Monday’s Market Moving News

Stocks ended on a sour note Friday and down 5% for last week. One wonders where they might have ended if not for the giant stimulus package and the son of TARP? Markets had been fantasising that the Obama administration’s big bang would at last put equities on the road to redemption but we remain no closer and there seems no rabbit left to pull. Financials were again caught in the cross wires as Lloyds (LLOY.L) share price plummeted on renewed nationalisation fears following revelations of a £10bn loss at basket case HBoS.

Today’s (Monday) Market Moving News

• All U.S. financial markets are closed today for the President’s Day public holiday.
• The grim economic news continued overnight with the release of the weakest Japanese GDP growth figure since 1974 (with a bigger than expected 3.3% contraction, which gives a scary annualised -12.7%!) A truly catastrophic number which shows the scale and global reach of the crisis.
• And staying with economic growth or the lack of it. The UK’s CBI has cut its GDP forecast for 2009 to -3.3%. ECB council member, Germany’s Jurgen Stark, has suggested that both growth and inflation forecasts for the Eurozone would be revised (lower) next month.
• Hugo “Che” Chavez took a step closer to becoming President (dictator) for life of South America’s biggest oil producing country after winning a referendum abolishing fixed term limits for elected officials.
• Not the kind of ill informed guff one wants to read on a Monday morning but the Times is reporting that Ireland “could default on debt.”
• Four more US banks with assets of more than $1bn were closed at the tail end of last week. This brings the running total to 13 thus far this year. The number and scale of these closures is putting serious stress on the FDIC (deposit insurance fund) as it shrinks rapidly and will soon need a bailout of it own.
• The Daily Telegraph’s harbinger of doom Ambrose Evans Pritchard writes today that the unfolding debt drama in Russia, Ukraine and the EU states of Eastern Europe has reached an acute danger point. He warns that, if mishandled, the situation could be big enough to shatter the fragile banking systems of Western Europe and precipitate a further down leg in the global crisis.
• Good to see someone thinks stocks are a buy.

Nothing Meaningful From G7 Meeting
The G7 communique was the usual watered down claptrap crowing on about a “severe” global downturn and the need to refrain from protectionist measures. From a market point of view it was very soft. The calls for the Chinese to revalue the Yuan upwards were reduced and concerns over Yen volatility dropped. Unsurprisingly there was no mention of the British pound’s weakness. Overall there is little to dissuade one from the view of general Dollar and Yen strength and Sterling weakness.

Equities

• UK bank RBS (RBS) is planning to shed as many as 10-20k jobs as it prepares to announce losses of up to £30bn.
• The building materials group, CRH, is considering a €1 billion rights issue. CRH’s key advantage, vis-à-vis their key competitors Cemex and Lafarge, is that they have a third of the debt. A cash pile now would enable them to get some assets for the long term at knock down prices from forced sellers leaving them well positioned for the upswing.
• Talks between EBS and IL&P are ongoing with the possibility of the life business being spun off and the government taking some higher quality assets of IL&P’s books to reduce their loan-to-deposits ratio and address some of their funding issues.
• Good news for Fyffes with some positive developments on the EU banana tariffs possibly being lowered. Brokers estimate the change hinted at by the Ecuadorian foreign minister could be worth €20mln+ a year to Fyffes.
• Drinks firm C&C has announced a rearrangement of the deck chairs with a new marketing director being appointed and the belated introduction of a pear flavoured cider to rival that of Kopparberg.
• Dana Petroleum has announced the acquisition of Bow Valley Energy (a North Sea oil specialist) with support from Bank of Scotland who have extended them a new three year Revolving Credit Facility of up to $400m.

Disclosures: None

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