There's probably more overnight, sub-prime related news than on any day since the present mess began to rattle US markets in early March, and then alarm them courtesy of the failure of a couple of hedge funds managed by Bear Stearns.
In Germany, various state banks, coordinated by German banking associations and the federal government, agreed to provide 3.5 billion euros to cover potential losses at IKB Deutsche Industriebank (reported by
Bloomberg among many others). The distress of IKB was first reported by German media at the beginning of the week.
IKB expects to lose up to a fifth of its 17.5 billion euro exposure to the sub-prime mortgage market,
Reuters reported.
Accredited Home Lenders Holding, a sub-prime mortgage lender that agreed in June to sell to private equity firm Lone Star said its survival as a going concern was uncertain and that bankruptcy is possible,
Reuters reported.
First American, a Title Insurer, posted a surprise second-quarter loss after drastically increasing reserves to cater to "a significant increase in defaults, foreclosures and mortgage fraud,"
Reuters reported.
Meanwhile on the Australian front Allco Finance Group said the impact of the US sub-prime crisis was negligible, but did confirm that some of its managed funds have small amounts invested in CDOs, but to date it has not had any non-performing loans or assets. Allco said it expects earnings per share growth of at least 20 per cent for the year.
Allco also said its Mobius mortgage platform, which funds sub-prime mortgages in the Australian market, was not affected by the issues associated with US sub-prime mortgages.
Meanwhile at an industry conference yesterday Macquarie Bank chief executive Allan Moss said this week's fall in Australian equities - and by implication his own bank's shares - was overdone.
"I think you would have to say it's probably an over-reaction," Moss said.
"The Australian economy is in very good shape, the global growth story is basically intact, when you look at what the IMF and other central banks say about global growth - they are continuing to say it's going to grow well."
Interestingly shares in Macquarie Bank faded in the last few minutes of trading on the ASX yesterday to close down by 10 cents, or 0.1 per cent, to $73.60, having been trading between two and three per cent higher a lot of the day. Banks and diversified financials otherwise largely recovered a lot of lost ground from the day before, with the All Ordinaries up one per cent and the financials index increasing 1.6 per cent.