Most Japanese stocks advanced as central banks and governments
globally moved to shore up the financial system, spurring investors to
buy shares in Asia's cheapest market.
Nomura Holdings Inc.
climbed 5 percent after U.S. Treasury Secretary Henry Paulson indicated
he may buy stakes in banks, and nine central banks lowered interest
rates. Nintendo Co., which had lost more than half its value this year,
rallied 13 percent, its daily limit. Mitsubishi Corp. gained 5 percent,
after the Topix index became the only benchmark in Asia to fall below
book value, according to Bloomberg data. Aeon Co. plunged after weak
consumer demand eroded profit.
About three stocks rose for every
two that fell on the Topix, which gained 6.10, or 0.7 percent, to
905.11 at the close of trading in Tokyo. The Nikkei 225 Stock Average
lost 45.83, or 0.5 percent, to 9,157.49.
The Nikkei has lost 40
percent this year, on course for its worst year ever as the financial
crisis that started with non- performing U.S. subprime loans spread to
economies globally. More than $20 trillion has been erased from equity
markets worldwide in the last year.
Yesterday, the Nikkei plunged
9.4 percent, its third- biggest drop on record, and the Topix index
slumped 8 percent, the steepest fall in 21 years. Shares on the Topix
traded below book value yesterday for the first time since Bloomberg
began tracking the data in 1989, indicating the liquidation value of
assets is greater than the company's ongoing business.
Banks
gained after the Federal Reserve led four other central banks in a
coordinated rate cut to bolster confidence in the financial system.
Nomura, the nation's largest brokerage, added 5 percent to 1,229 yen.
Sumitomo Mitsui Financial Group Inc., the country's third-biggest
listed bank, gained 7.5 percent to 601,000 yen.
The Fed, European
Central Bank, Bank of England, Bank of Canada and Sweden's Riksbank
each reduced their benchmark rates by half a percentage point. China's
central bank separately cut its key rate 0.27 percentage point. South
Korea, Hong Kong and Taiwan also lowered rates today.
Paulson said
yesterday he intends to use the authority granted in a rescue package
last week to purchase more than just mortgage-related assets from
financial companies. He indicated that such moves may include cash
infusions to boost lenders' capital.
Nintendo, Japan's
second-largest video-game maker, soared by its daily limit of 4,000
yen, or 13 percent, to 35,000. The shares fell 11 percent yesterday.
Mitsubishi Corp., which generates more than half its profit from
commodities dealing, rose 5 percent to 1,667 yen, after retreating 12
percent yesterday. Sony Corp., the world's second-biggest consumer
electronics maker, rallied 5.7 percent to 2,520 yen.
The average
price-to-book ratio for Topix companies dropped to 0.98 yesterday.
That's the lowest since the Topix became a market
capitalization-weighted gauge in 1968, according to Mizuho Securities
Co. If book value is less than one, shareholders theoretically would
profit if a company dissolved and liquidated its assets. Mitsubishi
Corp.'s book value slumped to 0.89 yesterday, while Sony's fell to
0.69.
Aeon, the nation's second-largest retailer, fell 11 percent
to 850 yen, the biggest slide in more than 10 years, after reporting an
8.6 percent drop in second-quarter operating profit. Larger rival Seven
& I Holdings Co. plunged 8.4 percent to 2,410 yen.
European
stocks fell for a fourth day, sending the Dow Jones Stoxx 600 Index to
the lowest in almost five years, on concern efforts by central banks
and governments to shore up the banking system won't prevent a global
recession.
E.ON AG led declines among utilities, dropping 11
percent on speculation ``problems'' in the integration of a 4.6
billion-euro ($6.3 billion) Russian acquisition could hamper growth and
as Belgium proposed power price regulation. GDF Suez SA slid 13
percent. Royal Dutch Shell Plc and Total SA retreated more than 3
percent as oil dropped below $87 a barrel.
Central banks from
London and Frankfurt to Washington and Hong Kong were forced to reduce
interest rates this week after the yearlong credit-market seizure
stoked concern banks will run short of money.
The cost of
borrowing in dollars for three months jumped to the highest level since
December, the British Bankers' Association said today.
Iceland suspended equity trading today until Oct. 13 after the government seized Kaupthing hf, the country's biggest bank.
The
European Central Bank offered banks as much cash as they need for six
days, bringing forward new auction measures as policy makers step up
efforts to unlock credit markets.
National benchmark indexes
decreased in 12 of the 17 western European markets that were open.
Germany's DAX fell 2.5 percent. The U.K.'s FTSE 100 lost 1.2 percent,
while France's CAC 40 retreated 1.6 percent.
E.ON, Germany's
largest utility, slumped 11 percent to 28.25 euros. GDF Suez, the
world's second-biggest utility, sank 13 percent to 26.25 euros.
E.ON
is having ``serious'' problems integrating its Russian unit, OAO OGK-4,
and is replacing several management figures, Handelsblatt reported
today, citing unidentified people familiar with the matter.
Basic-resources
shares were the best performer in the Stoxx 600, adding 5.1 percent as
a group. BHP Billiton Ltd., the world's largest mining company, climbed
6.5 percent to 1,036 pence. Rio Tinto Group, the third-biggest, climbed
4.7 percent to 2,750 pence. Copper, lead and zinc gained in London.
Royal
Bank of Scotland Group Plc rallied 5.8 percent to 96 pence after
Citigroup Inc. upgraded shares of U.K. banks to ``neutral'' from
``underweight,'' citing ``underperformance'' and actions by central
banks and the government yesterday. RBS is down 48 percent this week.
Aviva
Plc climbed 5.9 percent to 434 pence after the U.K.'s biggest insurer
said it has a ``strong'' capital position following the turmoil in
global financial markets. The insurer has surplus capital to meet
regulatory requirements of 1.9 billion pounds, the company said.
Stocks
finished the session near their lows Thursday, despite beginning the
trading day with healthy gains. A late-session sell-off took the Dow to
its lowest level in more than five years and a long-time Dow component
to its worst point since 1950.
Trading was upbeat early on when
tech bellwether IBM (IBM 89.00, -1.55) preannounced a third quarter
earnings surprise, central banks in the Far East cut interest rates,
and investors assessed comments from the Treasury may inject capital
directly into banks.
Dow component IBM gave investors some temporary
reassurance that the tech sector hasn't turned over this morning. It
stated that that third quarter earnings would total $2.05 per share,
which is more than analysts were expecting. On the downside, the
company did fall short of the consensus revenue forecast, but stated it
remains confident it will hit its full-year earnings forecast of $8.75
per share.
Tech posted a gain for much of the session, but finished 3.4% lower.
Central
banks in South Korea, Hong Kong and Taiwan all moved to cut target
interest rates, according to Financial Times. The move came just one
day after the Federal Reserve and several other major central banks
slashed interest rates in a coordinated effort to mitigate economic
risks.
Despite the plan's intent to help shore up balance sheets at
financial companies, the sector was hit with heavy selling pressure. It
was up 3.6% early on, but closed 11.7% lower as every one of its
industry groups floundered. Losses were most significant among regional
banks (-15.2%), investment banks and brokers (-15.7%), and insurance
companies (-16.8%).
Part of the ongoing efforts to shore up the
financial system have the New York Fed entering into an agreement with
subsidiaries of AIG (AIG 2.39, -0.80). Their agreement calls for the
subsidiaries to exchange investment grade fixed income securities for
up to $37.8 billion in cash.
The energy sector (-11.4%) also posted
deep losses. The downturn is generally owed to fear of demand
destruction for fuel amid slower economic activity.
In turn, oil
futures were recently indicated below $85 per barrel, down nearly 12%
year-to-date. That has OPEC calling for a meeting November 18. It is
being presumed that OPEC will agree to production cut.
Thursday
marked the first session after the ban on short-selling certain
financial stocks expired. The ban was originally limited to 799
financial stocks, but was later expanded to some nonfinancial
companies, such as Dow component General Motors (GM 4.76 -2.15).
Shares
of GM have been consistently listed on the Dow since 1925, but slumped
to their lowest level since 1950 as participants assess the challenges
facing the company. GM was placed on CreditWatch Negative at Standard
& Poor's as the firm assessed the weakening state of global
automotive markets, along with capital market conditions that remain
challenging.
Heavy selling pressure pushed the Dow well below 9000.
The index has not been that low since mid-2003. The session's action
also had the volatility index, VIX, above 60 for the first time ever.
The
latest initial claims report was generally relegated to the back burner
since it didn't bring any surprises. Claims for the week ended October
4 fell 20,000 to 478,000, which is generally in-line with the consensus
estimate of 475,000. The four-week moving average bumped up to 482,500
and continuing claims hit 3.66 million from 3.60 million the week
before.