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World stocks mixed on US mortgage plan PDF Print E-mail
Wednesday, 16 July 2008

AP, LONDON -- World markets were mixed Monday as investors took in news of U.S. government moves to prop up ailing mortgage financiers Fannie Mae and Freddie Mac.

European markets rose in early afternoon trading in the region on sentiment that government backing was positive. Most Asian markets opened higher but then shed their gains. Major indexes in China and the Philippines ended higher.

Britain's FTSE 100 rose 1.8 percent to 5,357.30, Germany's DAX added 1.3 percent to 6,235.78 and France's CAC-40 gained 1.9 percent to 4,179.36.
 
Spanish banking company Banco Santander boosted financial stocks when it said it agreed to take over the British mortgage lender Alliance & Leicester PLC in a deal valued at 1.26 billion pounds ($2.5 billion).
 
''Confirmation that the U.S. authorities are standing behind Fannie Mae and Freddie Mac have given a big boost to confidence and that's been further cemented by the confirmed takeover of Alliance & Leicester,'' said Keith Bowman, an analyst at Hargreaves Lansdown Stockbrokers.
 
In Asia, Japan's Nikkei 225 index lost 0.2 percent to close at 13,010.16. Hong Kong's blue-chip Hang Seng Index dropped 0.8 percent to 22,014.46.
 
The declines came after the U.S. Federal Reserve said Sunday it was granting its New York branch authority to lend to the two mortgage financiers ''should such lending prove necessary.'' The measure allows Fannie Mae and Freddie Mac to borrow from the central bank at the same rate given to commercial banks and big Wall Street firms should they need short-term funding in the face of a slumping U.S. housing sector and tightening credit market.
 
The Fed said the step would help both firms ''promote the availability of home mortgage credit during a period of stress in financial markets.''
 
The measure comforted some investors after Friday's failure of IndyMac Bancorp Inc., one of the largest U.S. bank meltdowns in decades, analysts said. But it also left many speculating on the scope of credit and mortgage troubles in the world's largest economy, a vital consumer of Asian-made goods.
 
''The markets generally view it as positive, but on the other hand, we don't know what kind of precedent it's going to set,'' said D. Gorton, a Hong Kong-based research analyst at Louis Capital Markets. ''You wonder how bad it's going to get, how much more is out there.''
 
Earlier, Japan's benchmark Nikkei had gained as much as 1.1 percent before falling back.
 
Sony Corp. shed 0.7 percent, and Softbank Corp., Japan's No. 3 mobile phone company, declined 3.2 percent. Softbank won the coveted right to sell Apple Inc.'s iPhone in Japan as the global rollout of the iPhone kicked off Friday in Asia.
 
Some finance firms rose. Banking giant Mizuho Financial Group Inc. gained 0.6 percent.
 
In Hong Kong, losses spread across most sectors. Beyond worrying over U.S. news, investors were cautious ahead of key data on Chinese inflation and economic growth due out later this week. Most banks lost ground, with HSBC off 1.9 percent and Standard Chartered sliding 3.4 percent.
 
Mainland China's Shanghai Composite index rose almost 0.8 percent to 2,878.26 points, led partly by gold and chemical companies.
 
Shandong Gold Ltd. rose 8.9 percent, while Zhongjin Gold Ltd. rose 5.2 percent. Blue Star New Chemical Co. rose 7.3 percent. Sinolink Securities Ltd., a major brokerage, rose 6.7 percent.
 
Oil, banking and insurance stocks were little changed.
 
China's shares have fallen sharply this year, hurt by high oil prices and worries that Beijing might hike interest rates to cool inflation near 12-year highs.
 
Investors are closely watching June inflation figures set for release Thursday. Analysts are forecasting a decline from May's 7.7 percent but are still expecting a rate above the government's target of 4.8 percent for the year.
 
The main Shanghai index is off 50 percent since its record high in October but analysts say investor confidence may be recovering as companies report strong profits and the government appears to be making progress on inflation.

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