US stocks declined as India’s unexpected interest rate boost spurred speculation withdrawals of economic stimulus will curtail global growth. The Dow Jones, S&P 500 and NASDAQ declined 0.35%, 0.51% and 0.59%, respectively. Exxon Mobil Corp. and Dow Chemical Co. dragged energy and raw-material producers to the biggest losses in the Standard & Poor’s 500 Index as oil fell. Financial shares dropped after Goldman Sachs Group Inc. cut estimates for banks and brokerages. Palm Inc. plunged 29% after forecasting sales that trailed analysts’ estimates and Canaccord Financial Inc. cut its share-price estimate to zero.
The benchmark FTSE 100 advanced, extending a 20-month high after shares of Lloyds Banking Group Plc soared, offsetting an unexpected interest rate rise in India. The FTSE 100 Index gained 7.51 points, or 0.13%, and ended at 5,650.13. Lloyds jumped 8.2% after it forecast a return to profit this year. Rival Royal Bank of Scotland Group Plc rallied 4.8%. Vedanta Resources Plc and Cairn Energy Plc limited gains as commodity producers fell with metal and oil prices.
Corporate News Headline
ONGC and partners walked away with more than half of the 33 oil and gas blocks awarded to successful bidders of the recently concluded eighth round of auction under the New Exploration Licensing Policy. (BS)
Bharti Airtel applied for broadband wireless access services spectrum for which government has kept the reserve price at Rs. 17.50 bn. (BS)
Larsen & Toubro has bagged a road project worth Rs. 14.00 bn from the National Highway Authority of India. (BS)
Economic and Political Headline
The RBI raised key policy rates by 25 bps to mark a reversal of its easy monetary policy regime to tame inflation and anchor inflationary expectations. The central bank said that the repo rate, or the rate at which banks borrow from the RBI, is being increased by 25 bps to 5%. Similarly, the reverse repo rate, which is the rate at which surplus cash is parked with the central bank, was also increased to 3.5%, from 3.25% earlier. (BS)
The Federal Reserve Board removed an exemption it had given to six banks at the start of the crisis in 2007 aimed at boosting liquidity in financing markets for securities backed by mortgage- and asset-backed securities. The so-called 23-A exemptions, named after a section of the Federal Reserve Act that limits such trades to protect bank depositors, were granted days after the Fed cut the discount rate by half a percentage point on Aug. 17, 2007. (Bloomberg)
President Nicolas Sarkozy opposes Germany’s push for an International Monetary Fund loan to Greece, pitting the euro area’s biggest members against one another over a rescue plan. (Bloomberg)