BusinessDesk: Swiss draw line across Alps

Equities on Wall Street dropped, again, as did stocks in Europe, as investors remained in the grip of concern about the eurozone’s debt crisis and the fate of global banks.

In late afternoon trading, the Dow Jones industrial average fell 1.43%, the Standard & Poor's 500 Index slid 1.29% and the Nasdaq Composite Index lost 0.93%.

Banks were big losers on both sides of the Altantic as several brokerages including Nomura slashed their price targets on big lenders.

Bank of America Corp and JPMorgan Chase & Co both dropped more than 3.5%.

“The big worry is the situation in Europe,” John Carey, a Boston-based money manager at Pioneer Investments, told Bloomberg News.

“Until we have some resolution of that crisis, we’re going to have continued turbulence in the market. I still think the chance of a recession is less than 50%. However, there’s the risk that sentiment just turns so negative that people crawl back into their holes and we do have another downturn.”

Realising that market conditions are hardly ideal for raising capital, Groupon has called off a road show promoting the initial public offering that had been scheduled for next week, according to a Wall Street Journal report, citing an unidentified person familiar with the matter.

The Internet coupons site was not cancelling its IPO, but was reassessing the timing for an offering on a week-by-week basis, the newspaper said.

In contrast, Carlyle Group filed for an IPO on Tuesday, as the private equity group looks to match earlier moves by Blackstone, KKR and Apollo.

While Carlyle's filing with the U.S. Securities and Exchange Commission lists an offering size of US$100 million, sources told Reuters in June that the offering could be as large as US$1 billion.

Carlyle is expected to move ahead with an IPO in the first half of 2012, depending on market conditions and regulatory approval, two sources familiar with the situation told Reuters on Tuesday.

JPMorgan Chase & Co, Citigroup Inc and Credit Suisse Group AG landed lead roles in the Carlyle share sale, according to Bloomberg.

Among the few bucking the gloomy trend on the markets today was Sunoco Inc, which rose 5% after the energy company said it planned to exit its refining business and concentrate on its logistics operations.

Meanwhile, there may be some relief on the horizon. President Barack Obama might press Congress for tax cuts that would exceed his past proposals as well as some of the offerings from House Republicans to strengthen his hand in talks on measures to boost the U.S. economy, Bloomberg News reported, citing a person familiar with the discussions.

Investors piled into U.S. Treasuries as they sought refuge in safe-haven assets. The yield on the 10-year note dropped to a record low.

The Swiss franc had also benefited from investors’ flight to safety in recent months, much to the dismay of the Swiss central bank. Today, the Swiss central bank drew its line in the sand by imposing a ceiling on the currency for the first time in more than three decades and vowed to defend the target with the “utmost determination.”
In response, the Swiss franc plunged, last trading at 1.2025 against the euro and at 85.82 centimes against the U.S. dollar.

The Swiss National Bank was “aiming for a substantial and sustained weakening of the franc,” the Zurich-based bank said in an e-mailed statement today.
“With immediate effect, it will no longer tolerate a euro-franc exchange rate below the minimum rate of 1.20 francs” and “is prepared to buy foreign currency in unlimited quantities.”

(BusinessDesk)