Following a rise in the dollar against the Japanese yen over the previous two trading sessions, Portales Partners analyst Charles Peabody on Tuesday warned that Citigroup could lose up to $7 billion in regulatory capital this year if the dollar keeps gaining against yen, the euro and currencies in emerging markets," according to a Bloomberg report. Roughly 60% of Citigroup's earnings came from outside the United States during the first quarter.
The broad indices all ended 1% lower, with investors appearing unsettled after the Bank of Japan said it would continue to purchase assets to expand Japan's monetary base at an annual pace of about 60 trillion yen ($612 billion) to 70 trillion yen, in an effort to reach a 2% inflation target.
The KBW Bank Index (I:BKX) was down 2% to close at 60.91, with all 24 index components showing declines.The downward pressure on long-term interest rates in Japan continues to push long-term rates higher in the United States. The market yield on 10-year U.S. Treasury bonds was 2.20% Tuesday afternoon, which was down slightly from the previous session, but up 50 basis points since the end of April. The Federal Open Market Committee will meet next week and the Federal Reserve appears very likely to keep the short-term federal funds rate in a range of zero to 0.25%. But conflicting remarks among FOMC members, including Fed chairman Ben Bernanke, have investors wondering how soon the central bank will slow down the expansion of its balance sheet. The Fed has been making monthly purchases of $85 billion in long-term securities since September. The market is anticipating lower levels of bond-buying by pushing the yield on the 10-year bond higher.
Dimon: Good Times AheadWhile some investors fear the eventual end of monetary easing by the Federal Reserve and higher interest rates, JPMorgan Chase (JPM)CEO James Dimon on Tuesday said the firm was well-positioned for a significant rise in earnings . Speaking at the Morgan Stanley Financials Conference in New York, Dimon said if the market yield on the 10-year U.S Treasury bonds were to rise by 100 basis points, the bank would make an additional $2 billion, "all else being equal."
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