Calls mount for Ohio attorney general to resign

Reuters: [2008-05-06 23:55:00]

CHICAGO, May 6 (Reuters) - Ohio Attorney General Marc Dann, who has been investigating companies involved with subprime mortgages, was under mounting pressure on Tuesday to resign or face possible impeachment in the wake of a sexual harassment probe in the attorney general's office.

Dann released an e-mail on Monday that he sent to his staff saying he intended to stay in office. On Friday, he announced the firing or resignation of three staffers in his office and said he had had a relationship with another staff member.

On Tuesday, the Democrat minority in the House was looking into procedural issues for impeachment, according to Phil Saken, communications director for House Democrats. He said it has been 188 years since Ohio tried to impeach a state official.

"The information we have leads to the conclusion it would be extremely difficult if not impossible for him to continue on as attorney general," Saken said.

Calls for Dann's resignation have come from fellow Democrats, such as Gov. Ted Strickland and State Treasurer Richard Cordray, as well as Republicans, including the heads of the Ohio House and Senate.

In January, Dann filed a lawsuit on behalf of a state pension fund against Freddie Mac <FRE.N>, accusing the mortgage finance company of securities fraud for failing to disclose risks from its subprime mortgage-related investments.

Dann's office has also sent civil investigative subpoenas to a number of subprime mortgage companies as part of a probe of possible anti-trust and civil rights law violations, and violations of Ohio's consumer sales practices. His office has declined to name the companies.

Ohio has been hit hard by the subprime-mortgage crisis, ranking eighth among states in foreclosure rates in the first quarter of 2008, according to RealtyTrac. (Reporting by Karen Pierog; Editing by Toni Reinhold) ((karen.pierog@thomsonreuters.com; +1-312-408-8647; Reuters Messaging: karen.pierog.reuters.com@reuters.net)) Keywords: OHIO ATTORNEYGENERAL/IMPEACHMENT

US STOCKS-Wall St climbs with Fannie and oil; Disney up late

Reuters: [2008-05-06 23:53:00]

(Updates close with volume and advance/decline figures)

By Ellis Mnyandu

NEW YORK, May 6 (Reuters) - U.S. stocks rose on Tuesday as Fannie Mae's <FNM.N> reassuring comments about the credit and housing markets buoyed financial shares, while record crude oil prices lifted shares of energy companies.

Speculation that Microsoft Corp <MSFT.O> could resume takeover talks with Yahoo Inc <YHOO.O> fed a rebound in technology shares. Yahoo gained 5.5 percent, while Microsoft rose 2.1 percent, leading the S&P 500's advance.

After an early retreat, the session turned positive when top executives of Fannie Mae, the largest U.S. home finance company, said the worst of the credit market turmoil erupting from the real estate slowdown may have passed. That mitigated earlier concern about its huge quarterly loss, and propelled a broad rally in financial stocks.

Fannie Mae climbed almost 9 percent, and smaller rival Freddie Mac <FRE.N> gained 7.1 percent.

Oil struck above $122 a barrel for the first time, carrying energy shares higher with it and outweighing a retreat in sectors sensitive to high fuel costs, such as airlines and retailers.

"When I came to work today, we thought Fannie Mae's stock will be trading south of $25, but somehow the investing public got news that they had a pretty positive conference call," said Angel Mata, managing director of listed equity trading at Stifel Nicolaus Capital Markets in Baltimore, Maryland.

"There's a lot of people that are eyeing the financials right now, so if you're going to play the financials, Fannie Mae and Freddie Mac have to be among them."

The Dow Jones industrial average <.DJI> finished up 51.29 points, or 0.40 percent, at 13,020.83. The Standard & Poor's 500 Index <.SPX> ended up 10.77 points, or 0.77 percent, at 1,418.26. The Nasdaq Composite Index <.IXIC> closed up 19.19 points, or 0.78 percent, at 2,483.31.

Immediately after the closing bell, there was more encouraging news that could help stocks extend their advance. Walt Disney Co <DIS.N> posted a stronger-than-expected quarterly profit, sending its shares up more than 3 percent in after-hours trade from their close at $33.73 on the New York Stock Exchange.

Disney, one of the world's largest media companies and owner of the ABC television network, ESPN all-sports cable TV network and Disney theme parks in Florida and southern California, is seen as a bellwether of consumer spending.

Cisco Systems Inc's <CSCO.O> shares jumped more than 2 percent after the bell from their Nasdaq close of $26.33 as the network equipment maker also posted a profit that topped estimates.

In the regular session, Fannie Mae shares finished at $30.81, while Freddie Mac shares closed at $27.33. Other financial standouts were insurer American International Group Inc <AIG.N>, which rose 2.1 percent to $48.40, and JPMorgan Chase & Co <JPM.N>, the No. 3 U.S. bank, whose stock added 0.4 percent to $48.20.

The optimism from Fannie Mae's comments also contributed to a rise in the shares of home builders, with the Dow Jones home construction index <.DJUSHB> up 2 percent for the day.

Shares of D.R. Horton Inc <DHI.N>, the largest U.S. home builder, jumped 5.5 percent to $16.85 even as the company posted a quarterly loss of $1.3 billion and halved its dividend. For details, see [ID:nN06454667]

Energy shares rose after U.S. crude oil hit a record above $122 a barrel. A stronger-than-expected profit from independent oil and gas company Anadarko Petroleum Corp <APC.N> also buoyed the energy sector.

Exxon Mobil shares rose 0.6 percent to $90.07, while ConocoPhillips <COP.N> climbed 1.8 percent to $88.74 and Chevron Corp's <CVX.N> shares gained 1.3 percent to $96.87, while Anadarko shares climbed 9.4 percent to $74.53.

Shares of oil services company Schlumberger Ltd <SLB.N> jumped 2 percent to $103.58. The oil index <.OIX> shot up 3.3 percent.

Investment bank Goldman Sachs <GS.N> said in a research note that the price of oil could shoot up to $200 a barrel within the next two years as part of a "super-spike" driven by poor growth in oil supplies.

"Energy prices are going to stay high until -- a) we get some production on line, which there's none that I know of -- or b) until we have a serious recession," said Sasha Kostadinov, portfolio manager at Shaker Investments in Cleveland, Ohio.

Microsoft Corp <MSFT.O> and Yahoo Inc <YHOO.O> were both among the Nasdaq's top five advancers as speculation continued that pressure from Yahoo's shareholders would revive takeover talks. Shares of Microsoft, which abandoned its bid for Yahoo at the weekend, ended at $29.70, while Yahoo closed at $25.72.

But higher energy costs threatened to crimp consumer spending. Wal-Mart Stores Inc <WMT.N>, the world's biggest retailer, was the top drag on the Dow. Wal-Mart's stock fell1.1 percent to $56.35.

On the New York Mercantile Exchange, June crude <CLM8> settled at $121.84 a barrel, up $1.87, or a gain of 1.56 percent for the session. Earlier, NYMEX June crude climbed as high as a record $122.73 a barrel, which eclipsed Monday's intraday record of $120.36.

Compared with a year ago, U.S. crude oil futures prices are up $59.91 a barrel -- or almost 97 percent.

Volume on the New York Stock Exchange was modest, with about 1.23 billion shares changing hands, below last year's estimated daily average of 1.90 billion. On the Nasdaq, about 2.21 billion shares traded, above last year's daily average of 2.17 billion.

Advancers outnumbered decliners on the NYSE by a ratio of almost 2 to 1, while on the Nasdaq, about three stocks rose for every two that fell. (Editing by Jan Paschal) ((Ellis.Mnyandu@thomsonreuters.com; +1 646 223 6085; Reuters Messaging:ellis.mnyandu.reuters.com@reuters.net)) ((Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com)) Keywords: MARKETS STOCKS

Mexico peso hurt by credit jitters; stocks gain

Reuters: [2008-05-06 23:04:00]

(Adds quotes, closing prices, details)

MEXICO CITY, May 6 (Reuters) - Mexico's peso weakened on Tuesday amid renewed Wall Street credit jitters, while local stocks gained, led by telecommunications bellwether America Movil.

The peso <MXN=> <MEX01> weakened nearly 0.20 percent at the official central bank close to 10.4995 per dollar while the benchmark IPC stock index <.MXX> gained 0.85 percent to 31,223.42 points.

Fannie Mae, the largest provider of U.S. home financing, reported its third straight quarterly loss and forecast further falls in home prices and continued problems in the mortgage market.

But reassuring comments from Fannie Mae executives about the company's stability helped stocks in New York recover from early losses.

But peso traders in Mexico said the news stirred fears that the worst may not be over for the credit crisis, curbing investor appetite for riskier emerging market assets and serving as a pretext to take profits after the peso's recent gains.

"There is still a worry that the subprime (mortgage) issue is still present and keeps causing damage to the financial sector," said Alejandro Martinez, a fixed-income and currency strategist at HSBC in Mexico City.

Traders also said investors were ruling out the possibility of further interest rate cuts in the United States.

Mexico's peso has gained around 4 percent since the beginning of the year as the spread between the U.S. target interest rate and Mexico's key rate widened to 5.5 percent.

"If you don't have the expectation that the spread could widen further, you don't have that additional attraction," Martinez said.

The U.S. Federal Reserve cut its target rate last week for the seventh time since September in a bid to prop up the stumbling economy, but it signaled that its may pause with its rate cutting cycle.

Also last week, Mexico's central bank revised upward its inflation outlook, which analysts have interpreted as meaning the bank will keep interest rates on hold for some time.

In debt trading, the government's benchmark 10-year peso bond <MX10YT=RR> rose 0.067 of a point in price to 98.914, pushing its yield down 1 basis points to 7.91 percent.

In stock trading, shares of America Movil <AMXL.MX>, Latin America's biggest cell phone operator and the heaviest weighted stock on the IPC, gained 0.72 percent to 30.89 pesos. Its New York-traded shares <AMX.N> edged up 0.44 percent to $58.87.

"The stock was unfairly punished after its first-quarter earnings report, and people are realizing it is cheap," said Gerardo Roman, head of equity trading at Actinver brokerage in Mexico City.

HSBC on Tuesday cut the price target for America Movil's New York shares to $82 from $91, but kept its rating unchanged at "overweight."

Top retailer Walmex <WALMEXV.MX> added 1.56 percent to 44.22 pesos.

Shares of Cemex <CMXCPO.MX> gained 1.79 percent to 30.73 pesos while its New York traded stock <CX.N> added 4.34 percent to $29.10. (Reporting by Michael O'Boyle; editing by Gary Crosse) ((michael.oboyle@reuters.com; +5255-5282-7160; Reuters Messaging: jason.lange.reuters.com@reuters.net)) Keywords: MARKETS MEXICO/

Brazil currency falls, stocks steady despite TIM

Reuters: [2008-05-06 22:47:00]

(Updates to close)

SAO PAULO, May 6 (Reuters) - Brazilian stocks closed little changed on Tuesday, weighed down by banking shares and mobile phone company TIM Participacoes, but buoyed by Petrobras, while the national currency dipped on concerns the government may announce measures to ease a recent surge.

The Sao Paulo Stock Exchange's benchmark Bovespa index <.BVSP> finished just 0.03 percent higher at 70,195.27 points -- a new all-time high close -- after erasing modest losses.

Shares of TIM Participacoes <TCSL4.SA>, Brazil's second-largest mobile phone company, slumped 8.07 percent to 5.24 reais after it reported a wider first-quarter loss. Banks declined after Itau, Brazil's second-largest private sector bank, posted first-quarter results and a slowdown in loan growth.

The Brazilian real <BRBY> weakened for a second consecutive session, edging down 0.12 percent to 1.661 per U.S. dollar.

The government may soon announce measures to boost export industries with a fund to finance Brazilian companies doing business abroad, but the measures are not aimed directly at the strong real, Budget Minister Paulo Bernardo said on Tuesday.

"The government will announce a package (to stimulate exports). Before that package is announced, nothing really will happen in the currency market," said Mario Battistel, manager of currency trading at the Fair brokerage.

Interest-rate futures <0#DIJ:> on the BM&F commodities and futures exchange in Sao Paulo were mostly higher after data on Tuesday showed prices in Brazil's largest city quickened in April. Inflation in Sao Paulo rose 0.54 percent last month, faster than the 0.31 percent gain in March, the Fipe research institute said.

On the stock exchange, Itau <ITAU4.SA>, Brazil's second-largest private sector bank, fell 4.3 percent to 47.61 reais. The bank said on Tuesday its first-quarter profit rose 7.5 percent to 2.04 billion reais from a year earlier and was up 0.7 percent from the fourth quarter. Loan growth slowed to 7.9 percent quarter-on-quarter after expanding 11.9 percent in the fourth quarter. For details, see [ID:nN06364869]

Other banks also fell on concerns growth in lending, one of the main sources of profits for the financial sector in past quarters, may slow further because of an increase in domestic interest rates.

Bradesco <BBDC4.SA> fell 3 percent to 39.09 reais, while Banco do Brasil <BBAS3.SA> dropped 3.67 percent to 28.9 reais.

But state-controlled oil company Petrobras <PETR4.SA> -- Bovespa's bellwether listing -- rose 2.62 percent to 45 reais as crude prices rose nearly 2 percent in London and New York amid concerns over tight supplies.

Mining company Vale <VALE5.SA>, the second most heavily weighted stock in the Bovespa index, gained 1.47 percent to 55.2 reais, buoyed by firmer prices of copper and other industrial metals. (Reporting by Elzio Barreto and Silvio Cascione; editing by Gary Crosse)

((elzio.barreto@thomsonreuters.com; +55-11-5644-7725; Reuters Messaging: elzio.barreto.reuters.com@reuters.net)) Keywords: MARKETS BRAZIL/

UPDATE 4-Fannie Mae posts loss, to cut payout, raise capital

Reuters: [2008-05-06 22:40:00]

(Updates with closing stock prices)

By Lynn Adler

NEW YORK, May 6 (Reuters) - Fannie Mae <FNM.N> on Tuesday posted a massive quarterly loss, its third straight, on the protracted U.S. housing market slump, prompting it to slash its dividend and set plans to raise $6 billion of fresh funds.

Still, executives of the largest U.S. provider of home financing were cautiously optimistic that the worst of the credit turmoil that erupted from the housing crisis may have passed. Their comments triggered an 8.9 percent rise in Fannie Mae shares and supported a wider advance in U.S. stocks.

"We're taking a long-term view, not an hour or a week or a month, and we think that in a couple of years this stock will be materially higher because there will be a recovery in the housing industry," said Marshall Front, chairman of Front Barnett Associates in Chicago, which holds Fannie Mae shares.

The stock had initially fallen on the deeper-than-expected quarterly loss and credit-related expenses. Fannie Mae posted a net loss, after payment of preferred dividends, of $2.51 billion, or $2.57 per share, for the first quarter, according to a regulatory filing. Before preferred dividends, it posted a loss of $2.19 billion.

The loss was greater than even the most pessimistic forecast and came on the heels of a record $3.6 billion loss in the fourth quarter of 2007. In last year's first quarter, just before the slump in the housing market torpedoed mortgage and credit markets, Fannie posted a profit, after preferred dividend payments, of $826 million, or 85 cents per share.

Fannie's latest quarterly loss and its need to raise capital reflect the plight of financial services companies worldwide, which have written off more than $330 billion in soured mortgage securities and raised more than $200 billion to shore up depleted balance sheets.

Market sentiment turned when company officials in a conference call stressed that the quality of the mortgages it is buying has improved and its fee structure now better reflects market risk.

They also said the housing market is now in the "belly" of one of the worst cycles since the Great Depression, suggesting the nadir may be in sight.

"Right now, we are in the belly of this cycle," Daniel Mudd, Fannie Mae's chief executive, said in a conference call. "The initial period of (disruption) in the marketplace appears to be dissipating. The capital markets are recovering balance."

Fannie Mae and its sister company Freddie Mac provide capital to U.S. mortgage markets by buying loans originated by banks and other lenders.

After Fannie Mae announced its capital-raising plans, its regulator, the Office of Federal Housing Enterprise Oversight, said it intended to reduce the amount of surplus capital the company needed to hold, which further boosted optimism about the company's ability to expand its holdings of relatively cheap mortgage assets and restore profitability.

Shares of Fannie Mae closed up $2.52 at $30.81 on the New York Stock Exchange, after trading as low as $26.25 earlier.

FURTHER DECLINES LIKELY

Still, Fannie Mae warned that U.S. house prices, by some measures already 15 percent below their peak in mid-2006, likely will drop as much as another 9 percent this year and related credit losses will keep increasing into 2009.

Home price declines and rising foreclosures that started in the risky subprime mortgage market have spread to higher-quality loans that make up the bulk of business at Fannie Mae and Freddie Mac <FRE.N>.

"During the first quarter we saw heightened volatility in the secondary mortgage market, credit spreads that widened out to 22-year highs and home prices that fell faster than expected," Mudd said.

The company has "stanched the bleeding" from some of its volatile assets with new hedge accounting, which should help reduce losses, said Robert Levin, Fannie Mae's chief business officer.

Freddie Mac, too, is expected to post a big loss when it reports its first-quarter results next week. Its shares bounced as the momentum changed in Fannie Mae shares, ending 7 percent higher at $27.33 on the New York Stock Exchange.

NEW CAPITAL, SMALLER DIVIDEND

In one measure to preserve cash, Fannie Mae said it will slash its common stock dividend to 25 cents per share from 35 cents, starting with its third-quarter payout, freeing up $390 million a year.

The company also plans to raise $6 billion in new capital through common and preferred stock offerings, which it started on Tuesday, it said.

Fannie Mae needs to retain capital and raise more funds to fight its way through the housing meltdown.

Regulator OFHEO on Tuesday said it planned to ease limits on the amount of surplus capital Fannie must maintain and lifted a consent order that had restricted some of the company's activities after an accounting scandal.

"They are going to have more capital to go out in the marketplace and take advantage of bargains," said Charles Lieberman, chief investment officer of Advisors Capital Management in Paramus, New Jersey, which owns Fannie Mae shares.

Fannie Mae executives confirmed that the new capital will enable it to keep expanding its mortgage purchases, seen critical by lawmakers who are turning to the company to help stabilize the U.S. housing market.

Through February, home prices fell nearly 15 percent from their July 2006 peak, based on the Standard & Poor's/Case Shiller index of 20 metropolitan areas. In February alone, the latest month for which data is available, prices slid 2.6 percent from January and 12.7 percent from a year earlier.

Foreclosure filings surged 23 percent in the first quarter, and were more than double a year earlier, RealtyTrac said.

For all the red ink, Fannie's results showed some improvement from the previous quarter. The company's mortgage market share, total book of business and revenues from its guarantee and investment activities grew in the quarter.

The housing and credit market crisis has hit financial shares hard, and Fannie Mae suffered more than most. Its stock is off more than 50 percent in the last year -- more than twice the S&P 500 financial index's <.GSPF> drop in the same period. (Editing by Leslie Adler) ((lynn.adler@thomsonreuters.com; +1 646 223-6307; Reuters Messaging: lynn.adler.reuters.com@reuters.net)) Keywords: FANNIEMAE/RESULTS