Inflation, Retail Earnings, Lehman Worries

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

Global stocks dropped for the second day in a row as financials declined. A day after Fannie and Freddie loss of more than 25%, Lehman Brothers lost more than 13%. An analyst estimate put write down of $4 billion in the latest quarter result that is expected next week. AIG fell as well on the a need to raise capital and estimate of escalating losses. Peru closed higer but most other markets in Latin America fell. European markets closed 2% or more lower.

4:30PM New York, 10:30PM Frankfurt, 6:30AM Sydney[R]– Financial stocks dropped for the second day in a row affected the trading sentiment around the world. Estimate of $4 billion write down at Lehman Brothers dragged market averages in the U.S., Europe and trimmed the rally in South American markets.[/R]

Global Markets Update

U.S. stocks dropped as investors worry about the rising loss estimates at Lehman Brothers. The fourth largest broker in the U.S. is scheduled to report earnings next week. The sharply higher estimates of losses at Lehman drove another nail in the faltering financial stocks. Retailers fell after weak earnings from Saks, Home Depot and Target. Saks reported largest quarterly loss in two years. American Airlines fell more than 12%. Mexico and Brazil trade higher but global markets sell-off.

Stocks in European 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.

Mumbai stocks edged lower on a continued weakness in the global credit markets as more worries mount on the health of the two largest government agencies. U.S. unwillingness to stabilize two largest mortgage lenders continues to send shock waves around the world. The proposed strike at the State Bank of India and other state run banks is not likely to affect trading on stock exchanges according to the Bombay Stock Exchange.

Stock indexes in Hong Kong and Shanghai fell to new lows after China hiked export tariffs on metallurgical coals. The Beijing move may improve supply of coals for the domestic steel industry and restrict the sale of coal to the international markets. Hang Seng dropped 2%, and reached to a new low in the last twelve months of trading and CSI 300 in Shanghai fell 1.5%, another low in the last nineteen months of trading. Property stocks fell on weak expectations of Cheung Kong earnings.

Stocks in Japan plunged on resurgent credit worries after media speculation that if the U.S Treasury bails out troubled mortgage lenders Freddie Mac and Fannie Mae, shareholders may be wiped out. The Bank of Japan left its key rate unchanged at 0.5%. Domestic related stocks gained as investors sought a haven from shares that are exposed to deteriorating global conditions. JGC led advancers in the Nikkei index with a rise of 3.3% followed by gains in Yahoo Japan and Citizen Holdings.

North American Markets indexes

Dow Jones Industrial Average decreased 130.84 or 1.14% to a close of 11,348.55, S&P 500 Index closed down 11.90 or 0.93% to 1,266.20, and Nasdaq Composite Index decreased 32.63 or 1.35% to close at 2,384.36. In Toronto TSX Composite closed down 47.81 or 0.36% to 13,071.56.

Of the 30 stocks in Dow Jones Industrial Average 2 stocks gained, 27 declined and one was unchanged.

AIG led decliners in Dow Jones Industrial Average with a loss of 5.4% followed by losses in Bank of America of 4.03%, in General Motors of 3.67%, in General Motors 3.6%, in Home Depot of 3.41% and in American Express of 3.2%.

Chevron Corp led gainers in the Dow Jones Industrial Average with a rise of 1.98% followed by increase in Exxon Mobil of 1.9% and Alcoa Inc was the only stock that was unchanged.

Of the stocks in S&P 500 index, 94 increased, 402 declined and 4 were unchanged. Of the index stocks, 26 rose more than 3% and 98 fell more than 3%.

Massey Energy Company led the gainers in the S&P 500 index with a rise of 7.43% followed by gains in Peabody Energy of 7.41%, in Southwestern Energy of 6.11%, in Consol Energy of 5.97%, in EOG Resources of 5.46% and in Cabot Oil & Gas of 5.4%.

SLM Corp led decliners in the S&P 500 index with a loss of 16% followed by losses in Lehman Brothers of 13.31%, in MGIC Investment Corp of 12.10%, in AutoNation Inc of 7.7%, in Macy’s Inc of 6.90%, in Dillards Inc of 6.5% and in Darden Restaurant of 5.8%.

South American Markets Indexes

Peru led gainers in the Latin American markets with a rise of 1.54% followed by increases in Brazil of 0.76%. Chile led decliners in the region with a loss of 1.9% followed by declines in Argentina of 0.35%, in Mexico of 0.17% and in Venezuela of 0.12%.

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.

Commodities, Metals, and Currencies

Crude oil increased $1.55 to close at $114.42 a barrel for a front month contract, natural gas closed up 9 cents to $7.98 per mBtu and gasoline futures increased 4.86 cents to close at 286.38 cents per gallon.

Gold increased $11.10 in New York trading to close at $816.80 per ounce, silver closed up $0.05 cents to $13.26 per ounce and copper for the front month delivery increased 2.96 cent to $3.407 per pound.

Wheat futures closed down 14.50 cents in Chicago trading and closed at $8.70 a bushel. Sugar decreased 0.01 cent to 13.67 cents a pound. Soybean future closed down 13.00 cents to $12.76 a bushel.

Dollar edged lower and traded near record low against euro to $1.4784 and edged lower against yen to 109.75.

Yields on U.S. bonds increased to 3.83% with 10 years of maturities and increased to 4.46% with 30-year of maturities.