MARKETS
Global stocks plummet on recession fears
Wednesday, January 16, 2008
World stock markets fell sharply amid worries of a global economic slowdown after Citigroup reported record quarterly losses.
Wednesday, January 16, 2008
By Reuters
NEW YORK, Jan 15 (Reuters) - World stock markets fell
sharply on Tuesday, with the Dow Jones industrials posting
triple-digit losses, as worries deepened over the magnitude of
the global economic slowdown following weak readings on the
consumer front and further losses at several major banks.
Citigroup, the largest U.S. bank, reported a record
quarterly loss, with earnings-per-share losses nearly twice
what was expected. It also slashed its dividend by 41 percent,
while U.S. Bancorp, the sixth-largest U.S. bank, posted a 21
percent fall in fourth-quarter profit.
But global stock markets were under severe selling pressure
after weak economic data which, in typical fashion, triggered
safe-haven buying of U.S. Treasuries.
Sales at U.S. retailers fell unexpectedly in December,
dropping 0.4 percent during the holiday month, and were revised
lower for November than previously reported, according to a
government report released Tuesday that implied costlier energy
and slumping housing prices were taking a toll on consumers.
In addition, the ZEW Center for European Economic Research
said its index of investor confidence in Germany, Europe's
largest economy, slumped to its lowest in 15 years.
"Investors continue to raise their concerns about the
chances of a recession in the U.S. and heightened fears that
perhaps global growth will fall sharply," said Tom Sowanick,
chief investment officer of Clearbrook Financial LLC in
Princeton, New Jersey.
Already, federal-fund futures are pricing in "not only a
50-basis point cut, but now a possible 75-basis-point rate cut,
helping fuel fear in the markets," added Sowanick.
On Wall Street, benchmark stock indexes were lower with the
Dow Jones industrial average ending down 277.04 points, or 2.17
percent, at 12,501.11. The Standard & Poor's 500 Index shed
35.30 points, or 2.49 percent, at 1,380.95. The Nasdaq
Composite Index fell 60.71 points, or 2.45 percent, at
2,417.59.
Adding to the Dow's decline, shares of plane maker Boeing
Co fell about 4.67 percent to $77.86, after The Wall Street
Journal reported the company may again delay the release of its
787 Dreamliner long-haul jet.
The FTSEurofirst 300 index of top European shares settled
down 2.57 percent, weakened among other things by Britain's
largest retailer Tesco, which missed sales forecasts.
Meanwhile, Japan's Nikkei ended below 14,000 for the first
time in 26 months, losing 1 percent to close at 13,972.63.
BONDS BID STRONGLY AGAIN
But nervousness over the depth of the economic slowdown was
exacerbated by Citigroup, the largest U.S. bank, which said it
had fewer writedowns from the credit crisis than analysts had
expected, although they amounted to a colossal $18.1 billion.
Also on Tuesday, financial services company State Street
Corp reported lower fourth-quarter net income after it set
aside millions for legal costs tied to mortgage securities
losses.
Investors are watching bank earnings closely to see how
hard the credit crisis has hit and to gauge the overall state
of the industry.
Not coincidentally, U.S. Treasury debt prices moved higher
as selling pressure on stocks sent investors seeking safe-haven
government bonds.
The benchmark 10-year U.S. Treasury note was up 19/32 in
price, with the yield at 3.697 percent, near their lowest
levels in 3-1/2 years. The 2-year U.S. Treasury note was up
1/32, with the yield at 2.5329 percent. The 30-year U.S.
Treasury bond was up 1-5/32, with the yield at 4.2925 percent.
In foreign exchange trade, the dollar edged up against a
basket of major currencies, with the U.S. Dollar Index up 0.1
percent at 75.686 from a previous session close of 75.613.
Against the Japanese yen, the dollar eased to 107.02, down
1.1 percent from a previous session close of 108.96.
The euro was up 0.23 percent at $1.4832 from a previous
session close of $1.4866.
In energy and commodities prices, U.S. light sweet crude
oil fell $2.30, or 2.44 percent, to settle at $91.90 per
barrel. Spot gold prices fell $9.60, or 1.06 percent, to
$895.20. The Reuters/Jefferies CRB Index was down 4.65 points,
or 1.26 percent, at 365.57.
sharply on Tuesday, with the Dow Jones industrials posting
triple-digit losses, as worries deepened over the magnitude of
the global economic slowdown following weak readings on the
consumer front and further losses at several major banks.
Citigroup, the largest U.S. bank, reported a record
quarterly loss, with earnings-per-share losses nearly twice
what was expected. It also slashed its dividend by 41 percent,
while U.S. Bancorp, the sixth-largest U.S. bank, posted a 21
percent fall in fourth-quarter profit.
But global stock markets were under severe selling pressure
after weak economic data which, in typical fashion, triggered
safe-haven buying of U.S. Treasuries.
Sales at U.S. retailers fell unexpectedly in December,
dropping 0.4 percent during the holiday month, and were revised
lower for November than previously reported, according to a
government report released Tuesday that implied costlier energy
and slumping housing prices were taking a toll on consumers.
In addition, the ZEW Center for European Economic Research
said its index of investor confidence in Germany, Europe's
largest economy, slumped to its lowest in 15 years.
"Investors continue to raise their concerns about the
chances of a recession in the U.S. and heightened fears that
perhaps global growth will fall sharply," said Tom Sowanick,
chief investment officer of Clearbrook Financial LLC in
Princeton, New Jersey.
Already, federal-fund futures are pricing in "not only a
50-basis point cut, but now a possible 75-basis-point rate cut,
helping fuel fear in the markets," added Sowanick.
On Wall Street, benchmark stock indexes were lower with the
Dow Jones industrial average ending down 277.04 points, or 2.17
percent, at 12,501.11. The Standard & Poor's 500 Index shed
35.30 points, or 2.49 percent, at 1,380.95. The Nasdaq
Composite Index fell 60.71 points, or 2.45 percent, at
2,417.59.
Adding to the Dow's decline, shares of plane maker Boeing
Co fell about 4.67 percent to $77.86, after The Wall Street
Journal reported the company may again delay the release of its
787 Dreamliner long-haul jet.
The FTSEurofirst 300 index of top European shares settled
down 2.57 percent, weakened among other things by Britain's
largest retailer Tesco, which missed sales forecasts.
Meanwhile, Japan's Nikkei ended below 14,000 for the first
time in 26 months, losing 1 percent to close at 13,972.63.
BONDS BID STRONGLY AGAIN
But nervousness over the depth of the economic slowdown was
exacerbated by Citigroup, the largest U.S. bank, which said it
had fewer writedowns from the credit crisis than analysts had
expected, although they amounted to a colossal $18.1 billion.
Also on Tuesday, financial services company State Street
Corp reported lower fourth-quarter net income after it set
aside millions for legal costs tied to mortgage securities
losses.
Investors are watching bank earnings closely to see how
hard the credit crisis has hit and to gauge the overall state
of the industry.
Not coincidentally, U.S. Treasury debt prices moved higher
as selling pressure on stocks sent investors seeking safe-haven
government bonds.
The benchmark 10-year U.S. Treasury note was up 19/32 in
price, with the yield at 3.697 percent, near their lowest
levels in 3-1/2 years. The 2-year U.S. Treasury note was up
1/32, with the yield at 2.5329 percent. The 30-year U.S.
Treasury bond was up 1-5/32, with the yield at 4.2925 percent.
In foreign exchange trade, the dollar edged up against a
basket of major currencies, with the U.S. Dollar Index up 0.1
percent at 75.686 from a previous session close of 75.613.
Against the Japanese yen, the dollar eased to 107.02, down
1.1 percent from a previous session close of 108.96.
The euro was up 0.23 percent at $1.4832 from a previous
session close of $1.4866.
In energy and commodities prices, U.S. light sweet crude
oil fell $2.30, or 2.44 percent, to settle at $91.90 per
barrel. Spot gold prices fell $9.60, or 1.06 percent, to
$895.20. The Reuters/Jefferies CRB Index was down 4.65 points,
or 1.26 percent, at 365.57.
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