CNBC's Domm: Today's Agenda in the Markets
Stocks start the week on firmer ground after central bankers once again pumped cash into the markets, injecting confidence and liquidity. Stock markets around the globe gained, and U.S. stock futures are higher.
The European Central Bank injected $65.2 billion into European money markets. The ECB, after its third day of the special operations, says market conditions are "normalizing." The Bank of Japan overnight added $5 billion.
The Fed is widely expected to jump in again as well this morning.
"What the Fed is reacting to: a nearly unprecedented seizure of short-term liquidity that found big banks reluctant to lend to each other and especially to lend to Europe," says CNBC's senior economic correspondent Steve Liesman. "It wasn't just mortgages that couldn't get financing, but high quality corporate credits had trouble. Forget subprime. Even some triple A mortgage bonds couldn't be financed."
"When the Coast Guard arrives to pick the survivors of the ship wreck out of the water, it doesn't choose not to save those who sunk the ship," says Liesman.
The damage at some of the quantitative funds, whose misbehaving models, roiled the stock market last week, will be exposed. In a rare call with investors and analysts, Goldman Sachs this morning will discuss its funds, and Barclays is expected to provide investors with an update on its 32 Capital Fund Ltd tomorrow.
In a release this morning, Goldman acknowledges that Global Alpha had disappointing results and it blamed market dislocation.
"We have reduced risk and leverage in these funds as well." Goldman said Global Alpha and North American Equity Opportunities Fund are positioned to "actively pursue market opportunities."
Goldman said Goldman Sachs and other investors, including CV Starr and Eli Broad, are making a $3 billion investment in one of its funds, Global Equity Opportunities (GEO), which had a net asset value of about $3.6 billion before the investment.
"These guys are pretty tough. They shoot things if they have to," says Scotsman Capital managing director Vince Farrell, a CNBC contributor. Goldman stocks is moving higher ahead of the opening.
Blood on the Street
Wall Street will take more than a few hits from the recent market turmoil. The Financial Times is reporting that Citigroup so far has racked up some of the biggest losses from the choked up credit markets. The bank lost more than $700 million in credit securities in July, the paper says. The FT quotes a person briefed on the situation who says the losses were mostly in the structured credit business.
That's what private equity firm Blackstone said, in its first earnings release as a public company of the current market environment. The firm said its net income tripled to $774.4 million in the quarter ended June 30, compared to last year's $224.1 million. Corporate private equity revenue increased to $426.1 million from $125.6 million a year earlier.
Blackstone said "concerns over weakness in the U.S. housing market and sub prime mortgage market, coupled with a large volume of debt financing backlog related to leveraged equity transactions, served to create more challenging financing conditions starting in the last week of the quarter, which continue to date."
CNBC's Matt Nesto will report on Blackstone today and decipher what the firm's statements mean for private equity, as the deal world has slowed down.
Spending Less and Later
NPD's back to school survey, released this morning, predicts consumers will start shopping later and spend less this year. Only 18% of those surveyed had begun shopping before Aug. 1, compared to 30% last year. 76% also plan to spend $500 or less, down 5% from last year.
Former Fed Head
Deutsche Bank said it hired former Fed Chairman Alan Greenspan as an adviser to its investment banking team and clients. Greenspan also has an advisory position with Pimco.
China inflation rose to 5.6% in July, the highest level in a decade. Food was the big driver.
The owner of the Chinese toy factory involved in a major recall of Mattel toys apparently committed suicide.