JP Morgan and NY Fed to fund Bear Stearns
JP Morgan Chase said on Friday it would provide an unspecified amount of funding for Bear Stearns together with the Federal Reserve Bank of New York.
The move comes on the back of growing concerns in the market that Bear Stearns was facing significant liquidity constraints. The concerns have hammered Bear Stearns shares, which were down nearly 20 per cent this week alone amid highly volatile trading.
âJP Morgan Chase announced that, in conjunction with the Federal Reserve Bank of New York, it has agreed to provide secured funding to Bear Stearns, as necessary, for an initial period of up to 28 days,â JP Morgan said in a statement.
âThrough its discount sindow, the Fed will provide non-recourse, back-to-back financing to JPMorgan Chase. Accordingly, JPMorgan Chase does not believe this transaction exposes its shareholders to any material risk. JPMorgan Chase is working closely with Bear Stearns on securing permanent financing or other alternatives for the company.â
Shares of Bear Stearns jumped as much as 10 per cent to $63 in pre-market action following the news.
Before the news on Bear Stearns, US equity futures had pointed to a positive start for Wall Street, after data showed inflation held steady in February.
Less than an hour before the opening bell, S&P 500 futures were 5.8 points, or 0.4 per cent, higher at 1,321.1, after earlier falling as much as 1 per cent. Futures for the Dow Jones industrial average rose 29 points to 12,180. Futures for the Nasdaq composite index were 18 points higher at 1,773.8.
The US consumer price index, the most widely used barometer of inflation, was flat last month after rising 0.4 per cent in January. Core consumer prices, which exclude food and energy, were also unchanged after rising 0.3 per cent in January.
In contrast, consensus forecasts were for an increase of 0.3 per cent overall and a rise of 0.2 per cent in core prices, according to economists polled by Reuters.
Elsewhere on the economic front, interest rate futures were pricing in an almost 100 per cent probability of a 75 basis point cut in interest rates at the next meeting of the Federal Reserve on Tuesday.
Nonetheless, the dollar strengthened marginally against a basket of major currencies.
The yield on the 10-year Treasury note fell 6bp to 3.46 per cent, while the yield on the two-year note fell 6bp to 1.56 per cent.
Oil retreated from its record highs, falling to around $109.80. But cocoa climbed to a five-year high on speculation a strike by cocoa workers in the Ivory Coast, the worldâs top producer, would cut supply. The workers are demanding better pay and improved working conditions.
Investors also awaiting a report on consumer sentiment, due at 10am.
http://www.ft.com/cms/s/0/54e1cd6c-f1c4-11dc-9b45-0000779fd2ac.html
JP Morgan Chase said on Friday it would provide an unspecified amount of funding for Bear Stearns together with the Federal Reserve Bank of New York.
The move comes on the back of growing concerns in the market that Bear Stearns was facing significant liquidity constraints. The concerns have hammered Bear Stearns shares, which were down nearly 20 per cent this week alone amid highly volatile trading.
âJP Morgan Chase announced that, in conjunction with the Federal Reserve Bank of New York, it has agreed to provide secured funding to Bear Stearns, as necessary, for an initial period of up to 28 days,â JP Morgan said in a statement.
âThrough its discount sindow, the Fed will provide non-recourse, back-to-back financing to JPMorgan Chase. Accordingly, JPMorgan Chase does not believe this transaction exposes its shareholders to any material risk. JPMorgan Chase is working closely with Bear Stearns on securing permanent financing or other alternatives for the company.â
Shares of Bear Stearns jumped as much as 10 per cent to $63 in pre-market action following the news.
Before the news on Bear Stearns, US equity futures had pointed to a positive start for Wall Street, after data showed inflation held steady in February.
Less than an hour before the opening bell, S&P 500 futures were 5.8 points, or 0.4 per cent, higher at 1,321.1, after earlier falling as much as 1 per cent. Futures for the Dow Jones industrial average rose 29 points to 12,180. Futures for the Nasdaq composite index were 18 points higher at 1,773.8.
The US consumer price index, the most widely used barometer of inflation, was flat last month after rising 0.4 per cent in January. Core consumer prices, which exclude food and energy, were also unchanged after rising 0.3 per cent in January.
In contrast, consensus forecasts were for an increase of 0.3 per cent overall and a rise of 0.2 per cent in core prices, according to economists polled by Reuters.
Elsewhere on the economic front, interest rate futures were pricing in an almost 100 per cent probability of a 75 basis point cut in interest rates at the next meeting of the Federal Reserve on Tuesday.
Nonetheless, the dollar strengthened marginally against a basket of major currencies.
The yield on the 10-year Treasury note fell 6bp to 3.46 per cent, while the yield on the two-year note fell 6bp to 1.56 per cent.
Oil retreated from its record highs, falling to around $109.80. But cocoa climbed to a five-year high on speculation a strike by cocoa workers in the Ivory Coast, the worldâs top producer, would cut supply. The workers are demanding better pay and improved working conditions.
Investors also awaiting a report on consumer sentiment, due at 10am.
http://www.ft.com/cms/s/0/54e1cd6c-f1c4-11dc-9b45-0000779fd2ac.html
