By Adam Haigh
Jan. 8 (Bloomberg) -- Stocks in Europe and Asia dropped, sending the MSCI World Index lower for a second day, on concern the deepening economic slump will wipe out earnings growth and curb demand for commodities. U.S. index futures declined.
Wal-Mart Stores Inc. sank 8.2 percent after the world’s biggest retailer cut its fourth-quarter forecast. Lenovo Group Ltd. posted its steepest slump in a decade after the fourth- biggest personal computer maker predicted a quarterly loss. BHP Billiton Ltd. and Rio Tinto Group slid more than 5 percent as copper retreated in London.
European stock-market volatility increased the most this year as the Dow Jones Stoxx 600 Index trimmed its advance since Nov. 21 to 14 percent. Equities had rallied even as earnings for western European companies tracked by Bloomberg missed analysts’ estimates by 92 percent over the past seven weeks.
“We call it the hard slog,” said Kevin Lecocq, chief investment officer at Barclays Wealth, which manages about $215 billion in assets. “You are going to see horrible numbers until some of the fiscal stimuli start to impact the real economy, which will probably come in the end of 2009 and into 2010,” he told Bloomberg Television in London.
The MSCI World Index fell 0.7 percent to 933.20 at 1:43 p.m. in London. The index of 23 developed nations sank 1.7 percent in the past two days as companies from Alcoa Inc. to Intel Corp. spurred concern the profit outlook is worsening. Citigroup Inc. estimates that the downturn in earnings is only a quarter of the way into a 50 percent slide from the peak. Futures on the Standard & Poor’s 500 Index slipped 0.9 percent.
$1 Trillion
The MSCI World has tumbled 41 percent since the start of last year as more than $1 trillion in losses at financial companies eroded profits and the U.S., Europe and Japan fell into the first simultaneous recessions since World War II.
U.S. President-elect Barack Obama warned that without immediate steps by the government to revive the economy, the unemployment rate could rise above 10 percent as the U.S. risks losing a “generation of potential and promise.”
Europe’s Stoxx 600 declined for a second day, losing 1.5 percent as Infineon Technologies AG retreated. The regional benchmark index had posted its best ever start to a year before yesterday on speculation efforts by governments and central banks will revive the global economy.
The 505 western European companies tracked by Bloomberg that announced results since the Stoxx 600 began its rebound in November have posted an average 75 percent decline in profit.
Bank of England
Data today showed that confidence in the economic outlook for Europe fell to the lowest on record and unemployment rose to a two-year high, adding to pressure on the European Central Bank for more interest-rate cuts.
The global slowdown prompted the Bank of England to reduce its key interest rate to 1.5 percent today, the lowest since the bank was founded in 1694. The ECB has reduced its benchmark rate by 1.75 percentage points to 2.5 percent since October.
The MSCI Asia Pacific Index dropped 3.1 percent, the biggest decline since Dec. 12, as Cnooc Ltd. and Macquarie Group Ltd. retreated.
Global equities “need to get more of the bad news out of the way before attempting a meaningful recovery,” Citigroup equity strategists led by Robert Buckland wrote in a note to clients dated yesterday. ING Wholesale Banking said stocks in western Europe will make little headway in 2009 and may test fresh lows in the first half of the year.
Wal-Mart, Macy’s
Wal-Mart and Macy’s Inc. cut their forecasts as recession- hit consumers pared their holiday shopping lists.
Wal-Mart fell 8.2 percent to $50.97 after saying that fourth-quarter profit will miss its earlier forecasts after sales at stores open at least a year rose 1.7 percent last month, trailing analysts’ estimates. Macy’s, the second-largest U.S. department-store chain, lost 6.7 percent to $10.55.
Lenovo sank 26 percent to HK$1.91. The company said it expects to post a “material loss” in the quarter ended Dec. 31 and will eliminate about 2,500 jobs, leading to savings of about $300 million in the year ending March 2010.
The outlook from the maker of Thinkpad laptops underscores the challenge facing technology companies after Intel yesterday said fourth-quarter revenue dropped 23 percent and Dell replaced top executives to revive demand. Dell slipped 1.7 percent to $10.96 in Germany.
Infineon, Nokia
Infineon lost 7.6 percent to 1.1 euros. Nokia Oyj, the world’s biggest maker of mobile phones, slipped 4.2 percent to 11.2 euros.
BHP, the world’s largest mining company, lost 5.3 percent to 1,264 pence. Rio Tinto, the third-biggest, slid 7.6 percent to 1,675 pence. Copper fell as much as 4.5 percent in London.
Earnings at basic-resource companies in the Stoxx 600 will drop 18 percent this year, according to analysts’ estimates compiled by Bloomberg. That’s the second-steepest decline among 10 industry groups after energy companies, the data show.
In Asia, Cnooc lost 6.7 percent to HK$7.37 after crude sank the most in more than seven years yesterday, plunging 12 percent to $42.63 a barrel in New York on demand concern. Oil added 1.1 percent today.
Macquarie dropped 3.7 percent to A$32.50 as Australia’s biggest securities firm said a “challenging” market is hurting profitability and announced a A$1.5 billion ($1.07 billion) sale of margin loans to a regional lender.
Concern that global stock losses will deepen remains elevated even after falling from record levels in October and November.
The benchmark index for European options, the VStoxx Index, rose 6.2 percent to 43.40 today, the biggest advance since Dec. 29. The gauge, which measures the cost of using options as insurance against declines in the Euro Stoxx 50 Index, climbed to 87.51 in October, the highest since at least 2001, data compiled by Bloomberg show.
TED Spread
The difference between what the U.S. government and banks pay to borrow for three months, the so-called TED Spread, is still about three times higher than before credit markets started freezing in August 2007, according to data compiled by Bloomberg.
Treasuries last year returned the most since 1995, according to Merrill Lynch & Co. indexes, with investors seeking the relative safety of government debt as losses and writedowns at the world’s biggest financial companies jumped. The rally has faded this year, with Treasuries falling 1.3 percent, amid concern debt sales will swell to unprecedented levels as Obama boosts spending to halt the recession.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
Posts
No comments:
Post a Comment