From CPN’s Morning Newsletter–Swap Investigation Launched: Did Manipulation Crush Financial Shares?
- Oct 20, 2008
As CPN reported in our Daily News REport Morning Edition(subscribe here), we are shocked, shocked that some in the markets might seek to profit from the misery of others. But a joint investigation, between New York attorney general, Andrew Cuomo, and the U.S. attorney in Manhattan, Michael Garcia, into credit-default swaps for financial-firm stock is looking into just that, according to a report in The New York Times. They are looking to see if the financial instruments—which insure against defaults on bonds–were used to push down share prices. The SEC is also looking at the swaps. At issue is the possibility that ghost-swaps were reported that were never done—thus falsely driving down share-prices. Short-sellers would benefit from such a maneuver. Otherwise, this Monday might see the cat taking another bounce. Buoyed by more bailout news, stocks rose in Asia and are rising so far in Europe. The Nikkei 225 rose 3.6 percent. Late in trading day, the Hang Seng was up 4.3 percent. In Australia, The S&P/ASX 200 jumped 4.3 percent. The boost in Asia came largely from news that the South Korean government plans to guarantee up to $100 billion in foreign debt in its banks—and would pour $30 billion more into bank sector bailouts., With the Won, Korea’s currency, losing 30 percent against the dollar, Seoul’s big banks will be hard-pressed to repay maturing foreign-currency debts.Joy in Asia, however, was tempered by the recession-reinforcing news that China’s economy grew 9 percent in Q3, vs. 9.7 percent forecasts and 10.1 percent in Q2. Industrial output hit a six-year low, partially due to factory closings to improve air-quality for the Olympics. In addition, China’s inflation is down for the fifth straight month to 4.6 percent, and its central bank has announced rate cuts and looser lending policies. European stocks are up now in part on news that ING is getting a $13.5 billion cash injection from the Dutch government after a weekend of furious talks. The bank’s stock had fallen 27 percent Friday after it announced a Q3 loss of 500 million euros as a result of 1.6 billion euros in write-downs. In addition, ING announced the sale its Taiwan life insurance unit to Fubon Financial for $600 million. “We wanted to make sure we had a buffer, a buffer large enough to carry us through the storm,” ING CFO John Hele told CNBC. The Dutch set aside 20 billion euros for their bailout. In credit-crisis news, the Libor declined 36 basis points, or 0.36 percentage point, to 4.06 percent today, the biggest drop since Jan. 23, according to British Bankers’ Association data. The overnight rate for dollars fell 16 basis points to 1.51 percent, says Bloomberg News, the lowest level since August 2004. On the retail front, Circuit City may be shuttering 150 stores, according to the Wall Street Journal. And Sumner Redstone, ancient chieftain of Viacom and CBS, appears to have a monster hit on his hands—and not the good kind. According to the New York Post, his theater chain, National Amusements, is trying to renegotiate its $1.6 billion debt, hammered by CBS and Viacom stock losses. Redstone may have to sell stock in those companies, otherwise, as half the debt is owed by year-end.Want to lose money faster? How about oil? OPEC is planning to cut output in the face of plunging crude prices. According to Bloomberg News, $50-dollar options on the New York Mercantile Exchange are risen 50-fold in the last two weeks. On the broader economic front, President Bush said Saturday that he would host the inaugural global summit of a series planned. The goal of the meetings, jointly announced after a weekend meeting with French President Nicolas Sarkozy and European Commission President Jose Manuel Barroso, is to revamp the global economic structure put in place at the 1944 Bretton Woods conferenceFinally, remember that quaint concept of a balanced federal budget. The New York Times reports that from fiscal conservatives and fiscal-anti-conservatives alike, the consensus is that in these troubled times…fugedaboudit.If you would like to partake of our Upcoming News digest with your morning coffee, please subscribe to ourDaily News REport Morning Edition.