By Sarah Jones
Nov. 24 (Bloomberg) -- European stocks and U.S. index futures rallied after Citigroup Inc. received a government guarantee on $306 billion of assets to help shore up investor confidence.
Deutsche Bank AG and Credit Suisse Group AG gained more than 5 percent as the U.S. government also said it will inject $20 billion into Citigroup, whose shares lost 60 percent last week. Citigroup jumped 51 percent today. Commodity producers followed metals prices higher, while oil companies climbed after trading at their cheapest on record.
Europe's Dow Jones Stoxx 600 Index added 3.3 percent to 188.15 at 1:49 p.m. in London as all 19 industry groups increased except for auto-related shares. Futures on the Standard & Poor's 500 Index added 2.6 percent.
``Citigroup is just too big to fail,'' said Roger Kunz, head of investment strategy at Clariden Leu AG in Zurich, which manages the equivalent of about $120 billion. ``On the one hand it's good news as it brings some stabilization, another major player will be rescued. On the other hand, it shows confidence is not returning'' to the market.
The MSCI Asia Pacific excluding Japan Index lost 0.3 percent, as Suncorp-Metway Ltd., Australia's third-largest insurer, raised its forecast for bad loans. Japan was shut for a holiday.
National benchmark indexes gained in all 18 western European markets. The U.K.'s FTSE 100 rose 4.7 percent as Royal Dutch Shell Plc and BHP Billiton Ltd. climbed. Germany's DAX added 3.5 percent, with Hypo Real Estate Holding AG jumping on a government debt guarantee. France's CAC 40 increased 4.3 percent.
The Stoxx 600 has fallen 48 percent this year after credit losses and writedowns topped $967 billion and countries from the U.K. to Germany and the U.S. slipped into recession.
Economic Team
U.S. President-elect Barack Obama will today unveil an economic team that will likely push for an unprecedented government role in reviving growth. New York Federal Reserve Bank President Timothy Geithner is set to be nominated as Treasury secretary, former Treasury chief Lawrence Summers will be White House economic director, and Peter Orszag, head of the Congressional Budget Office, will be in charge of assembling Obama's budget, aides said.
Citigroup climbed 51 percent to $5.90 in pre-market trading. The bank will have troubled mortgages and other assets guaranteed by the government and will receive a cash infusion from the Treasury Department's $700 billion Troubled Asset Relief Program.
In return for the cash and guarantees, the government will get $27 billion of preferred shares paying an 8 percent dividend.
The Treasury, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement that the move aims to bolster financial-market stability and restore economic growth.
Deutsche Bank
Deutsche Bank, Germany's largest bank, rose 9 percent to 20.485 euros. Credit Suisse, Switzerland's second-biggest bank, gained 5.3 percent to 26.22 francs.
``The only good news is bailout news,'' said Felix Riley, head of binaries, a type of spread-betting, at ChoiceOdds in London. ``The Treasury's quasi-nationalization of Citigroup is music to the market's ears.''
The cost of protecting corporate bonds from default fell around the world. Credit-default swaps on the Markit iTraxx Crossover index of 50 companies with mostly high-risk, high- yield credit ratings dropped 21 basis points to 892, according to JPMorgan Chase & Co. prices.
Contracts on Citigroup tumbled 245 basis points to 255, Phoenix Partners Group prices show.
Debt Guarantee
Hypo Real Estate advanced 15 percent to 2.47 euros after the property lender received a 20 billion-euro ($25 billion) debt guarantee from the government's rescue fund.
The German Financial Markets Stabilization Fund granted the lender a ``framework guarantee to strengthen the group's liquidity,'' Hypo Real Estate said in a statement on Nov. 21.
UBS AG, which has lost $48.6 billion in the subprime mortgage market, rose 9.8 percent to 12.46 francs. The Swiss government is willing to assist the country's biggest bank with more capital if financial markets don't calm down, SonntagsZeitung reported, citing Federal Banking Commission Director Daniel Zuberbuehler in an interview.
Barclays Plc rallied 9.1 percent to 145.3 pence as the lender won shareholder support to raise 7 billion pounds ($10.5 billion) without surrendering control of its dividends and lending, Chairman Marcus Agius said.
The bank, the second largest in the U.K., got the required majority in a preliminary count and will get most of the money from groups in the Persian Gulf, Agius told Barclays shareholders today in London.
Commodities Rally
BHP Billiton, the world's largest mining company, jumped 10 percent to 880.5 pence. Anglo American Plc, the fourth-biggest diversified mining company, rallied 9.6 percent to 1,241 pence. Copper, nickel, tin and zinc gained in London.
Shell, Europe's largest oil company, rose 7.8 percent to 1,579 pence as crude oil rallied. BP Plc, Europe's second-biggest oil company, increased 5.8 percent to 489 pence. Total SA, the region's third-largest, increased 7.3 percent to 39.42 euros.
The Dow Jones Stoxx Oil & Gas Index was valued at 4.9 times reported earnings of the companies in the index at the close last week, the lowest since records began in 1998.
Crude for January delivery rose as much as $2.16, or 4.3 percent, to $52.09 a barrel in New York.
Roche Holding AG climbed 3.5 percent to 155.8 francs after the drugmaker said new clinical trial data on the Avastin cancer drug showed the medicine helped women with breast cancer live longer without their disease progressing than chemotherapy alone.
Raising Capital
Standard Chartered Plc fell 5.1 percent to 720.5 pence after the third-largest U.K. bank announced plans to raise 1.8 billion pounds ($2.7 billion) in a rights offer to bolster its finances as the global economic recession deepens.
The London-based bank is offering 30 new shares for 91 already held to existing shareholders at 390 pence each, or a 48.7 percent discount to the last closing price.
Shares of Anheuser-Busch InBev fell 3.4 percent to 19.90 euros after the brewer, created by a $52 billion transaction that was completed last week, said it will raise as much as 6.36 billion euros in a rights offering of new shares.
Anheuser-Busch InBev will sell as many as 986.1 million new shares at 6.45 euros apiece.
Acciona SA, the Madrid-based builder that last year teamed up to buy control of power company Endesa SA, jumped 11 percent to 71.80 euros after UBS recommended the stock, saying it offered ``deep value'' after declines this year. The stock dropped 70 percent in 2008 through last week.
Acciona's share price at the moment assigns no value to its option to sell the 25 percent stake in Endesa or its 1.2 billion-euro pipeline of wind energy projects, Ignacio Carvajal Cebrian and Ignacio Sanz, UBS analysts, wrote in a report. They upgraded the stock to ``buy'' from ``neutral.''
Sanofi-Aventis SA, France's largest drugmaker, rallied 8.3 percent to 42.01 euros after Morgan Stanley analysts raised the rating on the stock to ``overweight'' from ``equal weight.''
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
Posts
No comments:
Post a Comment