In case there’s anyone who still thinks markets would react badly to “receivership and restructuring” of our zombie banks…take a look at how Europe and the US futures are reacting to the news that Citi might swap preferred into common equity, all but wiping out current stockholders:
Bloomberg: Stocks in Europe and Asia climbed, pushing the MSCI World Index higher for the first time in 10 days, and U.S. futures gained on speculation the U.S. government will increase its control over Citigroup Inc. Treasuries and the dollar fell.
Citigroup surged 26 per cent in Germany after the Wall Street Journal said the bank is in talks with federal officials that may result in the government holding as much as 40 per cent of its common stock. Barclays Plc and Hang Seng Bank Ltd., Hong Kong’s second-largest by assets, added more than 4 per cent. Royal Bank of Scotland Group Plc climbed 17 per cent after a person familiar with the situation said RBS plans to cut costs by more than 1 billion pounds ($1.44 billion) and split into two units…
The MSCI World Index increased 1 per cent to 780.48 at 9:57 a.m. in London. The index of 23 developed countries lost 12 per cent in the previous nine days as companies from Anglo American Plc to Cie. de Saint-Gobain SA indicated the recession is worsening.
Futures on the Standard & Poor’s 500 Index rose 1.7 per cent on optimism that greater government control of Citigroup will reduce the risk that bank failures will deepen the global recession. The MSCI Asia Pacific Index added 0.6 per cent.