Market briefing---Matt (slow)
CIBC's settlement---Peter (slow)
NYSE ---Deb (fast)
Currency market:
Inteview: FleetBoston---Podolsky, Paul---Currency Strategist
welcome to “world financial report.” i’m matt nesto. canada’s third largest bank by assets agreed to settle allegations that it aided and abetted enron’s fraud. bloomberg’s peter cook joins us live from washington with the latest and more on cri cibc’s settlement with u.s. and canadian regulators.
>> cibc is the fourth major financial institution accused of helping enron commit fraud. to settle with the securities and exchange commission, in the agreement, the bank will pay $80 million but does not admit or deny wrongdoing. related settlements were reached with the department of justice, the federal reserve bank of new york and canadian regulators that include new monitoring of the bank’s activities. the s.e.c. announced the settlement in washington this morning, calling cibc’s conduct reprehensible. the bank was accused of engaging in 34 complex structured financing arrangements with enron between june of 1998 and ucket of 2001 that lacked any business purpose, accord to the s.e.c. the s.e.c. said the deals were called asset sales but were really loans intended to hide enron’s financial condition.
>> as a result o of the conduct here, cibc helped enron inflate reporting operating cash flows by more than $2 billion and inflate reported earnings by over $1 billion.
>> two former cibc executives agreed to settle with the s.e.c. today and will turn over more than $600,0000,000. a third, ian schotlander, is finding the charges against him. cibc issued a statement today saying that the company believes the agreement brings to an end the investigation into its enron business and the president and c.e.o. saying that they are pleased to put the enron matter behind them as they have various enron-related civil suits pending and intend to defend themselves vigorously. cibc previously set aside $81 million to handle any enron-related liability and the company saying it will cease certain structured finance deals in the future, a decision the bank executives say will cost them 10 cents a share canadian in annual earnings. cibc’s settlement follows similar agreements with the s.e.c. and merrill lynch, citigroup and j.p. morganchase. as for enron, asked today whether the s.e.c. is closer to charging former executives, more than two years after the company filed for bankruptcy, officials would only say the investigation continues.
>> peter cook. hard to believe, two years, folks, amazing. equities on a roll again today closing near their highest level of the session. deborah kostroun is there for the closing bell and bringing us up to date on how things wrapped up.
>> what we saw for the dow and s&p 500, both hitting new 19-month highs, at least for the dow for the fifth day in a row. further s&p 500, further fourth time in five days as the s&p was lower friday. also today, what we saw, tech falling. that hurt the indexes, at least the nasdaq. but the dow jones industrial average outperforming. what is really helping the dow, you can see how it’s performing at least in today’s session, we saw 3m, also alcoa performing well. 3m hitting a new record high. u.b.s. raised 3m’s target price from $100 to $90. they’re saying a recovery in manufacturing will continue and boost 3m’s profits. j.p. morgan says alcoa shares could jump another $10 in 12 months and aluminum prices will rise as the global economy grows, boosting next year’s profits. general motors, the best performer on the dow jones industrial average today as the stock gained over $2, or 4%. 4%. over the weekend, the u.s. government signed off on that sale of its stake in directv to news corp. and g.m.’s c.e.o. saying that the company’s balance sheet will be strengthened by that deal. autos were the best performers in the s&p 500. ford helping there, as well, as they increased their 2003 forecast. another big performer out of the auto sector. and as we get closer to 2004, investors polled by u.b.s. and gallup very bullish. we’ll get to that in a moment. energy stocks have been up recently but today one of the laggards, although they ended fractionally higher. crul in―crude oil in new york tumbled as mild northeast weather expected to trim fuel demand. heating oil and natural gas prices plummeteted, but have been on the rise and that led many of the stocks on the list here, they have been higher recently and inventories at critical levels. investor optimism poll reached the highest level in nearly two years as 70% of those polled believe the economy is in recovery and that would be good news for corporate profits. also 75% of people they talked to sailing next year will be better for stocks than this year and that’s surprising as we had a gain of 20% this year, the largest in the s&p 500 since 1998. and many strategists and investors doubt that stocks can rise as much as they have this year going into next year although we are looking for a rise. back to you.
>> thank you very much. and i will do the big picture now that she’s done the finite details and that is the update for the dow. if you’re counting at home, five in a row, 4-5 for the s&p 500. the nasdaq also higher here today. the big picture in the minds of most people is the 19-month high and the fact that it was on december 11 that the dow breached the 10,000 level and now we’re almost 3.5% higher since that milestone. here’s the volume picture. i left out one thing, currencies. guess what, the dollar fell to a record low versus the euro in new york after the u.s. government raised its security alert. officials say there is a “substantial increase in the potential for terrorism during the year-end holidays.” homeland security secretary tom ridge raised the alert to high from elevated. joining us to discuss the dollar’s fall is paul podolsky, currency strategist with fleetboston financial. the dollar used to be the safe haven currency. is it no longer the safe haven currency?
>> that’s one of the issues dogging the dollar but look at the big picture, as you said. the u.s. is really having a hard time attracting enough funds to fund the current account taevs and as long as that happens, the dollar will be on a downward trend.
>> so the increasing or the elevation of the terror alert status is a negative for the u.s. dollar? it’s not seen broadly but that the risk is to the u.s. alone?
>> no, i think you have to look at the big picture here. the euro is up over 40% from its low and that has to do with the u.s. having a big current account deficit and even if the u.s. economy is recovering, as many seem to believe it is, it doesn’t necessarily help the dollar, terrorism threat or no because u.s. bonds may not do well in that environment.
>> i have your recent note, you’re bullish on the pound, euro and yen and on the canadian dollar and you see the pound breaking out and going to 180?
>> that’s right. i feel earlier this month at the same time that u.s. stocks were breaking into new highs, the pound has been in a long-term consolidation period and once it broke above 174, for me, it was symbolic about the medium-term direction the dollar is going in and i think 180 is next in the cards. so terrorism is important but if you look at what stocks and bonds have done today, people people are accustomed to the fact that the terrorism alert can change and it won’t change the fundamentals in the market.
>> paul, thank you very much. that’s paul podolsky, currency strategist at fleetboston financial. the federated international equity fund is up 30% this year in line with the international indexes, most closely followed, the morgan stanley eafe. we’ll talk to one fund manager to learn why, within the whole world, he likes japan the best.
