US markets gave up recent winnings with blue chip stocks closing 2.4 per cent lighter on Thursday. Dour housing market and unemployment data reignited concerns of economic fragility, sapping the market of any positive sentiment.
Labor Department data showed that unemployment claims rose by a larger than expect seasonally adjusted 34,000 to 406,000 last week. Unemployment claims were at their highest level since September 2005.
Meanwhile, National Association of Realtors data showed existing home sales fell 2.6 per cent to a lower than expected 4.86 million annual rate in June.
The grim economic picture took its toll on US equity markets.
The Dow dropped 283.10, or 2.43 per cent to 11349.28, while the broader S&P 500 fell 29.65, or 2.31 per cent to 1252.53. The NASDAQ shed 45.77, or 1.97 per cent at 2280.11.
Housing market concerns pulled the rug out from beneath homebuilders. Lennar fell 18.2 per cent, KB Homes slid 15.4 per cent, Centex shed 16.4 per cent and D. R. Horton dropped 13.8 per cent.
Financials were a casualty of the downturn in sentiment, giving up momentum built up in recent sessions. Washington Mutual, which reported a larger than expected second quarter loss last week, tumbled 13 per cent.
Even financials that recently reported smaller than expected losses were sold off. Merrill Lynch lost 14.1 per cent, Citigroup dropped 9.8 per cent, JPMorgan fell 6.7 per cent and Wachovia gave up 11.1 per cent.
Meanwhile, Fannie Mae and Freddie Mac fell 19.9 per cent and 18.4 per cent respectively even as Congress looked set to authorise a relief plan for the mortgage financiers.
Elsewhere, US car giant Ford reported a US$8.7 billion loss in the second quarter, its largest quarterly loss ever. The struggling carmaker said it would restructure its North American product line to introduce more fuel-efficient vehicles. Ford shares fell 15.3 per cent.
Meanwhile, Dow Chemical and Rohm and Hass reported lower than expected earnings, sending the shares down 3.3 per cent and 0.2 per cent respectively.
On the upside, 3M reported a 3 per cent increase in quarterly earnings, topping consensus estimates. The conglomerate’s shares defied the broader slump to edge 0.4 per cent higher.
Amazon.com also overcame market headwinds, soaring 11.6 per cent. After market close Wednesday, the Internet retailer posted larger than expected second quarter earnings and increased its 2008 revenue projections.
In other corporate news, XM and Sirius agreed to pay the Federal Communications Commission a US$19 million fine for violating radio transmission rules. Many argued that the agreement cleared the remaining regulatory hurdles for a merger between the two satellite radio companies.
McDonald’s fell 2.2 per cent after it was downgraded by Deutsche Bank. AT&T, which suffered a similar fate at JPMorgan’s hands, fell 1.4 per cent. Meanwhile, Boeing fell 6.3 per cent as Citigroup and Sanford Bernstein cut their price targets on the company.
NYMEX light crude for September delivery was up US$1.05 at US$125.49 after falling nearly US$4 Wednesday. Exxon Mobil and Chevron slid 0.2 per cent and 0.8 per cent respectively.
Meanwhile, COMEX gold for August delivery fell US50c to settle at US$922.30 an ounce.
UK markets
Britain's blue chips fell on Thursday as oil producers and miners tracked softer commodity prices. Banks also faltered as concerns about global economic growth and financial stress continued to dampen market sentiment.
The FTSE 100 closed 87.60 or 1.61 per cent lower at 5362.30.
Among the banks, Royal Bank of Scotland slipped 0.9 per cent, Barclays and HBOS both fell 1.1 per cent, while HSBC fell 0.6 per cent and Lloyds TSB Shed 2.5 per cent.
Oil firms suffered as crude prices hit seven-week lows, while miners followed a sharp drop in base metals prices.
BP lost 1.8 per cent, Royal Dutch Shell slipped 1.3 per cent and gas producer BG Group shed 6.3 per cent.
Meanwhile, British Energy jumped 6.2 per cent on speculation it may receive a an offer to buy the UK's biggest power producer for more than 12 billion pounds.
Among the miners, Aussie big shots BHP Billiton and Rio Tinto fell 4.7 per cent and 3.8 per cent, while Swiss miner Xstrata lost 6.1 per cent. Eurasian Natural Resources shed 6.5 per cent, Kazakhmys was off 4.7 per cent and Lonmin was down 6 per cent.
Meanwhile, UK economic data showed retail sales fell 3.9 per cent in June after rising 3.6 per cent in May, which was the biggest increase since the data series began more than two decades ago.
However, Kingfisher, Europe's largest home improvement retailer, managed to gain 6.5 per cent after saying sales at its B&Q unit unexpectedly climbed in the last two and a half months and profit margins improved.
British Airways lost 8.1 per cent, while Rolls-Royce rose 0.7 per cent after the engine maker met forecasts with an 8 per cent rise in first-half profit, promised more growth and a 10 per cent dividend hike despite global economic conditions.
European markets
European stocks fell on Thursday, giving up most of the previous day's gains as automakers cut annual forecasts on a weak economic outlook. Meanwhile, German business confidence plunged and European manufacturing and services shrank, increasing the risk of a recession across the eurozone.
The decline in German confidence was part of a series of data suggesting ECB president Jean-Claude Trichet might be too optimistic when he says growth will rebound later this year.
Germany’s DAX lost 95.39 or 1.46 per cent to 6440.70 and France’s CAC 40 shed 60.75 or 1.38 per cent to 4347.99.
Credit Suisse was the shining light among the banks, surging 5.3 per cent after the group posted forecast-beating earnings, but the good results failed to spark a rally in the banking sector.
Deutsche Bank lost 1.3 per cent, Commerzbank fell 1 per cent and UBS slipped 7.1 per cent.
Meanwhile, automakers got hammered after both Daimler and Renault cut their forecasts, quashing hopes for the sector after Peugeot, Volkswagen and Fiat stuck to their targets earlier in the week.
Daimler sank 10 per cent, Fiat lost 4.9 per cent and Peugeot fell 7.2 per cent. VW was down 2.9 per cent.
Japanese markets
Japan’s market rose to a four week high as carmakers led gains by exporters on the back of a softer yen and a drop in oil prices. Meanwhile, an earthquake paralysed the country's steel producers.
The Nikkei 225 climbed 290.38 points, or 2.2 per cent to 13603.31.
Toyota led the carmakers gaining 5.3 per cent, while Honda added 3.8 per cent and Nissan edged 1.2 per cent higher.
Meanwhile, Canon closed 3.7 per cent higher before reporting a 12 per cent fall in second quarter profits.
Toray Industries and Mitsubishi Rayon gained 4.8 per cent and 8 per cent respectively after announcing plans to work with other firms to develop a new carbon fibre material for cars which would lighten vehicles for better fuel efficiency.
Nippon Steel ended flat but said it had restarted production later in the session.
Hong Kong markets
Hong Kong shares eased slightly, dragged lower by resources stocks. The fall comes after the markets strongest start in six weeks, undercutting an extended rally in the financial sector.
The Hang Seng closed 46.83 points or 0.2 per cent lower at 23087.72.
Bourse operator Hong Kong Exchanges & Clearing increased about 3.6 per cent to a five week high recovering from its low on 8 July.
China Coal Energy lost 3.6 per cent, while Yanzhou Coal shed 4.5 per cent.
Gold miners followed the resource trend, with Zijin Mining sinking 2.6 per cent and Sino Gold down 6 per cent.
HSBC Holdings edged 0.9 per cent higher to a near seven-week high.
Weakened oil prices helped the airlines stay afloat, with Air China, Cathay Pacific and China Southern all making gains of 4.7 per cent, 1.3 per cent and 7.9 per cent respectively.
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