Tuesday April 8, 11:43 am ET By Christopher S. Rugaber, AP Business Writer
IMF Says Credit Crisis, Despite Some Recent Improvement, Remains Threat to Economic Growth
WASHINGTON (AP) -- The International Monetary Fund on Tuesday said the global credit crisis, despite some recent improvement, remains a significant threat to economic growth.
Despite "unprecedented intervention" by central banks such as the Federal Reserve, "financial markets remain under considerable strain, now compounded" by a slowing economy, low levels of capital at financial companies and widespread efforts to unload debt, the fund said.
The U.S. mortgage and credit crises could cause almost $1 trillion in financial losses, the IMF said in an update to its Global Financial Stability Report, with $565 billion of those losses stemming from the residential mortgage market and related securities, and the rest from the commercial real estate, consumer credit and corporate debt markets.
That figure includes $200 billion in losses that banks have already announced, plus an additional $80 billion the banks have yet to write down, IMF officials said during a briefing.
The rest is held by other financial institutions, such as hedge funds and pension funds, the officials said.
"The deterioration in credit has moved up and across the credit spectrum to prime residential and commercial mortgage markets, and to corporate credit markets," said Jaime Caruana, director of the IMF's Monetary and Capital Markets department.
Credit markets have stabilized since last month, IMF officials said, when Bear Stearns Cos., the fifth-largest U.S. investment bank, was acquired by JPMorgan Chase & Co. at a fire-sale price.
Caruana said investments earlier this year by government-run investment funds in large U.S. and European banks "have helped, but more may be needed to restore their lending capacity."
Government funds, also known as sovereign wealth funds, from China, Singapore and the Middle East invested more than $40 billion in Citigroup Inc., Merrill Lynch & Co. Inc., and Swiss bank UBS late last year and early this year.
The IMF is developing a voluntary code of best practices for the funds, which have sparked some concerns in the United States and Europe because they are government-run. Critics fear they could invest for noncommercial reasons, such as to obtain sensitive technologies.
While some sovereign fund managers, such as China's, have criticized the IMF's efforts, Caruana said the code could "help ... to mitigate some of the concerns" about sovereign funds.
"We think that it is very important to keep the financial system open and competitive," Caruana said.
Government regulation and supervision of the financial sector, along with private sector risk management, "all lagged behind the rapid innovation" of banks and securities firms, which resulted in "excessive risk-taking, weak underwriting ... and asset price inflation," the IMF said in its report.
Among other steps, the IMF recommended streamlining regulation of the financial sector to avoid subjecting banks and other financial firms to multiple supervisors.
Treasury Secretary Henry Paulson has proposed a regulatory overhaul along those lines that would eliminate some agencies and consolidate others. Most of Paulson's blueprint would require congressional approval, however, and is unlikely to be enacted before President Bush leaves office.
The IMF issued the update in advance of the spring meetings of finance ministers and central bank governors from its 185 member nations, which takes place this weekend in Washington. The IMF conducts economic analyses and provides loans and technical assistance to developing countries.
Tuesday, April 8, 2008
Stocks in Europe, Asia Decline; U.S. Index Futures Retreat
April 8 (Bloomberg) -- Stocks fell in Europe and Asia, and U.S. index futures declined, after chipmaker Advanced Micro Devices Inc. said first-quarter revenue fell more than forecast and TomTom NV predicted lower sales.
STMicroelectronics NV, Europe's largest semiconductor maker, retreated as researchers cut sales estimates for memory chips. Advanced Micro dropped in Germany. TomTom, the world's biggest maker of car-navigation equipment, sank 10 percent in Amsterdam. Elpida Memory Inc. fell in Tokyo after Dramexchange Technology Inc. said memory makers failed to raise prices.
Barratt Developments Plc, the U.K.'s second-biggest homebuilder, dropped as a report showed house prices slumped by the most since 1992 in March.
The MSCI World Index lost 0.5 percent to 1,491.33 at 10:04 a.m. in London, decreasing for the first time in seven days. The index has climbed 8.2 percent from a 17-month low on March 17 as measures by the U.S. Federal Reserve supported banks suffering from $232 billion in losses and asset writedowns. Futures on the Standard & Poor's 500 Index fell 0.4 percent today.
"Judging by AMD and TomTom, I don't think that first- quarter earnings will provide the much-needed catalysts,'' said Jesper Kruger, a fund manager in Copenhagen at ATP, which has about $64 billion.
Earnings at S&P 500 companies probably fell an average of 11.3 percent from a year earlier in the first quarter, the third consecutive quarterly decline, based on analyst estimates compiled by Bloomberg. In Europe, profit for companies in the Dow Jones Stoxx 600 Index will rise 0.6 percent this year, down from 11 percent predicted at the end of last year, Bloomberg data show.
"Earnings downgrades will have to continue,'' said Bernd Meyer, head of pan-European strategy at Deutsche Bank AG. "There will be more bad news flow and more of this will feed through'' to stocks, he said.
STMicro, ASML
Europe's Stoxx 600 sank 1.2 percent, with all 18 industry groups retreating. The MSCI Asia Pacific Index also decreased 1.2 percent, declining from a five-week high.
STMicroelectronics sank 2.5 percent to 7.165 euros. ASML Holding NV, Europe's largest maker of semiconductor equipment, declined 5.7 percent to 15.80 euros after iSuppli Corp. reduced estimates for sales of memory chips this year.
Advanced Micro said first-quarter sales fell to about $1.5 billion and announced plans to cut about 1,650 jobs. The sales would be down 22 percent from a year earlier and 15 percent from the holiday period, a steeper slump than usual for this time of year. The stock dropped 39 cents to $5.95 in Germany.
Infineon Technologies AG fell 5.7 percent to 4.79 euros. Europe's second-biggest maker of semiconductors was downgraded to "neutral'' from "outperform'' at Credit Suisse Group.
Elpida, TomTom
Elpida, Japan's largest computer-memory chipmaker, tumbled 7.3 percent to 3,580 yen.
Chipmakers kept prices of the benchmark computer memory at 3 cents shy of a record low, Taipei-based Dramexchange, Asia's biggest spot market for the semiconductor, said yesterday.
Fukuoka Financial Group Inc., Japan's second-largest regional bank by assets, plunged 13 percent to 449 yen after saying it missed its profit forecast by 92 percent for the year ended March 31.
TomTom tumbled 2.85 euros to 23.58. The company lowered its sales outlook for this year as European shops reduce inventory more than anticipated. TomTom targets revenue of 1.8 billion euros ($2.8 billion) to 2 billion euros this year, the company said in an e-mailed statement today.
Alcoa Inc. dropped 33 cents to $37.11 in Germany. The world's third-largest aluminum company said first-quarter profit tumbled 54 percent on surging energy costs, a weaker U.S. dollar and lower metals prices.
Barratt Developments, the U.K.'s second-largest house builder by volume, dropped 5.6 percent to 372.25 pence. Bellway Plc, a U.K. homebuilder aimed at first-time buyers, slid 5.4 percent to 795.5 pence.
Home Prices
The average cost of a home in Britain fell 2.5 percent to 191,556 pounds ($379,000) from February, HBOS Plc, the U.K.'s biggest mortgage lender said in a statement on the Regulatory News Service today. Economists predicted a 0.3 percent decline, according to the median of 12 estimates in a Bloomberg News survey.
Home Retail Group Plc, the owner of Argos and Homebase stores, slid 3.4 percent to 263.5 pence. Marks & Spencer Group Plc, the largest U.K. clothes retailer, fell 3 percent to 380 pence. Tesco Plc, the nation's biggest supermarket chain, dropped 1.7 percent to 402.75 pence.
AstraZeneca Plc retreated 1.5 percent to 2,054 pence. Goldman Sachs Group Inc. analysts, including London-based John Murphy, downgraded shares of the U.K.'s second-largest drugmaker to "neutral'' from "buy,'' citing a "a 20 percent share-price move over the past three weeks.''
Michael Page International Plc declined 4 percent to 277.25 pence after the U.K.'s second-largest recruitment firm was cut to "sell'' from "neutral'' at UBS, which said first-quarter revenue "disappoints.''
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
Last Updated: April 8, 2008 05:15 EDT
STMicroelectronics NV, Europe's largest semiconductor maker, retreated as researchers cut sales estimates for memory chips. Advanced Micro dropped in Germany. TomTom, the world's biggest maker of car-navigation equipment, sank 10 percent in Amsterdam. Elpida Memory Inc. fell in Tokyo after Dramexchange Technology Inc. said memory makers failed to raise prices.
Barratt Developments Plc, the U.K.'s second-biggest homebuilder, dropped as a report showed house prices slumped by the most since 1992 in March.
The MSCI World Index lost 0.5 percent to 1,491.33 at 10:04 a.m. in London, decreasing for the first time in seven days. The index has climbed 8.2 percent from a 17-month low on March 17 as measures by the U.S. Federal Reserve supported banks suffering from $232 billion in losses and asset writedowns. Futures on the Standard & Poor's 500 Index fell 0.4 percent today.
"Judging by AMD and TomTom, I don't think that first- quarter earnings will provide the much-needed catalysts,'' said Jesper Kruger, a fund manager in Copenhagen at ATP, which has about $64 billion.
Earnings at S&P 500 companies probably fell an average of 11.3 percent from a year earlier in the first quarter, the third consecutive quarterly decline, based on analyst estimates compiled by Bloomberg. In Europe, profit for companies in the Dow Jones Stoxx 600 Index will rise 0.6 percent this year, down from 11 percent predicted at the end of last year, Bloomberg data show.
"Earnings downgrades will have to continue,'' said Bernd Meyer, head of pan-European strategy at Deutsche Bank AG. "There will be more bad news flow and more of this will feed through'' to stocks, he said.
STMicro, ASML
Europe's Stoxx 600 sank 1.2 percent, with all 18 industry groups retreating. The MSCI Asia Pacific Index also decreased 1.2 percent, declining from a five-week high.
STMicroelectronics sank 2.5 percent to 7.165 euros. ASML Holding NV, Europe's largest maker of semiconductor equipment, declined 5.7 percent to 15.80 euros after iSuppli Corp. reduced estimates for sales of memory chips this year.
Advanced Micro said first-quarter sales fell to about $1.5 billion and announced plans to cut about 1,650 jobs. The sales would be down 22 percent from a year earlier and 15 percent from the holiday period, a steeper slump than usual for this time of year. The stock dropped 39 cents to $5.95 in Germany.
Infineon Technologies AG fell 5.7 percent to 4.79 euros. Europe's second-biggest maker of semiconductors was downgraded to "neutral'' from "outperform'' at Credit Suisse Group.
Elpida, TomTom
Elpida, Japan's largest computer-memory chipmaker, tumbled 7.3 percent to 3,580 yen.
Chipmakers kept prices of the benchmark computer memory at 3 cents shy of a record low, Taipei-based Dramexchange, Asia's biggest spot market for the semiconductor, said yesterday.
Fukuoka Financial Group Inc., Japan's second-largest regional bank by assets, plunged 13 percent to 449 yen after saying it missed its profit forecast by 92 percent for the year ended March 31.
TomTom tumbled 2.85 euros to 23.58. The company lowered its sales outlook for this year as European shops reduce inventory more than anticipated. TomTom targets revenue of 1.8 billion euros ($2.8 billion) to 2 billion euros this year, the company said in an e-mailed statement today.
Alcoa Inc. dropped 33 cents to $37.11 in Germany. The world's third-largest aluminum company said first-quarter profit tumbled 54 percent on surging energy costs, a weaker U.S. dollar and lower metals prices.
Barratt Developments, the U.K.'s second-largest house builder by volume, dropped 5.6 percent to 372.25 pence. Bellway Plc, a U.K. homebuilder aimed at first-time buyers, slid 5.4 percent to 795.5 pence.
Home Prices
The average cost of a home in Britain fell 2.5 percent to 191,556 pounds ($379,000) from February, HBOS Plc, the U.K.'s biggest mortgage lender said in a statement on the Regulatory News Service today. Economists predicted a 0.3 percent decline, according to the median of 12 estimates in a Bloomberg News survey.
Home Retail Group Plc, the owner of Argos and Homebase stores, slid 3.4 percent to 263.5 pence. Marks & Spencer Group Plc, the largest U.K. clothes retailer, fell 3 percent to 380 pence. Tesco Plc, the nation's biggest supermarket chain, dropped 1.7 percent to 402.75 pence.
AstraZeneca Plc retreated 1.5 percent to 2,054 pence. Goldman Sachs Group Inc. analysts, including London-based John Murphy, downgraded shares of the U.K.'s second-largest drugmaker to "neutral'' from "buy,'' citing a "a 20 percent share-price move over the past three weeks.''
Michael Page International Plc declined 4 percent to 277.25 pence after the U.K.'s second-largest recruitment firm was cut to "sell'' from "neutral'' at UBS, which said first-quarter revenue "disappoints.''
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
Last Updated: April 8, 2008 05:15 EDT
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