Automakers May Need $100 B, Europe Rate Cuts

123jump.com Staff
04 Dec, 2008
New York City

U.S. stocks closed lower after weak same store retail sales. U.S. auto industry sought $34 billion in emergency funding and may need $75 billion more. The Bank of England cut its key lending rate to 2% and the ECB cut its rate by 0.75% to 2.5%. Sweden lowered its rate too. Stocks in Japan fell.

4:30PM New York, 10:30PM Frankfurt, 7:30AM Sydney[R]– U.S. stocks closed lower after weak same store retail sales. U.S. auto industry sought $34 billion in emergency funding. Bank of England cut its key lending rate to 2% and ECB cut its rate to 2.5%. Stocks in Japan fell.[/R]

Global Markets

Initial claims of U.S. unemployment fell at the end of last week but number of insured unemployed persons rose above 4 million. November same store sales fell sharply, despite initial surge in the holiday period. AT&T Inc plans to eliminate 12,000 jobs, nearly 4% of its staff.

U.S. stocks closed lower after same store retail sales fell and automakers are likely to need more than $100 billion in bailout funds. Three automakers GM, Ford and Chrysler in a testimony to the U.S. Congress said that if funds of $34 billion are not released by the end of the year the companies may not survive. Skeptical lawmakers asked for more guarantees of loan payback that most bank executives were not asked when they received more than $125 billion.

Crude oil fell below $45 a barrel on the worries that the weak economy will lower demand and forecast that the futures price may fall as low as $25 a barrel.

Tokyo stocks fell 1% on the worries that automakers in Japan will suffer if GM and Chrysler are forced to seek bankruptcy protection. Separately, Japanese companies’ profits dropped 22.4% in the three months to September. Yen dropped against dollar but remains at the highest level for the year.

The Bank of England lowered its key lending rate by 1% to 2% and cited that the economic downturn has gathered pace. The sharper than expected rate cut raised questions about the health of the economy. The central bank expects inflation to decline as food and energy prices fall. Home prices fell.

The ECB lowered its rate by 0.75%, the largest rate cut in its 10-year history to 2.5% and central bank in Sweden lowered its rate by 1.75% to 2%. The central banks in Europe are likely to lower rates as low as zero according to most private economists.

Stocks in Hong Kong fell but in Shanghai rose on trading volume below average level last year. Earlier stock dropped as much as 2% on the higher mortgage rates. Realty stocks fell sharply but banks rose.

Stocks in Mumbai trading sharply after the hopes that Reserve Bank of India will lower rates significantly to sustain economic expansion. Key benchmark index closed above 9,000. Realty, financials and metals stocks gained. Wholesale inflation fell to 8.4% stoking rate cut expectations.

Australia Bureau of Statistics reported that balance of goods and services was a surplus of A$2.9 billion in October from a revised surplus of A$1.25 billion in the previous month. Separately ABS reported that total dwelling units approved dropped 5.4% to 10,730 units in October from a year ago.

North American Markets

Dow Jones Industrial Average lost 215.45 or 2.51% to a close of 8,376.24, S&P 500 Index decreased 25.52 or 2.9% to 845.22, and Nasdaq Composite Index declined 46.82 or 3.14% to close at 1,445.56. In Toronto, TSX Composite Index dropped 239.14 or 2.9% to 8,057.82.

Of the stocks in Dow Jones Industrial Average 5 increased and 25 declined.

General Motors led decliners in the Dow with a fall of 16.1% followed by decreases in Alcoa Inc of 13.2%, in Intel Corp of 6.5%, in Merck & Company of 5.5% and Caterpillar Inc of 5.4%.

JP Morgan Chase led gainers in the Dow with a rise of 2.7% followed by increase in McDonalds Corp of 2.2%, in Home Depot Inc of 2.1% and in Wal-Mart Stores of 1.4%.

Of the stocks in S&P 500 index, 87 increased, 411 decreased and 2 were unchanged. Of the index stocks, 260 fell more than 3%, 32 closed above 3% and 5 surged more than 10% and 26 dropped more than 10%.

Range Resources led decliners in the S&P 500 index with a fall of 17.6% followed by losses in Peabody Energy of 17%, in General Motors of 16%, in Chesapeake Energy of 16%, in Southwestern Energy of 15.4% and in Cognizant Technology of 15.3%.

Office Depot led gainers in the S&P 500 index with a rise of 14.8% followed by increases in CIT Group Inc of 11%, in Tiffany & Company of 11%, in Nordstrom Inc of 10% and in Lennar Corp of 9.96%.

South American Markets Indexes

Argentina led gainers in the region with a rise of 2.8% followed by increases in Colombia of 0.6% and in Venezuela of 0.3%.

Mexico led decliners in the region with a loss of 1.2% followed by losses in Peru of 0.9%, in Brazil of 0.5% and in Chile of 0.07%.

Europe Markets Review

In London FTSE 100 Index closed lower 6.35 or 0.15% to 4,163.61, in Paris CAC 40 Index decreased 5.49 or 0.17% to close at 3,161.16 and in Frankfurt DAX index lower 3.01 or 0.07% to close at 4,564.23. In Zurich trading SMI increased 44.91 or 0.80% to close at 5,649.14.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 79.86 or 1.00% to 7,924.24, Hang Seng index in Hong Kong decreased 78.88 or 0.58% closed to 13,509.78 CSI 300 index in China higher 30.26 or 1.55% closed to 1,982.93. ASX 200 index in Australia decreased 1.40 or 0.04% to close 3,532.40. The KL Composite index in Malaysia lower 0.67 or 0.08% closed to 846.86.

The Kospi Index in South Korea decreased 16.13 or 1.58% to close at 1,006.54. SET index in Thailand closed lower 0.05 or 0.01% to 392.87 and JSE Index in Indonesia increased 12.80 or 1.07% to 1,205.32. The Sensex index in India increased 482.32 or 5.51% closed to 9,229.75.

Commodities, Metals, and Currencies

Crude oil decreased $3.07 to close at $43.72 a barrel for a front month contract, natural gas decreased 33 cents to $6.02 per mBtu and gasoline futures decreased 7.21 cents to close at 96.94 cents per gallon.

Wheat futures closed down 33.75 cents in Chicago trading and closed at $4.86 a bushel. Sugar decreased 0.36 cent to 10.86 cents a pound. Soybean future closed down 19 cent to $8.11 a bushel.

Gold decreased $3.70 in New York trading to close at $766.80 per ounce, silver closed up 9.5 cents to $9.49 per ounce and copper for the front month delivery decreased 10.50 cent to $1.4495 per pound.

Dollar edged lower against euro to $1.2778 and rose against yen to 92.23.

Yields on 10-year U.S. bonds dropped to 2.55% and with 30-year maturities decreased to 3.06%.