TOP STORIES
Future looks brighter for bond insurers, markets
The uncertainty surrounding bond insurers MBIA and Ambac may be dissipating, bringing hope to the stock markets and credit markets. Both Standard and Poor's and Moody's Investors Service reconfirmed MBIA's triple-A rating this week. S&P also confirmed Ambac's top rating. Financial Times (subscription required) (26 Feb.)
CEO Brown says MBIA done raising dilutive capital: MBIA Chief Executive Jay Brown said the largest bond insurer in the world has completed its "significant dilutive capital" raising. The company has also eliminated its quarterly dividend, will no longer insure new derivative credit contracts, and has temporarily halted the writing of new structured finance business. CNBC/Reuters/The Associated Press (26 Feb.)Stock of European insurers hit along with banks
European insurance companies have been hurt along with the banking sector. Though banks worldwide are writing down billions in assets, not so the insurers. "Insurers are not banks, despite the appallingly simplistic references to financial stocks," said insurance analysts at U.K. brokerage Collins Stewart. But some investors believe that lack of clarity on writedowns warrants a defensive stance on all financials. MarketWatch (26 Feb.)
Investors begin to question fair value accounting
Fair value accounting, touted as a way to increase transparency, is now questioned by investors who have seen their markets evaporate in the credit squeeze. Critics say the accounting practice is not worth the volatility it causes, as exemplified by Merrill Lynch, Citigroup and other firms that have posted massive write-downs on hard-to-value assets. Reuters (26 Feb.)
Private equity conference sounds gloomy tone
A somber mood dominated the private equity industry's key conference in Munich. The industry has been slammed by the credit crunch and the resulting loss of cheap debt. Alchemy Partners founder Jon Moulton said it could be years before favorable conditions return. "The banks aren't offering anything but threats. They are in trouble themselves, and we won't see an aggressive banking market for a number of years," he said. Bloomberg/ClipSyndicate (27 Feb.) , The Independent (London) (27 Feb.)
ISDA offers suggestions on CDS settlements
Holders of credit default swaps have new guidance on settling trades if one of the troubled U.S. bond insurers were to fail. The International Swaps and Derivatives Association published a list of deliverables bonds. "The purpose of the list is to provide information as to the range of obligations that market participants believe may be delivered in the occurrence of a credit event," the association said. FinancialWeek (26 Feb.)
Trichet notes Asia's global economic role increasing
The governance of global macroeconomic and financial affairs is changing as Asia-Pacific countries gain economic power and assume more global responsibilities, European Central Bank President Jean-Claude Trichet said. "The world economy might be better able to rely on the dynamism of the Asia-Pacific region should growth in other regions lose some momentum," he said. Agence France-Presse (26 Feb.)
Energy shares climb as oil price hits new high
With oil services companies in the lead, energy-related shares rose in New York trading as oil pushed through to a record close above $100 a barrel. El Paso Corp. was left out of the surge because the company's earnings failed to meet estimates. MarketWatch (26 Feb.)
ABN AMRO to close investment accounts held by U.S. citizens
ABN AMRO said that for "strategic reasons" it will close the investment accounts of customers with U.S. passports, although they will be allowed to keep their checking and savings accounts. "It has nothing to do with individual clients, but is part of a strategic assessment and affects only a very small part of the client base," said Hans van Zon, an ABN AMRO representative in Amsterdam. International Herald Tribune (26 Feb.)
JPMorgan gauge shows global liquidity returning
A JPMorgan indicator is showing signs that global liquidity is improving. David Shairp, global strategist at JPMorgan Asset Management, says the gauge, which takes in the U.S. monetary base and the Federal Reserve's custody holdings on behalf of other central banks, has picked up significantly in recent weeks. The global liquidity surge comes as central banks hold more bonds, perhaps because they want to stop their currencies appreciating. Financial Times (subscription required) (26 Feb.)
Banco do Brasil profit drops 2.5%
Government-controlled Banco do Brasil SA said fourth-quarter profit fell 2.5% as it spent more on expansion insurance and increased provisions to cover lawsuits. Latin America's largest bank by assets said its recurring profit fell 0.4%. Banco do Brasil is awaiting regulatory approval to offer services to Brazilians living in the U.S. The bank is also studying expansion into Argentina, Chile and Uruguay. Bloomberg (26 Feb.)
Canadian banks may report first profit slide in six years
Canada's biggest banks are likely to post quarterly profit declines for the first time in almost six years when they begin publishing results later today. Canadian banks have been hurt by debt write-downs, but also by falling investment banking revenue driven by fewer mergers and weaker capital markets. Bloomberg (27 Feb.)
MARKET ACTIVITY
Banco do Brasil profit drops 2.5%
Government-controlled Banco do Brasil SA said fourth-quarter profit fell 2.5% as it spent more on expansion insurance and increased provisions to cover lawsuits. Latin America's largest bank by assets said its recurring profit fell 0.4%. Banco do Brasil is awaiting regulatory approval to offer services to Brazilians living in the U.S. The bank is also studying expansion into Argentina, Chile and Uruguay. Bloomberg (26 Feb.)
Canadian banks may report first profit slide in six years
Canada's biggest banks are likely to post quarterly profit declines for the first time in almost six years when they begin publishing results later today. Canadian banks have been hurt by debt write-downs, but also by falling investment banking revenue driven by fewer mergers and weaker capital markets. Bloomberg (27 Feb.)
ECONOMICS
Dollar falls to new low against euro
The U.S. dollar sank to a record low against the euro Wednesday following weak economic data and news that U.S. consumer sentiment hit a five-year low. The euro's value went past the psychologically important $1.50 level in Asian trading.
Bloomberg/ClipSyndicate (27 Feb.) , Forbes/Reuters (27 Feb.)
Indicators show Americans squeezed by inflation, home values
New economic reports confirme that Americans are squeezed between falling home values and rising costs of goods. A gauge of consumer confidence fell to its lowest level in nearly five years. "Look at the things that are accelerating: food and energy. What is decelerating? It's electronics and light trucks. These are not things that people buy every day," said Seth B. Plunkett, a bond portfolio manager at American Century Investments. The New York Times (27 Feb.)
Survey: Institutional investors see high recession risk
More than half of institutional investors believe there is a high risk of a U.S. recession, while virtually all expect the risk is at least moderate. A survey by Fitch Ratings revealed a dramatic souring in the outlook of institutional investors in the past six months. Respondents expect credit markets to be unstable through the third quarter, with housing market stability taking longer. FinancialWeek (26 Feb.)
Geopolitical/Regulatory
EC proposes voluntary code for SWFs
The European Commission plans to announce today proposed ground rules for sovereign wealth funds. The measures, aimed at creating a global voluntary code of conduct for the funds, are designed to thwart a more a protectionist initiative led by French President Nicolas Sarkozy.
The Times (London) (27 Feb.)
Bernanke reshapes Fed in his image
Federal Reserve Chairman Ben Bernanke has introduced some of the discipline of inflation-targeting central banks in Britain and Sweden. He has demonstrated a focus on medium-term goals while flooding the banking system with short-term cash in a pinch. Bernanke has also persuaded fellow members of the Federal Open Market Committee to publish their projections four times a year instead of two, and stretch out to a third year. Bloomberg (27 Feb.)
Financial Products
ETF offers Egypt's large-cap stocks
Egypt's first exchange traded fund for large-cap stocks is expected to draw local customers as well as foreign institutional investors, Morgan Stanley said. Cairo's benchmark CASE 30 has risen more than 500% since Egypt launched an economic reform drive in 2004. The CASE 30 rose 51.3% last year. Reuters (26 Feb.)
More offerings allow small investors access to commodities
Investors are more willing to consider commodities now that major stock indexes are down and Treasury bonds are battered from multiple Federal Reserve rate cuts. But the potential for the U.S. to fall into recession leaves some wondering if the commodity price boom will bust. A recession would likely cut U.S. demand for energy, metals, and farm products, though growth in the rest of the world could keep prices high.
BusinessWeek (27 Feb.)
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