The Wall Street Journal-20080129-Asia- Europe Shares Slide on U-S- Worries
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A WSJ News Roundup
Continued worry that the beleaguered U.S. economy will slow global growth hurt shares in both Asia and Europe yesterday.
Shanghai took the biggest hit. The Shanghai Composite Index dropped 7.2%, as winter storms threatened to exacerbate national energy shortages and accelerate already-high inflation. The loss halted a three-day winning streak and left the index down 16% this month.
In Tokyo, Hong Kong, Singapore and Seoul, the decline in share prices ranged from 3.8% to 4.3%.
In Europe, the pan-European Dow Jones Stoxx 600 Index declined 1.1% to 318.70, bringing its loss for the month to nearly 13%. That leaves the index on track to record its second-steepest monthly decline ever, after a 14% plunge in September 2002.
"Earnings-revisions trends remain crucial to the outlook for equities," said Gareth Williams, an equity strategist at ING. "Fourth- quarter results from 2007, first-quarter outlooks for 2008 and the prospect of recession means consensus earnings are now adjusting."
But at least one strategist said European stocks have priced in a significant amount of bad news. "We still believe that unless we get a serious U.S. recession, European markets will be up, not down, for 2008," said Karen Olney at Merrill Lynch.
In TOKYO, the Nikkei Stock Average of 225 companies fell 4% to 13087.91. Nippon Steel sagged 7.7% after the steel giant said net profit in the October-December quarter skidded 13% as weakness in U.S. demand and higher-than-forecast price increases for raw materials exacerbated the effect of a slump in Japan's construction sector.
Analysts said Nippon Steel's earnings were a warning that a U.S. slowdown is about to be felt in Asia. Many of the region's biggest companies depend on sales in the U.S. and other developed economies to spur growth. Some economies are doubly exposed because they sell both directly to the U.S. and to other Asian economies that later export to the U.S.
In HONG KONG, shares slumped 4.3%, as investors hurried to exit shares ahead of any additional bad news out of the U.S., including a possible decision by the central bank not to lower interest rates again after last week's surprise federal-funds-rate cut. China Mobile, the index's biggest constituent by market capitalization, fell 4.8%.
Meanwhile, two more initial public offerings have been called off in Hong Kong, essentially drying up the pipeline amid market turmoil.
While Chinese solar-wafer maker Solargiga Energy Holdings Ltd. and civil-engineering firm SFK Construction Holdings Ltd. aren't coming to market now, bankers said IPO activity will pick up later in the quarter as the global economic outlook becomes clearer.
"While the markets today are challenging, the majority of equity markets are very liquid, providing some stability," said Marshall Nicholson, head of equity capital markets at BOC International.
More offerings are expected after the New Year, with market watchers saying the real test for IPOs lies in state infrastructure firm China Railway Construction Corp.'s US$4 billion offer in Shanghai and Hong Kong.
In MUMBAI, the bellwether Sensex fell 1.1%. Real-estate giant DLF dropped 5.6%, outsourcer Infosys Technologies was down 4.9%, and telecommunications giant Bharti Airtel fell 4.9%.
In LONDON, the FTSE 100 index fell 1.4% to 5788.90, its third decline in four sessions. Mining stocks tumbled on worries about global economic growth. Anglo American fell 4.8%.
In PARIS, the CAC 40 index dropped 0.6% to 4848.30. Societe Generale fell an additional 3.8% as details continue to emerge on how one trader could have cost the bank $7.2 billion in unauthorized trades.
Other banks lost ground as worries about write-offs persisted. Erste Bank fell 6.3% in Vienna, Natixis shed 3.2% in Paris, and HSBC Holdings lost 2% in London.
But Dutch-Belgian banking group Fortis, which was hammered Friday on worries about a write-down, gained 8.3%, making up most of that loss. Munich Re climbed 1.4% after the reinsurer's chief executive told a German newspaper that management is no longer concerned about the firm's exposure to subprime-related investments.
In MEXICO CITY, stocks closed higher, as investors bet on further rate cuts by the U.S. Federal Reserve later in the week following a worse-than-expected U.S. housing report.
The IPC index of 35 most-traded issues rose 1.4%, or 379.01 points, to close at 27758.93.
"People are waiting for [U.S.] consumer data [Tuesday]. There is some optimism it could come in positive," a Mexico City trader said.
The IPC rose 2.5% last week after the Fed cut interest rates. U.S. markets, which influence the IPC, also closed firmly in the black on Monday as investors bid stocks higher on expectations the Fed will cut rates at its regularly scheduled meeting following another poor housing report.
Among local issues, the L shares of telecommunications bellwether America Movil rose 3.1%; shares of fixed-line telephone company Telefonos de Mexico closed 2.8% higher and the V shares of the country's top retailer Wal-Mart de Mexico rose 1%.
The B shares of airport operator Grupo Aeroportuario del Sureste, or Asur, fell 3.5% as UBS Investment Research Monday downgraded its recommendation to neutral from buy, citing an "overextended" valuation.
In TORONTO, stocks closed slightly higher as shell-shocked investors awaited the latest move from the U.S. Federal Reserve. Trading activity was relatively muted in comparison with last week's volatility
The S&P/TSX Composite Index rose 92.08 points, or 0.71%, to 12986.91.
"Everyone is in a wait-and-see mode until the Fed meets. That is going to be key," said Gareth Watson, Canadian equity adviser at ScotiaMcLeod.
The materials index was the best performer Monday, rising 2.1%. Yamana Gold gained 76 Canadian cents to C$16.46 while Goldcorp added 0.32 to 38.44. Barrick Gold rose 1.28 to 53.77 and diversified miner Teck Cominco gained 0.13 to 32.79.
