While you were sleeping: Obama pledges housing support

Thursday 19th February 2009

US President Barack Obama pledged US$275 billion in funds to a programme that aims to reduce foreclosures and ease mortgage payments for those homeowners, efforts that may help lift the American housing sector out of its slump.

The US Treasury will buy up to US$200 billion of preferred shares in Fannie Mae and Freddie Mac, equipping the mortgage financiers to lift efforts to prevent foreclosures.

The move "will give millions of families resigned to financial ruin a chance to rebuild," Obama said. "By bringing down the foreclosure rate, it will help to shore up housing prices for everyone."

The US dollar climbed to a six-week high against the yen and gained against the euro after the announcement of the housing plan. The dollar rose to 93.80 yen from 92.41. The greenback gained to $1.2536 per euro from $1.2582. The yen rose to 117.54 per euro from 116.27.

Housing starts dropped 17% to an annual pace of 466,000, the lowest since records began in 1959, according to the Commerce Department. The Federal Reserve's industrial production index fell 1.8% to 101.3, a five-year low.

Fed chairman Ben Bernanke said in a speech that the central bank expects "inflation to be quite low for some time." The fed released the minutes of its last meeting, showing that policy makers see long-term economic growth in the US at 2.5% to 2.7% and a jobless rate of 4.8% to 5%.

Benchmark stock indexes on Wall Street swung between gains and declines. Wal-Mart Stores rose 3% to US$49.70, leading the Dow Jones Industrial Average up 0.04% to 7555.63. Bank of America slipped 5.5% to US$4.64 and Citigroup dropped 4.6% to US$2.92.

The Standard & Poor's 500 Index slipped 0.1%% to 788.41 and the Nasdaq Composite fell 0.2% to 1467.97.

General Motors, which is seeking as much as US$16.6 billion in additional government aid, fell 5.5% to US$2.06. The largest US automaker is in talks the bondholders and unions to try to wring out more cost savings to win government support.

In Europe, Roche Holding AG plans to raise US$16 billion by selling bonds to finance its acquisition of Genentech Inc., Bloomberg reported, citing people familiar with the matter. Switzerland's biggest drugmaker is seeking to tap demand for well rated corporate debt as deposits rates fall and investor seek higher yields.

European stocks declined for the third straight day, reflecting weak US housing and production data and dwindling earnings from the region's companies.

The Dow Jones Stoxx 600 Index slipped 0.3% to 183.35. Royal Bank of Scotland fell 13% and Legal & General declined 12%. Germany's Hypo real Estate soared 47% after the government hinted that it could take over the company via a capital raising.

The DAX 30 fell 0.3% to 4204.96 and France's CAC 40 declined 0.04% to 2874.07. In London, the FTSE 100 Index fell 0.7% to 4006.83.

Crude oil fell on speculation US Energy Department figures tomorrow will show stockpiles rose as the economic slump reduced demand for fuel.

Crude oil for March delivery fell 1.1% to US$34.54 a barrel on the New York Mercantile Exchange.

Copper rose after the London Metal Excahnge reported a drop in stockpiles. Inventories monitored by the LME fell 1,125 metric tons to 525,300 tons. Copper futures for May delivery rose 0.8% to US$1.4545 a pound in New York.

Gold rose for a second day as investors bought the precious metals as a haven against the economic downturn.

Gold futures for April delivery rose 1.1% to US$978.20 an ounce on the New York Mercantile Exchange.

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