US stocks ended lower following a volatile session in New York on Monday. Financial stocks led the retreat, with government-backed lenders Fannie Mae and Freddie Mac sliding on fears they would be forced to raise additional capital.
The Dow was down 56.89, or 0.5 per cent at 11231.96, while the broader S&P 500 fell 10.59, or 0.84 per cent to 1252.31. Meanwhile, the NASDAQ edged 2.06 points, or 0.09 per cent lower to 2243.32.
Despite an initial rise, a report from Lehman brothers soon put the market on the defensive. The investment bank issued a note warning that Fannie Mae and Freddie Mac would be forced to raise a combined US$75 million if new accounting rules were enacted. Freddie Mac slumped 17.9 per cent, while Fannie Mae was down 16.2 per cent. The two lenders had already been rattled by the ongoing credit market chaos.
Comments from San Francisco Fed Bank president Janet Yellen didn’t help matters. She warned that the credit crisis and housing market weakness would likely get worse before getting better.
Among the financial sector’s Dow components American Express was off 1.6 per cent, Bank of America dropped 3.9 per cent, Citigroup slipped 2.5 per cent and JPMorgan fell 3.6 per cent.
Merrill Lynch and Lehman Brothers gave up 2.4 per cent and 8.8 per cent respectively.
Elsewhere, General Motors added 1.2 per cent on reports that it was readying itself for layoffs and the sale of some brands as its battles the ongoing weakness in the automobile market.
With reporting season around the corner, Dow heavyweight Alcoa is slated to release its second quarter results on Tuesday. General Electric is due to report later this week.
On Monday, Alcoa closed 1.9 per cent higher, while General Electric tacked on 0.7 per cent.
Meanwhile, NBC Universal, a GE subsidiary, and two private equity firms agreed to buy The Weather Channel from Landmark Communications.
In other M&A related news, Belgian brewer InBev said it wanted to replace the entire Anheuser-Busch board as it looks to make a hostile bid for the US target. Anheuser-Busch shares edged 0.1 per cent higher.
Meanwhile, Yahoo! surged 12 per cent on talk that it could still strike a deal with Microsoft if the internet search giant elects a new board at its upcoming meeting on 1 August. Microsoft shares picked up 0.2 per cent.
Looking to commodity markets, NYMEX light crude for August delivery fell US$3.92 to US$141.37.
Oil majors Chevron and Exxon Mobil fell 1.8 per cent and 1.5 per cent respectively.
COMEX gold for August delivery fell US$4.80 to US$928.80 an ounce.
UKmarkets
British stocks ended higher on Monday after oil prices retreated, sending airlines and travel companies sky high. Shares rallied the most in more than two months on the back of broker upgrades for several retailers.
The benchmark FTSE 100 added 99.90, or 1.85 per cent to 5512.70.
The falling oil prices helped buoy travel stocks. Carnival, easyJet and British Airways gained 4.4 per cent, 4 per cent and 4.6 per cent.
British Airways also benefited from a sentiment lift in the sector on news that Air France-KLM reported a 2.6 per cent rise in June passenger traffic.
Despite falling crude prices, heavyweight oil shares featured among leading gainers as traders said the sector had been oversold in recent sessions.
Sentiment was also boosted by a Deutsche Bank price upgrade for BP and Shell, which added 3.7 per cent and 4 per cent. BG Group gained 5 per cent and Tullow Oil rose 4 per cent.
Retailer Carphone Warehouse tacked on 6.2 per cent after Goldman Sachs rated Europe's biggest independent mobile phone retailer a buy.
Supermarket group Sainsbury's added 3 per cent after JPMorgan upgraded the food retailer to overweight from neutral.
Among other retailers, Marks & Spencer continued its poor performance with a fall of 4.4 per cent. Last week the company issued a profit warning and concerns got worse as analysts cut forecasts and price targets ahead of a shareholder meeting on Wednesday.
Also on the downside, mortgage lender Bradford & Bingley fell 16 per cent, extending losses made Friday when TPG backed out of a stake-buying deal.
Meanwhile, home builders also fell again as reports pointed to more job cuts in the hard-hit sector.
Shares of Persimmon declined 3.4 per cent after The Daily Telegraph reported that the firm would cut some 1000 jobs when it releases a trading update on Tuesday. Taylor Wimpey lost another 14 per cent and Barratt fell 4.1 per cent.
European markets
Like their counterparts across the channel, investors on the continent welcomed a fall in crude prices. The market also gained momentum on the back of merger speculation in the utility sector.
France’s CAC 40 gained 76.59, or 1.80 per cent to 4342.59, while Germany’s DAX was 123.54, or 1.97 per cent higher at 6395.75.
Spain’s Iberdrola was a major gainer, rising by more than 7 per cent after Repsol, the company's second largest shareholder, said it saw no alternative to a merger between the company and Gas Natural, which rose 4.5 per cent.
Investor optimism for stable earnings within the sector also helped rivals EDF, Centrica and Suez to gain between 3 per cent and 5.5 per cent.
Despite a lower crude prices, oil and gas producers were among the top performers, with France’s Total adding 2.5 per cent.
In the banking sector, ING and UniCredit rose 1.6 per cent and 1 per cent respectively.
Meanwhile, UBS lost 2.5 per cent per cent and Credit Suisse fell 1.9 per cent after a Swiss weekly publication, citing lawmakers, said authorities could require the two banks to set aside an additional US$68.3 billion in capital.
Japanese markets
The Japanese market gained on Monday, breaking its longest losing streak in more than 50 years. The softer yen and positive signs in other Asian markets gave investors some hope after a gloomy fortnight.
The benchmark Nikkei 225 was 122.15 points, or 0.92 per cent higher at 13360.04, its first gain after 12 days of losses.
Computer security software maker Trend Micro jumped 3.2 per cent after a rating upgrade from Mitsubishi UFJ Securities that cited a strong second-quarter outlook for the company.
Among the biggest contributors to the Nikkei's gain was digital camera maker Canon, which rose 1.5 per cent.
On the downside, Magara Construction plummeted 75 per cent, its daily limit, after the construction firm said it became unable to honour payments due this week and had filed for rehabilitation.
Hong Kongmarkets
Hong Kong shares made their biggest one-day gain in 13 weeks on the back of strong advances in Chinese financials after positive earnings estimates from three banks. Investors also snapped up property stocks on the news.
The Hang Seng Index closed 489.24 points, or 2.28 per cent higher at 21913.06 after opening slightly lower.
Industrial & Commercial Bank of China shot up 3.9 per cent after it estimated profit growth of at least 50 per cent in the first six months. China Merchants Bank surged 9.2 per cent after saying it expected profit to double, and CITIC Bank soared 4.5 per cent after it forecast a 150 per cent profit increase.
Top insurer China Life climbed 5.5 per cent.
Real estate developers China Overseas and R&F Properties jumped 7.8 per cent and 9.2 per cent after mainland newspapers hinted at a likely relaxation in the country's aggressive credit tightening stance.
Sun Hung Kai Properties shot up 5.2 per cent after Credit Suisse upgraded the stock to outperform from neutral, saying the recent correction in the stock price had more than discounted the weakness in the property market.
Elsewhere, index heavyweight China Mobile added 1.7 per cent, propping up gains in the overall market.
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