Global Markets Fall on Rising Crude, Inflation

123jump.com Staff
20 May, 2008
New York City

Stocks in the U.S., Europe and Asia fell on inflation worries and rising crude oil prices. April wholesale inflation rise sparked fears of inflation in the U.S. and dragged the stocks lower. Home Depot, Saks, Target, Autozone fell on earnings. European markets declined as crude oil hovered near $130 a barrel, a new record. UK dropped nearly 3% on the worries that housing market fall may bring more losses to mortgage lenders and banks.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – U.S., European and Asian markets fell sharply as crude oil price edged higher. Inflation worries drag stocks around the world.[/R]

Global Markets Update

U.S. stocks turned lower after April wholesale inflation rose. The rise in inflation put investors on the defensive. Crude oil price surged above $129 a barrel after comments from oil complex investor T Boone Pickens. His comments suggested that the crude oil price may reach $150 a barrel. European markets closed sharply lower led by a sharp fall in the UK and Sweden. Retailers including Home Depot, Saks, Target, Autozone and Staples reported weak earnings. Home Depot reported sharply lower earnings on 6.5% fall in same store sales, however, dry bulk goods ocean carrier DryShips revenue in the quarter jumped 62%. Smaller carrier, Excel Maritime yesterday reported 94% rise in revenue and 213% rise in earnings in the first quarter.

Crude oil in London traded at record high sparking fears of rising inflation in the region. Crude oil prices have risen nearly 30% in the last three months when valued in the U.S. dollar and nearly 18% in euro. The prediction of higher crude oil prices put investors on the defensive. Commodities related stocks fell after a broker encouraged investors to trade out of the sector for now. BHP Billiton, Rio Tinto and Antofagasta fell on profit taking.

European markets closed lower across the region led by a sharp decline in the UK and Swedish indexes. Crude oil prices reached another record above $129 a barrel, sparking fears of sustained inflation in the region. DAX 30 index in Germany and CAC 40 index in France dropped 1.5% and 1.7% respectively. German confidence fell on worries related to strong euro and rising inflation dominated the news. Auto sales in European markets rose nearly 10% in April.

Stocks in Japan declined on the worries that the current U.S. credit market malaise in the U.S. could drag earnings of Japanese companies. Nikkei 225 index fell 0.8% to 14,160. According to a report issued by the Ministry of Industry and Trade, demand for services in March rose 0.3% after a revised demand increase of 1.6% in February. The Bank of Japan left its key interest rate at 0.5% and said that corporate profits are leveling and economic growth is slowing on rising commodities prices.

European Markets indexes

In London FTSE 100 Index closed lower 184.90 or 2.90% to 6,191.60, in Paris CAC 40 Index decreased 87.22 or 1.70% to close at 5,054.88 and in Frankfurt DAX index lower 107.44 or 1.49% to close at 7,118.50. In Zurich trading SMI decreased 152.35 or 1.96% to close at 7,626.58.

Of the DAX 30 members, all stocks declined led by 7% fall in Infineon Technology to €6.65. Deutsche Boerse declined 4% or €4.15 to €100.40 euros, Deutsche Lufthansa AG lost 3.6% or €0.64 to €16.55. Thyssenkrupp AG fell 3.5% or €1.61 to €44.90 and Man AG was lower at 3.2% or €3.22 to €101.03.

Adidas AG fell 1.3% to €2.70. The company reported that its first quarter revenue climbed 3% to €2.621 billion from €2.538 billion in 2007.

The group said net income increased 32% to €169 million from €128 million last year driven by strong operating margin improvement and lower net financial expenses. Basic earnings per share rose 33% from a year earlier to €0.84 in 2008 up from €0.63 in 2007

Of the CAC 40 shares, Gaz De France led the gainers with a rise of 1.1% to €43.32. EDF gained 0.6% to €69.95 and Unibail Rodamco was higher at 1.4% to €169.

STMicroelectronics declined 4.9% to €8.17 euros, Air France lost 4.9% to €19.33 euros, EADS fell 4.3% or €4.85 euros, Alcatel declined 3.9% or €16.18 euros and ArcelorMittal declined 3.7% to €63.55.

North American Markets indexes

Dow Jones Industrial Average fell 199.48 or 1.53% to a close of 12,828.68, S&P 500 closed down 13.23 or 0.93% to 1,413.40, and Nasdaq Composite Index decreased 23.83 or 0.95% to close at 2,492.26. In Toronto TSX Composite closed up 63.14 or 0.42% to 15,047.34 in Friday’s trading.

Of the 30 stocks in Dow Jones Industrial Average, 2 closed higher, 28 closed lower, and none were unchanged.

Home Depot led the decliners in the Dow Jones Index with a fall of 5.6% followed by losses in JP Morgan of 4.5%, in General Motors of 4.5%, in Citigroup of 3.6% and in Verizon Communications of 3.4%. Chevron gained 0.9% and Hewlett Packard added 0.2%.

Of the stocks in S&P 500 index, 87 stocks increased, 413 declined, and none were unchanged. Of the stocks in the index, 57 stocks fell more than 3% and 4 gained more than 3%.

Micron Technology drop of 6.6% led the decliners in the S&P 500 index followed by losses in KB Home of 5.7%, in Home Depot of 5.6%, in Broadcom Corp of 5.5% and in Discover Financial of 5.52%. Humana led the gainers in the S&P 500 index with a rise of 6.3% followed by increases in SLM Corp of 4.45%, Range Resources rose 3.9% and Compuware added 3.3%.

South American Markets Indexes

Argentina and Chile led the gainers in the Latin American markets with a rise of 1.10% followed by increases in Brazil of 0.11%. Colombia led the decliners in the region with a loss of 0.9% followed by declines in Mexico of 0.85%, in Venezuela of 0.46% and in Peru of 0.22%.

Asian markets

In Tokyo Nikkei 225 Index closed lower 109.52 or 0.77% to 14,160.09, in Hong Kong Hang Seng index decreased 572.77 or 2.23% closed to 25,169.46. In Australia ASX 200 index lower 41.30 or 0.69% to close 5,908.10. In Malaysia KL Composite index decreased 13.24 or 1.02% closed to 1,287.43.

In South Korea Kospi Index decreased 12.22 or 0.65% to close at 1,873.15, in Thailand SET index closed higher 3.49 or 0.40% to 873.82. Sensex index in India decreased 204.76 or 1.17% to 17,230.18. Market of Indonesia was closed today.

Commodities, Metals, and Currencies

Crude oil increased $2.02 to close at $129.07 a barrel for a front month contract, natural gas increased 40 cents to $11.36 per mBtu, and gasoline futures increased 5.84 cents to close at 329.50 cents per gallon.

Gold increased $5.90 in New York trading to close at $905.80 per ounce, silver closed up 70 cents to $17.72 per ounce, and copper for front month delivery increased 3 cents to $3.776 per pound.

Wheat futures decreased 7.00 cent in Chicago trading and closed at $7.84 per bushel. Sugar decreased 17 cent to $10.69 per pound. Soybean future closed down 1.50 cents to $13.31 a bushel.

Dollar edged lower and traded near record low against euro to $1.5661 and fell against yen to 103.58.

Yields on U.S. bonds decreased to 3.77% with 10 years of maturities and decreased to 4.53% with 30-year of maturities.