Cyprus works to avert run on banks
BOE: British banks must raise extra £25B by year-end. U.K. banks must raise another £25B by the year-end to protect themselves from potential losses, the Bank of England has said, with the sector facing a total capital shortfall of £50B. The news sent the FTSE, U.S. stock futures and the pound-dollar lower, although Barclays (BCS) and Lloyds (LYG) were higher at midday in London. HSBC (HBC) and RBS (RBS) were down.
Citigroup mulls slashing liquidity by $35B. Citigroup (C) is thinking about cutting its cash on hand by $35B, which could help the bank boost its earnings 2% this year by allowing it to cut debt or purchase higher-yielding assets. Even after reducing its available capital, Citigroup's liquidity would still be 10% more than will be required under Basel III.
Cyprus works to avert run on banks. Cyprus has been preparing capital controls to prevent a run on the banks when they reopen for business tomorrow after being closed for almost a fortnight. Russia has warned Cyprus not to make the controls too onerous. Uninsured depositors at Laiki bank, which is being shut down, will probably lose 80% of their cash, the rest of which could take years to return, while those at Bank of Cyprus could take a haircut of up to 40%.
Top Stock News
S&P near record close. The S&P 500 could close at a record high today if negative pre-market sentiment turns positive, with the index having finished just two points shy of its peak yesterday. The Dow hit a fresh high as investors shrugged off eurozone concerns, and focused on what seemed to be decent U.S. house-price and manufacturing data. While the numbers were nuanced and consumer confidence plunged, the buy-the-dip mentality continued to prevail.
Wal-Mart sees losses from Mexico bribery allegations. Wal-Mart (WMT) expects to incur losses from the Mexico bribery scandal, which already cost the retailer $157M in the last fiscal year. Wal-Mart didn't provide a specific forecast for the losses, due to the complexity of the affair, but it did say that the amount probably won't have a material effect on its business.
JPMorgan probed over Madoff affair. Federal prosecutors are reportedly investigating whether JPMorgan (JPM) breached the law by not fully alerting authorities about suspicions related to Bernard Madoff. The probe adds to several others JPMorgan is facing, with eight federal agencies investigating the company. In April, the FBI and other authorities are due to interview executives, including CEO Jamie Dimon, about whether JPMorgan misled investors and regulators over the London Whaling loss.
GM cutting almost 600 jobs in Brazil. Possibly inviting a political backlash, GM (GM) is cutting 598 jobs at a Brazilian plant in the state of Sao Paulo due to low productivity. The layoffs, which involve a complex that employed 7,500 workers last year, come as GM struggles to turn a profit on its Brazilian ops, and as the auto giant is pressured by the government to abstain from layoffs in exchange for tax breaks.
JCP returns to strategy of discounts. J.C. Penney (JCP) has resumed its strategy of initially putting high prices on its own-brand products and then discounting them. The move comes after the retailer's attempts to implement an "everyday low price" policy turned into a disaster. JCP CEO Ron Johnson said in February that the department store would go back to using discounts as part of an attempt to turn the company around.
Ericsson axes almost 1,400 jobs. Ericsson (ERIC) has cut 1,399 positions in Sweden as part of its restructuring, fewer than the 1,550 jobs that the network-equipment vendor originally planned to axe. Ericsson will take a charge of 1.5B kroner ($230M) on its Q1 results because of the losses. Meanwhile, the company is reportedly in talks to acquire Microsoft's (MSFT) MediaRoom IPTV business, which allows telecom companies to provide television via the Internet.
Top Economic & Other News
Trial over Stockton bankruptcy nears end. A judge is due to hear closing arguments today about whether Stockton in California should be allowed to file for bankruptcy protection. The main issue is whether the city can continue paying into the Calpers pension fund while forcing losses on bondholders. The case is being widely watched, with Alabama's Jefferson County and California's San Bernardino also considering breaking with the long-standing practice of meeting obligations to bondholders.
America is a magnet for the world's money. America's "international investment position," or how much the value of foreign investments in the U.S. surpass American investments abroad, rose to $4.4T in 2012 from $4T in 2011. During Q2 and Q3, the gap reached $4.7T, the highest since records began in 1976. While the trend suggests the U.S. is still an attractive place to put money despite the country's weak growth, it also makes the economy more vulnerable to external shocks.
Government funded until September. President Barack Obama yesterday signed the FY 2013 funding bill into law, one day before the previous financing measure was due to expire. The package includes the $85B of sequestration and ensures that the government will be financed until the end of the fiscal year in September, with spending projected at $984B.