Opening Bell: 10.09.08

Posted by Daniel Harrison, Oct 09, 2008, 7:29am


U.S.futures point to Wall St rebounding (Reuters)
After six days in the snake-pit, this morning's futures activity shows the first genuine signs of an up day. Futures in the Dow, S&P, and the Nasdaq are all climbing around 1.7%. Whatever happens, it's probably going to feel a bit like a newly-fitted jet over the Himalayas. Short selling comes off today, which funds will either to pummel Goldman, Morgan et al, or they'll use to hedge against big upside bets. With valuations so weak now, it looks like stocks will probably move towards the buying end of the scale.

Paulson Signals U.S. May Invest in Banks to Shore Up Confidence (Bloomberg)
Perhaps due to the farsightedness of the British, Paulson indicated yesterday that the U.S. federal government is mulling a plan to buy some of its own banks. Unfortunately, that's probably the type of drastic measure that may be required to stem the blood in this market if things get any worse.

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U.S. Pending Home Resales Rise 7.4% as Prices Drop (Bloomberg)
... then again, that's the biggest jump in home resales since 2001. The increase has been attributed to lots of "vulture investors", among other things. Either way, once again this does suggest that we're still pretty far from recessionary conditions.

Icelandic Regulator Takes Control of Kaupthing Bank (Bloomberg)
The Icelandic saga continues ... and ends in the tradition of all contemporary bank dramas: nationalization of its biggest lender. Iceland took control of Kaupthing today, the country's largest bank, after the krona/euro peg was abandoned Wednesday. Talks with the Russians for the $5.5 billion loan begin Tuesday, and Iceland may also tap the IMF now, according to Bloomberg.

MetLife, Hartford Held Merger Talks: Report (CNBC.com)
It should be pretty clear by now that when a firm comes out and says it's raising money, really what it means is that it's talking to M&A departments about getting bought out or merging. So it is with Met Life: apparently, the insurance giant approached Hartford Financial Services Group about a merger. European insurer Allianz bought $2.5 billion of Hartford earlier this week; it seems that's enough for Hartford execs to have said "don't call us, we'll call you" to Met Life. My guess is Chinese Ping An could end up tying up with Met Life.

Oil prices rebound (AFP)
After falling in wake of Wednesday's coordinated rate cuts, the black liquid is up again at around $90. But oil prices are moving in much smaller increments these days when they go up (and much larger ones when they go down); there's definitely a lot of downward pressure on the price right now. And oil companies aren't as satisfied with profits as you'd think.

Hong Kong rises, Sydney drops in mixed region (Marketwatch)
Mixed trading in Asia, with Japan's Nikkei off a little bit, for the sixth straight day. Hong Kong jumped 3.3%, while the Japanese yen weakened a little bit to around 101 yen vs. dollar. In other words, Asian markets are in "wait and see" mode. All eyes on us today.


S. Korea, Hong Kong, Taiwan Cut Rates, Joining Action (Bloomberg)
This feels like yesterday's news, but more coordinated rate cutting in Asia, with Hong Kong slashing its benchmark rate to 2%, and the Japanese pumping $20 billion into its banking sector. Something says that's probably not quite enough right now.

Global Economic Outlook Grows Darker, IMF Says (WSJ)
More doom and gloom, this time from the International Monetary Fund. The IMF is projecting global growth at 3.9% this year, down from 4.1% in July. Most startling is its estimation for U.S. growth next year: an insipid 0.1%! As if. Economists and analysts the world over really need to stop jumping on the latest market momentum bandwagon.

Citigroup, Wells Fargo Gain Two Days in Wachovia Deal (Bloomberg)
The ceasefire between Citi and Wells Fargo has been extended by 2 days. According to Wachovia's lawyer, a "grand solution" is on the table between the two bidders. Apparently, the Fed intervened and pushed for the extension, because of the state of the stock market right now. So far, Citi has offered $2.16 billion for the banking operation, while Wells said it would trump up $15 billion for whole thing. It's worth noting economies of scale here: Wells' offer is three times the amount Iceland needs as a bridging loan for its entire banking system!

U.K. Stocks Fall Despite New Bank-Rescue Effort (WSJ)
Pay no attention to the headline (which looks like it was written for a completely different story) but do read the article, which is pretty thorough. The banks expected to tap the government for extra cash are Barclays and RBS, which is no surprise, while Abbey, HSBC, and Stan Chart are saying, "thanks, but no thanks." Lloyds is mulling the decision. The $699 billion plan has actually helped UK banks today: RBS is gaining 15%, and Lloyds is up 10%, although Barclays is off around 5%.


IBM affirms outlook, shares rise in late trading (Marketwatch)
Finally, someone who beat the street's estimates this earnings season! In Q208, IBM says it made $2.8 billion vs. $2.4 billion in the same period last year. After slumping 5% along with the rest of the market yesterday, shares in IBM leaped 6% in after-market hours. Bernanke should give chief exec Samuel Palmisano a medal for exemplary service to his nation's economy.

Boeing and Union Agree to Restart Talks (New York Times)
Unsurprisingly with things how they are, there hasn't been a lot of news from the airline sector recently. But it seems Boeing are ready to take up the mantle and continue talks with unions. It should. Its workers are all on strike over a squabble about a 2% pay increase (Boeing's offering 11%, the workers want 13%), and it's costing Boeing $100 million a day in lost business. The stock tumbled 17.5% yesterday. That's worse than Morgan Staley!

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