4:00 PM New York – U.S. stock fluctuated as world markets focused on the ongoing financial and debt crisis in Spain and the euro zone. The troubled Spanish home lender Bankia asked $19 billion in government bailout as the bank battles with high default rates.
U.S. indexes traded sideways after consumer confidence rose to a high last seen in 2007 but the market gains were tempered after Spanish banks were downgraded to junk status.
Banks in Spain were in focus after the fourth largest bank Bankia was suspended from trading ahead of the board meeting and the bank requested 19 billion euros in bailout more than 9 billion euros estimated by the government.
Standard & Poor’s lowered debt rating of Bankia S.A., Bakinter and Banco Popular Espanol S.A. to junk status and kept the ratings unrevised on Banca Civica and Banco Financiero y de Ahorros. Ratings on nine other banks were also left unchanged with negative outlook.
Bankia has scheduled a press conference to discuss the recapitalization plan on Saturday.
Bankia, created from the merger of seven Spanish regional banks, holds $40 billion of defaulted mortgage loans and is seeking new capital from the government to restart the credit flow. The Spanish banking system has been under pressure for the last three years ever since the collapse of the housing market and the government may be overwhelmed and may need an international rescue from the European Central Bank or other nations in the euro zone.
In corporate news, Bank of America and Barclays agreed to sell their remaining stake in Archstone to Lehman for $1.58 billion. Citigroup completed sale of equity interest in Turkey-based Akbank for $1.15 billion. Chesapeake Energy gained more than 2% after an activist investor Carl Ichan known for aggressive tactics became one of the largest shareholder.
On the earnings front, Flowers Foods first quarter net slipped 8% and lifted fiscal outlook. Fred's said first quarter net increased 10% and rue21 first quarter net soared 20.6%. Semtech first quarter net tumbled by 90% and VeriFone second quarter net plunged 42.5% to $14.5 million.
The European indexes extended gains for the second day and the Euro area leading index fell and Spanish producer price inflation eased in April. Delphi offered to acquire the motorized vehicles unit of FCI for €765 million. Japan Tobacco agreed to buy Gryson for €475 million.
Stocks in Tokyo traded sideways and the Nikkei index declined for the eighth week in a row and extended losses to 16% from the peak in late March. Japan Tobacco agreed to acquire Belgium based cigarette maker Gryson NV for $600 million.
Australian stocks closed lower and the ASX 200 index erased gains of the year and closed down 0.7% for the year. The index has steadily lost all its gains in the last two months after commodities prices eased on the rising prospects of a global slowdown.
Commodities, Bonds and Currencies
The yields on 10-year U.S. bond decreased to 1.74% and 30-year U.S. bond edged lower to 2.84%.
The U.S. dollar edged up to $1.251 to one euro and gained against the Japanese yen to 79.66 in New York trading.
Immediate delivery futures of Texas crude oil increased 7 cents to $90.73 a barrel and Brent crude futures rose 35 cents to $106.86. Futures of natural gas decreased 0.11 cents to $2.82 per mbtu and gasoline price increased 0.86 cents to 288.52 cents a gallon.
In metals trading, copper increased 1.65 cents to $3.44 per pound, gold increased $7.90 to $1,561.80 per ounce and silver added 9 cents to $28.25.