By Natsuko Waki
LONDON, Feb 15 (Reuters) - Banking shares and the dollar
fell on Friday, pressured by the Federal Reserve chairman's
downbeat outlook on the U.S. economy and a ratings downgrade of
a U.S. bond insurer.
Overall, European share indexes edged higher, supported by
mining and resource shares, while platinum held near historic
highs above $2,000 an ounce on lingering supply concerns in
South Africa, supporting emerging market assets.
Fed chairman Ben Bernanke said on Thursday the outlook for
the economy had worsened in recent months and pledged that the
central bank would act in a timely manner to support growth.
His comments reinforced market expectations the Fed would
cut interest rates again in March, on top of a total 225 basis
points of reductions since September.
Also on Thursday, Moody's Investor Service cut its triple-A
ratings on FGIC's bond insurance arm because of a $4 billion
hole in the insurer's capital position. It raised fears that
this would trigger a broader sell-off in bonds insured by FGIC
and generating more writedowns for banks.
"I'm getting the feeling that the markets have priced in a
lot of the negatives but it will take at least 12 months for all
the credit market issues to shake themselves out of the market,"
said Angus Gluskie, portfolio manager at White Funds Management.
The FTSEurofirst 300 index <> was up 0.1 percent on
the day while MSCI main world equity index <.MIWD00000PUS> was
also up 0.1 percent.
Banking shares <.SX7P> were major losers, with the sector
falling 0.7 percent on the day.
Citi's equity research team said Swiss bank UBS may need to
write down up to $18 billion in new writedowns. The total size
of the banking sector writedowns of subprime mortgage-related
losses is estimated at around $300-400 billion, around a third
of which has so far come to light.
The Markit iTraxx Crossover index <ITCRS5EA=GFI>, the
mostly-widely watched indicator for European credit market
sentiment, widened 6 basis points to 547 bps -- below record
wides of 575 bps set earlier this week.
The dollar fell to a one-week low of 76.038 against a basket
of major currencies <.DXY>.
"(Bernanke's) comments are likely to confirm the medium-term
view that with its rate cuts the Fed is doing the right thing in
order to stem downside risks for the U.S. economy," Commerzbank
said in a note to clients.
"However, by highlighting the downside risks to growth,
Bernanke confirmed prevailing aggressive rate cut speculation,
which currently keeps the dollar under broad pressure."
Emerging stocks <.MSCIEF> rose 0.3 percent while emerging
sovereign spreads <11EMJ> were unchanged.
The March Bund future <FGBLH8> was down 20 ticks.
U.S. light crude <CLc1> was steady at $95.50 a barrel.
Platinum <XPT=> rose to $2,010 an ounce after hitting record
highs around $2,025 on Thursday as a power crisis in South
Africa forced another miner to forecast lower output in 2008.
Gold <XAU=> rose to $908.30 an ounce.
(Editing by Mike Peacock)
