Global Markets Fall on Weak U.S. Banks

123jump.com Staff
21 Jun, 2008
New York City

Investors around the world sold stocks on the worries that the U.S. banking crisis may worsen before improving. Stocks of banks linked to the U.S. declined around the globe from Japan to Switzerland. Rising inflation hobbled stocks in Asia and market indexes in India, Malaysia, and Vietnam fell. Pakistan stocks plunged 10%. Indexes in India plunged 3.5%, in Brazil lost 3%, in Germany and France declined 2% and in UK, Mexico and Canada dropped 1.5%. Wachovia Bank drifted to a 12-year low.

2:35AM New York, 8:35AM Frankfurt, 4:35PM Sydney[R]– Investors cannot shake-off that falling home loan values will inevitably require more capital replenishment at banks. In the U.S. Nasdaq, S&P 500 lost more than 2% and in the global markets the Sensex index in India plunged 3.5%. European markets fell more than 1.5%. For the week Japan and Shanghai traded more than 3% lower.[/R]

Global Markets Update

U.S. stocks fell sharply led by a sharp loss in financial stocks. Rating agency Moody’s removed bond insurance companies MBIA and Ambac Financial Group from its top rating. Mortgage lenders Fannie Mae and Freddie Mac declined and leading banks traded lower. Wachovia Bank fell to a 12-year low.

Banks led the decliners after Wachovia Bank drifted to as low as 12-year low on the mounting worries that banks will have to eliminate dividend and raise more capital. SanDisk fell after Citigroup analyst said that the company may miss the earnings for the current quarter on slower sales. Regional banks rose after Huntington Bancshares reaffirmed its loan loss estimate.

European indexes drifted lower on persistent worries in the credit markets and rising inflation in the region. Germany reported a sharp rise in producer price index in May. The index increased at a rate of 6% from a year ago. Separately, Deutsche Boerse reported earnings per share increase of 61% in the first quarter but trading volume so far in the quarter has declined 33% from a year ago.

Latest wholesales inflation index in India surged to a 13-year high to 11.11%. The sharp rise in inflation was fueled by the rising costs of fuel, food and materials. Higher inflation numbers has sparked fears of tighter monetary policy by the central bank, stocks fell sharply. Last week, the Reserve Bank of India made a surprise interest rate rise last week.

UK stocks fell after yet another day of weak financial stocks. Sumitomo Bank is reported to agree to inject 100 billion yen in Barclays Bank. The bank has denied that it needs to raise capital to strengthen its capital base and has sufficient capital to cover the losses in its risky loans. Crude oil surged 3% as Israel conducted military exercises in preparation of possible strikes to Iranian nuclear installation.

Stocks in Japan declined after weakness in financial stocks kept broader averages lower. China hiked its fuel prices by as much as 18% inflation in India surged to 13-year high. In Tokyo trading Nikkei 225 declined 1.33% or 188.09 to 13,942.08, falling 0.2% for the week, and the broader Topix Index fell 1.4% to 1,356.74.

Stocks in Hong Kong fell but in Shanghai rose as the decision by the government to raise electricity and oil prices affected mainland airlines. Commodity stocks and power companies were active after China imposed a price freeze on thermal coal prices. In Shanghai trading, CSI 300 Index advanced 2.8% to 2,849.67. In Hong Kong trading Hang Seng Index edged down 0.23% to 22,745.60, rising 0.7% for the week.

Australian stocks fell as global financial stocks declined. The weakness in the U.S. trading and persistent worries related to the health of the U.S. banks kept Australian banks in check. ASX 200 index fell 1.5% to 5,288.30. Xstrata abandoned its offer for Indophil after a bid led by its chief executive offered 28% more. Victoria Supreme Court gave its approval for the merger between Zinifex and Oxiana. The newly merged company will be renamed Oz Minerals and will be the third largest mining company in Australia after BHP and Rio Tinto.

North American Markets indexes

Dow Jones Industrial Average fell 220.40 or 1.83% to a close of 11,842.69, S&P 500 closed down 24.90 or 1.85% to 1,317.93, and Nasdaq Composite Index decreased 55.97 or 2.27% to close at 2,406.09. In Toronto TSX Composite closed down 209.48 or 1.42% to 14,580.67.

Of the 30 stocks in Dow Jones Industrial Average 1 gained and 29 declined.
General Motors led the decliners in the Dow Jones Industrial Average with a loss of 6.8% followed by declines in Alcoa Inc of 4.6%, in Citigroup of 4.3% and in Bank of America of 3.7%.

The lone gainer in the Dow Jones index was Coca-Cola Company with a rise of 0.56%.

Of the stocks in S&P 500 index, 44 increased, 456 declined, and none were unchanged. Of the index stocks 6 increased more than 3% and 119 declined more than 3%.

Huntington Bancshare Incorporated led the gainers in the S&P 500 index with a rise of 29.8% followed by gains in Western Union with a rise of 8.3%, in Sovereign Bancorp of 5.6%, in SunTrust Banks, Inc. of 5.5% and in Fifth Third Bancorp of 3.7%.

MBIA Inc led the decliners in the S&P 500 index with a loss of 13.3%, in H&R Block Inc of 10.3%, in SanDisk Corp of 9.7%, Ford Motor Company of 8% and in Freddie Mac of 7.7%.

European Markets indexes

The European market indexes edged lower in the morning trading but accelerated their losses in the day on the weakness in New York trading.

The CAC 40 retreated 2.21% to 4,494.02. In Germany the DAX 30-index fell 157.73 points or 2.35% to 6,563.44. Shares in Switzerland fell as the Swiss Market index dropped 108.41 points or 1.51% to 7,050.53. The FTSE 100 fell 91.40 points or 1.60% to 5,617.00.

Among the CAC 40 shares 1 was up and 39 were down. In Germany among the DAX 30 stocks 2 gained and 28 stocks fell.

The price of Brent Crude Oil climbed to $135.60 a barrel an increase of $3.60 or 2.73%.

Gainers and losers

Credit Agricole was the only gainer in the CAC 40 index stocks with a rise of 0.98% to 13.31 euros.

Alcatel-Lucent led the decliners in the CAC 40 index with a loss of 5.41% to 4.01 euros followed by losses in Schneider Electric of 4.52% to 73.50 euros, in Saint Gobain of 4.44% to 40.02 euros, in STMicroelectronics of 4.33% to 6.91 euros and in Michelin of 4.17% to 46.56 euros.

Among the DAX 30 index shares, ThyssenKrupp led the two gainers with a rise of 1.85% to 41.93 euros followed by Merck KGaA which climbed 0.78% to 88.69 euros.

Commerzbank led the decliners in the DAX 30 index with a fall of 7.86% to 19.12 euros followed by losses in Deutsche Borse of 5.36% to 78.06 euros, in MAN AG of 4.47% to 78.14 euros, in Siemens AG of 3.52% to 72.45 euros and in RWE AG of 3.50% to 78.21 euros.


South American Markets Indexes

Chile led advancers in the Latin American markets with a rise of 1.02% followed by rises in Mexico of 0.78%, in Argentina of 0.74% and in Venezuela of 0.05%.

Brazil led the decliners in the region with a loss of 2.97% followed by losses in Chile of 1.2%, in Mexico of 1.05% and in Venezuela of 0.45%.

Asian markets

In Tokyo Nikkei 225 Index closed lower 188.09 or 1.33% to 13,942.08, in Hong Kong Hang Seng index decreased 52.01 or 0.23% closed to 22,745.60. In Australia ASX 200 index lower 78.30 or 1.46% to close 5,288.30. In Malaysia KL Composite index increased 10.28 or 0.86% closed to 1,206.67.

In South Korea Kospi Index decreased 9.72 or 0.56% to close at 1,731.00, in Thailand SET index closed higher 26.44 or 3.56% to 768.90 and Indonesia JSE Index edged decreased 1.29 or 0.05% to 2,371.78. Sensex index in India decreased 516.70 or 3.42% to 14,571.29.

Commodities, Metals, and Currencies

Crude oil increased $2.76 to close at $135.36 a barrel for a front month contract, natural gas increased 13 cents to $12.99 per mBtu, and gasoline futures increased 8.66 cents to close at 343.92 cents per gallon.

Gold decreased $0.50 in New York trading to close at $903.70 per ounce, silver closed down 7.3 cents to $17.40 per ounce, and copper for front month delivery increased 5.25 cent to $3.88 per pound.

Wheat futures decreased 14.50 cent in Chicago trading and closed at $8.84 per bushel. Sugar decreased 37 cent to $13.08 per pound. Soybean future closed down 12.50 cents to $15.09 a bushel.

Dollar edged lower and traded near record low against euro to $1.5606 and fell against yen to 107.33.

Yields on U.S. bonds decreased to 4.17% with 10 years of maturities and decreased to 4.73% with 30-year of maturities.