European Markets Head Higher, As BAC Gets Another Bailout

Current Futures: Dow +80.00, S&P +9.00, NASDAQ +11.75
 
European Trade: Government interventions have again helped equity markets surge higher. European stocks are heading higher, while Asian stocks closed the last day of trading above the break-even line. U.S. futures gained almost 1% overnight. 

The uncertainty surrounding the financial system continues. Bank of America agreed with the U.S. government to receive $20 billion in cash injections, and another $10 billion that will be used to secure any losses from its $118 billion assets portfolio. However, Bank of America has to undergo the first $10 billion in losses. Previously, the bank received $25 billion to boost its capital and take over Merrill Lynch.

Separate from Bank of Americas’ actions, the Senate voted tonight to release the second part of the $700 TARP fund. Even though a large part of this fund is already committed to different programs, the major banks will still receive a considerable stake. This should further strengthen the balance sheets of these banks, that have been affected by huge write-downs

Tonight, Asian markets closed higher. The Nikkei gained 206.84 points (2.58%) to 8,230.15. The Australian S&P/Asx rose 21.40 points (0.61%) to 3,550.90. In Europe, the German Dax gained 95.35 points (2.20%) to 4,432.08. The U.K. Ftse rose 68.41 points (1.66%) to 4,189.52.

Crude oil is trading near the lowest value touched in a while. Crude oil for February delivery fell $0.20 to $35.50.

Gold posted strong gains, as the dollar declined. Bullion for immediate delivery rose $13.80 to $821.10.

Previous Asian trade: Equity markets turned from red to green yesterday aided by the Senate’s decision to allow access to the second part of the $700 bailout fund. U.S. markets managed to close slightly into the green, despite earlier dropping close to 3%, while the Asian markets are currently trading higher. 

The trading session took off with rumors of banks running out of funds. However, the Senate vote for the $350 billion TARP money shed those rumors away, as banks will receive new cash infusions in the following days. About $100 billion is committed to help homeowners overcome the difficult period, something that both parties agreed upon.

In other news, Goldman Sachs said losses from the U.S. residential mortgage loans might reach $1.1trillion, up from $780 billion. In the same time, losses from commercial real estate, credit car, auto debt and business debt might balloon at $2.1 trillion. Up to now, banks had written off about 1 trillion, the rest of the toxic loans still being on the banks’ balance sheets.