The Wall Street Journal-20080116-European Stocks Hit by Sour Mood- Steep Losses Posted In Nervous Market- -Very Serious Now-
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European Stocks Hit by Sour Mood; Steep Losses Posted In Nervous Market; 'Very Serious Now'
LONDON -- European stocks posted their steepest loss in nearly two months yesterday, as more signs of slowing consumer spending and subprime-related write-downs continued to plague the market.
"It's becoming very serious now," said Christian Tegllund Blaabjerg, an equity strategist at Saxo Bank in Copenhagen. "I believe we will see more and more negative earnings surprises."
The pan-European Dow Jones Stoxx 600 Index slumped 2.6% to 335.94, its lowest point since Sept. 25, 2006. The day's percentage decline was the steepest since Nov. 21 and brings the loss for the month to 7.9%. That puts the index on track for its worst January ever, eclipsing a 6.3% drop in January 2003.
"It's getting to be a case of take some profits where you can," said Edmund Shing, a Paris-based equity strategist at BNP Paribas.
Worries about the parlous state of global growth were magnified by a larger-than-expected drop in U.S. retail sales during December. In Europe, Germany's ZEW think tank said the mood among institutional investors and analysts last month weakened to its lowest level in 15 years on fears of a U.S. recession.
Among European retailers, luxury-goods firm Burberry Group missed its quarterly sales target after cutting prices more than usual last month. Its stock skidded 16%.
While U.K. department-store operator Debenhams had a better Christmas than analysts had expected, its cautious outlook sent the stock tumbling 17%. The sour mood even caught Inditex Group, owner of the Zara fashion chain, whose stock dropped 8.8%.
U.K. supermarket chain Tesco fell 3.1% after it reported a smaller- than-expected rise in same-store sales during the Christmas holidays. "Tesco is showing that the U.K. consumer is finding life tough," said Andrew Lynch, portfolio manager at Schroder Investment Management.
Banks also suffered after large write-downs tied to subprime- mortgage-related investments were reported by Citigroup and German property lender Hypo Real Estate Holding.
Shares in the German firm, a component of the country's DAX index, plummeted 35% after it announced write-downs almost equal to the size of its 2006 earnings.
Other banks declined as well. Royal Bank of Scotland Group skidded 5.9% and HSBC Holdings fell 4.8%, both in London, while UBS shed 2.8% in Zurich. Commerzbank tumbled 8.3% in Frankfurt.
Among major national markets, the U.K.'s FTSE 100 index sank 3.1%, its biggest loss since Aug. 16, to 6025.60, its lowest close since the same date. France's CAC 40 Index dropped 2.8% to 5250.82, its lowest close since Oct. 3, 2006. Germany's DAX fell 2.1% to 7566.38, bringing its loss this month to 6.2%.
Beleaguered U.K. mortgage bank Northern Rock shed 16% as shareholders voted to limit some of the board's power to negotiate a private-sector bailout.
Until recently, so-called cyclical stocks that are more sensitive to economic trends had taken the brunt of investor selling. But the selling broadened to more-defensive areas of the market amid growing pessimism about earnings trends.
They included food and household-goods companies such as Nestle, which fell 2.3% yesterday, and Unilever, down 3.6%.
Roche Holding dropped 2.6% in Zurich after majority-held biotech Genentech reported sales of Avastin, Rituxan and Herceptin that disappointed analysts.
Novo Nordisk lost 5.3% in Copenhagen after its decision to discontinue development of an inhaled insulin system led to a charge of 1.3 billion Danish kroner ($260 million).
Oil giant BP fell 4% after it was downgraded by Lehman Brothers to "underweight."
Nikkei Off Again;
Gains in Taipei
Japanese, Hong Kong and Korean shares extended losing streaks as investors remained nervous about the U.S. economy.
In TOKYO, the Nikkei Stock Average closed below 14000 for the first time since November 2005, with the strong yen hurting exporters such as Honda Motor, down 4.4%. The Nikkei was down for the third straight session, falling 1% to 13972.63. The market had been closed Monday for the Coming of Age holiday. Sompo Japan Insurance sank 4.9% after cutting its full-year earnings forecast.
In HONG KONG, stocks were pulled down by selling in heavyweights such as HSBC Holdings, off 2.1%, and China Mobile, off 4.1%. The Hang Seng Index fell 2.4%, its fourth straight drop. At 25837.78, it has lost 7.1% this month. An analyst at a local brokerage said the selloff "reflects a lot of funds turning bearish on the market outlook and raising their cash levels." HSBC fell to a 26-month low after Goldman Sachs added the bank to its "conviction sell" list, while China Mobile was hit by uncertainty about a planned telecom-industry overhaul. The Chinese government has yet to map out its reform plans.
Dry-bulk shipping firms continued to fall on concerns over a sector downturn. On Friday, the Baltic Dry Index -- an international measure of dry-bulk shipping rates -- registered its largest one-day drop since 1985. China Cosco Holdings dropped 7.6%, while China Shipping Development skidded 6.7%.
But in TAIPEI, shares climbed for a second day following the opposition party Kuomintang's decisive electoral victory over the weekend. Taiwan's Weighted index added 3.1% to 8428.84 as investors bet that the new government will quickly improve ties with China. China Airlines rose 6.8%, Huaku Construction 6.9% and personal- computer maker Acer 2.5%.
In SHANGHAI, the Composite Index, which tracks yuan-denominated Class A shares and foreign-currency Class B shares, fell 1% to 5443.79, snapping a four-day winning streak.
In MUMBAI, India's benchmark Sensitive Index fell 2.3%, or 476.96 points, to 20251.09, its lowest close since Dec. 28. Bharti Airtel fell 5.5% on persistent fears that it may lose market share following a government decision last week to allow other companies to offer GSM mobile-phone services.
In SEOUL, South Korea's Kospi declined 1.1%, its fourth straight loss, to 1746.95 as investors continued to fret about the impact of a U.S. recession. But Samsung Electronics gained 1.3% after posting results that were better than expected.
In TORONTO, stocks tumbled, hit by the latest woes in the financial- services sector, a drop in the price of oil and rising concerns that the U.S. economy is slipping into recession. The S&P/TSX Composite Index fell 381.50 points, or 2.80%, to 13316.78. The biggest loser was the energy group, which dropped 3.43%, as the price of oil fell in New York. EnCana fell C$2.67 to C$66.59, Suncor slid 5.84 to 100.61 and Canadian Natural Resources ended down 2.89 to 70.60.
