Stocks: Monday's review
Japan’s Nikkei 225 Stock Average declined for a second day after China raised reserve requirements for banks, fueling concern more tightening measures will curb demand in Japan’s biggest overseas market.
TDK Corp., a manufacturer of electronic parts which gets almost a third of its revenue from China, lost 3.7 percent. Komatsu Ltd. a maker of construction equipment that has benefited from China’s building boom, fell 1.2 percent. Canon Inc. sank 1.4 percent after the yen gained, clouding the earnings outlook for the camera maker, which gets about 80 percent of its sales overseas.
European stocks dropped the most in three weeks as Standard & Poor’s Ratings Service revised its credit outlook for the U.S. to negative and speculation escalated that Greece needs to restructure its debt.
The Wall Street Journal reported that the IMF regards Greece’s debt as unsustainable and the government should consider restructuring as early as next year. The newspaper cited three people familiar with the situation.
The cost of insuring Greek sovereign debt jumped 56 basis points to a record 1,211, according to CMA prices for credit- default swaps. That indicates there’s a 64.5 percent probability of default within five years.
Alpha Bank SA and Societe Generale SA led a selloff in banks, both dropping more than 3 percent. Salzgitter AG lost 5.1 percent after Goldman Sachs Group Inc. recommended that investors sell the German steelmaker. Synthes Inc. soared 5.6 percent after the company confirmed it has held talks about a possible takeover by Johnson & Johnson.
U.S. stocks slumped, sending benchmark indexes to their biggest declines in a month, after Standard & Poor’s Ratings Service cut the nation’s long-term credit outlook to negative.
S&P put a “negative” outlook on the U.S. AAA credit rating, assigning a one-in-three chance of a ratings cut in the next two years, because of rising budget deficits and debt.
Shares of companies most-tied to economic growth led the declines in the S&P 500. The Morgan Stanley Cyclical Index dropped 1.3 percent as 26 of its 30 stocks tumbled. Caterpillar Inc. and DuPont Co. sank at least 2 percent to help pace the declines in the Dow Jones Industrial Average. Exxon Mobil Corp. and Chevron Corp. dropped more than 1.6 percent amid concern that China’s efforts to cool inflation will hurt the economy.
The S&P 500 had rallied 4.9 percent this year through April 15 amid higher-than-estimated corporate earnings and government stimulus measures. The Fed and U.S. agencies have lent, spent or guaranteed about $8.2 trillion to lift the economy from the worst slump since the Great Depression