US stocks retreated on Thursday after a larger than expected loss at American Insurance Group rekindled credit market concerns. Grim sales data from Wal-Mart and other retailers fuelled fears about the broader economic fallout from recent financial and housing turmoil.
Weekly employment data offered no comfort. A government report showed the number of Americans filing new claims for unemployment last week rose by 7,000 to 455,000, a six year high.
A positive housing market reading helped temper pessimism. National Association of Realtors reported its index of sales contracts on previously owned US homes rose 5.3 per cent in June from the prior month.
But the housing market reading wasn’t enough to push the market into positive territory.
The Dow fell 224.64, or 1.93 per cent to 11431.43, while the broader S&P 500 dropped 23.12, or 1.79 per cent to 1266.07. The NASDAQ was down 22.64, or 0.95 per cent at 2355.73.
Late Wednesday, AIG posted a worse than expected quarterly loss of US$5.36 billion. Like many of its peers, the company cited massive write downs related to credit market turbulence.
AIG shares tumbled 18.1 per cent, but the fallout wasn’t limited to the insurer. JPMorgan and Bank of America fell 3.3 per cent and 5.8 per cent respectively.
American Express dropped 4.2 per cent after Moody’s downgraded the credit card company’s credit rating.
Banking giant Citigroup agreed to buy back or help clients sell up US$19.5 billion in auction-rate securities and pay a $100 million fine to settle claims that it had improperly unloaded untradeable bonds on unwitting customers.
Citigroup closed 6.2 per cent lower. Year to date, Citigroup’s shares have slumped 36.9 per cent.
Merrill Lynch, which fell 8.4 per cent, offered to buy back auction rate securities that it sold to retail clients at par. The investment bank said its offer would be open for a year starting January 2009.
Meanwhile, Lehman Brothers and Goldman Sachs sank 12.9 per cent and 4 per cent respectively.
Government bank mortgage financiers Fannie Mae and Freddie Mac continued to receive the cold shoulder from investors, falling 14.2 per cent and 9.2 per cent.
Weak retail sales data had investors concerned that housing market woes, a tight credit market and high energy prices were undercutting consumer spending.
Wal-Mart, the world’s larges retailer, said sales at stores open a year or more rose by 3 per cent, disappointing analysts who had tipped an increase of 3.4 per cent. Wal-Mart shares were down 6.3 per cent.
Target said same store sales fell by a larger than expected 1.2 per cent, sending shares 4.7 per cent lower.
A number of other counters reported equally disappointing sales figures but discount retailer Costco bucked the trend with a larger than expected 10 per cent increase in reported sales. Costco shares outperformed the market, edging 0.2 per cent higher.
Also on a positive note, Avis Budget Group jumped 12.9 per cent after the car-rental company posted a larger than expected US15c per share profit for the second quarter.
The Dow’s technology plays also managed to defy the broader sell-off. Intel added 3.8 per cent, Microsoft closed 1.4 per cent dearer and Hewlett-Packard picked up 0.8 per cent.
However, the NASDAQ was pressured by the likes of Google, Dell and Apple, whose shares lost 1.5 per cent, 1 per cent and 0.4 per cent.
Crude bounced slightly from its recent slump. NYMEX light crude for September delivery rose US$1.44 to settle at US$120.02.
Nonetheless, Chevron and Exxon Mobil slipped 1.3 per cent and 1.1 per cent respectively.
COMEX gold for December delivery fell US$5.10 to settle at US$877.90 an ounce.
UKmarkets
British stocks ended lower on Thursday despite spending much of the day above the line. Mixed corporate updates caused a lack of direction, while higher crude prices helped buoy oil companies.
The Bank of England's decision to leave interest rates at 5 per cent for the fourth straight month had little affect on the market.
The FTSE 100 slipped 8.60, or 0.16 per cent to 5477.50.
Oil and gas producers were the top gainers by sector, helped by crude prices that rose on the back of supply concerns.
BP added 2.1 per cent, gas producer BG Group increased 3.4 per cent, while Cairn Energy rose 2.7 per cent. Tullow Oil gained 1.9 per cent and Royal Dutch Shell advanced 0.4 per cent.
However, the rise in crude hurt British Airways 4.9 per cent and cruise operator Carnival sank 4.3 per cent.
Among companies reporting, Smith & Nephew climbed 5.2 per cent after Europe's biggest medical device maker posted better than expected second-quarter earnings as revenues hit US$1 billion for the first time.
Shares in Friends Provident dropped 4.9 per cent after the insurer booked a first half loss of 84 million pounds, compared to a profit of 107 million pounds recorded at the same point a year ago. Results were hurt by a 70 million pound charge related to corporate bond credit spreads.
Barclays added 1.6 per cent after its first-half profits beat forecasts. The bank produced stronger than expected revenue growth and capital position, and good cost control.
Elsewhere in the sector, HBOS was up 0.5 per cent and Lloyds TSB gained 1.4 per cent. Royal Bank of Scotland shed 0.5 per cent ahead of its first half results on Friday.
Xstrata closed 0.7 per cent lower, while Lonmin rose 0.4 per cent to 34.40 pounds after it rejected Xstrata’s 33 pounds per share offer as inadequate.
European markets
European shares ended mixed on Thursday after the European Central Bank left interest rates on hold, as expected. The ECB indicated it was unlikely to raise euro zone rates again any time soon as growth risks had materialised.
Germany’s DAX slipped 17.90, or 0.27 per cent to 6543.49, while France’s CAC 40 added 9.10, or 0.20 per cent to 4457.43.
German insurer Allianz released results that showed the ongoing damage from the credit crunch. Europe's biggest insurer dropped 0.8 per cent after reporting a 29 per cent drop in second-quarter profit and cutting its outlook.
French insurance giant AXA, ended the day with gains of 4.8 per cent after posting a 32 per cent drop in first-half net profit to 2.16 billion euros, which wasn't as steep as analysts feared.
Shares in Swiss food producer Nestle pared early losses to end 0.1 per cent higher after producing a mixed set of results. Net profit exceeded analyst forecasts with a rise of 6 per cent to 5.21 billion Swiss francs, sales were up 4 per cent to 53.10 billion francs.
French electricity giant EdF climbed 5.9 per cent following a decision by the French government to allow companies to hike electricity and gas tariff rates from September.
Japanese markets
Japanese stocks fell on Thursday as a weaker yen and a sluggish economic outlook weighed on exporters. Banks and financials led the slide after blue chip corporate earnings across the Pacific came in below par.
The Nikkei 225 lost 129.9 or 0.98 per cent to 13124.99.
Air conditioner maker Daikin suffered its biggest one-day fall in 16 years as it cut its profit outlook on poor sales in Europe, prompting broker downgrades. At close, the company was down 11.1 per cent.
Investors were also treading lightly ahead of Toyota’s earnings release tomorrow. Toyota ended down 1.3 per cent.
Top lender Mitsubishi UFJ Financial Group fell 3.9 per cent, while Mizuho Financial Group was off 3.5 per cent.
On the other side of the coin, Kubota Corp rocketed 15.2 per cent after the farm equipment maker's first-quarter profit fell less than expected.
Hong Kongmarkets
Hong Kong shares edged ahead on Thursday but closed early due to a tropical storm warning. Resource stocks tracked softer commodity prices, pulling the market back form early intraday highs.
The Hang Seng finished 154.45 points, or 0.70 per cent higher to 22104.20.
Shares in shipping firms fell on the back of a continued four-week decline in the global freight index. China Cosco dropped 5.8 per cent, while China Shipping Development gave up 7.9 per cent.
Asia's largest refiner Sinopec Corp added 1.1 per cent, while crude producer CNOOC was off 0.9 per cent.
Metal stocks continued their pull back as commodity prices softened. Jiangxi Copper slumped 5.5 per cent, while Angang shed 5.4 per cent.
Hunan Nonferrous Metals plummeted 11.4 per cent after saying it expected its first-half net profit to fall significantly amid substantial decreases in the average selling price of zinc.
The Overnight MarketWatch report is provided by SHAW Stockbroking's egoli - simple but informative market news for the everyday investor.
egoli news: A view of the Australian market, from your perspective, as it happens. For more information go to http://www.egoli.com.au/egoli/egolihome.asp