While you were sleeping: Bank of America falls, oil tumbles

Wednesday 22nd April 2009

Bank of America shares tumbled after the biggest US lender by assets posted results that showed a 41% surge in nonperforming assets in the first quarter.

The bank increased its reserves for bad loans by US$6.44 billion to cover losses on mortgages, credit cards and commercial real estate loans. Non-performing assets climbed to US$25.7 billion. Rising bad loans eclipsed a better-than-expected first-quarter profit of US$4.25 billion.

The shares dropped 23% to US$8.19, leading the Dow Jones Industrial Average down 3.6% to 7842. Citigroup slumped 20% to US$2.93 after Goldman Sachs analyst Richard Ramsden said its credit losses are growing at a “rapid” rate and reiterated his ‘sell’ recommendation. JPMorgan Chase slipped 7.4% to US$30.81.

The Obama administration is debating the release of so-called stress tests on the 19 largest American banks and said it doesn’t expect there will be further calls on government aid.

The Standard & Poor’s 500 declined 3.9% to 835.67 and the Nasdaq Composite fell 3.9% to 1608. Sun Microsystems soared 37% to US$9.18 after Oracle agreed to buy the manufacturer of computer servers for US$7.4 billion. Oracle, the world’s No. 2 software company, stepped in after IBM’s attempts to acquire Sun faltered.

Economic surveys pointed to the prospects of prolonged recession in the US The Conference Board index of US leading economic indicators fell 0.3%, more than expected and the ninth monthly slide, last month.

US Treasuries rose on speculation the recession won’t abate soon and after Bank of America identified growing credit losses.

The yield on 10-year Treasuries dropped 10 basis points to 2.85%.

Crude oil led a slide in commodity prices on increasing gloom about the world’s largest economy and as the US dollar advanced. Crude oil for May delivery fell 7.6% to US$46.49 a barrel on the New York Mercantile Exchange.

Copper futures for July delivery slumped 4% to US$210.65 a pound, trimming its 56% surge this year. The Reuters/Jefferies CRB Index of 19 commodities fell 2.8% to 219.42.

The euro weakened against the U.S. dollar and the yen as a rift widens between policymakers in the European Central Bank over ways to counter the region’s recession.

The euro fell to $1.2923 from $1.3044 and earlier slipped below $1.29 for the first time in more than a month. The euro declined to 126.55 yen from 129.33. Japan’s currency strengthened to 97.77 per dollar from 99.16.

In Europe, the Dow Jones Stoxx 600 Index fell 3.6% to 189.93, the biggest decline in three weeks, led by commodity companies and financials as prices of raw materials dropped and European lenders reacted to Bank of America’s results.

BHP Billiton, the world’s biggest mining company, fell 4.3% and Anglo American tumbled 6.4%.

BNP Paribas, France’s largest bank, fell 6.6%, UBS AG declined 4.7% and Credit Suisse Group slipped 4.4%.

In the UK the FTSE 100 fell 2.5%. Xstrata tumbled 11%.

Germany’s DAX 30 slid 4.1% to 4,486.30, with Deutsche Bank, falling 8.6% and Commerzbank declining 7.8%. Germany’s largest steelmaker, ThyssenKrupp, slid 7.2%.

France’s CAC 40 Index fell 4% to 2,969.40, with ArcelorMittal declining 115.

Businesswire.co.nz

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