Greek stock market falls (AP)

Athens – Athens Stock Exchange shares are plunging, with a decrease of 4.8 percent to levels not seen since the mid-1990s, the general price index.

The overall index stood at 1, 011.70, as global stock markets continued their recent slide after the breakdown of the debt of the United States Friday by Standard & Poors.

Debt-ridden Greece became the first EU country to seek a bailout International last year, when he saw his recruitment costs spiral out of control as investors doubted the country would repay debts.

The financial crisis has also affected other countries in the eurozone, Portugal and Ireland also receive bailouts.

Sunday, the European Central Bank said it will implement a program to buying bonds to calm investor worries that Italy and Spain will not be able to pay their debts.

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ECB gets pledge, Spain Italy rates down (AP)

Brussels – the European Central Bank's decision to buy billions of dollars worth of bonds in Spanish and Italian, pushed down borrowing costs, the two countries Monday, but analysts warned that the move transfers significant risks on the budgets of an institution long reluctant to go beyond its traditional role to control inflation.

The radical expansion of bond purchase programme of ECB cements the role of the Bank as an institution with primary responsibility for Europe to solve the financial crisis 21 months.

The ECB has been reluctant to become directly involved in averting the crisis instead of push politicians to get the finances of their countries under control and build their own crisis management system.

But a recent spike in investors ' concern for Italy and Spain's high debt levels and lackluster economic growth captured the 17 countries of the eurozone just as parliaments broke for summer recess, delaying the implementation of crucial changes to the bottom of the bailout of Monetary Union.

These changes, once implemented, would allow the European mechanism of financial stability to buy government bonds on the open markets, just as did the ECB.

The French Parliament will not be able to approve the expansion of European rescue first of September, said the Finance Minister of France.

French legislators are scheduled to hold a special session from 6 September to vote on an amendment allowing budget funding for the new aid plan approved by EU leaders on 21 July. Asked if he could be summoned Parliament immediately instead, Francois Baroin said on Europe-1 radio that: "for a democratic process with such heavy stakes, we can go any faster."

With similar votes pending throughout the EU, the ECB decided late Sunday decided to "implement actively" his bond purchase programme, one of its main tools that crisis was not yet used for Italy and Spain.

The Central Bank now plans to buy an average of 2.5 billion euros worth of Spanish and Italian bonds each day, equivalent to 600 billion dollars annually, analysts at the Royal Bank of Scotland wrote in a note.

Bond purchase supports their prices, taking off pressure from broadcasters during an investor sell-off. In early trading Monday, yields, or the interest rate on bonds of Italy fell 0.55 percentage point to 5.45% while the equivalent rate in Spain has fallen 0.71 percentage point to 5.34%.

The ECB could quickly push down the interest rate spread between bonds the two countries and those of Germany — seen as sovereign safer eurozone — 1-1 .5 percentage points, RBS said.

Loans of Italy and Spain Costa rose above 6 percent last week — rates that are deemed unsustainable in the long term for the economies of the third and fourth largest in the eurozone.

But the program will probably have its toll on the interest rate paid by rich nations such as Germany, when they borrow in markets. The ECB's move will not only slow down a recent flight to safety that has kept very low German interest rates, but also transfers credit risk of the Italian and Spanish Governments to the Central Bank and eurozone taxpayers.

Until now, the ECB had invested just under euro80 billion (113 billion dollars) in Greek, Irish and Portuguese bonds.

That appeared to cushion the consequences of Standard & Poors decision Friday feared of downgrading the long-term debt of the United States.

In contrast with the purchase of bonds programs of U.S. Federal Reserve and the Bank of England, the ECB "Sterilize" bond purchases to withdraw funds from the financial system, so that the total amount of money in circulation stays the same and not shoot up inflation.

The ECB's decision to take a more active role came after both in Italy and Spain announced new measures to cut spending and stimulate growth. Italian Premier Silvio Berlusconi said Friday night that his country would work to balance the budget by 2013, one year ahead of schedule.

Spanish Finance Minister Elena Salgado on Sunday announced new reforms to bring in an additional Euro 5 billion to help achieve the goal of cutting its deficit to 6 percent of GDP this year.

He said that half the money will come from changing a system of staggered payment of assessment, so that large companies have to pay at the beginning in the year, although the actual tax rates will not go.

The other half will euro5 billion come from savings in government expenditure by hospital purchases of generic drugs, Salgado told the news agency Efe in an interview. These changes will be approved at a meeting of Cabinet or August 19 or 26.

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Pan Pylas London, Greg Keller, in Paris, Daniel Woolls in Madrid, David McHugh in Frankfurt, Germany, contributed to this article.

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In Abu Dhabi, lingerie reflects pull retail UAE (AP)

ABU DHABI, United Arab Emirates – It could have picked London or Hong Kong. Instead, the lingerie retailer that styles itself "the original sex symbol" chose the buttoned down sheikdom of Abu Dhabi for the launch of its first international store.

Frederick's of Hollywood, famed for its curve-cinching corsets and provocative push-up bras, opened up to little fanfare in the Saudi capital last weekend. Another outpost offering the chain's racy lingerie is soon set to open up the road in the more freewheeling Dubai.

The choice of venue is revealing — not only about demand for risque unmentionables on the Arabian Peninsula, but also for what it says about the United Arab Emirates ' retail pull. In only a few short years, this South Carolina-sized desert country has emerged as an unlikely first port of call for retailers looking to test their brands overseas.

"Despite the outward conservative cultures ... this is a very fashion-conscious market," Frederick's Chairman and CEO Thomas Lynch said in a recent interview. "They're no less interested in what we have to offer."

Other retailers seem to agree. Crate and Barrel, American Eagle Outfitters, Aeropostale, Pottery Barn and Bloomingdale's each have launched their first stores outside North America in the UAE in the past couple of years.

Smaller companies are making the leap too. When Manhattan favorites Shake Shack and Magnolia Bakery decided to take their burgers and red velvet cupcakes overseas, the first city they turned to Dubai was.

Retailers and restaurant chains that once protective shied away from overseas markets are being seduced by the region's deep-pocketed citizens and the growing track records of their Arab franchise partners, who take on many of the costs and much of the legwork that goes into transferring the brand abroad.

Frederick's deal is a good example.

While financial details are private, Lynch said paying for the Gulf expansion is mainly up to the company's Abu Dhabi-based partners, Safeer Establishment. Frederick's is primarily providing brand support "for an arrangement that envisions 10 stores across the region in the next three years, he said.

The u.a.e. has other advantages too. It boasts plenty of high-quality retail space and few of the deeply entrenched local brands that retailers can put off expanding into mature markets like Europe. The country's booming airlines have turned the Emirates into a global crossroads, funneling armies of guest workers — including Westerners — and millions of tourists into the country's shopping malls each year.

That was part of the appeal for Bloomingdale 's, which opened its first international store in Dubai's biggest shopping mall early last year.

"With all the tourists passing through there, it's a great billboard for Bloomingdale 's," Chairman and CEO Michael Gould told The Associated Press.

Gould said it is tricky for many American retailers to translate their brands to Europe, as it is for European chains looking to enter the U.S. To market such as the Emirates, however, offers a "much more fertile environment. People have an opportunity to build something there, "he said.

A recent surge of new retailers, particularly from the U.S., Dubai has pushed into the No. 1 spot alongside London in terms of market penetration for major retail brands, according to a recent report by real estate firm CB Richard Ellis. On the national level, the UAE is in second place globally, just behind Britain and ahead of the United States.

As the Gulf's most liberal and internationally-connected city, Dubai has traditionally been the first stop for chains looking to expand in the region. But as it becomes more saturated, CBRE expects international retailers will increasingly target nearby Abu Dhabi and other Gulf markets such as Kuwait City and Doha, Qatar.

Michael Leighton, a retail consultant at CBRE, said many American retailers have long resisted setting up franchises, which is effectively a requirement for doing business in the Gulf. The economic downturn helped changed that.

"As consumer spending has reduced in the U.S., they've been forced to adjust their business model," he said. Setting up a franchise in the Gulf is "a very easy way of generating extra revenue. ... People have to generate profits and balance the books, and in the U.S. it's very very hard at the moment, "he added.

The strategy is not without risks. Dubai's economy was being pummeled by the global economic downturn, which sent property prices or plunging and exposed large levels of debt. Many retailers planned their regional expansions during the boom years late last decade and had to contend with leaner times when they eventually opened.

"When we made the deal, we made it right at the peak. ... When we opened, it was certainly at a much more difficult time, "Bloomingdale's Gould said. He said the Dubai store nonetheless beat the company's first-year projections in 2010, and he insists this year is looking "just terrific." He declined to give specifics.

The U.S. retail invasion shows few signs of slowing down.

Chicago-based Potbelly Sandwich Shop this year opened two stores in Dubai — with pork-free menus to suit Islamic rules.

The Cheesecake Factory plans to open its first international restaurants in Dubai and Kuwait next year. It, like Potbelly and Shake Shack, is expanding through an agreement with Kuwait's M.H. Alshaya co., which has several Mideast partnership deals with American companies, including Starbucks and frozen yogurt chains Pinkberry.

"There is great demand for high-quality American brands there," said Jill Peters, vice president for investor relations at the cheesecake chain.

Frederick's expects its Gulf customers won't be that different from those in the U.S. — young, fashion-conscious women who keep a close watch on what's happening on the red carpets of Hollywood, said Lynch, the CEO.

While the Abu Dhabi store offers saucy staples such as the "Exxtreme\r Cleavage" bra and even a pair of rhinestone-covered handcuffs, Lynch is eager to point out the company has lots more to offer, including swimwear and shoes.

Scantily dressed mannequins in the windows of its flagship Emirates store hints at the risque offerings inside, though the storefront is designed so passers-by by can't easily peer into. Inside, lingerie is grouped by color, with a relatively more modest bridal collection showcased in a lushly carpeted centerpiece section.

The set-up differs from U.S. layouts and is designed to appeal to Gulf tastes, said Usama Rashad, retail manager for franchisee Safeer's parent company.

He expects local women, who generally appear in public covered in full-length black cloaks and headscarves, and other Arabs will account for as much as two-thirds of sales.

"They know what they want," he said. "They travel a lot. They know these brands. And they like to spend their money. "

Still, as savvy as the region's shoppers may be, there are limits to what Frederick's is willing to offer in its Arabian stores. Out for now, for example, are kinky dress-up costumes that are popular at Halloween.

"It's an area that's more conservative than Southern California. There's no question, "Lynch said. "We're not naive. ... There are things that we traditionally carry on our website that we wouldn't even think of carrying over there. "

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Mitsubishi Heavy says merger talks with Toshiba: report (Reuters)

TOKYO Mitsubishi Heavy Industries (7011) President said his company does not intend to initiate merger talks with Hitachi (6501), the Mainichi Daily reported Monday, in the first public denial from his Manager.

"There is no truth that we are entering the talks at this time," Mitsubishi Heavy President Hideaki Omiya told the newspaper in an interview, referring to negotiations for a merger with Hitachi.

Leaders Mitsubishi Heavy, the leading manufacturer of heavy machinery of Japan, had remained silent since media reports on Thursday that the company and Hitachi have begun talks on what could lead to the merger of Japan's largest domestic.

A clear rift between the two surfaced almost immediately after the first news reports.

Hitachi Chief Executive Hiroaki Nakanishi told reporters early Thursday that his company would make an announcement later that day regarding relations on their merger talks. But Hitachi, later issued a statement denying the reported merger talks, and the announcement did not take place.

In a separate statement the same day, Mitsubishi Heavy said it had no intention of accepting a merger as reported by the media.

Sources told Reuters that Mitsubishi Heavy had taken into account a partial integration of their social infrastructure, including power generation systems, while Hitachi is looking at a full merger.

For Mitsubishi Heavy, there are strong doubts of a merger, because it would probably be the one that is swallowed their difference in size given.

"Hitachi has an annual turnover of 9 billion yen and Mitsubishi has 3 trillion ... Mitsubishi Heavy people proud to be a leader of the Group Mitsubishi and we don't want to be resumed, "said a Mitsubishi Heavy, who declined to be named.

In the interview with the Mainichi newspaper, Mitsubishi Heavy President Omiya said his company had "several meetings" with Hitachi, confirming that he had taken into account the integration of some of its operations, including social infrastructure systems.

But he has denied the possibility of an all-out merger of the two, saying that his company had no plan to establish a Preparatory Committee of the merger, as has been reported by some media, the paper said.

"We should not try to do everything by ourselves, when we venture into foreign markets such as internal market shrinks," was quoted as saying.

"If credit is available for both sides, we would like to bond with not only Hitachi but with foreign companies," he told the newspaper.

(Reporting by Taiga Uranaka; Editing by Chris Gallagher)

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CEO confirms 2 000 job losses "Ballpark".

Reuters reports that Royal Bank of Scotland CEO Stephen Hester confirmed last week that additional 2,000 investment bank jobs would go in the 12 to 18 months.

Hester, has said that the 2,000 figure "would be in the right stage".

Meanwhile, dow jones newswires reported that Knight Capital Group is cut about 6% of its workforce of work (thought to represent approximately 90 positions), as it restructures its operations in the wake of the current conditions of market.

Reuters also reports that, according to Credit Switzerland, a review of the income of a cross section of 7 large investment banks reveals that on average, revenues from fixed-income sales and trading have fallen by 36% in the second quarter from the first quarter of 2011. The jury is still decided that this fall is totally focused on the market, or is part of a structural change caused by settlement increased and more capital ratios.

Finally, reports The Financial Times that, according to the Research Hedge Fund, hedge fund average started last week, approximately 1.6% through 2011, but this quickly evaporated that the markets are directed towards the South towards the end of the week.

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Bankers "Bad smell" said of the difficulty in obtaining jobs in the sector

Telegraph reports that, for some of its sources of headhunting, "where the companies of the private sector in a range of industries would have once jumped at the opportunity of hiring of the ex-banquiers, now much will not touch with a barge pole."

Here is the city, however, is not so sure that all of this.

"There are many talented bankers out there who are, or may soon will be, the search for a new job", says our roving reporter Rhiann Hughes, "while not all companies believe that bankers have transferable skills to the right to go to work for them, but companies outside of the industry who have traditionally recruited bankers will continue to do so." And if they do not, it will be more to do with where we are in the economic cycle, as any general stigma attached to the bankers. This discussion of collective guilt is exaggerated way '.

Another area where bankers can find a source Ready-made of employment opportunities are firms of Grand Council, which many had big plans to gear up to this year and are happy to fish in the pool of banker. Even organizations such as the M16 have been known to recruit with ex-banquiers in the past and it is doubtful whether rest if the actions of a few hundred bankers senior difference to employers looking to pick up some decent talent relatively inexpensive.

"Bankers may not be particularly popular", a recruiter said here is the city, ' but that they can bring to the party. Many have transferable skills, a strong work ethic and the ability to think for themselves. "Any company to outside financial markets which is prepared to strike out a candidate simply because he / she has worked in the sector banking industry itself is drawn in the foot."

 

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Stock-Index Futures tumble on downgrades S & P (Reuters)

NEW YORK Stock index futures tracked to sharp drop in global equity markets on Monday after rating agency Standard Poor's cut & the top-tier AAA credit rating of the United States, rattling jittery investors.

The agency's move came late Friday after a wild week for stocks--its worst in more than two years--as lingering concerns about sluggish economic growth and heavy public debt loads in developed economies hit sentiment.

The impact of S&P's rating cut was felt in Asia and Europe. Japan's Nikkei stock average (.INDU) slid 2.2 percent at the close on Monday, while the FTSEurofirst 300 index (.FTEU3) of top European shares fell 1.8 percent in early trading after a bounce following the European Central Bank's move to buy Spanish and Italian bonds.

Peter Cardillo, chief market economist at Rockwell Global Capital in New York, said he expected an intraday reversal after sharp falls at the open, similar to Friday's action.

Hedge funds are selling out at levels that they are somewhat compelled to, so it feeds on itself "said," he said. "The market is grossly oversold, valuations are attractive, and I think at this point the market has already discounted a growth slowdown."

S&P 500 futures fell 24.8 points and were below fair value, a formula that re-evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures lost 213 points, and Nasdaq 100 futures shed 49.25 points.

Last week's steep selloff in equities wiped about $ 2.5 trillion off global market valuations.

Safe-haven assets were in demand. Gold hit another record high of $ 715.01 an ounce and was set for its second largest daily gain this year.

Resource-related stocks will be under pressure as crude oil prices fell 3.3 percent to $ 84 a barrel on concerns over the economic outlook. Copper fell to a five-week low.

Sentiment worsened after the S&P cut the U.S. long-term credit rating by a notch to AA-plus late Friday on concerns about the debt situation in the world's largest economy. The downgrade could eventually raise borrowing costs for the U.S. government, companies as well as consumers.

Moody's on Monday repeated a warning it could downgrade the U.S. rating before 2013 if the fiscal or economic outlook weakens significantly, but said it saw potential for a new debt agreement in Washington to cut the budget deficit before then.

Analysts said the S&P 500 index could test Friday's intraday low of 1, 168.09. Some traders look for a pullback to the 32.8 percent retracement of the rally from the index's bear market low on March 2009. That level is around 1.100.

(Editing by Jeffrey Benkoe)

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In case you have missed-Top Stories last week

In case you missed the, here are stories of last week.

1. Top Firm to eliminate 30,000 jobs

2 7 Best companies currently undertaking cost reduction programs

3 Burdensome 3 comments possibly on the merger of the Bank of worse in history

4 11 Of the worst decisions made by the banks

5 4 Pieces more than difficult News that highlights just how it is there

6 Goldman Sachs and the "CV bonus"

7 'No Go Go' firm not said "No layoff here"

8 UBS said in London 'Threat'

9 If you thought that the last batch of photos have been incredible...

10 Farm credit, Goldman, HSBC, Lazard, Nomura

11 Other firm will shed 3,000 jobs in 2011

12 Exile on Wall Street

13 Barclays, HSBC, Goldman, JPMorgan, SocGen, Standard Chartered, UBS, Wells Fargo

14 Bank of America CEO "Desperate" ploy?

15 Summertime Blues

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Sales of BMW vehicles 7.6 per cent in July in the United States, China (Reuters)

Frankfurt (Reuters)-the German manufacturer BMW (BMWG award.DE) said unit sales rose 7.6 percent in July, driven by growth in demand from the United States and China.

July sales of its brands BMW, Mini and Rolls-Royce climbed to 129.094 vehicles, it said on Monday.

"We just reported July sales of the most successful ever and we are on the way to reaching our goal recently announced more than 1.6 million vehicles in 2011, the best result ever for the BMW Group sales," the head of BMW's sales Ian Robertson said in a statement.

In the United States, the company has delivered 21.409 vehicles during the month of July, 11.7 percent over a year earlier. Growth in China was 36.1% with 18.858 cars sold.

(Reporting by Ludwig Burger)

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The wild ride in financial markets, by the numbers (AP)

Global financial markets have been on a wild ride in the last two weeks. Political impasse in Washington has led in the United States close to defaulting on its debt; European leaders scrambled to prevent a debt crisis from spreading in Italy and Spain; and news on the economy of the United States has shown that growth has slowed. Here's how the markets reacted.

U.S. MARKETS:

U.S. Stock indexes entered a correction, which means a decrease of at least 10 percent from a peak recently. Corrections are common during bull markets and do not mean necessarily that stocks are starting a long decline. However, a decline of 20 percent or more generally marks the beginning of a bear market, or a long period of losses on the stock exchange.

• Dow Jones industrial average fell 1,280 points, or 10 percent, from July 21, when it closed at 12.724. 699 points is down this week, the largest weekly point decline since October 2008. The drop week of 5.8 per cent was the worst since March 2009.

• Standard & poor's 500 index, the market's most widely used by professional investors and mutual funds, is 10.8 percent below where it was on 22 July, when its decline began recently. The decline of 7.2% this week was the worst week since November 2008.

• Nasdaq composite index, which includes many technology companies, is down 11.4 percent since July 22. This week, its worst week since November 2008 lost 8.1 per cent.

• Russell 2000 index of small companies in the u.s. is down 15 percent since July 22. Decline of 10.3% this week was the worst since November 2008.

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WORLD MARKETS:

Overseas stock markets also took a beating this week, especially in Europe. Indexes in Italy and Spain have dropped more than 10 percent, as did Germany's DAX and CAC 40-in France. Asian markets didn't rate as pretty bad.

Europe:

• Germany DAX fell 12.9% this week, its worst loss since October 2008.

FTSE 100 • England fell to 9.8 percent, the worst loss since November 2008.

FT-IF MIB of Italy • decreased 13.1 percent, the worst loss since March 2009.

Spain's IBEX 35 fell • 10 percent, its worst loss since May 2010.

Asia:

Japan's Nikkei 225 • fell 5.4 percent, its worst loss since March.

• Hong Kong's Hang Seng fell 6.7 percent, the worst loss since March 2009.

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GOVERNMENT SECURITIES IN THE UNITED STATES

Investors rushed to buy Senate seeking safer investments. The price of two-year Treasury Note rose so high that its yield, which moves in the opposite direction of its price, fell to a record low. The 10-year Treasury yield serves as the benchmark for many types of loans. When it falls, are often on mortgages rates and other consumer loans.

• The note of the two-year Treasury yield fell 0.26 percent lower on Thursday, a record low before Friday that rises to 0.29 per cent. It was at 0.36% a week earlier.

• The yield on the 10-year note fell Treasury of 2.56% from 2.80 percent a week earlier. On Thursday, it fell to 2.39%, the lowest level since October.

• The yield on 30-year Treasury bond fell to 3.85 percent from 4.12 percent a week earlier.

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GAINERS AND LOSERS ON WALL STREET

All three major U.S. stock indexes lost more than 5% during the week. The steepest losses were by companies whose profits are more dependent on a growing economy. These include oil companies, producers of raw materials and banks.

• Bank of America Corp. fell 15.9% during the week, the largest loss among the 30 stocks in the Dow Jones industrial average.

• Alcoa Inc. fell 13.2 percent on concerns that a global economic slowdown will mean weaker demand for aluminum.

• Kraft Foods Inc., was the only Dow stock between 30 to rise during the week, gaining 1.4 percent. It is divided into two companies, with one focusing on snacks and the other on groceries.

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RAW MATERIALS:

Concerns about the weakening of the economies of the world, has led investors to sell oil and natural gas. I am concerned about the lower energy demand. But the nervousness also led to the gold price, which is considered a safer investment.

• Crude oil fell by 8.8% during the week.

• Natural Gas fell 7.7 percent.

• Gold ended the week at $ 651.80 per ounce. Earlier in the week, rose as high as $1,668. Adjusted for inflation, is still below its peak of 1980.

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Broadcasters brace for impact from debt downgrade (Reuters)

NEW YORK  – A downgrade of United States ' top-tier credit rating has Wall Street scrambling to figure out the knock on effects for the financial system, from mortgages to banks to markets that rely on U.S. Treasuries for collateral.

The immediate effects of the & Standard Poor's downgrade of the country's AAA credit rating late on Friday are likely to be modest, largely because it was expected and already discounted at least partly, experts said.

Many downplayed the likelihood of the sort of financial contagion experienced when Lehman Brothers went under in September 2008. Few had expected it to have to file for bankruptcy, and few were prepared for the fallout. Money market funds froze, some major commercial banks collapsed, and many major dealers and finance houses teetered on the edge of failure.

But even if that type of scenario is unlikely this time, bankers, lawyers and investors wonder if there could be longer-term consequences of S&P's downgrade, given that U.S. sovereign credit is bedrock to the world financial system.

The analysis is complicated because so many of the potential stress points for the financial system are relatively opaque areas like over-the-counter derivatives markets.

Adding to the difficulties is the concern that the downgrade is only one of the many issues roiling global markets. The European debt crisis is spreading, with Italy and Spain coming under the gun after Greece, and data in recent weeks point to a weaker U.S. economy than many investors had thought and have led to fears of another recession.

"I actually think it is going to end up having more of an impact than some of the news stories are suggesting," said Thomas Stoddard, senior managing director at Blackstone Group who focuses on financial services investment banking.

"Not having the U.S. as triple-A is just going to pop up in more places and have more frictional costs than people might suspect," Stoddard added.

A number of entities that are key players in the U.S. financial system--including mortgage finance companies Fannie Mae and Freddie Mac, and securities clearinghouses like the Options Clearing Corp Depository Trust Co.--are likely to be downgraded by Standard & Poor's on Monday.

For Fannie Mae and Freddie Mac, losing their triple-A rating could lift borrowing costs, potentially making mortgages more expensive for consumers and adding to stress in the already unstable U.S. housing market.

Last month, S&P said it may also cut ratings for companies like the Depository Trust Co., which facilitates payment transfers among major banks, and several Federal Home Loan Banks and Farm Credit System Banks.

On Friday evening, when S&P cut the United States ' sovereign rating by one notch to "AA-plus," it said it would offer more detail about the ratings for these companies on Monday.

DERIVATIVES MARKETS

Another source of potential stress is derivatives markets, where investors and banks often collateralize their positions using U.S. Treasuries.

If banks start demanding more Treasuries to collateralize the same exposure, investors could be forced to sell assets to come up with extra collateral, causing broader market declines. As long As Treasury yields are at all time lows, that risk seems relatively low, said a hedge fund trader who spoke on condition of anonymity.

Some derivatives transactions may have ratings triggers built into them that unwind the deals if the U.S. is downgraded, the trader said, but he said it is difficult to know how many such transactions are out there.

OCC, the world's largest equity derivatives clearing organization, said on Sunday it has no current plans to adjust its current valuations or haircuts on Treasuries used as collateral.

There are some factors working in markets ' favor, analysts noted.

For one thing, major U.S. banks are better organized as credit losses have slowed. The U.S. banking system had $ 1.51 trillion of equity capital at the end of the first quarter, compared with $ 1.29 trillion in the fourth quarter of 2008. That roughly 17 percent of extra capital is supporting about 3 percent fewer assets than it used to.

If stresses become strong in areas like the repo market, a massive market that banks use to fund securities short-term, dealers are fairly sure the Federal Reserve can jump in to offer support, as it did during the credit crunch, the trader said.

Any impact in the derivatives market will be less than what the pessimists fear, said Michael Holland, founder of asset manager Holland & co. "I don't expect major disruptions in the markets just from the downgrade."

BORROWING COSTS

Borrowing costs for companies with top ratings like Microsoft Corp. and Exxon Mobil Corp. could drop, because triple-A rated debt may be even more attractive to some investors now, analysts said. Some companies have at times had more available cash on their balance sheets than the U.S. government in recent weeks.

In general, corporate borrowing costs may not rise following the last downgrade. Last week, when many in the market were expecting the U.S. to be downgraded, six U.S. companies issued 30-year bonds, which is unusually long-dated for the corporate market.

Even highly-rated corporate bonds have seen their risk premiums rise in recent sessions, signaling that portfolio managers are still concerned about credit risk. As turmoil in Europe, those ratchets higher risk premiums may rise more. But investors ' willingness to buy long-term corporate debt signals some confidence in the sector.

"To a certain extent, corporate debt may look even more attractive, especially cash-rich balance sheet companies with lots of liquidity," said Chip MacDonald, a financial services partner at law firm Jones Day.

STATE FINANCES

States that rely heavily on federal government spending--such as Virginia and Maryland, which are home to many federal employees and defense contractors--could suffer if Congress and President Barack Obama slice the federal budget more deeply.

A downgrade of Fannie Mae and Freddie Mac would affect billions of dollars of debt issued by public housing authorities secured by federally guaranteed mortgages.

Hospital credits could be weakened if the federal government slashes programs such as Medicaid--the health plan for the elderly, poor and disabled that accounts for as much as 30 percent of state spending. Stocks in the health care sector sold off last week, amid fears of declining government support for spending in the sector.

"The degree of dependence on the federal government now becomes a state credit issue," said Philip Fischer to managing principal at eBooleant Consulting, in a recent report.

S&P is also expected to immediately downgrade pre-refunded bonds. When municipal bonds are refunded, investors are typically repaid from Treasuries held in escrow.

Debt issued by AAA-rated universities and colleges with global reputations might rise in price, said Evan Rourke, a portfolio manager with Eaton Vance, citing as examples the Harvard and Princeton.

Indeed, the immediate impact of the downgrade might be muted by the tax-free market's traditional strengths.

"I don't see a tremendous flight out of municipals. You might see credit spreads widening for lower-rated issues but we also think a lot will hold their ratings, "Rourke said.

(Reporting by Paritosh Bansal and Dan Wilchins, additional reporting by Joan Gralla, Ben Berkowitz and Ann Saphir; Editing by Marguerita Choy)

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In summary: Berkshire Hathaway's 2Q earnings (AP)

Berkshire Hathaway says it's generated a net profit of $ 3.4 billion during the second quarter. Here's a breakdown of the firm's profits top contributors:

INVESTMENTS and derivatives: Added 713 million dollars of net income, loss of 1.1 billion dollars last year.

RAIL: Towed net profit of 690 million dollars to 603 million dollars last year.

PRODUCTION, service and RETAIL: added 789 million, up from 671 million dollars last year.

UTILITIES: Added 215 million dollars, down from 233 million.

SUBSCRIBE to insurance: Recorded a loss of 7 million dollars this year, down from net income of $462 million last year.

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London Deals - tea of afternoon in the Tophams, Belgravia; Time Out subscription; Car derived from the courts; 60% Coupon for Contact lenses. 61% Off GRAB Thai Street Kitchen, nr Old Street; 62% Off the coast of Brussels break

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TOWIE, Geordie and Jersey Shore all dominant television listings, we were feeling a little coarse recently. We have been fondly recalling once tashing offshore before and vajazzles.

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5 Candidates in the run Deutsche corporate & Investment Bank

With Anshu Jain offshore to become co - CEO of Deutsche Bank, Paris are on who will replace him at the head of the Bank corporate and investment banking unit.

Here are the 5 most widely tipped candidates of the estate:

Alan cloete - head of Global Finance & FX

Colin Fan - head of commercial credit and emerging markets

Michele faissola - head of global rates & Commodities

rich Herman - head of institutional Clients

Stephan leithner - co-coordinator of investment banking coverage & Advisory

All five are members of the company and the Executive Committee of investment bank.

Sources - Bloomberg, The Wall Street Journal

 

 

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G7 says committed to ensuring liquidity, support markets (Reuters)

Paris the Group of seven Nations agree to take coordinated action to secure liquidity and supporting the functioning of financial markets, financial stability and economic growth, G7 Finance Ministers and Central Bank Governors, said in a statement.

"These actions, along with continued efforts of fiscal discipline will enable long-term sustainability of Public Finances," said the statement issued early on Monday.

"No change in the fundamentals of financial guarantees the recent tensions faced by Spain and Italy. We welcome additional policy measures announced by Italy and Spain to strengthen fiscal discipline and support the upswing in economic activity and job creation, "he added.

Senior officials conferred by phone before the opening of the Asian financial markets such as financial crises on both sides of the Atlantic has threatened to escalate.

In separate efforts to prevent panic, the European Central Bank has reported would begin to buy Italian and Spanish debt, while the United States Treasury Secretary Timothy Geithner said Treasury securities are just as strong as they were before a potentially damaging debt downgrade from Standard Poors & on Friday.

G7 officials said in their statement that would closely consult on action on currency markets and would be appropriate on a foreign currency.

"Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability," they said.

(Reporting by Geert De Clercq; Editing by Michael Roddy and Chizu Nomiyama)

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