U.S. Drags Global Markets Lower, Anheuser Talks

123jump.com Staff
11 Jul, 2008
New York City

Investors increasingly fear that credit markets are likely to weaken further and government sponsored mortgage agencies may have to be bailed out by the U.S. government at the expense of shareholders. Fannie and Freddie dropped to 2-decade lows. The ongoing turmoil in the U.S. financial system is increasingly viewed by global investors as the primary driver for the global economic slowdown. In addition rising military threat from Israel is driving the crude oil to record high.

4:30PM New York, 10:30PM Frankfurt, 6:30AM Sydney[R]– Investors increasingly fear that credit markets are likely to weaken further and government sponsored mortgage agencies may have to be bailed out by the U.S. government at the expense of shareholders. Fannie and Freddie dropped to 2-decade lows.[/R]

Global Markets

U.S. stocks fell sharply on a sharp rise in crude oil prices and continued weakness in financial stocks. Rising tensions in the Mideast lifted crude oil futures to a record high. Fannie Mae Plunged 30% and Freddie Mac dropped as much as 40% on the speculation that the government bailout plan may not include shareholders. Lehman Brothers fell 17% to 9-year in sympathy. Citigroup sold its German consumer finance business to Credit Mutuel Group of France for 4.9 billion euros or $7.6 billion.

Anheuser Busch and InBev NV have entered in merger talks and InBev has lifted its offer price to $70 per share. Retailers, consumer driven stocks and transportation stocks fell sharply.

European markets declined between 2% and 3% in the region on the worries that economic slowdown will hurt corporate profits. Banks, financials and retailers declined for the second day in a row this week.

Stocks in London declined as investors worried that U.S. financial system crisis is likely to spread further and may require government bailout of two largest mortgage lending agencies. Fannie Mae and Freddie Mac dropped to 2-decade low and dragged with them stocks of banks in the U.S. and UK. The stocks of lenders including HSBC, Barclays, HBOS and Royal Bank of Scotland declined more than 20% in the last nine months of trading.

Stocks in Japan continue to decline as investors worry that the growing crisis in the U.S. financial system may dampen exports. The ongoing credit market crisis in the U.S. may require bailout of the two mortgage agencies Fannie Mae and Freddie Mac. The two mortgage lenders collectively hold $5.2 trillion in debt and the U.S. government debt totals $9.3 trillion. Exporters, banks, realtors and retailers closed lower. J Front Retailing fell 5% after it forecasted annual income rise of 19%.

Asian markets edged higher but India closed sharply lower on a weak industrial production data, rising inflation and ongoing worries related to the exports to the U.S.

North American Markets indexes

Dow Jones Industrial Average decreased 128.48 or 1.14% to a close of 11,100.54, S&P 500 closed down 13.90 or 1.11% to 1,239.49, and Nasdaq Composite Index decreased 18.77 or 0.83% to close at 2,239.08. In Toronto TSX Composite closed down 34.78 or 0.25% to 13,709.10.

Of the 30 stocks in Dow Jones Industrial Average 9 stocks gained and 21 declined.

Chevron led the decliners in the Dow Jones Index with a fall of 4.2% followed by decreases in Boeing of 4.1%, in JP Morgan Chase of 3.91%, in AIG of 3.7%, in Bank of America of 3.1% and in United Technologies of 2.4%.

General Motors led the gainers in the Dow Jones Index with a rise of 2.4% followed by increases in Caterpillar Inc of 2.1%, in Coca-Cola of 0.5%, in American Express of 0.4% and in Hewlett Packard of 0.34%.

Of the stocks in S&P 500 index, 104 increased, 394 declined and 2 were unchanged. Of the index stocks 10 stocks rose more than 3% and 77 fell more than 3%.

Fannie Mae led the decliners in the S&P 500 index with a loss of 23% followed by declines in MGIC Investment Corp of 19.9%, in Ashland Inc of 13.3%, in Wachovia Corp of 12.1%, in Regions Financial of 9.9%, in Rockwell Collins of 8.3% and in Legg Mason Inc of 7.8%

Hercules Inc led the gainers in the S&P 500 index with a rise of 25.8% followed by gains in Anheuser Busch of 8.6%, in Massey Energy Company of 6.1%, in Ford Motor Company of 6.1%, in Fifth Third Bancorp of 5.4% and in Consol Energy of 4.7%.

South American Markets Indexes

Argentina led the decliners in the Latin American markets with a loss of 1.7% followed by losses in Chile of 1.5%, in Colombia of 1.43%, in Mexico of 0.94%, in Peru of 0.76%, in Venezuela of 0.65% and in Brazil of 0.17%.

None of the major markets in the region closed higher.

European Markets Indexes

In London FTSE 100 Index closed lower 145.20 or 2.69% to 5,261.60, in Paris CAC 40 Index decreased 130.92 or 3.09% to close at 4,100.64 and in Frankfurt DAX index lower 151.70 or 2.41% to close at 6,153.30. In Zurich trading SMI decreased 164.18 or 2.41% to close at 6,638.89.

Asian markets

The Nikkei 225 Index in Tokyo closed lower 27.52 or 0.21% to 13,039.69, Hang Seng index in Hong Kong increased 362.77 or 1.66% closed to 22,184.55. ASX 200 index in Australia increased 42.50 or 0.86% to close 4,979.90. The KL Composite index in Malaysia increased 14.90 or 1.31% closed to 1,150.39.

The Kospi Index in South Korea increased 30.08 or 1.96% to close at 1,567.51, SET index in Thailand closed higher 8.43 or 1.17% to 730.29 and JSE Index in Indonesia increased 0.62 or 0.03% to 2,276.85. The Sensex index in India decreased 456.39 or 3.28% to 13,469.85.

Commodities, Metals, and Currencies

Crude oil increased $3.39 to close at $145.04 a barrel for a front month contract, natural gas closed down to 46 cents to $11.84 per mBtu and gasoline futures increased 5.23 cents to close at 356.32 cents per gallon.

Gold increased $18.60 in New York trading to close at $960.60 per ounce, silver closed up 50 cents to $18.82 per ounce, and copper for front month delivery increased 2.15 cent to $3.74 per pound.

Wheat futures increased 12.750 cent in Chicago trading and closed at $8.30 per bushel. Sugar increased 38 cent to $13.99 per pound. Soybean future closed up 9.00 cents to $15.96 a bushel.

Dollar edged lower and traded near record low against euro to $1.5934 and fell against yen to 106.25.

Yields on U.S. bonds increased to 3.95% with 10 years of maturities and increased to 4.53% with 30-year of maturities.