Selloff in U.S. Equities Hurts Markets Across the Americas and Europe
Friday January 5 2:50pm
Source: Dow Jones
NEW YORK -- Markets across the Americas finished broadly lower Friday, hurt by sinking U.S. stocks amid concerns about corporate profits and employment data that clouded the prospects for another aggressive interest-rate cut by the Federal Reserve.
Earlier, European shares finished mixed as investors sought out telecommunications and technology stocks at the expense of defensive plays such as insurance and pharmaceutical issues. Major Asian stock markets finished higher.
In Toronto, the TSE Composite Index tumbled 215.42, or 2.4%, to 8690.23. Technology stocks were pounded by heavy losses in U.S. shares. Nortel Networks closed down 9%, fiber-optics equipment company JDS Uniphase lost 11% and wireless Internet-device maker Research In Motion tumbled 16%. Financials, utilities and consumer-product stocks all were weak.
In Mexico City, the IPC index lost 124.01, or 2.1%, to 5924.33. Over the previous two sessions, the index had gained nearly 9% on investors' enthusiasm for the surprise interest-rate cut by the Fed.
In Sao Paulo, the Bovespa index ended down 265.25, or 1.6%, to 16409.81 -- its first losing session since Dec. 21. Cable-television provider Globo Cabo's preferred shares, one of the biggest gainers recently, lost 5.1%.
Those three markets were hurt by heavy losses on Wall Street, where the Dow Jones Industrial Average dropped 250.40, or 2.3%, to 10662.01, and the battered Nasdaq Composite Index sank 159.18, or 6.2%, to 2407.65.
In New York, concerns about the latest corporate-profit warnings were exacerbated by a December employment report suggesting the U.S. economy isn't slowing as quickly as some had feared. The U.S. Labor Department reported the U.S. unemployment rate held steady in December at 4%, while nonfarm payrolls grew by 105,000, up from the downwardly revised 59,000 seen in November. The November payroll figure had originally been reported as 94,000.
In London, the Financial Times-Stock Exchange 100-Share index edged up 12.5 points, or 0.2%, to 6198.1.
In Frankfurt, the Xetra DAX index tacked on 5.77, or 0.1%, to 6382.31.
The CAC 40 Index in Paris closed down 57.97, or 1%, to 5758.02.
Shares of supermarket group Carrefour dropped 4.8% as investors braced for details of December revenues, scheduled to be reported Monday.
Swedish shares ended Friday's shortened session mixed, with heavyweights Ericsson and AstraZeneca ending lower in thin trading. The Stockholm General index rose 30.93, or 0.7%, to 4773.10.
Milan's Mibtel index closed up 0.4%, but Amsterdam's AEX index eased 0.5%. Shares in Madrid finished little changed, while Zurich's Swiss Market index, loaded with pharmaceutical and insurance shares, dropped 131.20, or 1.6%, to 7985.60.
Telecommunications and technology stocks were a bright spot in Europe. Both sectors have risen in the past two days following the U.S. Federal Reserve's cuts in interest rates. But the gains came at the expense of many defensive stocks, such as pharmaceutical and food companies. In Zurich, Novartis dropped 4.4% and Nestle lost 1.5%.
Telecom stocks climbed after Deutsche Bank released a bullish report on the sector. Deutsche Telekom, up 1.9%, was named one of the bank's top picks and Telefonica, British Telecommunications and Vodafone Group were given "strong buy" recommendations. Telefonica, BT and Vodafone finished up 1.6%, 2.8% and 1.4%, respectively.
Following a steep selloff earlier this week, Autonomy surged 17% in London. The British software developer said in a statement it didn't experience a slowdown in sales in the fourth quarter and it remains confident about its prospects.
But EM.TV & Merchandising stumbled 10% on the Neuer Markt in Frankfurt on a report that talks between it and German media company Kirsch have broken down, casting doubts about a deal to save the troubled media company.
In Tokyo, shares rose for the first time in five sessions on expectations that a stronger dollar will mean more robust profits at Japanese exporters when they convert their overseas earnings into yen. The blue-chip Nikkei 225 index gained 176.12 points, or 1.3%, to close at 13867.61. Decliners beat advancers by 22 issues as an estimated 482.5 million shares changed hands. The key Nikkei index had lost about 317 points in the last four sessions before Friday.
Exporters of precision equipment, automobiles, and electronic devices led the gains. Nikon, Honda, TDK, and Ricoh all rose more than 4.5%. Leading high-technology shares finished broadly higher, including NTT DoCoMo, Sony, Toshiba, NEC, Fujitsu, Sharp, Matsushita Electric, Advantest, Tokyo Electron, Fanuc and Kyocera.
Despite the rise in Tokyo stocks, the yen dropped as the dollar topped 116 yen for first time since July 1999, rising as high as 116.86 yen in Asian trading. Investors again sold the Japanese currency on worries that Japan is losing its footing as it tries to climb out of its deepest economic slump in decades.
Hong Kong's Hang Seng index rose 212.58, or 1.4%, to close at 15447.61, continuing to advance amid hopes that the Fed will ease U.S. rates again at the end of this month, and on expectations that local monetary policy would be eased to mirror Wednesday's U.S. rate cut.
The Hong Kong Monetary Authority lowered its base overnight lending rate by one-half point to 7.5%. The authority, which functions as Hong Kong's central bank, tends to match interest-rate adjustments in the U.S. because of the Hong Kong dollar's peg to the U.S. dollar. After the market's close, the Hong Kong Association of Banks cut the maximum interest rate on savings accounts to 4.25% from 4.75%, and Hong Kong's major lenders followed suit by saying they will trim their prime lending rates to 9% from 9.5%, effective Monday.
Property companies that carry heavy debt loads stand to gain from the turn in the rate cycle, with New World Development's 10% leap Friday outperforming the sector. Major commercial landlords Wharf Holdings and Swire Pacific also gained, adding 4.7% and 5.9%, respectively.
But Pacific Century CyberWorks fell 2.9% after the five banks arranging its $4.7 billion syndicated loan said the company agreed to pay higher interest rates on the financing package.
In Seoul, shares on the Korea Stock Exchange extended their gains on active foreign buying despite profit-taking by retail investors following Thursday's 7% jump, analysts said. The Korea Composite Stock Price Index, or Kospi, rose 22.83, or 4.1%, to close at 580.85, its highest level since hitting 588.34 Oct. 10.
Shares in Taipei rose on hopes that tensions with China will ease and the U.S. rate cuts, analysts said. The Weighted Price Index of the Taiwan Stock Exchange gained 159.40 points, or 3.1%, to close at 5295.53 after Thursday's 4.9% rally.
Elsewhere in the region, main market indexes closed up 2.9% in Bangkok, 2.8% in Singapore, 2.2% in Jakarta, 1.7% in Bombay and 1% in Kuala Lumpur, but Philippine shares finished modestly lower.
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