Opening Bell: 10.07.08

U.S. stock futures flattish after Monday's hammering (Marketwatch)
After a bloody Monday, U.S. stock futures are pretty much all over the place this morning. S&P 500 futures are down 2 points, at 1051.30, while Dow futures are off 55 points. Nasdaq futures are up 5 points, at 1,411.50. Once again, the attention is going to be on the Fed today, with regard to getting involved in the unsecured lending market (see next article), and as the street waits to see its stance on interest rates.

Fed reportedly looking into unsecured lending (Marketwatch)
According to the FT, the Fed is meeting with dealers and exchange execs today, to discuss the possibility of getting into unsecured lending. That would allow the Fed to directly purchase commercial paper for the first time in history, as well as participate in the inter-bank money market. Depending on the validity of this story, and how it pans out, it may well end up dominating today's newsflow.

Bank of America profits plunge 68% (CNN Money)
We all knew it was going to be a bad quarter for BoA, but here's the official figure, announced a week in advance: earnings of $1.18 billion, or 15 cents a share, down 68% from $3.7 billion, or 82 cents a share. Wall Street was apparently looking for $3.22 billion, or 62 cents a share, which, even if you can take deposits, seems way too high given the current market environment for financials. BoA shares tumbled 9% after market hours, when the bank made the statement Monday. BoA also said it is raising $10 billion in fresh capital. As an aside, it seems that in the mayhem everyone overlooked yesterday the news that BoA has settled with 11 states to save 400,000 former Countrywide mortgage holders from losing their homes. As a positive story, it's just not getting enough play here.

Bank of Japan leaves door open for rate cut (Reuters)
After Australia slashed its benchmark interest rate an unprecedented one percentage point, to 6%, there's rumors of rate cuts everywhere. The Aussie rate cut was the most since 1992, and temporarily stimulated Asian markets out of a steep morning slide. Now, Reuters reports that the Bank of Japan may be among the central banks looking to reduce rates. That would be hugely significant, because the interest rate there is only 0.5%, and could lead to a resurgence of sorts of the "yen carry trade". Some in Asia are speculating that this alternative credit market, for want of a better term, may provide a much needed cheap lending source. The following are the official dates of the central bank meetings: Bank of England, Oct. 9 (25 bps cut anticipated); Fed, Oct. 29; ECB, Nov. 6, and Thailand and S Korea later this week.

Rate cut lifts Sydney stocks, hopes of joint action (Marketwatch)
Hong Kong was closed for a holiday today, but the Nikkei slumped 3%, finishing at 10,155.90, after coming back from a deep selloff in the morning to 9,916.21. Markets in South Korea and China were up slightly. Tuesday's best performer by far was the Aussie S&P/ASX 200 index, which jumped 1.7%, to 4,618.70, after the rate cut.

EBay Trims Its Work Force and Makes Acquisitions (New York Times)
It's not just on Wall Street that people are being laid off: San Jose, California-based auction giant EBay is letting go of 1,600 workers, or about ten percent of its work force. The majority of those workers are full-time. "We are treating the affected people with the kinds of values you would expect out of eBay," says chief executive John Donahoe. Really? That would be why then EBay is simultaneously announcing the $920 million acquisition of online payment firm Bill Me Later, and it's also using money which could be spent on retaining current employees to buy Danish classified advertisers Den Bla Avis and BilBasen. The timing could not be worse. Whatever the outcome, this is EBay's public relations department at its very, very worst: announcing billion dollar plus (mostly foreign) acquisitions while sacking a chunk of its (presumably) U.S. workers in the midst of a suffocated jobs market. EBay's in pretty healthy shape, but the political implications of these combined moves is toxic.

Zoellick Faults G-7, Calls for New Order (WSJ)
What do you do when a product isn't selling so well anymore? Well, you can either scrap it, or you can add some extra ingredients at little to no extra cost, and stick a plus on the end of it. World Bank President Robert Zoellick is essentially calling for the latter tried-and-tested formula: he wants the G7 to include some emerging markets now, according to the Wall Street Journal. Specifically, Zoellick wants the G7 to add China, Russia, Saudi Arabia, Brazil, India, Mexico and South Africa to its mix, so that the group comprises 70% of the world's GDP, and 62% of the world's energy production. This kind of move, while not to everyone's taste, is probably a bit overdue and pretty inevitable. Zoellick says that he wants it to be more than just a G14: so, we're naming it "G7 plus" for the moment.

Barclays, RBS in Talks on U.K. Government Funding (Bloomberg)
Tuesday morning has been pretty ugly in the British banking sector. Barclays (now proud owner of some of the Lehman fire-sale pieces) is down around 10% in British trading; RBS fell as much as 39% before rising a little bit. Bloomberg's sources are saying the U.K. government may now trump up $79 billion to bridge the credit gap in both banks' balance sheets. There seems to be a pattern forming here: bank in crisis buys a bank in even more crisis, then asks the government afterwards to help out with the recent shopping spree. Either way, money market rates in Europe are consequentially at an all-time high, with the euro interbank offered rate up 3 basis points, at 5.38%.

Iceland Says It Received EU4 Billion Loan From Russia (Bloomberg)
This story has been brewing for a few days, and has now seemingly come to some kind of climax. Iceland is borrowing 4 billion euros, or $5.43 billion, from Russia, fixing its national currency, the krona, at 131 euro ... and nationalizing Landsbanki Islands, the country's second biggest bank. Iceland's biggest bank, called Kaupthing, is getting a 500 million euro loan from the central bank. For extra information on this one, both Landsbanki and Kaupthing have a big presence in Scandinavia more generally, and are key players in the nordic derivatives market, which has had somewhat of a boom in recent years.

Bank shares plummet and Icesave deposits frozen ... Landsbanki cont. (Times UK)
Just in: Hey, it's a bank holiday for Landsbanki now! (Why come to work when you're going under anyway?) Landsbanki just announced that it's not taking deposit or withdrawal requests in the U.K., through internet banking subsidiary Icesave. A statement on the website reads: "We are not currently processing any deposits or any withdrawal requests through our Icesave Internet accounts. We apologize for any inconvenience this may cause our customers. We hope to provide you with more information shortly." If I were Landsbanki, I'm not sure if I'd use the word "inconvenience" when denying customers access to their hard-earned cash. Anyway, that's not going to do Anglo-Scandinavia relations any favors! [Ed: Sorry, I know I overdid this story a bit!]

Cramer: Dow 7,700 a Real Possibility (CNBC.com)
Yesterday morning the Cramer consensus seemed to be for a potential fall to 5,000 for the Dow, but by evening on Mad Money the number was 7,700. Cramer's thesis, if you like, is that 7,700 was the number we hit in 2002 when, he says, things were much more rosy than they are now with the housing crisis. The chief problem with all these doomsday predictions for the Dow is mainly that they don't take into account any of the growth of the wider global economy. In 2002, for example, Coke or Pepsi were definitely not selling as many soft drinks in China as they are today; Boeing or Airbus (higher oil prices notwithstanding) were not selling as many jets to the Brazilians and the Russians. U.S. exports due to a weaker dollar was arguably what kept the country out of recession in the second quarter this year. It's as if everyone suddenly thinks the world begins and ends at the Hudson River.