US shares ended on a moody note as worries about Wachovia’s earnings and the outlook for corporate profits overshadowed the March retail sales report.
The Dow lost 0.2%; the Standard & Poor’s 500 index lost 0.3% and Nasdaq composite lost 0.6%.
After Friday’s sharp fall in the wake of General Electric’s poor profit figures, concerns were revived Monday by Wachovia, America’s fourth biggest commercial bank, which reported weak figures including a $350 million loss and $7 billion in new capital raisings. Wachovia’s result was brought forward four days and released at 6 am New York time, a move that worried some investors.
The market fell sharply, but then retracted after the 0.2% rise in march retail sales. The market had been expecting a fall but after car and petrol sales were taken out, the figure was only up 0.1% (after an upward revision to February’s drop).
Wachovia also cut its dividend to save $US2 billion, another sign of the strain it is under. A week ago it was Washington Mutual, America’s biggest savings and loan, which received a $US7 billion capital injection, cut dividend, closed 180 offices and sacked 3,000 people.
Wachovia shares ended down 10% after falling 17% at one stage and setting off a tremor across financials.Citigroup, Bank of America and Washington Mutual were all weak.
A $1 billion bid from Blockbuster for Circuit City was seen as an act of desperation by a company whose basic video and DVD rentals and sales business is being overtaken by the internet and direct downloads.
Blockbuster shares lost 13%, while Circuit City shares jumped 29%. Circuit City has been stumbling along as the retail and housing slowdowns have battered sales.
It has been sacking staff and closing stores to try and keep in the game. A tax benefit meant it reported a small first quarter profit last week. The merger proposal is considered a last attempt by two companies to maintain their relevance.
Delta Air Lines and Northwest were reportedly close to announcing a merger after months of speculation.
Commodity prices : May crude oil futures rose $US1.62 to settle at $US111.76 a barrel on the New York Mercantile Exchange. That was a record close.
Comex June gold futures rose 70 cents to $US927.70 an ounce: a weaker greenback drove both gold and oil higher.
European stocks fell for a fifth day after Philips reported lower profits than expected, the surprise loss and early profit statement from Wachovia Corp and the Group of Seven finance ministers said prospects for the economy deteriorated.
Philips is Europe’s largest consumer-electronics maker and it revealed a 75% drop in first quarter earnings before trading started.
Fears about the health of the British mortgage and banking sectors were added to by the Wachovia news and financials across the region eased. BHP Billiton declined with metals prices in London.
The Australian market will open steady according to the futures market overnight. That probably means early weakness.
In Europe the Dow Jones Stoxx 600 Index fell 0.8% as national indexes dropped in all 18 western European markets. London’s FTSE 100 lost 1.1%, while Germany’s DAX and France’s CAC eased 0.7%.
Stocks dropped in Europe and Asia after Philips profit missed estimates, banks were hit, industrial shares fell after general Electric’s bad first quarter figures and the Group of Seven finance ministers said economic prospects have deteriorated.
Philips, Europe’s largest consumer-electronics maker, fell after revealing a 75% slump in first quarter earnings.
KDDI in Japan fell after missing full-year profit targets and US bank, Wachovia dipped ahead of US trading after bringing forward its first quarter results amid rumours of a $US7 billion recapitalisation.
Airline stocks in Australia and Britain fell and transport stocks were also easier.
The MSCI World Index fell 0.6% in European trading, China’s CSI 300 Index plunged 6.5%, the most since late January and the Australian market fell almost 2%.
News of the G-7 finance ministers comments that prospects for the global economy have weakened and financial market losses will continue didn’t help confidence. The ministers downgraded their outlook from two months ago, saying the global economy faces "downside” risks.
Europe’s Dow Jones Stoxx 600 Index slipped 0.7%, while the MSCI Asia Pacific Indexes plunged 2.3%.
London’s FT 100 index fell as the UK reported the worst producer price index numbers since 1991 in March.
Prices at factory gates climbed 6.2% from a year earlier, compared with 5.9% rise in February.
UK stocks declined for the fifth day, led by Rio Tinto Group and other miners after copper dropped more than 2% in London and nickel, lead, zinc and aluminium prices fell.
The FTSE 100 was off 0.6%, while the Irish market dropped 1.1%.
Overall, Asian stocks fell the most in a month, led by banks and consumer electronics makers.
Tokyo’s Nikkei Index fell 2.8% and Australian shares shed 1.8% to a two-week low. Other markets were lower, but the damage was greatest in China.
In Australia, the ASX 200 index fell 96.9 points to 5342.4, adding to last week’s 3.2% decline. It’s now down 15.7% since the start of the year, but is still up 6% from the 2008 low seen on March 18. But that gain is narrowing.
The banks all fell, after a brief respite in the previous session with the NAB down 1.8% to $28.50 and Commonwealth Bank 2.3% to $40.49.
Resources were weaker and will go lower after the fall in London overnight.
BHP Billiton fell 1.2% to $41.65, and Woodside Petroleum dropped 2.5% to $54.30 and gold miner Lihir Gold dropped 1.9% to $3.18.
Sino Gold slumped 12% to $5.71 after it cut its production forecast for its Jinfeng gold mine in China by about 20,000 ounces, in part due to power supply disruptions.
Airline Virgi
