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24.11.2011 08:54

Stocks: Wednesday’s review

Asian stocks fell, with a regional gauge heading for its lowest close in a month, as a mining tax was approved in Australia and reports showed the U.S. economy grew slower than expected and China’s manufacturing may have contracted.

Exporters fell after a revised Commerce Department report showed that U.S. gross domestic product climbed at a 2 percent annual rate from July through September, less than a 2.5 percent prior estimate. Some Fed officials said the central bank should consider easing monetary policy further, according to minutes of their Nov. 1-2 meeting.

Australia’s S&P/ASX 200 sank 2 percent, while Hong Kong’s Hang Seng Index dropped 2.1 percent and China’s Shanghai Composite Index fell 0.7 percent, erasing gains of as much as 0.3 percent. Japanese markets are closed today for a holiday.

Samsung Electronics, South Korea’s biggest exporter of consumer electronics, fell 2.9 percent to 935,000 won in Seoul on speculation exports will drop as growth in the world’s biggest economy slows. Li & Fung Ltd., a toy and clothing supplier that counts the U.S. as its largest market, slid 2.9 percent to HK$14.30 in Hong Kong. James Hardie Industries SE, a building materials supplier that gets about 68 percent of sales from the U.S., slipped 1.9 percent to A$6.38 in Sydney.

Australian raw material producers dropped as BHP Billiton, Rio Tinto Group and other iron-ore and coal suppliers face paying about A$11 billion ($10.8 billion) in extra charges in the first three years of the mining tax passed by the lower house of Australia’s parliament yesterday.

BHP Billiton dropped 3.1 percent to A$34.51. Rio Tinto, the world’s second-largest mining company by sales, fell 3.4 percent to A$62.30. OneSteel Ltd., Australia’s second-biggest producer of the metal, sank 7.2 percent to 77 Australian cents.

Chinese lenders declined after HSBC Holdings Plc and Markit Economics said a preliminary survey showed a Chinese manufacturing index may fall to 48 in November from 51 last month. A reading below 50 indicates a contraction.

Industrial & Commercial Bank of China Ltd., the nation’s largest lender, fell 2.8 percent after the report showing China’s manufacturing may have shrunk. China Construction Bank Corp., the country’s second-largest lender, lost 1.7 percent to HK$5.20.

European stocks declined, with the benchmark Stoxx Europe 600 Index posting its longest losing streak since August, as Germany failed to attract sufficient bids at an auction of benchmark 10-year bunds. Germany failed to reach its maximum sales target of 6 billion euros ($8 billion) at an auction of securities due in January 2022. Total bids amounted to 3.889 billion euros, falling short by 35 percent, according to data from the Bundesbank. The securities were sold at a yield of 1.98 percent.

The European Central Bank bought Italian government bonds, according to three people with knowledge of the transactions, who declined to be identified because the trades are confidential. A spokesman for the ECB in Frankfurt declined to comment today on asset purchases.

A preliminary reading of a euro-area composite index from a survey of purchasing managers in manufacturing and services rose to 47.2 in November from 46.5 in October, London-based Markit Economics said today.

National benchmark indexes fell in 17 of the 18 western- European markets. France’s CAC 40 Index slipped 1.7 percent. Germany’s DAX Index dropped 1.4 percent. The U.K.’s FTSE 100 Index slid 1.3 percent.

Logica fell 4.2 percent to 67.6 pence after the stock was cut to “underperform” from “hold” at Jefferies and Co.

Halfords Group Plc dropped 5.1 percent to 314.1 pence. The shares were cut to “sell” from “neutral” at UBS, which cited the company’s limited strategic options for growth.

Dexia jumped 13 percent to 26.9 euro cents. Luxembourg’s Finance Minister Luc Frieden said that talks about the government-backed funding of the remaining assets do not face “insurmountable difficulties.”

Tui Travel Plc, Europe’s largest tour operator, rallied 13 percent to 154 pence, its biggest advance since October 2008, as analysts said concern over the future of rival Thomas Cook Group Plc may present an opportunity to gain market share.

U.S. stocks slumped, sending the Standard & Poor’s 500 Index down for a sixth straight day, as the cost of insuring European government debt against default rose to a record on concern the region’s crisis is worsening.

The crisis that began more than two years ago now risks engulfing Germany. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments rose to an all-time high today as Germany failed to find buyers for 35 percent of the bonds offered at an auction. German Finance Minister Wolfgang Schaeuble said market turbulence sparked by the euro region’s sovereign-debt crisis will last for “a few months.”

European services and manufacturing output shrank for a third month, while a preliminary gauge indicated China’s manufacturing contracted by the most since March 2009. Americans pulled back on spending in October and manufacturers received fewer orders for durable goods.

All 10 groups in the S&P 500 fell as commodity and financial shares had the biggest declines. A gauge of financial stocks in the S&P 500 fell for a third straight day. Goldman Sachs Group Inc. sank 1.7 percent to $87.89, the lowest level since March 2009. American International Group Inc. dropped 4.3 percent to $20.10.

The Fed imposed a tougher capital test on the 31 largest U.S. banks yesterday, releasing the criteria for measuring their wherewithal if the U.S. economy sours and major trading partners default on their debt.

Bank of America (BAC) Corp. dropped 4.3 percent to the lowest since March 2009, the most in the Dow, to $5.14, while Citigroup Inc. decreased 3.9 percent to $23.51. Both are among lenders that may have to temper plans to raise dividends and buy back stock next year as the Federal Reserve toughens capital tests for the biggest U.S. banks.

Commodity shares in the S&P 500 fell at least 2.7 percent. JPMorgan Chase & Co. downgraded commodities to “underweight,” citing policy failures in the U.S. and Europe. Alcoa Inc. (AA) and Halliburton Co. tumbled at least 4.1 percent as data indicated China manufacturing will shrink, sparking concern about slower demand for commodities. U.S. Steel Corp. erased 7.6 percent to $22.41.

Groupon Inc., the largest Internet daily-deal site, plunged 16 percent to below its initial public offering price. The stock was dragged down on concern that profit margins will be squeezed by surging marketing costs and competition from rivals such as, backed by Inc. Signs that Europe’s credit crisis may be worsening also fueled speculation that Groupon’s international operations will suffer.

Walgreen Co. rose 4.4 percent, the most in the S&P 500, to $32.09, on speculation it resolved a dispute with Express Scripts Inc. that could preserve more than $5 billion in annual drug sales for the retailer. Walgreen’s contract to provide prescriptions for Express Scripts’ customers expires at the end of the year.

Deere & Co. rallied 3.9 percent to $74.72. The largest farm-equipment maker reported fiscal fourth-quarter profit and forecast 2012 earnings that topped analysts’ estimates as U.S. farmers flush with cash buy more tractors and combines.

Boston Scientific Corp. rose 0.2 percent after gaining U.S. approval for a new version of its drug-coated heart stent. The second-biggest heart-device maker by revenue will immediately begin manufacturing and selling the Promus Element stent system, the Natick, Massachusetts-based company said in a statement late yesterday.

Market Focus

  • The eurozone started the third quarter on a solid footing, according to PMI survey data
  • Earnings Season in U.S.: Major Reports of the Week
  • German private sector output growth slowed for the second month running in July
  • ECB's Mersch says as conditions normalise, it is unlikely that uncoventional policies will remain necessary
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