AIG Loss Sparks Credit Fears; Indexes Fall

123jump.com Staff
07 Aug, 2008
New York City

U.S. stock benchmarks fell on large loss at AIG and other financial companies, weaker than expected earnings from consumer related stocks and mixed same store U.S. retail sales. Global financial companies exceeded $500 billion cumulative losses. Same store sales in July fell but sales at discounters rose. Barclays rose after it reported 35% drop in profit. In Japan, Toyota and Kubota reported profit declines. Shipping lines in China fell on the fourth weekly decline in freight rate index.

4:30PM New York, 10:30PM Frankfurt, 6:30AM Sydney[R]– U.S. stocks fell after a barrage of negative earnings from financials and consumer related companies. AIG reported a huge loss. Barclays in UK reported profit declined of 35% but better than expected earnings and Chuo Mitsui profit fell 52%.[/R]

Global Markets Update

Stocks traded sharply lower after a loss at AIG, weak retail sales outlook and Toyota Motor and Allianz earnings drop. AIG, the largest insurer reported wider than expected loss and may be forced to raise capital as its portfolio losses mount. Earlier, Allianz SE, the largest insurer in Europe reported lower earnings on losses at its banking unit Dresdner Bank. Wal-Mart Stores fell after it offered a cautious outlook for August sales.

U.S. stocks fell on further weakness in financial companies and a drop in earnings from Toyota, Martin Marietta Materials, Cardinal Health, Atlas Air Worldwide, Fortress Investments Group. Retailers reported mixed same store sales with Target sales declining and Wal-Mart issuing a conservative outlook for August.

The Bank of England left its key rate unchanged at 5% and ECB left its key rate at 4.25%. UK is facing slowing housing market and manufacturing and service sectors and retail sales are falling as well. However, food and energy prices are rising. The economies in Europe and UK are slowing down but inflation pressures are expected to rise. The comments of the ECB chief were interpreted as further hikes in the rates are less likely and may be lowered by the end of the year.

Stocks in Japan fell as worries related to banking sector earnings rose. Losses at financial institutions in Japan increased above 1 trillion yen and are likely to climb higher. Chuo Mitsui Trust Holding first quarter profit fell 52%. Machinery order in June rose. Kubota first quarter revenue fell 2.5% and earnings declined 16.5%. JAL net loss in the quarter shrank to 3.4 billion yen.

Stocks Hong Kong edged higher but in Shanghai fell a fraction. Financial stocks were mixed after a sharp loss at AIG but better than expected earnings at Standard & Chartered. Airlines, commodities and shipping lines fell. Shipping lines fell after Baltic Dry Index fell for the fourth week in a row. China Cosco, CSCL and CSD dropped nearly 6%.

North American Markets indexes

Dow Jones Industrial Average decreased 224.64 or 1.93% to a close of 11,431.43, S&P 500 closed down 23.12 or 1.79% to 1,266.07, and Nasdaq Composite Index decreased 22.64 or 0.95% to close at 2,355.73. In Toronto TSX Composite closed down 68.34 or 0.51% to 13,385.17.

Of the 30 stocks in Dow Jones Industrial Average 3 stocks gained, 27 declined and none was unchanged.

Intel led gainers in the Dow Jones Industrial Average with a rise of 3.8% followed by increases in Microsoft Corp of 1.4% and in Hewlett Packard of 0.80%.

AIG led the decliners in the Dow Jones Industrial Average with a loss of 18.1% followed by losses in Wal-Mart Stores of 6.3%, in Citigroup of 6.2%, in Bank of America of 5.8% and in General Motors of 4.9%.

Of the stocks in S&P 500 index, 82 increased, 417 declined and 1 was unchanged. Of the index stocks, 10 rose more than 3% and 118 fell more than 3%.

Fidelity National led the gainers in the S&P 500 index with a rise of 18.6% followed by gains in Tesoro Corp of 11.98%, in Freeport-McMoran of 10.98%, in American Capital of 9.79%, in Valero Energy of 7.25% and in Polo Ralph Lauren of 7.09%.

AIG led decliners in the S&P 500 index with a loss of 18.1% followed by losses in King Pharmaceuticals of 17.47%, in Fannie Mae of 14.3%, in Lehman Brothers of 13.6%, in Verisign Inc of 12.72%, in MGIC Investment Corp of 12.6% and in Abercrombie Fitch of 10.6%.

South American Markets Indexes

Argentina led decliners in the Latin American markets with a fall of 2.97% followed by decreases in Mexico of 1.3%, in Brazil of 0.91%, in Colombia of 0.75%, in Venezuela and Peru of 0.58% and in Chile of 0.19%.

None of the major markets in the region closed higher.

Europe Markets Review

In London FTSE 100 Index closed lower 8.60 or 0.16% to 5,477.50, in Paris CAC 40 Index increased 9.10 or 0.20% to close at 4,457.43 and in Frankfurt DAX index lower 17.90 or 0.27% to close at 6,543.49. In Zurich trading SMI decreased 27.27 or 0.38% to close at 7,182.07.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 129.90 or 0.98% to 13,124.99, Hang Seng index in Hong Kong increased 154.45 or 0.70% closed to 22,104.20. ASX 200 index in Australia increased 14.20 or 0.29% to close 4,983.30. The KL Composite index in Malaysia decreased 4.03 or 0.36% closed to 1,129.56.

The Kospi Index in South Korea decreased 14.71 or 0.93% to close at 1,564.00, SET index in Thailand closed higher 29.00 or 4.29% to 705.35 and JSE Index in Indonesia increased 11.81 or 0.54% to 2,199.01. The Sensex index in India increased 43.71 or 0.29% to 15,117.25.

Commodities, Metals, and Currencies

Crude oil increased $1.38 to close at $119.96 a barrel for a front month contract, natural gas closed down 20 cents to $8.57 per mBtu and gasoline futures increased 4.80 cents to close at 299.730 cents per gallon.

Gold decreased $2.20 in New York trading to close at $880.80 per ounce, silver closed down 29 cents to $16.21 per ounce and copper for the front month delivery increased 0.15 cent to $3.425 per pound.

Wheat futures closed up 56.25 cents in Chicago trading and closed at $8.47 a bushel. Sugar decreased 0.40 cent to 13.79 cents a pound. Soybean future closed up 17.00 cents to $12.39 a bushel.

Dollar edged higher and traded near record low against euro to $1.53145 and edged higher against yen to 109.446.

Yields on U.S. bonds decreased to 3.92% with 10 years of maturities and increased to 4.55% with 30-year of maturities.