Tumbling oil and commodity prices saw a spark of life for US markets which rebounded more than 1% overnight.
The small rally will be reflected here with the overnight futures market signalling a rise: the upbeat mood will help battered Asian and European markets later in the day. they were sold off again overnight before the drop in oil prices could influence prices.
Nymex August crude in New York fell almost $US5.50 to $US135.85. It finished a touch higher in official trading, but fell in after hours deals.
The drop took the fall in two days to more than 5%, or over $US9 a barrel.
The prices of most commodities, especially metals like copper, nickel and zinc fell in either London and or New York. Gold prices were lower as were prices of major agricultural commodities such as corn in Chicago.
Also helping the US recovery was a strong signal that the US Fed’s financial lifeline to battered banks would continue into 2009. That was taken as a positive by desperate investors, as were comments by the head of JP Morgan that buyers were returning for some financial securities.
But the Fed comments, by chairman Ben Bernanke, isn’t a positive for the market, or the US economy. it’s a recognition that US financial firms are still too weak to stand on their own feet in the markets and fund themselves. It’s a form of financial life support. And it should also be remembered that one of those on that life support from the Fed, via the Bear Stearns rescue back up, is JP Morgan.
The Dow jumped 151.76 points, or 1.35%, to 11,383.72 after swinging through a 220 point range; Nasdaq rose 51.10 points, or 2.28%, to 2294.42 (On news Microsoft still wants Yahoo) and the Standard & Poor’s 500 index finished up 17.46 points, or 2.24%, to a preliminary close at 1273.70.
Airline and car industry shares were boosted ( Northwest Airlines price surged 31%: US investors are getting desperate).
European markets tumbled sharply ahead of the US oil price fall. The Dow Jones SToxx 600 Index fell to a three year low driven by falls in all 18 European stockmarkets.
Banks, energy, retailing and manufacturing stocks slumped. German industrial giant Siemens revealed plans to sack more than 16,000 workers around the world to cut costs and the Bank of Ireland said the slump and credit crunch were "adversely impacting" on its financial results.
The Stoxx Index fell 1.5%, extending its 2008 decline to 23%. London’s FTSE 100 Index averted a bear market at the close after earlier extending its retreat from last year’s high to 20%. The Footsie 1.3%, to 5,440.5. The index earlier dropped as much as 20.4% from a high of 6,732.4 on June 15, 2007.
National indexes dropped in all 18 western European markets today. Germany’s DAX lost 1.4% while France’s CAC 40 slipped 1.5%. Ireland’s ISEQ Index plunged 4.1%.
In Australia and Asia yesterday it was a day for unwanted comparisons.
The Australian market hit its lowest point in almost two years and the main Asian benchmark, the MSCI Asia Pacific Index hit its lowest point since November 2006.
The MSCI Asia Pacific Index fell 1.8% to the lowest level since November 2006 and is now firmly in bear territory, being off nearly 24% since its peak on November 1 2007.
Japan’s Nikkei lost 2.5%, South Korea’s Kospi Index plunged 2.9%, its the biggest decline since February and Hong Kong’s Hang Seng Index slumped 3.2%.
No one factor stood out except the sharp falls for Fannie Mae and Freddie Mac in the US. There were estimates that the two quasi-US Government controlled mortgage insurers would need another $US75 billion in capital. With bills in the US Congress giving both groups a major role in helping to try to stem the flood of mortgage failures in the US, the forecasted new capital needs hit market confidence.
The US Senate could vote on one bill tonight, just in time for the election campaign. It has to be resolved with the US House of Representatives where a similar bill was passed.
US analysts say it will be hard for both to raise fresh capital from the market, especially in that quantity. Both have already raised around $US20 billion in the past year.
The news knocked confidence in financial shares in Australia and Asia. That saw the ASX 200 lose 69.6 points or 1.4%, to 4,932.9, its lowest since August 2, 2006. The index has lost more than a quarter of its value since reaching an all- time high on November 1, 2007.
Australian financial shares fell more than 2% yesterday while Australia’s business confidence index dropped to minus 9 points from minus 4 in May, the lowest since September 2001.
Companies reported (See above story) rising costs, falling sales and solid wage rises.
The ANZ fell 60 cents to $18.60, the NAB 72 cents to $26.35, Westpac dropped 48 cents to $19.52 and Commonwealth Bank lost 72 cents to $40.73.
The big miners were mixed, with Rio Tinto gaining 20 cents to $123.45 and BHP Billiton losing 25 cents to $39.50. Struggling fund manager Allco Finance Group gained 1.5 cents to 36 cents after the company took another step on the road to recovery, with the sale of Singaporean real estate assets for $138 million. Allco said it generated a $90 profit on the deal.
The media sector was mixed, with Fairfax rising 6 cents to $2.85, Consolidated Media Holdings 2 cents to $3.19, but News Corp lost 26 cents to $15.34 and its non-voting shares fell 25 cents to $15.08.
Retailers were mixed, with Harvey Norman rising 4 cents to $3.11, Woolworths gaining 37 cents to $24.40. But David Jones shed 11 cents to $2.91 and Wesfarmers l2 cents to $34.23.
Alcoa came out after the
