Most recently, the Swiss government agreed to hand over private bank information of 4,450 American UBS clients to American regulators, putting a damper on Swiss banks’ secrecy policies.  As a result, Swiss private bankers are turning their attention to emerging markets, such as Russia, Asia and the Middle East, stressing their expertise and financial stability, states Ghana Business News.  The litigation and controversy is damaging the reputation of Swiss banks and is forcing the nation to draft up new treaties.

In addition to this, it appears that investors from Europe, South Africa and Asia are the first to gain inquiries in equity participation for international banks that are in trouble.  Some big names like the Commercial Bank of China have gone so far as to hire accounting firms to run forensic audits on the international banks.

A combination of the aforementioned can truly be detrimental to the global financial sector.  An ETF that could be influenced is the WisdomTree International Financial Sector Fund (DRF) which is up 31.9% year-to-date and above its 200-day moving average.

• iShares MSCI Switzerland (EWL): up 10.1% year-to-date; UBS 5.6%

For more stories on the financial sector, visit our financial category.

Kevin Grewal contributed to this article.

The Commerce Department said that consumer spending rose slightly more than expected in June by 0.4%, primarily boosted by expenditures on nondurable goods.  On the other hand, personal incomes declining by 1.3% in June as the effects of one-time government stimulus checks in May wore off.

The National Association of Realtors reported pending home sales in June rose for the fifth straight month.  In more good news, for the first time years in five years, home resales have have risen for three straight months, increasing almost 4% in June.

In the earnings arena, GMAC posted a wider second quarter loss of $3.9 billion as it transitioned into an independent bank.  Revenue for the lender dropped by 28%, but the bulk of the loss was caused by a $1.6 billion charge related to its mortgage business and a $1.2 billion tax charge on its conversion to a separate company from General Motors (GM).

Swiss bank UBS (UBS) reported its seventh quarterly loss in the past eight quarters.  The bank reported a loss of $1.32 billion on further outflows from its private banking business as well as restructuring and impairment charges.  The news sent the iShares MSCI Switzerland (EWL) down nearly 1% in morning trading, UBS is 4.1%.

The Dow Jones Industrial Average was relatively flat, up 0.01%, while the S&P 500 followed declining nearly 0.01% and the Nasdaq gave up 0.1% in morning trading.

For more stories on financials, visit our financial category.

Kevin Grewal contributed to this article.

In an attempt to ignite a much-needed spark in a battered automotive industry, the government is offering consumers incentives of up to $4,500 to turn in their old gas-guzzling vehicles for new more fuel-efficient ones.  The way the program works is if one trades in a vehicle that gives 18 miles per gallon or less, a voucher for $3,500 will be given. If an older model is traded in for one that gives 10 miles per gallon, a voucher for $4,500 will be given, states Ken Thomas for the Associated Press. Critics of the program state that many consumers are still wary of taking on new or higher car payments, and they’re skeptical that it will work.

Crude oil rose once again to surpass the $72/barrel mark.  The commodity was trading at $72.14/barrel by mid-morning on the New York Mercantile Exchange.  The relative strength of black gold has been reinforced by investor’s fear of inflation and the risk factors in Nigeria and Iran.  The United States Oil Fund (USO) jumped 0.6% in morning trading.

Drug maker Novartis (NVS) received uplifting news from the FDA as they approved the sale of its drug, Illaris, which is used to focus on genetic triggers that cause diseases.  The news sent the iShares MSCI Switzerland Index (EWL) up nearly 1.7% in intraday trading, however, it is down 4.7% year-to-date ; NVS is 11.7%.

Auto retailer, Carmax Inc. (KMX) reported a drop in first quarter profit of 2.7% on huge sales drops, a loss in its auto financing arn and charges related to loans.  However, the adjusted earnings of $0.22/share that the company reported were well above Wall Street’s expectations of $0.04/share, which was the result of increased traffic and better sales execution.

Overall, all three major U.S. indexes are up in morning trading.  The Dow Jones Industrial Average added 0.5%, the S&P 500 added nearly 0.7% and the Nasdaq was up 1.5%.

For more stories on crude oil, visit our crude oil category.

Kevin Grewal contributed to this article.

Stocks are modestly higher as investors try to turn Wall Street’s best performance this year into a two-day advance, says Sars Lepro for the Associated Press. Although the financial stocks that led the rally are keeping their gains, analysts caution that the market is still under water. Investors bought stocks furiously Tuesday on news that Citigroup Inc. was operating at a profit for the first two months of 2009.

World markets are also enjoying the news regarding Citigroup (C) as Asian markets rallied along with European markets taking modest gains. Jeremiah Marquez for Associated Press reports that the relief was likely to be temporary as the economic slump continued to ravage Asia’s export-driven nations. The fact that Citigroup turned a profit does not help the fact that many large economies are still suffering a slowdown.

• SPDR Dow Jones EURO STOXX 50 (FEZ): down 30% year-to-date; up 3.6% for one week

UBS AG, Switzerland’s biggest bank, posted a loss of $18 billion for 2008, with more losses anticipated in the coming year. Elena Logutenkova for Bloomberg reports that costs to settle a U.S. tax investigation and additional writedowns on securities enlarged the full years’ loss.

UBS agreed on Feb. 18 to pay $780 million and disclose the names of about 300 secret account holders to avoid U.S. criminal prosecution on a charge that it helped wealthy Americans evade taxes.

• iShares MSCI Switzerland (EWL): down 25.7% year-to-date; up 4.2% for one week; UBS is 5.1%

Ford Motor Company (F) and the United Automobile Workers union are trying to save $500 million a year and bring its labor costs in line with what foreign competitors pay their workers in the United States. The deal, which UAWmembers ratified this week, immediately reduces its all-in hourly rate, including benefits, to $55, reports Nick Bunkly for The New York Times.

Currently, Ford’s labor costs amount to a little more than $60 an hour, including health care for retirees. The figure would continue to shrink as more workers take buyouts and when the new-vehicle market recovers, allowing increased production.

Phillip Waller for The International Herald Tribune reports that the British arm of Toyota (TM) is to cut UK staff pay and working hours by 10% to save money in the face of a sharp downturn in global demand. The “work share” agreement will take place at the two plants in Derby and Deeside and would begin on April 1, and continue throughout next year. Toyota is aiming at keeping employment sufficient throughout this hard period of time.

The Associated Press reports that President Barack Obama said he will accept a $410 billion spending package today, but insisted it must signal an “end to the old way of doing business.” The Federal funding earmarks were called “pork” by some, however, the president insists they are legitimate when done right. Plus, he said he’ll “work with Congress” to eliminate any earmarks the administration objects to.

The stability of Switzerland could in jeopardy as its largest bank (UBS) is in the throes of a tax scandal on top of $53 billion in write-downs on U.S. subprime securities, reports Nelson D. Schwartz for The New York times.

UBS forked over $780 million in fines and revealed 250 client names to avoid a criminal indictment, which was not taken too well by a country that prided itself on its “bank privacy.” The Alpine wealth haven is also readying itself for a lashing as a Senate panel looks into how UBS helped U.S. taxpayers evade the IRS.

Peter Kurer, the chairman of UBS during the tax and subprime brouhahas, has been ousted and the former finance minister, Kaspar Villiger, will replace him.

The balance sheet of UBS is around $2 trillion, or four times that of Switzerland’s GDP. All Swiss bank assets amount to 6.8 times GDP. The financial service sector contributes 12.5% to the Switzerland’s GDP.

In previous years, the Swiss economy grew almost 3% annually, but in the fourth quarter, it contracted 0.6%.

• iShares MSCI Switzerland Index (EWL): down 16.2% in the last month; down 17.5% in the last three months; holdings of 5.1% in UBS; the Swiss financial sector amounts to 20% of this fund; it’s down 7.7% since the bank was forced to reveal the names of its account holders
  

The latest program is shelling out $1.5 trillion from the Treasury, private investors and Federal Reserve in an effort to restore the faith in the baking system and giving hope to voters and lawmakers, report Edmund Andrews and Stephan Labaton for The New York Times.

Geithner’s main promise was transparency for the public in regard to the bailout money and tighter accountability for banking institutions that receive rescue money. His multi-pronged program includes:

• The new program, the “bad bank” program, is to buy up hard-to-sell assets that have bogged down banks and financial institutions for the past year. $250-$500 billion is expected to be spent.
• Direct injections into banks up to the remaining $350 billion of the rescue plan money.
• A huge lending program that is aimed at getting consumers the loans they need; $1 trillion will be supplied to regain liquidity into the area of student loans, car loans and credit card debt.

Dakin Campbell and Matthew Brown for Bloomberg report that upon this news, the Treasuries rallied due to the prognosis that the plan would simply not be enough. The safety of the government is the path investors felt was cautious.

Geithner said the Obama administration will fight a “two-front” battle to jump start the economy by stimulating employment and bolstering financial markets. The United States will sell a record $32 billion of three-year notes today. This may help cut consumer borrowing costs. The yield on a 10-year note was down 0.11%, to 2.88%.

• Vanguard Extended Duration Treasury ETF (EDV): up 12.7% over past three months; down 4.9% over past week

Swiss banking giant UBS lost $6.9 billion, or 8.1 billion francs, for the fourth quarter, as they continued to write down assets and many wealth management clients left. This was a bigger hit than analysts had anticipated, and the bank now has a plan to mend.

UBS said it would split its wealth management business into two units with one focusing on clients in the Americas and another on Switzerland and the rest, reports Julia Werdigier for The New York Times. Net money inflows were gained in January, and the bank is hopeful that full profit will be achieved by next year.

• iShares MSCI Switzerland Index (EWL): down 12.4% over past three months; UBS 5.1% of assets

A study by Thomas Reuters indicated that the total value of canceled mergers for the quarter is at an astonishing $322 billion, an amount almost equal to the value of completed mergers.  Another study by UBS, shows that one-third of all potential mergers have been nipped in the bud before consummation and the value of mergers and acquisitions for the year is at $2.8 trillion, down 27% from the prior year. 

In fact, recently mining giant BHP Billiton (BHP) backed out of its planned acquisition of Rio Tinto (RTP), sending shares of Rio Tinto down 37%.  Although BHP was able to secure the necessary debt for the acquisition to go through, they were wary of investor reaction to picking up this extra debt; since the call off, the price of insuring BHP against default has fallen dramatically, states the Economist.

To make it even more problematic, rumors have stirred up that the acquisition of telecom giant BCE (BCE) by private equity groups and the acquisition of Genentech (DNA) by Roche may be next on the list to hit the skids.

These failures, and potential failures, of transactions will have drastic affects on the ETFs that have these relinquishing companies as major holdings, sending their prices down the drain. It’s important for investors to watch these deals and to be aware of which of these companies they might be holding.

It isn’t all gloom for for the M&A industry.  When funding can be aquired and stability reaches the financial market, weaker firms will be more accepting of offers and some of these deals that have been called off may be rekindled.

iShares MSCI Australia Index Fund (EWA): is down 53.7% year-to-date; BHP is 13.3% and RTP is 3.1%

iShares MSCI Switzerland (EWL): is down 35.6%, Roche is 13.7%

PowerShares Dynamic Biotech & Genome (PBE): is down 29.4% year-to-date, DNA is 5.6%

The country has managed to remain relatively stable amid the global chaos, as their economy boasts a stable currency. Make no mistake: it’s definitely in bear territory being 39.3% off its December 2007 high. But it has managed to dodge the more severe downturns seen by other global funds that are 50%, 60% and even 70% off their highs.

To what does the iShares MSCI Swizterland Index (EWL) owe this? The fund tracks the performance of the Swiss equity market with 41 components that have high market capitalizations, reports Don Dion for Seeking Alpha. The companies in the fund are among the most resilient of global equities, with a top sector weighting in health care. The second- and third-largest holdings are in financials and consumer staples, at 22% and 20%, respectively.

While financials aren’t a word everyone wants to hear, consumer staples has gained favor with conservative investors.

Switzerland’s growth rate has held steady in recent years. Their GDP may pull back some this year though, to 2% in 2008 and 1.4% in 2009, so they’re definitely feeling the impact of the global slowdown. Their exports fell 4.4% year-over-year last month, which is the first decline since January 2005.

While it’s far below its 200-day moving average right now, EWL’s relative strength during this severe downturn could help it when we begin a recovery. The fund is down 35.2% year-to-date.

Roche, the Swiss pharmaceutical company, offered Genentech an initial bid of $43.7 billion, which was rejected. Roche already owns 55.9% of Genentech, reports Andrew Pollack for The New York Times. Genentech’s stock is up on hopes that Roche will eventually raise the offer.

The two companies are expected to go into negotiations and Genentech’s response appears friendly. In the interim, Genentech is going to apply a broad-based employee retention program, in hopes that the scientists and executives will not leave early and force the company to lose its independence.

Biotechnology has seen a number of deals struck between companies. Last month, Novartis bought research partner Speedel, and GlaxoSmithKline struck an insomnia drug licensing deal with Actelion.

Related ETFs include:

• SPDR S&P Biotech (XBI): up 16.8% year-to-date; DNA is 4.2%
• PowerShares Dynamic Biotech and Genome (PBE): up 7.1% year-to-date; DNA is 5.6%
• iShares Nasdaq Biotech Index (IBB): up 9.9% year-to-date
• iShares MSCI Switzerland (EWL): down 8.9% year-to-date; Roche is 13.7%

For full disclosure, Tom Lydon;s clients own shares of IBB.

New York Attorney General Andrew Cuomo has said he plans to charge the bank with fraudulently marketing and selling auction-rate securities, as well as destroying subpoenaed documents, report Joseph A. Giannone and Jonathan Stempel for Reuters.

Cuomo has left open the possibility for a settlement, but any resolution is going to require that Citigroup buy back the affected debt at face value, pay damages and a penalty.

Other financial institutions are under the microscope of regulators, who are looking into auction-rate sales practices. They include many of the top holdings of financial ETFs, such as Bank of America (BAC), Merrill Lynch (MER), UBS AG and Wachovia (WB).

Some ETFs that could be affected as the investigations progress include:

• Financial Select Sector SPDR (XLF): down 25.4% year-to-date; Bank of America, 7.8%; Citigroup, 5.9%; Wachovia, 2.6%
• KBW Bank (KBE): down 23% year-to-date; Bank of America, 8.2%; Citigroup, 6.7%; Wachovia, 5.3%
• iShares MSCI Switzerland (EWL): down 9.7% year-to-date; UBS AG, 4.6%
• iShares Dow Jones U.S. Financial Services (IYG): down 25.3% year-to-date; Bank of America, 8.8%; Citigroup, 7.5%