US stocks staged a late rally to end the session in the black. The spike was triggered by a report that listed a number of potential suitors for Lehman Brothers, but the news did little to help the broker itself.
Late in the session The Wall Street Journal published a report suggesting the embattled broker was actively courting a number of suitors, including Bank of America. The Journal’s report couldn’t prevent the Lehman’s shares from slumping 41.8 per cent.
But the news seemed to lifted investor sentiment and helped the broader market close above the gain line.
The Dow gained 164.79, or 1.46 per cent to 11433.71, while the S&P 500 was up 17.01, or 1.38 per cent to 1249.05. The NASDAQ closed 29.52 points, or 1.32 per cent higher at 2258.22.
Bank of America, which declined to comment on the Journal’s article, added 2 per cent.
Washington Mutual, which had been pressured in recent sessions, jumped 22 per cent.
JPMorgan added 5.7 per cent, Wells Fargo was up 6.8 per cent and American Insurance Group added a relatively modest 0.3 per cent.
AIG also benefited from reports that it might consider selling the consumer finance and reinsurance units to raise money.
Meanwhile, Fannie Mae added 5.4 per cent.
However, it wasn’t all positive for the sector. Freddie Mac fell 10.6 per cent, Merrill Lynch tumbled 16.6 per cent and Citigroup edged 0.4 per cent lower.
Looking beyond the financial sector, General Motors jumped 11.7 per cent and Ford gained 4.7 per cent on speculation about US$25 billion in federal loans to help the ailing US auto industry.
The car makers also benefited from ongoing weakness in oil prices. NYMEX light crude for October delivery slipped US$1.71 to US$100.87 a barrel, the lowest close since late-March.
However energy majors Exxon Mobil and Chevron managed to gain 0.4 per cent and 2 per cent respectively.
Gold also continued to slide. COMEX gold for December delivery fell US$17 to US$745.50 an ounce.
Major miner Freeport McMoRan Copper & Gold dropped 1.3 per cent.
Boeing climbed 0.7 per cent, while Northrop Grumman edged 0.3 per cent lower.
Yesterday, the US Defense Department said it would push back its decision on a US$35 billion tanker contract to the next administration, delaying the competition between Boeing and Northrop Grumman to replace the Air Force's aerial refuelling fleet.
Among technology stocks, Microsoft added 3.4 per cent, Google climbed 4.7 per cent and Apple was up 0.7 per cent.
Yesterday, Apple a line of iPods reached an agreement with NBC Universal that means the TV network will begin selling programs again on iTunes.
NBC parent General Electric tacked on 0.25 per cent.
In economic news, the US trade deficit jumped to US$62.2 billion in July, compared to US$58.8 billion in June. The deficit came in larger than economists' forecasts for US$58 billion.
Meanwhile, the number of Americans filing new jobless claims fell 6,000 to 445,000 last week. Economists had forecasted a larger drop.
UKmarkets
British stocks suffered their third consecutive loss as US credit crunch spill over again hit the UK. Banks continued their slide as concerns over Lehman’s bailout left investors flummoxed.
The FTSE 100 closed 47.8, or 0.89 per cent lower at 5318.4.
UK banks HSBC, Barclays, Royal Bank of Scotland, HBOS and Lloyds TSB were between 2.1 per cent and 4.3 per cent cheaper.
Retailers were also battered, Morrison Supermarkets fell 6.1 per cent even though its results met guidance.
Discretionary stocks were not left unscathed either, Home Retail lost 5.7 per cent after posting second quarter results that missed the mark. The mid cap saw losses in both it Argos and Homebase businesses.
Home improvement retailer, Kingfisher, suffered a downgrade from Berstein, sending the stock 5.4 per cent lower.
Sainsbury slipped nearly 6 per cent, Tesco let off 1.9 per cent while Marks & Spencer dropped off 3.1 per cent.
On the other hand, miners capped loses, BG Group picked up 4.3 per cent after saying that after drilling at the Iara oil field in Brazil it now estimated the field could contain three to four billion barrels of recoverable reserves, confirming earlier comments by project partner Petrobas.
BG received an extra boost after it decided to abandon its takeover bid for Autralia’s Origin Energy.
European markets
Euro markets slid for the third day in a row as investors contemplated the fate of the banking sector. Further fallout out over Lehman Brothers continued to plague financial stocks.
Germany’s DAX fell 31.42, or 0.5 per cent to 6178.9, while France’s CAC 40 lost 34.59, or 0.81 per cent to 4249.07.
The banking sector was the biggest drag, BNP Paribas was 0.9 per cent off, Dexia was 3.3 per cent lighter and Credit Agricole was 2.1 per cent cheaper.
Deutsche Bank was 2.6 per cent weaker. The bank said it was advancing talks to buy a stake in rival Deutsche Postbank. Insurer, AXA, fell 3.3 per cent on a broker downgrade.
Also dampening the sector was a EU report saying that member countries needed to be better prepared for sharing the bailout costs should one of the bloc’s large financial institutions run into problems, a leading Brussels policymaker said on Thursday.
Postbank shares climbed 4.1 per cent and Deutsche Post shares rose 1.2 per cent.
Pharmaceutical stocks were also under the pump as Goldman Sachs cut AstraZeneca’s rating and downgraded Shire. The firms were trading down around 2.9 per cent and 2 per cent respectively.
European supermarkets tracked their British peers lower. Carrefour fell 2 per cent, Casino Guichard let off 2.5 per cent and Dutch retailer Ahold dipped 1.5 per cent.
Japanese markets
Japanese markets lost ground on Thursday to close near a six-month low. Banks were the hardest hit as investors considered the impact of Lehman Brothers.
The benchmark Nikkei 225 lost 244.13 points, or 1.98 per cent, to 12102.50.
Japan's top lender Mitsubishi UFJ fell 5.1 per cent, while Mizuho Financial Group lost 5.3 per cent.
Nomura Holdings, Japan's biggest brokerage, skidded 5.9 per cent.
However the biggest drag on the Nikkei was digital camera maker Canon which declined 3.6 per cent amid uncertainty about the health of the global economy. Fellow exporter Honda Motor fell 2.2 per cent.
Suzuki, the nation's second-largest mini-car maker, sank 4.7 per cent. Hino Motors fell 4.9 per cent, the lowest since March 2003, after Credit Suisse Group cut its recommendation on the truck maker to neutral.
Hitachi fell 4.8 per cent after Chubu Electric Power said it would sue the electronics maker, seeking US$390 million in damages as well as late payment charges due to problems with a Hitachi-made turbine at the utility's nuclear plant.
Hong Kongmarkets
Hong Kong shares dropped on Thursday to their lowest close in 18 months. Investors dumped shares in Chinese firms amid deepening fears of a global slowdown and a lack of growth-supportive policies from Beijing.
The Hang Seng Index finished 611.06 points, or 3.06 per cent lower at 19388.72.
China Mobile sank 5.3 per cent, China Unicom, China Mobile's smaller rival, tumbled 4.8 per cent. China Netcom, which is soon to be merged with China Unicom, dropped 4.5 per cent
Chinese telecom stocks were pressured by deepening concerns over the fallout from widespread industry restructuring and regulatory uncertainties.
HSBC Holdings, which has a weighting of more than 16 per cent in the Hang Seng index, saw its shares slip 1.3 per cent.
Among China-related shares listed in Hong Kong, Industrial & Commercial Bank of China lost 3.4 per cent, while Anhui Conch Cement Co surrendered 12.1 per cent, amid worries about weakening demand on the mainland.
In the property sector, Cheung Kong shed 4 per cent, China Overseas Land gave up 8.8 per cent while Guangzhou R&F Properties also slid 8.8 per cent.
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