U.S. Stocks Fall on Debt Rating Worries

123jump.com Staff
08 Dec, 2009
New York City

U.S. stocks and gold declined as the dollar edged higher. European and the Middle East markets fell. Banks in Europe and UK traded lower. Dubai and Saudi Markets dropped for the sixth day as investor fear rising losses at Dubai World and acrimonious discussion with bondholders.

[R]10:55 AM New York – U.S. stocks and gold declined as the dollar edged higher. European and the Middle East markets fell. Banks in Europe and UK traded lower. Dubai and Saudi Markets dropped for the sixth day as investor fear rising losses at Dubai World and acrimonious discussion with bondholders.[/R]

Investors resolve around the world may soon be tested as rating agencies sound louder alarm regarding deteriorating finances in the UK and U.S. Japan also proposed an additional fiscal budget of $81 billion, sharply higher than $45 billion that was estimated by economists.

The rating agency Moody’s Investors Services highlighted the growing budget deficits in the US and UK may force it to review its top ratings of sovereign debts of these nations.

Fed Chairman Bernanke yesterday stressed that the Fed has a plan to unwind the large stimulus and it will “not” be inflationary. Investors are increasingly worried about the inflationary pressures in the years to come.

The rising sovereign debt, growing fiscal deficits in the U.S., UK, Europe and several emerging markets has worried investors. In trading, European index at close declined between 1% and 2% and U.S. indexes opened lower.

Crude oil and gold fell more than 1%.

Greek stocks and bonds decline as rating agencies clamor for a possible downgrade and investors fear deteriorating government financials. Though investors demand higher yield on bonds, Greece is not alone when it comes lack of fiscal discipline in Europe.

The sukuk bonds issued by Dubai World came under additional pressure today after Nakheel PJSC struggles with the declining revenues and rising losses. The sukuk declined to as low as 49.38 cents.

Nakheel first half revenues decline d78% to 1.97 billion dirham and lost 13.4 billion dirham. The document reviewed by 123jump.com showed the loss in the first half the news was first reported by Bloomberg News.

Dubai Financial Markets General Index dropped 6.1% and Tadawul All Share Index in Saudi Arabia declined 2.3%. Qatar DSM 20 index declined 2%.

Greek stocks and bonds declined as investors increasingly take a dim view of the government finances. Rating agencies have been sounding alarms that the nation’s debt may be downgraded. Banks fell sharply for the second day.

Fitch Ratings cut the government debt rating one step lower to BBB+ ad S&P placed the debt on watch.

Prime Minister George Papandreou government hopes to cut the fiscal deficit to 9.1% from the 12.7% shortfall in the current year.

Athens Composite Share Index declined as much as 5.6% but recovered near the close to a loss of 4.9% to 2,205.47. The 2-year Greek government bond yield increased 45 basis points to 2.52% and on 10-year bond jumped 25 basis points to 5.39%.

National Bank of Greece SA dropped 6.8% and EFG Eurobank Ergasias declined 5.8%.

UK Output Decline

Overall production output in October fell by 8.4% from a year ago. Output in mining & quarrying declined by 11.8%, energy supply industry fell 8.6%. Annually manufacturing output fell 7.8% in October from same month of year ago.

Earnings Review

Casey’s General Stores, Inc., the general store said second quarter revenues fell 17% to $1.15 billion from $1.39 billion a year ago. Net income in the quarter rose 23% to $33.6 million or 66 cents per diluted share compared to net income of $27.3 million or 54 cents per share a year ago.

The Pep Boys-Manny, Moe & Jack, an automotive service and retail chain said third quarter revenues rose 2% to $472.6 million from $464.2 million a year ago. Net income in the quarter was $2.1 million or 4 cents per diluted share compared to net loss of $7.3 million or 14 cents per share a year ago.

Demag Cranes AG, the providers of industrial cranes and port automation technology said full-year revenues fell 14.6% to €1.05 billion from €1.23 billion a year ago. Net profit in the full-year fell 98.5% to €1.2 million or €0.04 per diluted share compared to net profit of €80.8 million or €3.79 per share a year ago.

Lukoil OAO, an integrated oil and gas company said nine months revenues fell 36.4% to $56.8 billion from $89.3 billion a year ago. Net profit in the nine months fell 51% to $5.3 billion or $6.24 per diluted share compared to net profit of $10.8 billion or $12.85 per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 27.13 or 0.27% to 10,140.47, and Hang Seng index in Hong Kong decreased 264.44 or 1.18% to 22,060.52, and CSI 300 index in China lower 44.81 or 1.22% to 3,624.02. ASX 200 index in Australia decreased 5.90 or 0.13% to 4,670.60. The FTSE Bursa KL Composite index in Malaysia was lower 3.90 or 0.31% to 1,261.46.

The Kospi Index in South Korea decreased 4.87 or 0.30% to close at 1,627.78. SET index in Thailand closed lower 2.76 or 0.39% to 698.82. JSE Index in Indonesia increased 0.13 or 0.01% to 2,483.89. The Sensex index in India increased 244.54 or 1.44% to 17,227.68.

Europe Markets Review

In London FTSE 100 Index traded lower 21.73 or 0.41% to 5,288.93, in Paris CAC 40 Index decreased 4.17 or 0.11% to 3,835.88 and in Frankfurt DAX index traded lower 2.26 or 0.04% to 5,782.49. In Zurich trading SMI increased 6.07 or 0.09% to 6,476.68.