WASHINGTON – The Treasury Department will start doling out $125 billion to nine major banks this week to get credit flowing again, giving a lift to U.S. markets on rising confidence that the government’s moves would stave off a protracted recession.

Investors overseas were less assured, though. Stocks fell sharply around the globe.

Assistant Treasury Secretary David Nason said the deals with the nine banks were signed Sunday, and the government will make the stock purchases this week. The deals are designed to bolster the banks’ balance sheets so they will begin more normal lending.

The action will mark the first deployment of resources from the government’s $700 billion financial rescue package passed by Congress on Oct. 3.

The bailout package has undergone a major change in emphasis since it was passed by Congress. Treasury Secretary Henry Paulson decided to use $250 billion of the $700 billion to make direct purchases of bank stock, partially nationalizing the country’s banking system, as a way to get money into the financial system more quickly.

The plan is also aimed at clearing banks’ balance sheets of bad assets. That effort has yet to begin although the administration expects to use $100 billion to purchase bad assets in coming months.

The deployment of the first $125 billion to the major banks had been delayed while the government and the banks worked out the details for the purchases. Nason, a key architect of the rescue plan, said in an interview Monday on CNBC that those agreements had been signed late Sunday night.

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written by Andrew

NEW YORK – In a typical recession, stocks start recovering about six months before the economy does. The crisis we’re in right now, however, is anything but typical: Lending is frozen, hedge-fund selling is happening on a massive scale, and economic troubles have spread all over the globe.

As a result, it’s possible the economy will need to show signs of strength before the stock market stabilizes and regains steam. So with readings getting darker by the day, expect more of the same this week: extreme volatility.

“Volatility’s here, and it’s here to stay,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research. Last Friday, the Dow Jones industrial average finished down 312 points, “and it seemed like a victory.”

The Dow finished last week down 5.35 percent, the Standard & Poor’s 500 index lost 6.78 percent and the Nasdaq composite index dropped 9.31 percent. That week wiped out nearly $800 billion from shareholder wealth, as measured by the Dow Jones Wilshire 5000 Composite Index.

One bright spot was that the market did not hit the trading lows reached Oct. 10, when panic appeared to be at a peak. But that doesn’t mean the market has hit bottom. Between 2000 and 2002, the S&P 500 fell 50 percent from peak to trough, and so far that index is only off 44 percent from its Oct. 9, 2007 peak.

“I’m not sure that the market has gotten to the point where you think, ‘It’s been beaten up enough.’ No one knows how bad it’s going to be,” said Tim Knepp, chief investment officer of Genworth Financial Asset Management.

Even if stocks have seen their lowest levels, an upturn is not necessarily around the corner.

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BEIJING, China (CNN) — Asian and European leaders vowed Saturday to act together to address the global financial crisis, calling for decisive action following a two-day summit in the Chinese capital.

The ASEM meeting brought together the leaders of 43 Asian and European nations, along with the heads of the European Commission and ASEAN, a group of southeastern Asian nations.

“Europe and Asia have come together in Beijing at a time of global crisis, and indeed, we are in a moment where we need global teamwork,” said EC President Jose Manuel Barroso. “We either stick together or we sink together.”

While the summit is usually a forum for political, economic and cultural issues, it has taken on added significance this year because of the unfolding crisis.

On Friday leaders at the summit called for new rules in dealing with international finance. They also urged a leading role for the IMF to help countries like Iceland and Pakistan that are struggling with the current crisis. Watch as urgency underscores the ASEM summit »

“Europe would like to try and come up with a common position among all of us as to a common response to this unprecedented financial crisis,” said French President Nicolas Sarkozy, whose country currently holds the rotating presidency of the European Union. “This was a very useful and very promising summit. Europe and Asia have many things that they can do together.”

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WASHINGTON – First, the $700 billion rescue for the economy was about buying devalued mortgage-backed securities from tottering banks to unclog frozen credit markets.

Then it was about using $250 billion of it to buy stakes in banks. The idea was that banks would use the money to start making loans again.

But reports surfaced that bankers might instead use the money to buy other banks, pay dividends, give employees a raise and executives a bonus, or just sit on it. Insurance companies now want a piece; maybe automakers, too, even though Congress has approved $25 billion in low-interest loans for them.

Three weeks after becoming law, and with the first dollar of the $700 billion yet to go out, officials are just beginning to talk about helping a few strapped homeowners keep the foreclosure wolf from the door.

As the crisis worsens, the government’s reaction keeps changing. Lawmakers in both parties are starting to gripe that the bailout is turning out to be far different from what the Bush administration sold to Congress.

In buying equity stakes in banks, the Treasury has “deviated significantly from its original course,” says Alabama Sen. Richard Shelby, the top Republican on the Senate Banking, Housing and Urban Affairs Committee. “We need to examine closely the reason for this change,” said Shelby, who opposed the bailout.

The centerpiece of the Emergency Economic Stabilization Act is the “troubled asset relief program,” or TARP for short. Critics note that tarps are used to cover things up. The money was to be devoted to buying “toxic” mortgage-backed securities whose value has fallen in lockstep with home prices.

But once European governments said they were going into the banking business, Treasury Secretary Henry Paulson followed suit and diverted $250 billion to buy stock in healthy banks to spur lending.

Bank executives hinted they might instead use it for acquisitions. Sen. Christopher Dodd, chairman of the Senate banking committee, said this development was “beyond troubling.”

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NEW YORK – Stocks are ending sharply lower as investors worry that the economy is poised to weaken even as frozen credit markets slowly start to show signs of recovery.

Corporate profit forecasts, a jump in the dollar and falling oil prices Wednesday indicate investors are worried that an economic slowdown will sweep the globe.

The major indexes each lost more than 4 percent, including the Dow Jones industrials, which is ending down 560 at the 8,469 level after being down as much as 698 points in the final half hour of trading.

Source: yahoo.com

written by Andrew

SAN FRANCISCO - Mired in a deep slump, Yahoo Inc. will fire at least 1,500 workers to cope with a crumbling economy that dented its third-quarter profit and turned up the heat on the Internet company’s management as investors stew over a missed opportunity to sell to Microsoft Corp. for $47.5 billion.

The purge outlined Tuesday represents a 10 percent reduction in Yahoo’s payroll of about 15,000 employees. It’s the second time in nine months that Yahoo has resorted to mass layoffs in what so far has been an ineffectual effort to rebound from a financial funk that has left its stock price near a 5 1/2-year low.

Things got worse in the third quarter as Yahoo earned $54.3 million, or 4 cents per share. That was a plunge of 64 percent from $151.3 million, or 11 cents per share, at the same time last year.

Source: yahoo.com

written by Andrew

FRANKFURT, (AFP) – The head of Germany’s biggest bank will forego his annual bonus of several million euros (dollars) to show solidarity with staff in this time of financial crisis, he told a Sunday newspaper.

“I told the Deutsche Bank supervisory board that I am renouncing my bonus in this difficult year in favour of hard-working staff that need the money more than I do,” Josef Ackermann told the Bild am Sonntag in comments to appear in its next edition.

The Swiss national intended to express a “personal sign of solidarity”, which would see him do without “a few million” euros in pay.

Deutsche Bank’s three other senior board members would follow his example, the bank said.

In 2007, they received a combined total of 33.2 million euros (million dollars) in pay, of which 4.3 million were performance bonuses.

Meanwhile, a financial source told AFP Friday that Deutsche Bank would also not seek state aid even if it is approved by the parliament, as expected.

“Deutsche Bank’s capital structure is very strong, as a result there is no need to seek state aid,” a source told AFP.

The German parliament was to vote on a plan worth 480 billion euros (650 billion dollars) to support banks hit by the international financial crisis.

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HONG KONG (Reuters) – Asian shares rose on Friday after encouraging earnings signals from technology firms such as IBM and a slowly improving tone in beleaguered short-term money markets helped ease concerns about a global recession.

Asian stocks posted their first weekly gain in seven, with advances in the last trading day underpinned by a rally on Wall Street on Thursday that sent the Dow Jones industrial average up more than 4 percent.

European shares were set to surge, with major indexes such as Britain’s FTSE 100 seen up by more than 4-5 percent.

Oil prices rose nearly $3 a barrel, helped by the equity gains and growing expectations for an OPEC production cut following a tumble in crude.

But jitters remain after a volatile week that saw global stock markets rally and slump on alternative days amid signals of a potentially deep economic slowdown worldwide.

The dollar sagged against the euro, but the U.S. currency held steady against the yen.

Source: yahoo.com

written by Andrew

HONG KONG - Asian stocks plummeted Thursday, with Tokyo’s market plunging more than 10 percent, after another dive on Wall Street as worse-than-expected data about the U.S. economy heightened fears of a global recession.

Japan’s benchmark Nikkei 225 stock average slid 911 points, or 9.6 percent, to 8,635.56, after earlier falling as much as 10.3 percent. Hong Kong’s key index lost 963.65 points, or 6 percent, to 15,034.65.

South Korea’s Kospi was down 7.2 percent, Australia’s benchmark was off 6.3 percent and Singapore’s index lost about 6 percent.

Investors were unnerved by U.S. data showing the country’s retail sales fell 1.2 percent in September, almost double the 0.7 percent decline analysts expected. Other readings, released by the U.S. Federal Reserve, indicated the economy continued to slow in the early fall as financial and credit market problems took a turn for the worse.

The figures were ominous signs that the world’s largest economy — a critical export market for Asia — was sliding into recession.

“Sentiment is deteriorating very fast. People are losing what little confidence they have on a day-by-day basis,” said Jacky Choi, a Hong Kong-based fund manager at Value Partners Ltd., which manages about US$5 billion in Asia. “Everyone is very worried about the economy in the U.S and around the world.”

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WASHINGTON - With any luck, the government’s quarter-trillion dollar cash infusion in banks will get them lending again, but the radical move won’t quickly turn around the tottering economy.

The pain will almost certainly drag on as vanishing jobs, shrinking paychecks and nest eggs, and slumping home values continue to force millions of Americans to pull back.

Sales at the nation’s retailers are expected to drop in September even as they get a break from record-high energy prices. Uncertainty about the economy — and their own financial fortunes — probably will force consumers and businesses alike to hunker down further, spelling more problems for the already troubled economy.

Anxiety about the economy is the No. 1 concern of voters. With the presidential election just weeks away, Democrat Barack Obama and Republican rival John McCain are working furiously to convince people that each is the best choice to steer the economy through these perilous times.

In addition to September retail sales numbers, other economic data out Wednesday is expected to show that even though the recent retreat in energy prices calmed inflation at the wholesale level bit, costs are still high and are squeezing businesses.

Many economists believe the country is on the edge of — or already in — its first recession since 2001.

If the government’s new plan works — it will merely cushion the blow. Democrats on Capitol Hill are pushing for another round of stimulus that could cost as much as $150 billion, an effort to provide additional relief and lift the country out of the doldrums.

Federal Reserve Chairman Ben Bernanke will provide an up-to-date assessment of the country’s economic and financial challenges in a speech in New York on Wednesday.

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written by Andrew