While you were sleeping: BusinessWire overnight wrap

Wednesday 21st January 2009

Shares dropped on Wall Street, underlining the challenges ahead for newly inaugurated President Barack Obama, as State Street Corp. slumped on unrealised bond losses, leading financials lower.

State Street tumbled 49% to US$18.60, in the biggest slump for 25 years, after the biggest money manager for institutions said unrealized losses on fixed-income securities rose to US$6.3 billion at Dec. 31 from $3.3 billion three months earlier.

The losses on bonds were almost twice the amount analysts had expected, stoking speculation the firm will be forced to raise more capital.

Bank of New York Mellon dropped 23% to US$17.61 after the world's largest custodian of assets brought forward its release of fourth-quarter earnings. Wells Fargo slumped 20% to US$14.89 and Bank of America Corp. fell 19% to US$5.80 after Friedman Billings Ramsey Group Inc. analyst Paul Miller lowered his earnings estimates and said Bank of America will need at least US$80 billion of extra additional capital.

The Dow Jones Industrial Average fell 3.3% to 8005.24 and the Standard & Poor's 500 Index slid 4.3% to 813.19. The Nasdaq Composite slipped 4.7% to 1457.24 amid expectations for weaker earnings among tech companies. IBM, which is due to post earnings after the close of trading today, fell 1.1% to US$83.95. Apple Inc. declined 4% to US$78.94 and Intel slipped 3.5% to US$13.26.

Obama became the 44th president of the US, calling on Americans to rally together to rebuild the world's largest economy.

"Starting today, we must pick ourselves up, dust ourselves off and begin again the work of remaking America," he told a crowd of between 1 million and 2 million gathered in Washington.
The first black man elected to the White House recalled how 60 years ago his father would not have been served at a local restaurant. He said the time for celebration is short, though, as he drives a US$850 billion fiscal aid package to restore the US economy from its worst slump since the Great Depression.

The US dollar fell versus the yen as some traders said Obama didn't provide sufficient detail of plans to address the economic crisis in his inauguration speech.

The dollar weakened to 89.77 yen from 90.20 yen while the euro was at $1.288 from $1.2940.

The British pound fell to a record low against the yen and slipped to a seven-year low against the US dollar after the UK announced its second bank bailout since October, stoking fears that nation's financial crisis is deepening.

The pound fell to 124.91 yen in New York from 130.71 yesterday. Sterling sank to $1.3904 from $1.4420 and earlier fell as low as $1.3863. It declined to 92.61 pence against the euro from 90.60.

Inflation in the UK fell to the lowest in a decade amid the nation's worsening recession. Consumer prices rose 3.1% from a year earlier, from a 4.1% rate in the previous month, according to the Office for National Statistics. Economists had expected the rate to slip further to 2.6%, according to a Bloomberg survey.

The FTSE 100 Index fell a second day, led by banks, amid concern more lenders will be nationalized, erasing the value for existing investors. The UK government pledged an extra 100 billion pounds to support its banks. Lloyds Banking Group tumbled 31% and Barclays Plc sank 17% after analysts at Exane BNP Paribas said the banks were at risk of being taken over by the government.

Royal Bank of Scotland fell 11% and the London Stock Exchange dropped 9.8%.

Lloyds also led the Dow Jones Stoxx 600 Index lower. The European benchmark fell 2% to 185.7. Allied Irish Banks fell 23%.

In Germany, the DAX 30 fell 1.8% to 4239.85 as Infineon fell 11% and Commerzbank fell 6.4%. France's CAC 40 dropped 2.2% to 2925.28 as Societe Generale fell 14% and BNP Paribas fell 13%.

Copper prices declined on concern about the deepening worldwide economic slump. Copper futures for March delivery fell 1.5% to US$1.5045 a pound on the New York Mercantile Exchange.
Crude oil rose as traders bought futures for February delivery ahead of their expiry yesterday. Crude oil for February rose 6.4% to US$38.85 a barrel in New York.

Gold rose to its highest in a week as the prospects of a prolonged recession spurred some investors to buy the precious metal as a haven. Gold futures for February delivery rose 1.8% to US$855.20 an ounce in New York.

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