European Markets Fall, Weak Banks

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

Stocks in London trading fell as in the region on estimates of large losses at Lehman Brothers and a sharp rise in inflation in Germany and in the U.S. European markets across the region fell 2% or more. A further indication of global economic slowdown lowered market averages. The Bank of Japan left its key rate at 0.5% and cited further weakening in the global economy. July producer price index in Germany rose at 2% from June and surged 8.9% from the month a year ago.

[R]1:00PM New York, 6:00PM London – Comments on Lehman Brothers dragged market indexes 2% lower in the European region.[/R]

Stocks in London trading fell as in the region on estimates of large losses at Lehman Brothers and a sharp rise in inflation in Germany and in the U.S. European markets across the region fell 2% or more.

A further indication of global economic slowdown lowered market averages in Europe and in Asia. The Bank of Japan left its key rate at 0.5% and cited further weakening in the global economy. July producer price index in Germany rose at 2% from June and surged 8.9% from the month a year ago. The index surged at the highest rate since it increased at 9.1% in 1981.

July Producer Price Index rose at 1.2% after rising at 1.8% in June, according to the Labor Department in Washington. Core index, that excludes the food and energy related items increased at 0.7% in July after rising at 0.2% rate in June.

U.S. housing starts dropped to the lowest level in 17 years to 965,000 at annual rate in July after logging a rate of 1.084 million in June.

Financial stocks declined after negative comments on Lehman Brothers and AIG. JP Morgan analysts estimated $4 billion write down for at the brokerage firm and Goldman Sachs analyst estimated that the insurance company may need to raise large amount of capital as it may face significantly higher credit losses.

Market Sentiment

In London trading FTSE 100 dropped 2.38% or 129.8 to 5,320.40.

Of the 102 FTSE 100 stocks 8 rose, 93 declined, and 1 was unchanged. Smith & Nephew led advancers in the index shares with a rise of 2.18% followed by Xstrata gaining 1.84%.

Lehman Brother Write down $4 billion

JP Morgan Chase said in a research note released yesterday that Lehman Brothers is most likely to write down $4 billion in the third quarter as conditions- measured by residential and commercial related indices- continue to deteriorate on the global financial markets

However the report says the lender is unlikely to sell the asset-management unit Neuberger Berman because “investors and ratings agencies will not welcome a divestiture that brings a steady cash flow, diversification and lower compensation ratio”.

U.K Rental Market Rises

The Royal Institution of Chartered Surveyors reported on its Web site today that the rental market boomed as housing sales dipped in July.

About 43% more Chartered Surveyors reported a rise in the second quarter than a fall in landlord instructions compared to 30% in the previous quarter.

New instructions to let houses and flats advanced to a record with 47% and 39% more Chartered Surveyors reporting a rise than a fall correspondingly.

In addition, 37% more surveyors reported a rise than a fall in tenant lettings, reflecting a 30% increase in the last quarter, while 43% more surveyors reported a rise than a fall in demand for houses compared to 34% Chartered Surveyors who reported a rise in demand for flats.

According to RICS, rents have continued to increase as house prices fall. Notably, the proportion of landlords opting to sell at the expiry of the tenant lease fell to a record 2.1, from 4.2%.

RICS spokesperson James Scott-Lee commented, “The lettings market is booming with many vendors opting to rent their property while sales in the housing market continue to dry up and many are willing to ''hold'' and await the return of capital appreciation. Becoming a landlord is now an increasingly profitable option with rising rents and yields offering good returns.”

Gainers & Losers

Smith & Nephew led advancers in the FTSE 100 index shares with a rise of 2.18% followed by rises in Xstrata Plc of 1.84%, in Wood Group of 1.12%, in Scottish & South of 0.97%, and Petrofac of 0.83%.

Wolseley led decliners in the FTSE 100 index shares with a fall of 8.62% followed by losses in HBOS of 7.35%, in Legal & General of 6.98%, in Prudential of 6.82%, and Hammerson of 6.61%.

Financial stocks declined. Standard Chartered lost 6.16%, Old Mutual shed 6.11%, Royal Bank of Scotland tumbled 5.91% and Barclays plummeted 5.40%.

Europe Markets Review

In London FTSE 100 Index closed lower 129.80 or 2.38% to 5,320.40, in Paris CAC 40 Index decreased 116.05 or 2.61% to close at 4,332.79 and in Frankfurt DAX index lower 150.45 or 2.34% to close at 6,282.43. In Zurich trading SMI decreased 116.22 or 1.61% to close at 7,115.18.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 300.40 or 2.28% to 12,865.05, Hang Seng index in Hong Kong decreased 446.30 or 2.13% closed to 20,484.37. ASX 200 index in Australia decreased 118.60 or 2.38% to close 4,866.40. The KL Composite index in Malaysia decreased 14.94 or 1.38% closed to 1,069.42.

The Kospi Index in South Korea decreased 26.30 or 1.68% to close at 1,541.41, SET index in Thailand closed lower 5.90 or 0.85% to 691.33 and JSE Index in Indonesia decreased 42.65 or 2.05% to 2,042.50. The Sensex index in India decreased 101.93 or 0.70% closed to 14,543.73.