Japan's stocks dropped, driving the Topix index below 1,000 points
for the first time since December 2003, after the global credit crisis
deepened in Europe and the yen jumped, cutting the value of overseas
sales.
Mitsubishi UFJ Financial Group Inc. plunged 9.2 percent
after worsening credit conditions forced new bailouts of Hypo Real
Estate Holding AG and Fortis. Nintendo Co., which gets 80 percent of
its sales from overseas markets, lost 8 percent as the yen surged to
its highest versus the euro since May 2006. Nippon Steel Corp. sank 7.8
percent on concern demand will wane.
The Topix fell 48.92, or 4.7
percent, to close at 999.05 in Tokyo. Only 93 of 1,714 members included
in the index rose. The Nikkei 225 Stock Average declined 465.05, or 4.3
percent, to 10,473.09.
Mitsubishi UFJ, Japan's largest listed
bank, lost 9.2 percent to 806 yen, the steepest plunge since October
2003, while Resona Holdings Inc., the fourth biggest, plummeted 9.5
percent to 119,800 yen.
Chiba Bank Ltd. plummeted 13 percent, the
most since October 1987, to 473 yen. The regional lender slashed its
full-year earnings target on Oct. 3 by 64 percent, saying rising
bankruptcies among developers prompted the bank to boost its loan-loss
provision.
Nintendo, the world's biggest maker of handheld game
players, sank 8 percent to 33,800 yen in Osaka trading, extending its
losing streak to a ninth day, the longest since December 2002. Sony
Corp., the world's second-biggest maker of consumer electronics,
tumbled 6.6 percent to 2,810 yen.
Nippon Steel, the world's
second-biggest maker of the metal, dived 7.8 percent to 319 yen. JFE
Holdings Inc., Nippon Steel's biggest Japanese rival, plunged 7.2
percent to 2,625 yen. A gauge of steelmakers has lost half its value so
far this year as the credit crisis and slowing economy dragged down
U.S. auto sales.
Nippon Steel also declined on concern it will
post losses on stock it holds in smaller steelmakers such as Sanyo
Special Steel Co., which sank 15 percent to 376 yen today.
Komatsu
Ltd., the world's second-biggest maker of earthmoving equipment,
dropped 9.3 percent to 1,252 yen. Hitachi Construction Machinery Co.
declined 8.1 percent to 1,814 yen.
Japan government reports have
shown industrial production fell at the fastest pace in five years in
August, household spending dropped for a sixth month and the jobless
rate reached a two-year high.
Developers fell after UBS AG said
real estate financing will weaken. NTT Urban Development Corp. tumbled
16 percent to 102,200 yen, the worst slump since it went public in
November 2004. Mitsui Fudosan Co., Japan's biggest real-estate company,
lost 5.9 percent to 1,761 yen, and Mitsubishi Estate Co. , the second
largest fell 4.5 percent to 1,860 yen. Sumitomo Realty &
Development Co., the third biggest, slid 5.9 percent to 1,934 yen. UBS
cut its ratings on the companies to ``neutral'' from ``buy.''
Sumitomo
Metal Mining Co., Japan's biggest nickel producer, sank 7.1 percent to
853 yen, having lost 30 percent of its value in nine days. Nippon
Mining Holdings Inc., the nation's largest copper producer, lost 7
percent to 348 yen.
On Oct. 3, nickel for three-month delivery
slid 1 percent to the lowest since March 2006 in London. Copper for
December delivery lost 4 percent in Shanghai today.
Stocks
tumbled around the world, the euro fell the most against the yen since
its debut and oil dropped below $90 a barrel as the yearlong credit
market seizure caused bank bailouts to spread. Government bonds
rallied.
Today's sell-off erased about $2.2 trillion from
global equities after the German government was forced to bail out Hypo
Real Estate Holding AG, overshadowing the $700 billion U.S. Treasury
plan to revive credit markets. The euro weakened 6.4 percent against
the yen, the most since 1999.
Two-year Treasury yields plunged
0.14 percentage point to 1.45 percent as investors sought the relative
safety of government bonds. The MSCI World Index slid 5.7 percent as
every industry fell at least 4 percent. Rio Tinto Plc, the world's
second-biggest aluminum producer, fell 15 percent and UBS AG, the
largest Swiss bank, lost 13 percent.
The Dow dipped below 10,000 for the first time since October 2004. Europe's Stoxx 600 sank 7.6 percent.
National
benchmark indexes fell in all 18 western European markets. London's
FTSE 100 dropped 7.9 percent, the most in two decades. Russia's Micex
plunged 19 percent, led by OAO Gazprom's 21 percent decrease. The MSCI
Asia Pacific Index lost 4 percent, as Mitsubishi UFJ Financial Group
Inc. and Macquarie Group Ltd. retreated more than 9 percent.
A 5.4
percent tumble in Brazil's Bovespa Index and a 10 percent retreat in
Indonesia's Jakarta Composite Index pushed the MSCI Emerging Market
Index down 9.5 percent, the steepest since it began.
UBS, the
European bank worst hit by credit crisis, lost 3.08 to 20.90 francs.
The bank's earnings will be ``challenged for some time,'' and UBS may
write down $3.1 billion in the third quarter, Oppenheimer & Co.
analyst Meredith Whitney wrote in a note to clients. The Swiss bank has
posted $44 billion in losses, according to data compiled by Bloomberg.
On Monday, stocks plummeted across the world on global financial and
economic concerns, although late-session buying interest helped U.S.
stocks pare more than half of their losses in the final hour of trade.
The
Dow, Nasdaq and S&P 500 fell 3.5%, 3.8% and 4.3%, respectively, all
settling at multi-year lows. Still, the end result was a huge
improvement from the session's worst levels, when the Dow, Nasdaq and
S&P 500 were down 7.8%, 8.8% and 8.3%, respectively.
Helping
stocks pare their losses was a headline that France proposed an
emergency G8 meeting on the financial crisis, which increased
speculation that global central banks may make a coordinated
intermeeting rate cut.
Overseas equity markets fared even worse than the U.S., with the DJ World Excluding U.S. Index falling 7.3% as Europe fell 7.6%
The
selling in Europe was driven over concerns that more bailouts of
European financial institutions are needed after Germany's government
stepped in to prevent the collapse of property lender Hypo Real Estate.
In addition, interbank lending rates rose in European currencies as
banks remain reluctant to lend to each other.
Global growth concerns
were prevalent in commodity trading, with the CRB Index plunging 5.2%.
Oil prices dropped 5.0% to $89.15 per barrel.
Meanwhile, risk averse
investors bid up the prices of Treasuries in a flight-to-quality trade.
The 10-year note climbed 36 ticks sending its yield down to 3.47%. On a
related note, gold, which is considered a safe-haven, rallied 4.4% to
$865.50 per ounce.
Weakness in Europe prompted a large 1.5% rally in the dollar. The euro fell 2.2% to $1.35 and the pound declined 1.7% to $1.74.
In
an attempt to improve liquidity and shore up confidence, the Fed
announced this morning that it is planning to double the outstanding
Term Auction Facilities (TAF) balances to $900 billion. The TAFs aim to
improve liquidity by allowing depository institutions to borrow from
the Fed using the same collateral that is accepted at the discount
window. The Fed will also start paying interest on depository
institutions' required and excess reserve balances. The announcement
failed to lift the stock market.
The sharp declines in global stock
markets induced traders to raise their bets on the size of a rate cut
at the Oct. 29 FOMC meeting, with increased speculation that there will
be a coordinated global central bank intermeeting rate cut. Fed funds
futures suggest a 52% chance that the fed funds rate will be cut by 75
basis points.