27.10.2008 12:04

STOCKS: weekly review

Japan stocks plunged, sending the Nikkei 225 Stock Average to the brink of 1982 levels, as Sony Corp. cut its forecast, Toyota Motor Corp.'s car sales fell for the first time in seven years, and the yen reached a 13-year high.
Sony, which gets three-quarters of its revenue outside of Japan, dived 14 percent to the lowest level since 1995, while Toyota, Japan's biggest carmaker, declined 6.4 percent. Canon Inc., the world's biggest digital-camera maker, and electronics companies Panasonic Corp. and Sharp Corp. plunged more than 12 percent as the surging yen cut the value of overseas sales.
The Nikkei 225 Stock Average declined 811.90, or 9.6 percent, to close at 7,649.08 in Tokyo, a level not seen since April 2003 and just 41 points from the lowest since 1982. The broader Topix index fell 65.59, or 7.5 percent, to 806.11. The Nikkei posted a 12 percent drop for this week, while the Topix lost 9.9 percent.
The Nikkei has lost half its value this year as the credit crisis led to a slowdown in the global economy. Chances the Bank of Japan will cut interest rates by year-end to avert a prolonged recession grew to 24 percent from 3 percent a month ago, based on JPMorgan Chase & Co. calculations of interest-rate swaps.
Sony, the world's second-biggest maker of consumer electronics, yesterday slashed its forecast for annual operating profit by 57 percent, citing the stronger yen and a worsening market for televisions and cameras. UBS AG yesterday cut 12-month price estimates on Canon and Ricoh Co. by almost half, noting the appreciating Japanese currency and weakening demand.
Sony dropped 14 percent to 1,972 yen, the lowest close since June 1995, while Panasonic sank 12 percent to 1,346 yen. Canon fell 13 percent, the most since October 1987, to 2,665 yen, and Ricoh, Japan's second-largest office-equipment maker, sank 14 percent to 876 yen. Sharp, the nation's largest maker of liquid- crystal display TVs, plunged 14 percent to 1,972, the lowest since April 1982.
Toyota said today global auto sales retreated 4.3 percent in the three months ended Sept. 30 from a year earlier, the first drop since 2001. The stock fell 6.4 percent to 3,200 yen. Fuji Heavy Industries Ltd., 16 percent owned by Toyota and the maker of Subaru cars, lost 7.3 percent to 320 yen, the lowest since December 1997, despite saying yesterday it beat its first-half profit forecast. Mazda Motor Corp., Japan's fourth-largest automaker, slumped 9.1 percent to 200 yen.
Sony's revision and Toyota's sales slump point to an increasing chance other overseas-dependent companies will have to cut earnings forecasts as the dollar and global demand weaken.

U.K. stocks declined, led by financial and energy companies, as investors speculated the worsening economy at home and elsewhere will hurt earnings.
HSBC Holdings Plc, Europe's biggest bank, declined the most since Sept. 11, 2001, after Morgan Stanley cut its share-price estimate for the company by 25 percent as the contagion from the global turmoil spread to Asia. Barclays Plc fell after it was lowered to ``neutral'' from ``buy'' at UBS AG, which said earnings and dividends at the U.K.'s second-biggest bank may be hurt as it raises capital.
The FTSE 100 Index lost 243.93, or 6 percent, to a five- year low of 3,843.9 at 10:13 a.m. in London, headed for a 5.4 percent decline this week.
HSBC slid 8.4 percent to 737.25. Morgan Stanley also lowered its earnings estimates for HSBC by 3 percent to $1.11 a share for this year and 10 percent to $1.05 for 2009.
Barclays fell 4.1 percent to 209.25.
Barclays is likely to cut its dividend next year as profit declines, Crutchley said, predicting a 2009 dividend of 12 pence and earnings of 24.36 pence a share, reduced from a previous estimate of 43.59 pence.
HBOS Plc, the U.K. bank that agreed to be bought by Lloyds TSB Group Plc, slid 9.3 percent to 66 pence. Aviva Plc, the U.K.'s biggest insurer, declined 8 percent to 253 pence.
BHP Billiton Ltd., the world's largest mining company, slid 1.7 percent to 809 pence. Royal Dutch Shell Plc, Europe's biggest oil company, decreased 5 percent to 1,473.
Copper for delivery in three months slumped for a fifth day, sliding 5.3 percent to $3,825 a metric ton in London. Nickel, lead, zinc and aluminum prices also fell.
German stocks plunged to the lowest in three years as investor concern deepened a global economic cooldown will weigh on corporate profits.
MAN AG, Europe's third-largest truckmaker, tumbled after Volvo AB cut its outlook and Scania AB reported profit figures that trailed analysts' estimates. Daimler AG fell to a 12-year low as several analysts reduced their share-price estimates for the world's largest truckmaker and Oddo & Cie cut its recommendation on the shares.
The DAX Index declined 224.03, or 5 percent, to 4,295.67, the lowest since May 2005. The DAX Index dropped 10 percent this week.
Volkswagen AG plunged 18.15 euros, or 7.9 percent, to 210.85, the lowest in more than five weeks.
Europe's largest carmaker said vehicle sales rose 3.9 percent in the first nine months because of growth in emerging economies and the introduction of new models. The company said it's sticking to a goal of selling more cars this year.
Daimler declined 1.41 euros, or 5.9 percent, to 22.41, the lowest since November 1998. Oddo lowered its recommendation on the luxury-car and truckmaker to ``reduce'' from ``add'' after Daimler yesterday scrapped its full-year profit forecast by 1 billion euros ($1.3 billion) on plunging auto sales.

Stocks may have closed with substantial losses Friday, but the extent of the downturn was far better than many initially feared.

Index future

s were limit down ahead of the session's opening bell, which occurs when trading is halted in order to pace losses amid frantic selling efforts. That had participants spooked and anticipating a large scale sell-off.
Stocks fell to their session low early on. At that point, the Dow was down 5.8%, the S&P 500 was down 6.1%, and the Nasdaq fell 6.9% to a new five-year low. Choppy trading gave way to a late session rally that helped stocks finish off their lows, but still deep in the red.
The bleak mood in early trading stemmed from continued fear of a global recession as England's economy contracted by a worse-than-expected 0.5%. That prompted London's FTSE 100 to close with a 5.0% loss. Other major European markets also saw losses, but none matched the 9.6% drop in Japan and the 8.3% fall in China.
The argument that slower global growth will undercut demand for oil has crude prices down 56% from their July high. That prompted OPEC to schedule an emergency meeting in which it decided to cut daily production by 1.5 million barrels, effective immediately. Oil prices fell further, though. Crude futures were down 7.7% at one point, but ended around 4.5% lower at less than $65 per barrel. Oil last traded there in mid-2007.
A dour outlook from global tech company Microsoft (MSFT 21.96, -0.36) only reaffirmed the fear that earnings prospects are clouded by macro concerns. The company posted better-than-expected revenue and earnings per share results for its latest quarter, but guided profits below the consensus estimate for both the fourth quarter and fiscal 2009.
With economic concerns abounding, markets believe the FOMC is certain to cut the fed funds target rate. Currently, there is a 78% probability it will be taken to 1.00%, and a 22% chance it will be taken to 0.75%, down from the current 1.50%.
The move by the Fed would complement other government efforts to restore financial and credit markets. For instance, sources indicated the U.S. Treasury is looking to further extend the use of funds in its TARP emergency plan to begin helping regional banks and possibly even insurers. PNC Financial Services (PNC 58.88, +2.00) plans to issue to the U.S. Treasury $7.7 billion of preferred stock and related warrants under the TARP program, which will help in its acquisition of National City (NCC 2.07, -0.68).
Lower interest rates would also aim to help restore the housing market by making loans more affordable. The latest data indicated existing home sales actually increased 5.5% in September from the prior month to an annualized rate of 5.18 million units.
Despite the likelihood of an interest rate cut and persistent volatility in major stock indices, the dollar continues to appreciate against foreign currencies. The dollar index, which measures the greenback's value against a basket of six major currencies, jumped 1.3% to a two-year high.