《【妖舞魔亂】Global Stocks Tumble on Economic Concern; Treasuries, Yen Rally》

 

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Global Stocks Tumble on Economic Concern; Treasuries, Yen Rally

By Lynn Thomasson and Sarah Jones
http://www.bloomberg.com/apps/news?pid=20601087&sid=asq3E5xJKHRI&refer=home

Oct. 24 (Bloomberg) -- Stocks tumbled around the world, sending the developed markets benchmark to the lowest level since June 2003, on concern the deepening economic slump will damage earnings. Yields on 30-year Treasuries dropped to a three-decade low, and the yen climbed to a 13-year high against the dollar.

The Standard & Poor's 500 Index lost 3 percent, a smaller decline than European and Asian equities, even after futures on the measure fell so far that trading was curbed. The U.K.'s FTSE 100 Index sank 6.6 percent and the pound slid the most versus the dollar since 1971 after the economy shrank for the first time since 1992. South Korea's Kospi Index fell 10 percent as the country's economy grew at the slowest pace in four years.

``There's a worldwide fear of a worldwide recession,'' said Michael Binger, Minneapolis-based fund manager at Thrivent Asset Management, which oversees about $70 billion. ``The concern has moved to being about which banks and companies will fail to which countries could fail, with Iceland and some of the smaller countries around the world being on life support.''

The MSCI World Index of 23 developed markets lost 4.3 percent to 871.95 at 11:22 a.m. in New York. The S&P 500's retreat gave the U.S. the fourth-best performance today. MSCI's measure of emerging markets lost 7.3 percent to 476.66 as Russia's Micex Stock Exchange stopped trading until next week after shares slumped 14 percent.

More than $10 trillion has been erased from the market value of equities so far this month, accounting for about one-third of the total value wiped off world equities this year. MSCI's index of developed and emerging stock markets plunged 48 percent in 2008 and is heading for its worst year on record as credit- related losses topped $660 billion in the worst financial crisis since the Great Depression.

VIX Jumps

The Chicago Board Options Exchange Volatility Index surged to 89.53, the highest in its 18-year history. The VIX measures the cost of using options as insurance against S&P 500 declines.

Since the start of October, 205 companies in the S&P 500 have reported quarterly results, posing an average profit decline of 25 percent, according to Bloomberg data.

Toyota Motor Corp. tumbled 6.4 percent to 3,200 yen after Japan's biggest carmaker reported a drop in quarterly sales for the first time in seven years.

U.S. auto sales this month may fall to their lowest rate in at least 25 years as tighter credit and falling home values cripple demand, according to Deutsche Bank AG.

No Bankruptcy

General Motors Corp. slid 14 percent to $5.24. GM reiterated today that bankruptcy is ``not an option'' for the company. Speculation regarding GM's financial stability is unfounded, spokesman Tony Cervone said in an interview.

Europe's Dow Jones Stoxx 600 Index slid 6.2 percent as Air France-KLM Group, the region's biggest airline, said it will be ``very difficult'' to meet full-year earnings targets as the global credit crisis and slowing economic growth undermine demand for travel.

Treasuries rose, sending the yield on the 30-year bond to the lowest since regular issuance of the securities began in 1977. The yield on the 4 1/2 percent bond due in May 2038 decreased 0.10 percentage point to 3.95 percent, according to BGCantor Market Data, after dropping as low as 3.8676 percent.

``We're getting very close to the emotional blow-off where everybody says, `I don't care; I want out,''' said E. Craig Coats Jr., who co-heads fixed income at Keefe, Bruyette & Woods Inc. in New York. ``Everybody seems to be saying `I want to be in cash or Treasuries.'''

Iceland Bailout

Iceland secured an emergency bailout loan of $2 billion from the International Monetary Fund after the collapse of the island's banking system paralyzed much of its foreign exchange market, Prime Minister Geir Haarde said in Reykjavik.

U.S. stocks would stop trading for an hour should the Dow average decline 1,100 points to 7,591.25, based on ``circuit breakers'' imposed by the New York Stock Exchange. The Dow fell 368.13, or 4.2 percent, to 8,323.12. Futures on the S&P 500 lost 6.6 percent before U.S. markets officially opened, triggering a Chicago Mercantile Exchange measure meant to limit losses.

Pulte Homes Inc. gained 6.9 percent to $8.67 after home resales in the U.S. rose more than forecast in September, helping U.S. stocks recover losses. Cheaper prices on foreclosed property lifted purchases of existing homes up 5.5 percent last month to a 5.18 million annual pace, the highest level in a year, the National Association of Realtors said in Washington.

Energy stocks fell the most globally, losing 7.2 percent, according to data compiled by Bloomberg. Crude oil slumped as much as 7.7 percent to $62.65, the lowest price since May 2007. Exxon Mobil Corp. retreated 4.4 percent to $67.31.

Takeunder

National City Corp. fell 19 percent to $2.22. PNC Financial Services Group Inc., Pennsylvania's largest bank, plans to buy the lender, Ohio's largest bank, for about $5.2 billion in stock with funds from the U.S. Treasury. The offer of $2.23 a share is 19 percent less than National City's closing price yesterday.

The yen climbed to a 13-year high against the dollar as stock-market losses prompted investors to dump higher-yielding assets funded by low-cost loans in Japan.

Japan's currency surged to the strongest in six years against the euro, posting its biggest gain ever, as the prospect of a deepening global recession prompted the unwinding of carry trades. The pound fell below $1.53 in its biggest drop in at least 37 years after the U.K. economy shrank more than forecast in the third quarter, bringing it to the brink of recession.

The yen touched 90.93 per dollar, the strongest level since August 1995. The yen climbed as much as 9.6 percent against the euro, the most on an intraday basis since the European currency's inception in 1999.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
Last Updated: October 24, 2008 11:24 EDT

 

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