While you were sleeping: BusinessWire weekend wrap

Monday 19th January 2009

Citigroup posted a fourth-quarter loss of US$8.29 billion on write-downs and credit losses while Bank of America reported a loss of US$1.79 billion as it struggled to digest the purchase of Merrill Lynch & Co.

The two firms were the biggest decliners on the Dow Jones Industrial Average on Friday, with Citigroup sinking 8.6% to US$3.50 on concern about its losses, which reflected US$28 billion of charges.

Under a plan to split Citigroup into two, its Citicorp division will hold its key retail banking and credit card, corporate and investment banking, its Citi Private Bank and its transaction services unit. Citi Holdings will hold its brokerage and asset management units including the 49% in its brokerage joint venture with Morgan Stanley.

Bank of America fell 14% to US$7.18 even after the US government agreed to extend US$20 billion on new aid and guarantee US$118 billion of troubled assets, much of which came from Merrill Lynch.

The US Treasury will provide the Bank of America with aid by buying preferred stock in the lender. Citigroup plans to split into two and shed assets as part of its survival strategy.

JPMorgan Chase fell 6.2% and American Express dropped 1.8% to US$17.01. The Dow ended the week higher, rising 68.73, or 0.8%, to 8281.22 as a gain in the price of crude oil lifted shares of Exxon Mobil by 1.9% to US$78.10. McDonald's Corp. rose 2.9% to US$59.67 after chief executive Jim Skinner told CNBC the fast-food chain expects to continue paying dividends.

Boeing Co. rose 3.7% to US$42.46, leading the Dow higher. The Standard & Poor's 500 Index rose 0.8% to 850.12 and the Nasdaq Composite gained 1.2% to 1529.33.

President-elect Barack Obama, whose inauguration in Washington is set to be the biggest event in the US this week, on Friday said Americans should expect even tougher times ahead and his US$825 billion fiscal stimulus package won't revive the world's biggest economy "overnight."

"Even with the measures that we're taking, things could get worse before they get better," said Obama, who is travelling to Washington by train in a remake of Abraham Lincoln's historic journey. Markets are closed in the US on Monday for Martin Luther King Day, which may reduce volumes of trading in Asian markets today.

Shares advanced in Europe on Friday. The Dow Jones Stoxx 600 Index gained 0.9% to 192.96, led by a 9.5% jump in HeidelbergCement after Reuters reported that US private equity firm TPG and Goldman Sachs were considering acquiring a stake in the German cement maker. Rio Tinto gained 7.6%, Xstrata rose 6% and Total climbed 1.1% as oil gained and prices of metals revived.

Barclays slumped 25%, leading a decline in European bank stocks, amid fears weakened balance sheets mean the sector needs more state-funded aid. Royal Bank of Scotland declined 13%.

The British government is planning another round of financial aid for financial institutions, Reuters reported, citing Treasury sources. Prime Minister Gordon Brown met with Bank of England officials and regulators thought hey declined to comment on the talks.

Commerzbank declined 7.9% and Deutsche Bank fell 3.6%, while BNP Paribas shed 3.2%. Irish banks sank after Ireland nationalized Anglo Irish Bank to save it from collapse. Allied Irish Banks fell 25% and Bank of Ireland dropped 17%.

The FTSE 100 Index rose 0.6% to 4147.06 and the DAX 30 gained 0.7% to 4366.28. In France, the CAC 40 advanced 0.7% to 3016.75.

The price of copper had its biggest gain in a week on Friday in New York amid speculation demand for the metal will revive on Obama's aid package and increased support for lenders in the US and the UK

Copper futures for March delivery rose 5.1% to US$1.5275 a pound on the New York Mercantile Exchange. The price of the metal has declined 64% since reaching a record US$4.2605 a pound in May.

Crude oil rose ahead of the expiry of the February futures contract in Jan. 20. Crude oil for February delivery rose 3.1% to US$36.51 a barrel on the New York Mercantile Exchange.

Gold gained as the US dollar fell, stoking the appeal of the precious metal as an alternative investment. Gold futures for February delivery rose 4% to US$839.90 an ounce in New York.

The US dollar and the yen weakened on Friday as stocks rose and banks received more government aid, reducing safe-haven demand for the currencies of the world's two largest economies.

The euro rose to $1.3290 from $1.3025 and climbed 1.8% to 120.24 yen. The US dollar rose 0.9% to 90.58 yen.

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