Citigroup does little to lift market mood; pound rises on British inflation spike

Citigroup does little to lift market mood

LONDON — World stock markets traded lower Tuesday after Citigroup Inc. posted a $7.6 billion loss in the final three months of 2009 as it repaid government bailout funds and suffered billions in bad loans.

In Europe, the FTSE 100 index of leading British shares was down 17.25 points, or 0.3 percent, at 5,477.14 while Germany’s DAX fell 20.49 points, or 0.4 percent, to 5,898.06. The CAC-40 was 40.47 points, or 1 percent, lower at 3,936.99.

Wall Street was poised for a subdued start to the week after being closed Monday for the Martin Luther King public holiday. Dow futures were down 28 points, or 0.3 percent, at 10,535 while the broader Standard & Poor’s 500 futures fell 4 points, or 0.4 percent, to 1,128.30.

Sentiment about Wall Street’s open has not been helped by Citigroup’s results, which showed the New York-based bank setting aside a staggering $8.2 billion to cover bad loans during the quarter.

However, one encouraging sign was that Citi’s provision for loan losses declined 10 percent from the previous quarter and 36 percent from the year-ago period when the credit crisis peaked.

Overall, Citigroup lost 33 cents per share during the quarter, in line with analysts expectations.

The focus over the rest of the week will be the next batch of fourth quarter corporate earnings — so far, earnings have been fairly mixed, with upside surprises from the likes of Intel Corp. offset by disappointments elsewhere, most notably Alcoa Inc.

Banks will be in the spotlight, with Citigroup followed later in the week Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley.

Over the week, 65 companies in the S&P 500 post their results this week, constituting about a fifth of the S&P’s total value. As well as the banks, earnings from Google Inc., IBM Corp. and McDonald’s Corp. will be closely monitored.

Though attention is primarily on the U.S., investors in Europe have had plenty of news to digest. On the corporate front, Kraft Foods Inc. finally succeeded in persuading Cadbury PLC’s board to accept and recommend to shareholders a takeover offer after improving its bid to $19.5 billion.

Cadbury topped the list of risers on the FTSE 100, gaining just over 3 percent to 835 pence a share, more or less in line with the offer price of 840 pence a share.

On the economic front, investors in Britain were surprised to hear that the inflation rate rose by a full percentage point to 2.9 percent in December — just shy of the level at which the Bank of England has to write a letter to the British finance minister explaining why inflation was overshooting the 2 percent target by more than one percentage point.

Analysts said higher than expected inflation in Britain would likely mean that the Bank of England will not be pumping any further money into the economy and that it may start raising interest rates sooner than anticipated. All eyes will be on governor Mervyn King later when he gives one of his major speeches of the year.

The pound was marked higher following the inflation news, rising as high as $1.6457, its strongest level for over a month. By mid-afternoon in London, it was up only 0.1 percent at $1.6344.

The euro, meanwhile, was hit by news that German investor confidence has slipped by more than expected in January, partly because of ongoing concerns over the automobile and construction sectors.

The ZEW institute said its main investor confidence index fell for the fourth month running to 47.2 points in January from December’s 50.4. The consensus in the markets was for a far more modest decline to around 50.

“This is adding to the euro’s problems,” said Hans Redeker, global head of foreign exchange strategy at BNP Paribas.

The euro has been on the retreat for the best part of a month partly because of mounting market fears about Greece’s public finances, though they were partly assuaged earlier by a fairly upbeat assessment from the Moody’s credit ratings agency.

The euro was trading 0.6 percent lower on the day at $1.4293.

Earlier in Asia, Japan’s Nikkei 225 stock average slipped 90.18 points, or 0.8 percent, to 10,764.90.

After the market closed, Japan Airlines filed for bankruptcy, ending months-long speculation about its fate and launching a massive overhaul to shed the fat and inefficiency that hobbled Asia’s biggest airline.

JAL shares, which have lost more than 90 percent of their value over the last week, tumbled 20 percent Tuesday to 4 yen before finishing flat at 5 yen. The company is now essentially worthless, with a market capitalization of about 10.9 billion yen ($120 million) — less than the price of one Boeing 787 jet.

Elsewhere, Hong Kong’s Hang Seng gained 217.97, or 1 percent, to 21,677.98 and China’s Shanghai index edged up 9.78 points, or 0.3 percent, to close at 3,246.87.

Most other Asian markets fell. South Korea’s Kospi lost 0.1 percent to 1,710.22, Australia’s market shed 1 percent and Taiwan retreated 1.1 percent.

Oil prices rose above $78 before retreating in late afternoon trade. Benchmark crude for February was down 40 cents to $77.60 in electronic trading on the New York Mercantile Exchange.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.