Weak U.S. Indexes Inflict Larger Global Losses

123jump.com Staff
21 Nov, 2007
New York City

U.S. stocks fell sharply in the morning trading, a day after the talk of economic slow-down from the Fed. Oil inched to $100 a barrel and the yield of 10-year bonds fell below 4%. In the S&p 500 index, 92% stocks are trading lower. Dollar fell to a record low against euro as investors speculated that the Fed may lower rates in the coming months. Asian stocks fell sharply in the overnight trading. Ten largest markets in Europe fell. Peru plunged 6% after losing 15% in 3-days, Brazil declined 4%.

[R]11:00AM New York – Weakness in the U.S. stocks drag European and Latin markets.[/R]

Stocks in New York fell in the morning trading as oil approached $100 a barrel, gold jumped, dollar edged to record low against euro, and economic slow-down inflicted by the on-going housing market correction worried investors.

Dow Jones Industrial Average fell 164 to 12,846, Nasdaq declined 45 to 2,550, and S&P 500 lost 21 to 1,418.

Of the stocks in the S&P 500 index, 437 declined, 61 rose, and 2 were unchanged. Patterson Company led the decliners in the index with a fall of 22%, followed by losses in Countrywide of 10%, in CIT Group of 8%, in XL Capital and MBIA of 7%. E*Trade led the gainers in the index stocks with a rise of 9% followed by increases in EDS of 4%, in Abercrombie and Terex of 2.3%.

Ten year treasury yield fell below 4% for the first time since 2005 after the Fed lowered its expectations for the economic growth. The bond yields declined to 3.99% before it settled at 4.02% in the morning trading.

With the slow-down in the U.S. economy, weakness in the housing market, and record low value of dollar in the international markets, investors are speculating the Fed may be forced to lower interest rate again. Short term bonds of 2-year duration and shorter increased in prices again today.

Separately the spread, between the 3month Treasury bill yield and interest rate charged by banks to each other known as Libor rate, jumped to four-month high indicating that investors are expecting further losses in the credit markets. Libor rate, The London inter-bank rate increased 2 basis points to 5.02%.

Ten largest markets across the European region fell on the weakness in the U.S. market, worries related to sub-prime losses in the European and American banks, and strength of euro. Belgium led the decliners in the region with a loss of 2.7% followed by losses in France and Spain of 1.9%, in the Netherlands and Switzerland of 1.7%, and in the U.K. of 1.6%.

Goldman Sachs lowered its ratings on Societe Generale and Credit Suisse. Worries related to sub-prime lending exposure and structured financing played a key role in the downgrade decision. Societe Generale fell 6.5% and Credit Suisse declined 3.6%.

Asian markets closed sharply lower on the rising oil, falling dollar, and worries that the U.S. is slowly inching toward a recession.

Hong Kong led the decliners in the region with a loss of 4.2% followed by losses in India and Korea of 3.5%, in Singapore and Thailand of 2.7%, in Indonesia of 2.3%, in Taiwan of 2.3%, in Philippines of 0.9%, and in Australia of 0.6%.

Stocks in Korea fell for the fifth day in a row and weakness persisted in trading in Hong Kong and Shanghai.

Banks, realty, life insurance, and export companies fell sharply in Tokyo trading as dollar fell below 109 yen level.

[R]7:00AM New York, 8:00PM Tokyo - Record oil price, U.S. sub-prime losses and weakening yen leads Tokyo down 2.5%. October trade surplus soars 66.1% to 1.02 trillion yen.[/R]

Japan’s stock averages plummeted on resurgent fears on subprime losses and as the yen climbed to a two-year high against the dollar.

In Tokyo trading Nikkei 225 slid 2.46% or 373.86 to 14,837.66, while the broad Topix Index fell 30.55 to 1,438.72.

U.S. mortgage finance company, Freddie Mac posted a second quarter net loss of $2 billion on higher provisions of credit losses, adding that the housing slump would continue through year end. Separately new home construction in the U.S. in October fell and new permits for home building fell as well. The decline in housing market may take longer than anticipated earlier by the most analysts.

Financial stocks fell on the news. Mitsubishi UFJ Financial Group retreated 1.60%, Mizuho Financial Group declined 4.08% and Sumitomo Mitsui Financial Group dropped 0.87%.

In the first section of the Tokyo Stock Exchange 9.0 billion shares valued at 1.1 trillion yen were traded and 463 million shares worth 6.7 billion yen were traded in the second section.

Of the Nikkei 225 stocks 32 gained, 191 declined, and 2 were unchanged. Mitsubishi Paper Mills Limited led advancers with a rise of 4.81% on news that Oji Paper Company Limited would pay 1.8 billion yen for a 2.34 stake in company as part of a production alliance, followed by Chuo Mitsui Trust rising 7.77%.

Oil prices for January delivery rose 1.3% to $99.29 per barrel. Inpex Holdings edged up 3.60%. Mitsubishi UFJ also raised the rating of the stock to “outperform”.

Japan’s Ministry of Finance announced today in its preliminary October trade statistics. Exports soared to a record 13.9% on increased exports of automobiles and electronics to Asia and Europe that helped offset a 1.5% decline of shipments to the U.S. Analysts had forecasted a 12.2% rise in aggregate exports.

According to the statistics, exports to China jumped 19.2% from an increase of 16.4% in September to a record 1.17 trillion yen. Shipments to Asia rose by a seasonally adjusted 12.9%, while exports to Europe spiked 23.7% to a record 1.14 trillion yen.

However, shipments to the U.S. declined 1.5% from a 9.3% slump in September to 1.5 trillion yen. Overally, imports rose 7%, yielding a trade surplus of 66.1% to 1.02 trillion yen. Rising oil prices and a strengthening yen against the dollar are threatening export gains in November.

The yen firmed to 109.94 from 108.98 against the dollar as minutes from the U.S. Federal Reserve October meeting showed revision of 2008 economic growth forecast to 1.8% from an estimate of 2.5% and 2.7%. Exporters fell on the news. Canon dipped 1.82%, Sony Corporation declined 1.88% and Toyota Motor Corporation dropped 2.78%.

Of the Nikkei 225 index shares, Mitsubishi Paper Mills Limited led gainers with a rise of 4.81%, followed by rises of 4.22% in Nippon Sheet Glass, 3.60% in Inpex Holdings, 3.49% in Toho Company Limited and 2.78% in Shizuoka Bank.

Mitsubishi Paper Mills Limited gained after announcing Oji Paper Company would pay 1.8 billion yen for a 2.34% stake in the company.

Nippon Sheet Glass Company rose after rebounded from a loss in the first quarter to record an increase in net profit from 3.86% to 4.55% in the second quarter. Sales in the three months to September also gained 2.9% to 216.1 billion yen. First half net income also jumped to 51.5 billion yen from 20.3 billion yen, more than the 47 billion yen forecasted. Net income for the fiscal year is expected to firm to 53 billion yen and full year sales are expected to rise 25% to 850 billion yen.

Sompo Japan Insurance led the decliners in the Nikkei 225 index with a drop of 15.58%, followed by losses in Sumco Corporation of 12.04%, Toho Zinc Company Limited of 8.37%, in Taiheiyo Cement of 7.49%, and in Fuji Heavy Industries of 7.39%.

Sompo Japan Insurance slumped the most in a decade after announcing it might have to pay 30 billion yen in subprime related insurance claims. Insurance company Millea Holdings fell 3.36% as well.

Mitsui O.S.K. Lines fell 5.52% and Kawasaki Heavy Industries Limited plunged 0.57%.