Current Futures: Dow -9.00, S&P -0.60, NASDAQ -0.75
European Trade: European markets saw another day of declines today, while the U.S. futures saw light selling in the overnight session. Asian equities advanced on average 1%, retracing some of the gains seen during the intra-day session.
The financials led the selling wave in the European markets, after Lloyds failed to reach an agreement with the U.K. government concerning the insurance scheme. Lloyds dropped almost 10% on the U.K. Ftse, while the other major financial institutions dropped, on average, 5%. Every company listed in the German Dax traded in the red this morning, except for Deutsche Telekom, which announced a smaller than expected loss for 2008, 730 million euros compared with 763 million euros.
Later today, a report is expected to show the U.S. economy contracted 5.4% annualized, or 1.3% in nominal terms. The initial report, also known as the advanced GDP report, showed the economy contracted 3.8% annualized in Q4.
Analysts based the downward forecasts on the increasing number of inventories and poor exports. The analyst’s forecasts range from -3.8% to -6.0%. In comparison, the Euro-area economy contracted 1.5%, or 6% in annualized terms, while the Japanese economy contracted a whopping 3.3%, or 12.7% in annualized terms. According to the latest projections, the world’s developed economies are set to contract for the remaining of this year.
A Bloomberg report shows that the U.S. government will require Citigroup to raise capital from private sources and change its board of directors. This happens, as the Treasury is set to convert its preferred shares to common shares, in an attempt to strengthen the bank’s balance sheets. However, the big question is now who would actually look to invest in Citi right now, and at what cost.
In the first phases of the credit crunch, Sovereign Wealth Funds were seen as the saviors of the day, but now, their own local economies have big problems, so it would be very hard to justify a foreign investment. In addition, SWTs have been hit hard by losses stemming from the credit crunch, and this only adds pressure on them to cut short their exposure for now. To some extent, Citi is right now between a rock and a hard place.
Tonight, the Nikkei gained 110.49 points (1.48%) to 7,568.42. The Australian S&P fell 1.00 points (0.03%) to 3,344.50. The U.K. Ftse declined 69.43 points (1.77%) to 3,846.21, while the German Dax shed 88.55 points (2.25%) to 3,854.07.
Crude oil declined for the first time in the last three days. Crude oil for March delivery fell $1.35 to $43.85
Gold rose tonight as equities are trading in the red. Bullion for immediate delivery gained $2.30 to $944.90.