AIG Worries Spark a Broad Sell-off

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

Wide spread pessimism was evident in a broad decline in stocks and in the S&P 500 index 447 stocks declined. Existing home sales in July rose 3.1% from June but fell 13% from a year ago. The home sales rose but so did inventories of unsold homes and Median home prices fell 7% from a year ago. Freddie Mac led gainers in the S&P 500 index after it placed $2 billion in debt at significantly higher yield than similar maturities of the U.S. Treasuries.

4:30PM New York, 10:30PM Frankfurt, 6:30AM Sydney[R]– U.S. stocks fell sharply as worries of more losses at financial companies dominated trading sentiment. Crude oil hovered near $115 a barrel and gold fell.[/R]

Global Markets Update

U.S. stocks fell in the morning trading as investors face more asset write downs in financial sector. AIG may write down $2.4 billion in mortgage related assets according to a latest estimate. Existing homes sales rose 3.1% in July from June but fell 13% from a year ago and median home prices declined 7%. Crude oil edged higher and European markets edged higher as markets near closure. Asian markets closed up with Hong Kong surging 3.5% and Japan adding 1.7%.

Stocks in Mumbai recovered a fraction as markets in the region rallied. Rupee continued its slide against the dollar as importers increase the demand for dollar and crude oil imports hover above $8 billion a month. The 60% rise in fuel price has kept the trade deficit higher. Gold in rupee is expected to edge higher.

Stocks in Hong Kong surged 3.5% after investors raced to cover recent short sales. Profits from Yanzhou Coal and China Construction helped the sentiment in Hong Kong and in Shanghai. Market index in Shanghai edged up a fraction. China Construction profit soared 71% and net at Yanzhou Coal surged 160% on higher coal prices in export sales. Corporate income tax collection in China fell 4.2% in July.

Hong Kong billionaire Li Ka-shing controlled conglomerate Hutchison Whampoa Ltd revenues rose 25% to HK$176 billion and net income attributable to shareholders fell 63% to HK$10.7 billion. Earnings per share in the period fell 63% to HK$2.51 from HK$6.75 a year ago. The telecom company 3 Group’s loss shrank 72% to HK$3.2 billion from a loss of HK$11.3 billion in the period a year ago. Excluding the profits on property revaluation and disposal of investments, the profit surged 199%.

Kirin acquired Australia's second largest dairy farm operations known as Dairy Farmers after ten months it acquired National Foods from San Miguel of Philippines. The brewer agree to pay A$910 million for the dairy and had paid A$2.7 billion for National Foods. Australia, the third largest dairy exporter in the world is expected to increase its milk production less than 2% and exports more than 10% in the fiscal 2009.

North American Markets indexes

Dow Jones Industrial Average increased 241.81 or 2.08% to a close of 11,386.25, S&P 500 Index closed down 25.35 or 1.96% to 1,266.85, and Nasdaq Composite Index increased 49.12 or 2.03% to close at 2,365.59. In Toronto TSX Composite closed down 146.59 or 1.09% to 13,300.70.

Of the 30 stocks in Dow Jones Industrial Average not a single stock gained, 30 declined and none was unchanged.

AIG led decliners in Dow Jones Industrial Average with a loss of 5.5% followed by losses in Bank of America of 4.2%, in JP Morgan Chase 4%, in General Motors of 2.97%, Chevron Corp 2.9% and in Citigroup of 2.94%.

Of the stocks in S&P 500 index, 23 increased, 477 declined and none were unchanged. Of the index stocks, 4 rose more than 3% and 110 fell more than 3%.

Freddie Mac led the gainers in the S&P 500 index with a rise of 17% followed by gains in MBIA Inc of 6.18%, in Titanium Metals of 5.99%, in Fannie Mae of 3.80%, in Biogen Idec of 3.80% and in Advanced Micro Devices of 2.07%.

Dillard’s Inc led decliners in the S&P 500 index with a loss of 6.8% followed by losses in Coach Inc of 6.8%, in Huntington Banc of 6.79%, in Lehman Brothers of 6.66%, in Ryder Systems Inc of 6.38%, in CB Richard Ellis of 6.3% and in WaMu Inc of 6.01%.

South American Markets Indexes

Brazil led decliners in the Latin American markets with a fall of 2.32% followed by decreases in Mexico of 1.71%, in Argentina of 0.92% and in Colombia of 0.4%. Peru led advancers in the region with a rise of 1.24% followed by increases in Venezuela of 0.33%.

Europe Markets Review

In Paris CAC 40 Index decreased 44.58 or 1.01% to close at 4,355.87 and in Frankfurt DAX index lower 45.47 or 0.72% to close at 6,296.95. In Zurich trading SMI decreased 31.54 or 0.44% to close at 7,062.58. Market of London was closed today.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 212.62 or 1.68% to 12,878.66, , Hang Seng index in Hong Kong increased 712.73 or 3.50% closed to 21,104.79.ASX 200 index in Australia increased 83.50 or 1.69% to close 5,014.90. The KL Composite index in Malaysia decreased 6.87 or 0.63% closed to 1,078.73.

The Kospi Index in South Korea increased 5.20 or 0.35% to close at 1,502.11, SET index in Thailand closed lower 3.73 or 0.55% to 678.20 and JSE Index in Indonesia increased 6.73 or 0.32% to 2,127.22. The Sensex index in India increased 48.86 or 0.34% closed to 14,450.35.

Commodities, Metals, and Currencies

Crude oil increased $0.58 to close at $115.17 a barrel for a front month contract, natural gas closed down 1 cent to $7.84 per mBtu and gasoline futures decreased 1.94 cents to close at 288.80 cents per gallon.

Gold decreased $7.50 in New York trading to close at $826.00 per ounce, silver closed down $0.08 cents to $13.51 per ounce and copper for the front month delivery increased 2.15 cent to $3.48 per pound.

Wheat futures closed down 25.75 cents in Chicago trading and closed at $8.64 a bushel. Sugar decreased 0.15 cent to 13.99 cents a pound. Soybean future closed up 20.00 cents to $13.47 a bushel.

Dollar edged higher and traded near record low against euro to $1.4753 and edged higher against yen to 109.32.

Yields on U.S. bonds decreased to 3.78% with 10 years of maturities and decreased to 4.40% with 30-year of maturities.