Monday, October 27, 2008
World Daily Markets Briefing
| by: ADVFN Newsdesk US Stocks at a Glance US STOCKS-Market drops on recession angst, tech fears NEW YORK - U.S. stocks fell on Monday as investors fretted about the likelihood of a sharp economic downturn and the fallout on corporate profits. Top drags included shares of technology bellwethers such as Microsoft Corp, down nearly 4 percent, amid worries about the toll of the credit crisis on tech spending. The Wall Street Journal reported that defaults on tech financings -- loans that allow companies to buy computers, software and other products, have spiked this year. Business software maker Oracle Corp fell 4 percent, while BlackBerry devices maker Research In Motion shed more than 3 percent. "The recession is taking more of a global front than people initially expected," said Cleveland Rueckert, market analyst at Birinyi Associates Inc in Stamford, Conne cticut. "There's a loss of confidence in stocks. A lot of the capital in stocks is moving around ... there's a lot of liquidation and hedge funds are forced to sell stocks." The Dow Jones industrial average fell 86.10 points, or 1.03 percent, to 8,292.85. The Standard & Poor's 500 Index shed 13.18 points, or 1.50 percent, to 863.59. The Nasdaq Composite Index dropped 25.86 points, or 1.67 percent, to 1,526.17. Investors also sold off shares of energy companies on fears that a global recession will hurt energy demand. Shares of Exxon Mobil declined about 2 percent. U.S. stocks had briefly turned higher following a government report that showed a surprise increase in September new home sales. For more see. & nbsp; Another positive spur came from comments by European Central Bank President Jean-Claude Trichet that appeared to open the door to another ECB interest rate cut. He said an ECB rate cut was a possibility, not a certainty, at the next policy meeting. But the boost from the data and Trichet's comments proved short-lived. Microsoft shares fell to $21.17 on Nasdaq, as shares of RIM declined to $43.42. Tech services giant International Business Machines Corp, off nearly 2 percent, was a top drag on the Dow. Shares of General Motors slid 7 percent to $5.54 on the New York Stock Exchange as investors fretted about the car makers's outlook after people familiar with the talks said that GM and Chrysler LLC's owners, Cerberus Capital Management , were discussing a merger. The diminishing appetite for risk is driving panicked investors, including hedge funds and mutual funds, to liquidate equity holdings en masse, threatening to make October the worst month ever for the benchmark Standard & Poor's 500 index in the post-World War Two period. In Asia, Hong Kong shares on Monday plunged 12.7 percent, and Japan's Nikkei average slid more than 6 percent to their lowest close in 26 years. In deal news, rural U.S. telephone service provider CenturyTel agreed to buy Embarq for $5.8 billion.. Shares of Embarq jumped 8 percent to $32.06. Forex FOREX-Yen stands firm despite G7, more RBA buying seen LONDON - The yen's rally was firmly intact on Monday despite the G7 singling out excessive volatility in the Japanese currency, while the dollar hit a two-year high versus the euro as investors shed exposure to risk. The yen was hovering below 13-year peaks against the dollar but hit its highest since May 2002 against the euro. Finance authorities of the Group of Seven leading countries issued an unscheduled statement saying it was concerned about recent excessive volatility in the yen and would continue to monitor markets closely, and cooperate as appropriate , raising the spectre of coordinated currency intervention. The yen has surged sharply as investors unloaded carry trades, which use the low-yielding yen to buy everything from higher-yielding currencies to stocks and commodities. Such trades have collapsed in the past few weeks as market players have been forced to sell many assets to raise cash. "Banks are cutting back on lending, that has consequences for emerging markets and asset prices generally. I can't see anything on the immediate horizon to break the current cycle," said Derek Halpenny, European head of FX research at BTM-UFJ in London. "That's the real problem for the authorities," he added. The yen has struck a 13-year peak against the dollar, a six-year peak against the euro and many other milestones in its roughly 20 percent surge on a trade-weighted basis this month. Japanese finance minister Shoichi Nakagawa said on Monday that he was watching currencies with "great interest". But some analysts said that while the possibility of concerted currency intervention was closer, it may still take time for authorities to act. "It (G7 statement) was hardly a warning shot, it was more like saying we are aware of recent volatility ... we're not there yet for intervention," said Geoffrey Yu, currency strategist at UBS in London. While not ruling out intervention by Japanese authorities if the dollar sinks to 80-85 yen sharply, "the likelihood is that everything will be done through the G7 framework, that's what the U.S. Treasury wants," he added. At 1200 GMT, the dollar was down 1.1 percent against the yen from late U.S. trade last week to 93.21 yen, having risen near to 94.50 yen after the G7 warning. On Friday the U.S. currency slid to a 13-year low of 90.90, according to Reuters data. The euro was down 2.3 percent at 116.20 ye n, after hitting a near 6-1/2 year low of 113.64 yen. Against the dollar, the euro dropped more than 2 percent to a near 2-1/2 year low of $1.2335 . The dollar has also soared against most other currencies, reaching a six-year high against the pound, as investors have unwound positions in many markets and boosted cash holdings in the greenback for investor redemptions. Meanwhile, the Reserve Bank of Australia continued to intervene unilaterally in the currency market, buying Aussie dollar for U.S. dollar in Europe on Monday, traders said. The RBA confirmed it had intervened in foreign exchange markets on Friday and in Asian trade earlier in the global session to stabilise the flagging Australian currency. The Australian dollar shed 2.9 percent to $0.6052, back near a six-year low. Against the yen, the Aussie fell 3.9 percent to 56.43 yen after sinking to 55.11 yen on Friday -- the lowest since it was allowed to trade freely. Reaction was muted to data showing German corporate sentiment fell more than expected in October to its lowest level since May 2003. The Munich-based Ifo economic research institute said on Monday that its business climate index fell to 90.2 from 92.9 in September. Europe share Europe shares fall sharply on deep recession fears LONDON - European shares fell more than 4 percent on Monday as global recession fears hit banks and energy shares, with Volkswagen a rare exception as Porsche disclosed its increased stake in the carmaker. By 1133 GMT the FTSEurofirst 300 index of top European shares was down 4.3 percent at 794.28 points, adding to Friday's decline of 4.9 percent, although it was off a session low of 784.29. "It is all following from the panic seen in the Far East. The whole thing has gone well beyond what is deemed as sensible. There is probably a lot of distressed selling, hedge funds or mutual funds having to meet redemptions," said Mike Lenhoff, strategist at Brewin Dolphin. "The market seems to be discounting a severe recession and is focusing on the prospect of a downturn which is longer and deeper than expected," added Lenhoff. Banks took the most points off the European index. HSBC , BNP Paribas, Societe Generale and Deutsche Bank were down between 8.9 and 15.7 percent. "Financials are down a lot. I don't think there will be much let up until we are basically well into the recession and investors feel there is going to be an end to it ," added Lenhoff. ; Energy shares were also lower. Crude fell by 3 percent as an emergency production cut by OPEC was shrugged off by traders anxious about the onset of a deep recession. BG Group, BP, Royal Dutch Shell and Total were down between 6.6-10 percent. Pharmaceutical stocks were also in the doldrums as European drugmaker Merck trimmed its full-year operating margin target. Roche, Sanofi-Aventis and AstraZeneca were down between 1.7-4.9 percent. Volkswagen jumped 86.6 percent after sports carmaker Porsche said on Sunday it had raised its VW stake to 42.6 percent of votes and controlled a further 31.5 percent via cash-settled options. Analysts said the news would intensify a short squeeze in VW shares. British bank HBOS also bucked the downtrend, up 2.5 percent. British Prime Minister Gordon Brown said in the Financial Times over the weekend the proposed merger between LloydsTSB and HBOS was the right step to save the bank as no other bidders had come forward. National Bank of Greece gained 8 percent. Greece's big banks, which have agreed to a 28 billion euro government rescue plan, said the scheme will enable them to get state funding if and when needed and be on a par with European peers. Underlining worries on the macroeconomic front, the German Ifo index which measures indications about German business sentiment fell to its lowest level since May 2003 on expectations the export sector will take a big hit from weakened foreign demand. "The Ifo business expectations were consistent with the view that prospects are not good and that a recession is taking shape," added Lenhoff. At 1400 GMT U.S. new home sales data will give the latest snapshot of the state of the U.S. housing market. Across Europe, the FTSE 100 index was down 3.8 percent, Germany's DAX slipped 3.2 percent and France's CAC 40 index was 5.3 percent lower. Asia at a Glance Asian Market Summary Japan's Nikkei average slid 6.4 percent on Monday to its lowest close in 26 years, as the yen rose to batter exporters such as Toyota Motor Corp and banks tumbled on concerns they would need to beef up capital. In its fourth straight negative day, the Nikkei shed 486.18 points to close at 7,162.90, its lowest close since October 1982 -- when Ronald Reagan was the U.S. President and Sony Corp released the CD player. At one point it fell as far as 7,141.27. The benchmark has lost 36.4 percent so far this month and 53 percent this year. The broader Topix was down 7.4 percent at 746.46. Shares of Mitsubishi UFJ Financial Group slid after sources said it may need to raise up to $10.8 billion in capital to offset hefty losses on its stock portfolio. Other banks were also looking at securing more capital, newspapers reported. Asian shares also fell, hurt by the view that central bank policy moves, including a record rate cut in South Korea, were not enough to allay a global recession. The MSCI index of stocks outside Japan was down 5.8 percent. "It's hard to see where the market will stop. If you consider valuations or any other sort of measure, the current levels are abnormal," said Takashi Ushio, head of investment strategy at Marusan Securities. Trade was active, with some 3.1 billion shares changing hands on the Tokyo Exchange's first section compared with last week's daily average of 2.1 billion. Declining shares outpaced advancing ones by more than 12 to one. Among blue-chip exporters, Toyota fell 8.1 percent to 2,940 yen, its lowest close since mid-2003 and Honda slid 8.9 percent to 1,812 yen. Digital camera and copier maker Canon Inc dropped 10.9 percent to 2,375 yen. After the close, it reported a 26 percent fall in quarterly operating profit and cut its annual outlook to predict its first profit decline in 9 years, hit by sluggish demand for copiers and digital cameras and a stronger yen. Among banks, Mitsubishi UFJ fell 14.6 percent to 583 yen, while Mizuho lost 14.8 percent to 230,000 yen and Sumitomo Mitsui shed 11.5 percent to 385,000 yen. Prime Minister Taro Aso said the government would expand a scheme that allows banks access to public funds and also strengthen regulations on the short-selling of shares. Other steps mentioned include using a state body to buy shares from banks, and extending tax relief on income from stocks and dividends. The measures underscore the difficulties now facing lenders in the world's No.2 economy, which at first appeared to have avoided the credit crisis, allowing them to invest in overseas rivals. Mizuho Financial Group, Japan's second-largest bank, and third-ranked Sumitomo Mitsui Financial Group are both looking to raise as much as 500 billion yen ($5.4 billion), newspapers said. Hong Kong shares plunged 12.7 percent in their biggest single-day drop since 1997 on Monday, led by blue-chip heavyweight HSBC, as fears of a global recession hammered Asian financial markets. The benchmark Hang Seng Index .HSI closed down 1,602.54 points at 11,015.84, its lowest level since mid-2004 and taking its losses so far this year to 60 percent. The index lost as much as 15 percent earlier, its largest one-day decline since 1987. Commodities Oil below $64, down on economic gloom Oil trimmed losses after sinking to a new 17-month low below $62 a barrel on Monday, driven down by investor pessimism about the deteriorating global economic climate and its likely impact on demand for fuel. U.S. light crude for December was 47 cents lower at $63.68 a barrel by 1409 GMT, after touching a 17-month low of $61.30 a barrel earlier in the session. London Brent crude was 73 cents lower at $61.32. Gloom about the world economy has had a greater impact than OPEC's deal on Friday to chop output by 1.5 million barrels per day to try to boost the oil market. "What OPEC did is constructive, but right now that is beside the point," said Mike Wittner of Societe Generale. Oil traders were watching for signs the Organization of the Petroleum Exporting Countries would implement its cuts. Asian oil refiners said on Monday they had yet to receive notice of any curbs on their Gulf crude oil shipments, but most were expecting a 5 percent cut. Iran's OPEC Governor Mohammad Ali Khatibi has said the group will reduce production further if the cut agreed in Vienna on Friday does not stabilise the market. Oil prices have fallen by nearly 60 percent since they hit a record high above $147 a barrel in July. Demand has fallen in the United States, the world's top energy consumer, and in other industrial countries as the credit crisis infects the wider economy and begins to spread to emerging markets. In China, for example, apparent oil demand rose by just over 2 percent in September, the slowest growth in 10 months. Investors around the world are trying to find shelter, contributing to heavy losses on Asian and European stock markets, as well as other commodities such as gold and copper. The volume of open contracts in energy, metals, grains and soft commodities on major U.S. commodity futures markets fell to its lowest since May 2006 in the week to Oct. 21, as the risk of recession has prompted some investors to pull out. Labels: ADVFN NewsDesk |
posted by Matbank at 4:23 PM
