Stocks: Wednesday's review
Most Asian stocks rose after a gauge of economic indicators signaled growth in China is withstanding Europe’s debt crisis and a faltering U.S. economy.
China Life Insurance Co., the nation’s biggest insurer by market value, rose 1.6 percent in Hong Kong after the Conference Board said its leading indicator index for the world’s second- largest economy rose 0.6 percent in July, citing a preliminary reading.
BHP Billiton Ltd. (BHP), the world’s largest mining company, climbed 0.9 percent in Sydney, reversing an earlier decline of as much as 0.5 percent.
Esprit Holdings Ltd. plunged 11 percent after Morgan Stanley listed it as one of the Asian companies most at risk from Europe’s debt crisis.
Stock gains were also limited today after the IMF said the world economy will expand 4 percent this year and next, revising down its June forecasts of 4.3 percent in 2011 and of 4.5 percent in 2012. The U.S. growth projection for 2011 was lowered to 1.5 percent from a 2.5 percent prediction in June.
European stocks retreated as officials said they plan to return to Athens next week after three days of consultations failed to produce a solution to the country’s debt crisis.
PSA Peugeot Citroen and Volkswagen AG (VOW) led a decline in automakers.
Deutsche Lufthansa AG (LHA) lost 5 percent as Deutsche Bank AG (DBK) downgraded Europe’s second-biggest airline. Stada Arzneimittel AG (SAZ) slumped 19 percent for the biggest drop in three years.
Bank of England officials considered ways of adding stimulus to the economy this month and most of them said an expansion of their 200 billion-pound ($313 billion) bond purchase program is “increasingly probable.” The nine-member Monetary Policy Committee voted 8-1 to maintain the current size of the bond plan and were unanimous in keeping the benchmark rate at a record low of 0.5 percent. The minutes of the Sept. 8 meeting show the decision on whether to expand stimulus was “finely balanced.”
National benchmark indexes retreated in 13 of the 18 western European markets. Germany’s DAX Index declined 2.5 percent, while the U.K.’s FTSE 100 lost 1.4 percent and France’s CAC 40 dropped 1.6 percent.
Peugeot, Europe’s second-largest carmaker, slid 5.7 percent to 17.04 euros and Volkswagen preferred shares slipped 2.6 percent to 111 euros. Bayerische Motoren Werke AG (BMW) and Daimler AG (DAI), the world’s biggest makers of luxury cars, declined 2.7 percent to 56.09 euros and 3.8 percent to 35.40 euros, respectively.
Fiat SpA (F) fell 6.2 percent to 4.04 as Moody’s Investors Service downgraded its corporate family rating. A gauge of auto- industry shares dropped 3.3 percent for the second-largest retreat among 19 industry groups in the Stoxx 600.
Deutsche Bank retreated 2.3 percent to 23.90 euros as Chief Financial Officer Stefan Krause said Germany’s biggest bank is “fighting” to meet its goal of 10 billion euros in operating pretax profit this year.
U.S. stocks slumped, giving the Standard & Poor’s 500 Index its biggest decline in a month, as the Federal Reserve announced plans to buy $400 billion of long- term debt and cited risks to the economic outlook.
Caterpillar Inc. and Dow Chemical Co. fell more than 5.1 percent, pacing losses among companies most-tied to the economy. Financial shares in the S&P 500 slid 4.9 percent as a group, to a two-year low, as Moody’s Investors Service cut its ratings on Bank of America Corp., Citigroup Inc. and Wells Fargo & Co.
Treasury 30-year bonds surged, pushing the yields below 3 percent for the first time since 2009, after the Fed said it will purchase longer-term debt and sell shorter maturities to sustain the economic recovery, confirming market speculation that the central bank was planning an “Operation Twist” similar to one of the central bank’s programs in the 1960s.
Fed Chairman Ben Bernanke said in an Aug. 26 speech that the central bank still has tools to stimulate the economy without signaling he will use them. He echoed comments of dissenting members of the Federal Open Market Committee who said then that U.S. economic data aren’t pointing to a recession.
The KBW Bank Index (BKX) declined 5.5 percent. Bank of America fell 7.5 percent to $6.38. Wells Fargo lost 3.9 percent to $23.71, and Citigroup slipped 5.2 percent to $25.52.
Bank of America and Wells Fargo had their long-term credit ratings downgraded by Moody’s, which cited a decreasing probability that the U.S. would support the lenders in an emergency. Citigroup’s short-term credit rating was cut.
Goldman Sachs Group Inc. (GS), the fifth-biggest U.S. bank by assets, closed below $100 for the first time since March 2009. The shares dropped 4.6 percent to $97.86. Morgan Stanley, the sixth-biggest U.S. bank by assets, sustained the biggest decline in the S&P 500 Financials Index as the stock fell 8.6 percent to $13.82.