Markets in Europe Plunge 3%

Elena
16 Aug, 2007
New York City

European stock markets plunged Thursday, making the biggest one-day dip since the Iraq war. Stocks were dragged down by growing credit-market woes along with a heavy sell off in the shares of metals producers and financial services firms. Shares of asset manager Invesco dropped 6.5%, while Asian-focused bank Standard Chartered moved down 7.6%. London led decliners, down 4.1%, falling below the 6,000 level. France tumbled 3.3%, while Germany declined 2.4%.

[R]1:00PM NY, 5:00 PM Frankfurt European markets finished about 3% lower, dragged by weak mining and financial stocks.[/R]

European stock markets plunged Thursday, making the biggest one-day dip since the Iraq war. Stocks were dragged down by growing credit-market woes along with a heavy sell off in the shares of metals producers and financial services firms. London led decliners, down 4.1%, falling below the 6,000 level. France tumbled 3.3%, while Germany declined 2.4%.

In Frankfurt Deutsche Boerse slipped 7.2%, due to the fact that many of its shares are held by funds which may have to sell them in order to raise cash to pay investors back. Hypo Real Estate fell 3.8% on fears it will not get investors'' approval for buying Depfa Bank Exporter issues posted a significant decline, with BMW falling 1.7% and Siemens losing 3.4%.

In Paris two of the country’s biggest banks paced losses, in accordance with financial weakness across Europe. BNP Paribas SA dropped 3.2% and Societe Generale SA lost 2.1%. Outside the sector, Saint-Gobain fell 2.4% after JPMorgan Chase & Co. downgraded the supplier of building materials.

In London, stocks were weighed down by declines in financial firms. Shares of asset manager Invesco dropped 6.5%, while Asian-focused bank Standard Chartered moved down 7.6%. Miners also posted heavy losses, contributing to the downward move. Rio Tinto tumbled 7%, Antofagasta dropped 11% and Xstrata slid 6.5%.


[R]11:30AM Market averages extended losses. Fed Reserve injected $17 billion into the banking system.[/R]

U.S. stocks extended losses, reflecting weaker-than-expected housing data which is adding to recent concerns about the outlook for the housing market. Continuing subprime mortgage woes and tightening lending standards also weighed. Countrywide Financial ((CFC)) fell 15% after it drew on an $11.5 billion line of credit to fund its operations. The Federal Reserve injected another $17 billion of liquidity into the banking system.

Technology stocks traded mostly lower, with computer makers all losing ground. Apple Inc. ((AAPL)) dropped 5.65, Dell Inc. ((DELL)) slipped 3.7%, and Hewlett-Packard Co. ((HPQ)) fell 2.4% before posting quarterly earnings after the market close. Tech giant Intel ((INTC)) rose 0.5% to stand out among the very few gainers. The chip maker gained after an upgrade by Credit Suisse from underperform to outperform.

In deal news, Fifth Third Bank ((FITB)) agreed to buy First Charter ((FCTR)) for $1.09 billion. Shares of Fifth Third dropped 3.8%, while First Charter rose 7%.

In late morning trading, the Dow tumbled 139.01, or 1.08%, to 12,722.46. The S&P shed 12.29, or 0.87%, at 1,394.41, and the Nasdaq composite index dropped 19.83, or 0.81%to 2,439.00. Bonds continued their rally as investors fled into safer securities. The yield on the benchmark 10-year Treasury note fell to 4.66% from 4.72% late Wednesday.


[R]Initial jobless claims rose 6,000.[/R]

Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended August 11th, showing that jobless claims unexpectedly increased compared to the previous week. The report showed that jobless claims rose to 322,000 from the previous week''s unrevised figure of 316,000. The increase came as a surprise to economists, who had expected jobless claims to edge down to about 315,000. The Labor Department also said that the less volatile four-week moving average rose to 312,500 from the previous week''s unrevised average of 307,750.

Additionally, the report showed that continuing claims in the week ended August 4 rose to 2.567 million from the preceding week''s revised level of 2.550 million. Recent employment data has painted a negative picture of the labor market, as last week''s jobless claims report showed that claims increased by more than economists had been expecting. Earlier this month, a report from the Labor Department showed that non-farm payroll employment increase by a smaller than expected 92,000 jobs in July. Economists had been expecting a more significant increase of about 135,000 jobs. The report also showed that the unemployment rate unexpectedly edged up to 4.6 percent in July from 4.5 percent in June. With the increase, the unemployment rate reached a six-month high, although it remains at relatively low levels.


[R]Housing starts hit a 10-year low.[/R]

The Department of Commerce released its report on housing starts and building permits in the month of July on Thursday, showing that both housing starts and building permits fell much more than economists had been expecting. The report showed that housing starts fell 6.1 percent to an annual rate of 1.381 million units in July from the revised June estimate of 1.470 million units. With the decrease, housing starts are down 20.9 percent year-over-year. Economists had been expecting a somewhat more modest decrease to a 1.405 million unit rate compared to the 1.467 million unit rate originally reported for the previous month.

The bigger than expected drop in housing starts was partly due to a notable decline in start in the South, which fell 11.0 percent. Housing starts fell 3.7 percent in the West and 1.3 percent in the Northeast, while starts in the Midwest edged up 2.6 percent. The Commerce Department also said that building permits fell 2.8 percent to an annual rate of 1.373 million units in July from the revised June rate of 1.413 million units. The decrease contributed to a 22.6 percent drop compared to July of 2006. The drop in building permits exceeded the estimates of economists, who had expected building permits to fall to a 1.400 million unit rate compared to the 1.406 million originally reported for the previous week.
[R]09:45AM Wall Street opened lower on weakness among home builders and Countrywide Financial.[/R]

Wall Street posted a notable decline at opening Thursday, pressured by data showing a deepening slump in the housing market and concerns about economic growth amid worsening credit markets conditions. News that the U.S. largest mortgage lender Countrywide Financial ((CFC)) was drawing on an $11.5 billion line of credit to fund its operations sent its stock down 13%. At the same time, the Federal Reserve injected another $17 billion of liquidity into the banking system.

Home builders posted significant declines after a government report showed housing starts hit a 10-year low in July, while building permit activity dropped its lowest in nearly 11 years. Shares of luxury home builder Hovnanian Enterprises ((HOV)) dropped 10%, while home builder Lennar ((LEN)) was down 5.8%.

Retailers received some support from J.C. Penney ((JCP)) which gained 1%after posting better-than-forecast quarterly results. Wal-Mart, the world''s largest retailer, added 0.3%, while the world''s largest home improvement chain Home Depot ((HD)) lost over 1%.

Crude oil futures tumbled 2.1% to $71.76 a barrel on the Nymex. The dollar fell 1.3% at 114.67 yen. Gold lost 1% to $672.80 an ounce. In the first hour of trading, the Dow tumbled 130.96, or 1.02%, to 12,730.51. The S&P''s 500 index was down 14.08, or 1%, at 1,392.62, and the Nasdaq dropped 21.53, or 0.88%, to 2,437.30. The yield on the benchmark 10-year Treasury note fell to 4.66% from 4.72% late Wednesday.


[R]09:00AM U.S. stock futures plunged, dragged by weak housing data and Countrywide Financial.[/R]

U.S. stock futures plunged on Thursday following a heavy sell-off the previous session as well as economic data showing new home construction at a 10-year low. Housing starts fell 6.1% in July to a seasonally adjusted annual rate of 1.381 million, lower than the expected fall to 1.40 million.

Countrywide''s decision to tap its entire credit line and a hint from a Fed Reserve official that there won''t be a rate cut soon further weighed on sentiment. The Fed said it would step in with a 14-day repurchase agreement worth $5 billion.

Countrywide Financial ((CFC)) said it would draw on an $11.5 billion credit facility to fund its operations as difficulty raising money in the credit markets threatened its business. The lender also accelerated its plans to transfer its mortgage production operations into Countrywide Bank. Company''s shares dropped 11% in pre-open trading.

On the earnings news front, J.C. Penney ((JCP)) posted Q2 earnings above forecast and lifted its full-year profit outlook. Hewlett-Packard ((HPQ)) is scheduled to release financial results after the closing bell. Among other pre-market highlights, Amgen ((AMGN)) lost 1.5% on its plans to cut up to 14% of its workforce in order to reduce costs.

The dollar touched a 13-month low vs. the yen. S&P 500 futures fell 16.4 points at 1,397.90 and Nasdaq 100 futures dropping 17.75 points at 1,860.75. Dow industrial futures fell 121 points. Treasury yields fell to 4.667%.

[R]8:30PM Mumbai, 11:00AM New York – Sensex in India fell sharply in sympathy with global declines. Investors remain cautious as U.S. subprime lending worries mount.[/R]

Sensex in Mumbai trading plunged 642.70 or 4.3% to 14,358.21, Nifty index fell 4.4% to 4,178.60. Asian markets declined across the region led by 7% loss in Korea and Malaysia. Second largest point decline in Sensex reflected worries that the U.S. subprime mortgage market crisis may deepen further and slow down the economy.

Daily turnover on the Bombay Stock Exchange increased to 5,291 crore rupees from 4,232 crore rupees and on NSE the turnover increased to 11,791 crore rupees from 7,832 crore rupees. Rupee recovered to 4-month high to 41.17 to a dollar.

Finance Ministry reported today that the indirect tax receipts collection increased 11.6% to 66,417 crore rupees in the period between April 2007 and July 2007 on higher than expected collection in customs receipts.

Recently listed real estate management company DLF closed 2.7% to 587 rupees on the news that it plans to spend nearly 20% of its IPO proceeds on land purchase in Delhi. The company is expected to complete its purchase of 38 acre land complex of Swatantra Bharat Mills controlled by DCM Shriram. The land deal worth 1,600 crore rupees is the largest real estate deal in the country. DCM Shriram fell nearly 2% to close at 84.20 rupees.

In other real estate industry news Parsvnath Developers plunged 9% to 299.80 rupees after the board approved the non-convertible debenture of 300 crore rupees. Unitech declined 8% followed by 6% fall in Indiabulls Real Estate and Sobha Developers.
Banks fell in sympathy with the global markets decline led by State Bank of India drop of 6% to 1,521, drop of 5.2% in ICICI Bank to 832 rupees, and 4.6% loss in HDFC Bank to 1,094.

Steel companies led the decliners in the market. Tata Steel plunged 10% to 576 rupees on 26 lakh or 2.6 million share volume. Sterlite Industries fell 8% to 558 rupees, Hindalco fell 5.6% to 145 rupees, and JSW Steel fell 5% to 614 rupees.

Reliance Industries fell 5% to 1,732.90 rupees. The company is expected to gain from the duty of 22,000 rupees per ton on processed yarn from China.

Housing Development and Infrastructure declined 7.5% to 504 rupees. The news report suggested that the company has entered in partnership with Lehman Brothers to develop land occupied by the largest slum in Dharavi, Mumbai.

Bharti Airtel dropped 7% to 798 rupees and Reliance Communication declined 5.7% to 494.35 rupees.

[R]8:15AM New York, 8:30PM Hong Kong – Asian markets fell sharply as fears grip market sentiment.[/R]

Asian markets were battered across the region as investors withdraw from markets. South Korea led the region with a loss of 6.93% followed sharp declines of 6.6% in Malaysia, 6% in Philippines, 5.94% in Indonesia, 4.5% in Taiwan and India, and more than 3% in Singapore, Taiwan and Hong Kong. Japan lost 2%.

In Sydney trading ASX 200 Index fell 76.5 or 1.32% at close to 5,711.50 after plunging 5.2% during the session. The sell-off in the Asian markets trading intensified as the worries related to the U.S. mortgage bonds sparked fears in the markets. Of the 201 stocks in the index, 147 stocks declined, 46 closed higher, and 8 were unchanged.

The Reserve Bank of Australia pumped $3 billion in liquidity in addition to A$5 billion added to the system on August 10th. The added liquidity in the market is not helping to calm nervous investors. Ram, home builder and lender, said that it is having difficulty in funding its short term loans worth A$6.2 billion. Australian dollar declined to 80.4546 to one American dollar, a decline of 2.1% and the yield on the 10-year bond fell to 5.88765%.

National Australia Bank fell 1.1%, ANZ Banking Group declined 2%, and Westpac Banking fell 1.5%. Macquarie Bank lost 4%.
Sigma Pharmaceuticals led the index stocks with a loss of 12% followed by losses of 9.7% in Sino Gold, 9% in Murchison and Monadelphous, and 7% in Western Areas, Alco Finance, and Babcock & Brown. Alinta fell 6% on 35 million shares. Spotless Group led the gainers in the index with a rise of 5% followed by increases of 4.7% in Tower Australia, 4.2% in Ansell, and 3.84% in Zinflex. Paladin Resources jumped 2% on 10 million shares. News Corp jumped 2.2% on 6.7 million shares. Brambles increased 0.6% on 17 million shares. Of the most active stocks Telstra declined 1.8% on 69 million shares trading volume followed by BHP Billiton with a loss of 0.6% on 37 million shares. Macquarie Bank fell 4% on 9 million shares. James Hardie fell 5.5%.

In Hong Kong trading Hang Seng fell 3.3% or 703.33 to close at 20,672.39 with the index losing 12% from the peak. The index has lost nearly 6% in the last three trading sessions. Turnover on the main board was recorded at HK$104.9 billion and on GEM market was at HK$750.8 million.

Banks led the decliners. China Construction Bank fell 5.3% followed by 3% fall in Bank of China. Only two stocks in the index gained. Hang Lung Properties and Li & Fung Properties.

Li & Fung jumped 5.1% to HK$26.18 after reporting first half profit increase of 38% to HK$1.05 billion. The sales increased 35% to HK$37.77 billion ($4.8 billion) and core operating income increased 41% to HK$1.2 billion. The company increased dividend to 21 cents from 16 cents a year ago. The company guided that it is on target to achieve its three-year plan goal to reach U.S. $10 billion in sales and will release the next three-year plan in March 2008.

Hang Lung Properties increased 0.2% to HK$24.20 after reporting earnings gain of 25% to HK$2.05 billion. For the year ended in June 30, 2007, revenue jumped to HK4.4 billion from HK$3.6 billion and earnings increased to HK$6.3 billion on property value increases of HK$5.9 billion from HK$4.5 billion on property increase of HK$3.4 billion a year ago. Earnings per share increased to 159 HK cents from 119 HK cents.

China Mobile fell 4% after reporting first half earnings gain of 26% to 37.9 billion yuan on higher value added services and new subscribers added in the smaller towns. Total number of subscribers increased by 31.2 million to 332 million lifting the revenue to Rmb166.6 billion an increase of 21%. The earnings gained 26% from a year ago to Rmb37.9 billion. The revenue from value added services jumped 35% to Rmb41.9 billion. Total number of subscribers increased 31.146 million at average monthly net additions of over five million. Majority of these subscribers are pre-paid subscribers.


[R]08:00AM J.C. Penney posted Q2 profit increase and lifted full-year forecast.[/R]

J.C. Penney Co. ((JCP)) posted nearly 2% earnings increase in Q2 to exceed analyst expectations and lifted its profit outlook for the full year. The department store retailer earned $175 million, or 78 cents a share, from continuing operations, compared with the year-ago continuing operations profit of $178 million, or 75 cents a share.

Quarterly sales rose 3.6% from a year ago to $4.39 billion. Analysts had expected a profit of 77 cents a share on sales of $4.42 billion. Looking ahead, J.C. Penney raised its full-year earnings forecast by a penny to $5.50 a share, above the average analyst estimates for $5.48. The stock slipped 3.3% in pre-market trading.


[R]6:00AM New York, 7:00PM Tokyo- Asian stocks suffered heavy losses on heightened investor concerns over the U.S. credit market turmoil. Nikkei 225 dropped 2% and in the region South Korea plunged 7% leading the decliners.[/R

Asian shares were battered across the region as investors withdraw from markets. South Korea led the region with a loss of 6.93% followed sharp declines of 6.6% in Malaysia, 6% in Philippines, 5.94% in Indonesia, 4.5% in Taiwan and India, and more than 3% in Singapore, Taiwan and Hong Kong. Japan lost 2%.

In Tokyo trading Nikkei 225 lost 1.99% or 327.12 to 16,148.49 led by declines in industrial shares. Over 20 stocks in the index fell more than 4%. Out of the 225 shares in the index 196 fell, 25 gained and 4 traded unchanged.

The Bank of Japan yesterday said it would withdraw 2 trillion-yen from the market, as anxiety over a potential credit squeeze paled into insignificance. BOJ had earlier sucked another 1.6 trillion-yen from the market, funds pumped during the global credit crunch since last Friday. Overnight rates had fallen to as low as 0.2%, suggesting liquidity positions had improved, bank officials said. The yen firmed to 116 against the dollar with fresh prospects it may touch 115 per dollar.

Mistumi Electric led the decliners in the Nikkei index with a loss of 7.3% followed by losses of 5.4% in Toshiba, 5.3% in Kirin Holdings, 5% in Konica Minolta, Sojitz Corporation, Nikon, and Nippon Light Metals. Credit Saison and Shisei Bank fell nearly 4%. Secom Company led the gainers in the index with a rise of 4.6% followed by gains of 4% in Sumitomo Trust, 3.5% in Toho Company, and 2.8% in Mitsubishi UFJ.

Of the 225 stocks in the index 166 declined more than 1% and 11 gained more than 1%. Shipping companies, steel, and oil companies fell more than 2% in the sell-off. Japan Steelworks fell 3.6%, Kobe Steel dropped 4%, Nippon Oil lost 3%, and Mitsui OSK declined 1.8%.

In Seoul trading Kospi Composite Index plunged 7% to 1,691.98 after the Wednesday holiday break catching up with other Asian losses. Of the 733 shares in the index only 18 gained. Over 508 million shares worth 8.4 trillion won were traded. Government said the option to pump additional liquidity to steady financial markets was open.

Bank and oil related shares dropped sharply. Dong Wha Pharm lost 15% and Daehou Fire& Mor dropped 14.90%. S&T Motors crashed 14.79%. while Rocket Electric Co dragged 14.76%. Meritz Fire skid 13.60% with Sung Chang Enter falling 12.62%. Several hundred stocks fell by more than 10%. Bank stocks were also worried about the contagion effect of the U.S. subprime mortgage market. Myung Sung rallied 14.95% while Hyundai Paint Industries surged 14.79 %. Acts Corpn rose 14.78% while Ilshin Stone pushed 5.99%. Ilkyunh rose 1.99% with Sung Shin Cement surging 1.78%. FNC Kolon up 0.83% and Sung Bo Chemical added 0.64%.