World Markets Selloff, Wal-Mart Falls 5% on Bribery Probe

Bikram Pandey
23 Apr, 2012
New York City

U.S. indexes traded lower and fell more than 1% and the Nasdaq declined as much as 1.7%. Crude oil and gold dropped and the dollar gained. Total of $15 billion of deals were announced in the U.S. and Europe. Hong Kong led the sharp declines in Asian markets.

[R]4:10 PM New York – U.S. indexes traded lower and fell more than 1% and the Nasdaq declined as much as 1.7%. Crude oil and gold dropped and the dollar gained. Total of $15 billion of deals were announced in the U.S. and Europe. Hong Kong led the sharp declines in Asian markets.[/R]

U.S. indexes fell after global economic worries and rising political and economic uncertainties in the euro zone.

Dutch government is likely to face a new election after partners failed to agree on budget and private sector activities in the euro zone declined surprising most economists.

Weak manufacturing activity from China and the euro area dampened market sentiment despite the release of $15 billion worth of deals in the U.S. and Europe.

On the merger Monday, Pfizer agreed to divest its infant nutrition business to Nestlé for $11.85 billion in a deal that most analysts billed as rich valuation. With the purchase Nestle will increase its reach in emerging markets after the company agreed to pay nearly 20 times pre-tax 2012 earnings.

Thomson Reuters agreed to sell its healthcare unit for $1.25 billion. AstraZeneca plc agreed to acquire Ardea Biosciences, Inc., the California-based biotechnology company for $1.26 billion. The acquisition includes Ardea's lead product, lesinurad, for gout.

Wal-Mart Stores Inc. fell nearly 5% after the company faces years of regulatory inquiry that may cost it as much as $5 billion and slowdown its international expansion.

The largest retailer failed to stem a bribery scandal in Mexico that facilitated its rapid growth in the nation and may have violated anti-bribery laws in Mexico and in the U.S., according to a report published by New York Times on Sunday.

The company confirmed it is investigating into possible violations of the U.S. Foreign Corrupt Practices Act at its Mexican unit where the local unit is alleged to have paid hundreds of bribes totaling $24 million to win permit approvals and expedite store roll out.

Mexican lawmakers demanded federal and local inquiries after New York Times reported that the company shunned several internal inquiries in the matter that may have protected its head of the local unit, Eduardo Castro-Wright, once the rising star in the company.

On the earnings front, BE Aerospace first quarter net surged 37% and reaffirmed 2012 outlook. ConocoPhillips net fell on weak production. Hasbro swung to first quarter net loss on weak sales in North America. Kellogg lowered full year outlook. Xerox quarterly net fell to $269 million.

European markets dropped after the latest reading on the private sector activity showed larger than expected weakness in April. French business sentiment index declined. Spanish economy shrank 0.4%, the first quarterly decline after seven quarters of modest growth.

The G-20 nations pledged $430 billion to the IMF. Nestlé agreed to acquire Pfizer infant nutrition business for $11.85 billion. Vodafone agreed to buy Cable & Wireless for $1.7 billion. AstraZeneca and Ardea Biosciences agreed on a merger deal of $1.26 billion.

Stocks in Tokyo decreased and the broader indexes fell ahead of comments from the Bank of Japan on Friday. Investors were cautious and speculation mounted that the central bank may expand its $800 billion asset purchase program. Rakuten, the largest e-commerce website operator shut down its site in China.

Australian stocks edged lower on the first day of a short trading week after producer prices declined in the March quarter. Investors are expecting consumer price index to show an increase of at least 0.6% tomorrow.

Commodities, Bonds and Currencies

The yields on 10-year U.S. bond decreased to 1.93% and 30-year U.S. bond edged lower to 3.08%.

The U.S. dollar gained a fraction to $1.315 to one euro and inched lower against the Japanese yen to 81.18 yen.

Immediate delivery futures of Texas crude oil decreased 86 cents to $103.02 a barrel and Brent crude futures fell 15 cents to $118.61.

In New York trading, futures of natural gas increased 0.09 cents to $2.01 per mbtu and traded near a decade low and gasoline price added 4.08 cents to 318.31 cents a gallon.

In metals trading, copper fell 5.8 cents to $3.64 per pound, gold added $3.90 to $1,638.90 per ounce and silver decreased 89 cents to $30.80.