Watson Wyatt Worldwide showed fewer US companies are planning to eliminate jobs.

Companies planning to cut jobs for the first time fell to 5% this month from 5%, according to the survey. Of 141 employers surveyed, 72% have already made cuts. The US economy has shed 5.1 million jobs since the recession started in December 2007.

The Federal Reserve bought US$7 billion of Treasuries as part of its efforts to reduce lending rates, the Federal Reserve Bank of New York said. The central bank has now acquired US$59.7 billion of US Treasuries since March, heading for a target of as much as US$300 billion over six months.

The US dollar and the yen fell against the euro after Geithner’s comments, which stoked investors’ appetite for risk.

The greenback weakened to $1.2932 per euro from $1.2921. The yen fell to 127.69 per euro from 126.48. The dollar strengthened to 98.74 yen from 97.89 yen.

In Europe, the Dow Jones Stoxx 600 Index edged up 0.1% to 190.20, led by a 13% gained for Burberry Group, Pernod Ricard climbed 4.9%.

In London, the FTSE 100 slipped 0.1% to 3987.46. Consumer prices in the UK rose 2.9% in March from a year earlier, the lowest pace in a year, according to the Office for National Statistics. Tesco, Europe’s second-largest retailer, jumped 4.9% after reporting UK same-store sales rose 3.4% in the six weeks through February.

Germany’s DAX 30 rose 0.3% to 4501.63 as MAN AG gained 4.4% and Adidas rose 3.6%. Deutsche Telekom fell 7.2% after the biggest telecommunications company in Europe lowered its forecast for 2009 earnings.

France’s CAC 40 rose 0.2% to 2973.94, with STMicroelectronics rising 5.3%.

Crude oil gained from a five-week low as US stocks revived on Geithner’s comments. Crude oil for May delivery rose 0.7% to US$46.20 a barrel on the New York Mercantile Exchange. The contract expired yesterday and June futures gained 0.5% to US$48.76.

Gold for June delivery was little changed at US$888 an ounce in New York. Copper for three-month delivery slipped 1.9% to US$4,504 a metric ton on the London Metal Exchange.

Businesswire.co.nz

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