Markets Decline on Higher Rates, Stimulus Trims

123jump.com Staff
27 Jan, 2010
New York City

World markets edge lower as investors confront the prospect of rising interest rates and fewer lending supports from the central banks. Federal Reserve is expected to end its $1.25 trillion mortgage bonds markets support and the ECB is preparing to trim stimulus measures.

[R]9:00 AM New York – World markets edge lower as investors confront the prospect of rising interest rates and fewer lending supports from the central banks. Federal Reserve is expected to end its $1.25 trillion mortgage bonds markets support and the ECB is preparing to trim stimulus measures. Interest rates in Australia, India and Brazil are expected to rise.[/R]

Markets in Asia closed lower and in Europe traded lower as investors recalibrate the prospects of growth and interest rate environment.

Asian and emerging markets are increasingly facing the prospects of rising interest rates and lower global growth. Central banks in Australia, India and Brazil are expected to increase rates in the next few months.

Stronger than expected inflation in India and a surge in asset prices in Australia and China has put the central bankers on the alert.

In addition, the governments in Europe and the U.S. are facing ballooning budget deficits and the U.S. Federal Reserve is likely to trim its support for mortgage market sooner than expected and the European Central Bank is preparing for ways to exit the stimulus measures to support lending.

Federal Reserve is expected to stick to its plan to end the mortgage market support program with $1.25 trillion by March as previously announced. The Fed is scheduled to release its statement at the conclusion of two-day meeting this afternoon.

Finance Ministry in Athens, Greece denied a Financial Times report suggesting that the government is preparing to sell 25 billion euro bonds to China. The Greek bonds yields premium to German bonds widened 16 basis points to 320 basis points.

World Earnings

Banco Bilbao Vizcaya Argentaria SA, the diversified international financial group said fourth quarter net interest income rose 16% to €3.6 billion from €3.1 billion a year ago. Net profit for the quarter fell 94% to €31 million compared to net profit of €519 million a year ago.

SAP AG, the software company said fourth quarter revenues fell 8.6% to €3.2 billion from €3.5 billion a year ago. Net profit for the quarter fell 12% to €727 million or €0.61 per diluted share compared to net profit of €830 million or €0.70 per share a year ago.

STMicroelectronics N.V., the chipmaker said fourth quarter sales rose 13.6% to $2.58 billion from $2.28 billion a year ago. Net loss for the quarter was $70 million or $0.08 per diluted share compared to net loss of $366 million or $0.42 per share a year ago.

WH Smith PLC, the magazine and book retailer reported its trading update for the 21 weeks to January 23.

For the 21-week total sales fell 2% and 4% decline in like-for-like sales. In High Street like-for-like sales for the 11 weeks fell 5% and for 21 weeks fell 4%. Gross margin improved as expected year on year.

Canon Inc, the manufacturer of digital cameras reported fourth quarter sales fell 4.1% to ¥954.1 billion from ¥994.7 billion a year ago. Net profit in the quarter rose 431% to ¥61.6 billion compared to net profit of ¥11.6 billion a year ago.

Sales for the full-year fell 21.7% to ¥3.21 trillion from ¥4.1 trillion a year ago. Net profit in the year fell 57.4% to ¥131.6 billion or ¥106.64 per diluted share compared to net profit of ¥309.1 billion or ¥246.20 per share a year ago.

NEC Electronics Corporation, the chipmaker reported third quarter sales fell 8% to ¥117.9 billion from ¥128.5 billion a year ago. Net loss in the quarter was ¥14.3 billion or ¥115.53 per diluted share compared to net loss of ¥20.2 billion or ¥163.56 per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 73.20 or 0.71% to 10,252.08, and Hang Seng index in Hong Kong decreased 76.26 or 0.38% to 20,033.07, and CSI 300 index in China lower 44.23 or 1.36% to 3,198.57. ASX 200 index in Australia decreased 73.30 or 1.55% to 4,644.60. The FTSE Bursa KL Composite index in Malaysia was lower 17.25 or 1.34% to 1,265.77.

The Kospi Index in South Korea decreased 11.86 or 0.72% to close at 1,625.48. SET index in Thailand closed lower 11.20 or 1.60% to 690.46. JSE Index in Indonesia decreased 13.86 or 0.54% to 2,564.55. The Sensex index in India decreased 490.64 or 2.92% to 16,289.82.

Europe Markets Review

In London FTSE 100 Index traded lower 43.72 or 0.83% to 5,233.13, in Paris CAC 40 Index decreased 37.25 or 0.98% to 3,769.79 and in Frankfurt DAX index traded lower 27.26 or 0.48% to 5,641.67. In Zurich trading SMI decreased 14.32 or 0.22% to 6,469.91.