US stocks were mixed after a Federal Reserve report fuelled fears about the economy. A smaller than expected sales drop at GM helped the Dow post modest gains, but the S&P 500 and NASDAQ closed in the red.
Another decline in crude prices added to anxiety about the trajectory of global growth. NYMEX light crude oil for October delivery fell US36c to settle at US$109.35 a barrel.
Meanwhile, the Federal Reserve’s semi-annual beige book showed that economic activity had slowed.
Prior to the release, Boston reserve bank president Eric Rosengren said the credit crunch was worse than the one seen in the early 1990's. He warned that it could push the unemployment rate up to 6 per cent.
There was a glimmer of positive news. A government report found that factory orders climbed by a larger than expected 1.3 per cent in July.
Looking to equity markets, the Dow was up 15.96, or 0.14 per cent to 11532.88. However, the S&P 500 lost 2.6 points, or 0.2 per cent to 1274.98 and the NASDAQ shed 15.51, or 0.66 per cent to 2333.73.
General Motors shares rose 5.8 per cent after the company reported that North American sales fell 20.4 per cent in August from a year ago. Market watchers had expected the automobile giant to report a 29 per cent decline.
Meanwhile, Ford’s 27 per cent year-on-year drop was worse than expected but its shares still managed to tack on 1.3 per cent.
Home improvement retailer, Home Depot rose 4.5 per cent after it suggested the bottom of the housing market crisis was in sight.
Office supplies vendor, Staples reported weaker quarterly earnings that were in line with consensus forecasts. The company’s shares closed 1.7 per cent higher.
In other earnings related news, glassmaker Corning warned that third quarter sales and earnings wouldn’t hit forecasts. The company cited weaker shipments of its glass used in flat-screen televisions and computers. Corning shares tumbled 12.6 per cent.
Coca-Cola slipped 0.6 per cent after announcing that it would buy a Chinese juice maker for US$2.5 billion in cash.
Looking to the financial sector, bond insurer Ambac financial jumped 22.4 per cent. On Wednesday, the company said plans for a new insurance subsidiary had been approved by Wisconsin insurance regulators.
The subsidiary will provide insurance only on US public finance and global infrastructure.
Lehman Brothers rose 5 per cent on speculation that Korea Development Bank had offered to buy a 25 per cent stake in the troubled financial services firm for as much as US$5.3 billion. HSBC and Tokyo Mitsubishi were also named as potential suitors.
Among the sector’s Dow components, Bank of America rose 3 per cent, Citigroup added 2.6 per cent and JPMorgan was up 1.9 per cent. American International Group and American Express added 3.8 per cent and 0.7 per cent respectively.
Exxon Mobil added 0.9 per cent and Chevron climbed 1.1 per cent despite ongoing weakness in crude prices.
Elsewhere, COMEX gold for December delivery fell US$2.30 to settle at $808.20 an ounce after plunging nearly US$25 in the previous session.
UK markets
British stocks slipped on Wednesday after the pound hit 12 year lows against the dollar, hurting the banking sector. Another fall in crude and metal prices saw high profile energy and commodity plays backtrack.
The FTSE 100 down 121 points, or 2.15 per cent at 5499.70.
Banks were in decline with shares of Royal Bank of Scotland 1.9 per cent lower, Lloyds TSB slipped 2.4 per cent and Bradford & Bingley dropped 5 per cent.
Shares in Barclays fell 3.7 per cent after it was downgraded to sell from hold by the Royal Bank of Scotland. RBS added that the third biggest UK bank may need to raise as much as 7.5 billion pounds.
In the Energy sector BG Group dropped 6.4 per cent after investors booked recent profits in reaction to the dip in oil prices and some concerns that the firm could raise its US$12 billion bid for Australia's Origin Energy.
Royal Dutch Shell fell 0.9 per cent while BP was 1.1 per cent lower.
Ferrexpo tumbled 15.4 per cent, Kazakhmys dropped 6.1 per cent, BHP Billiton was down 3.4 per cent and Rio Tinto slipped 4.7 per cent.
Vodafone Group shares lost 1.8 per cent after Credit Suisse downgraded the wireless operator to neutral from outperform.
Pubs declined after Britain's biggest operator, Punch Taverns lost 12.2 per cent. The company reported a decline in sales for its latest financial year and scrapped its dividend.
Enterprise Inns lost 8.8 per cent, while Whitbread lost 4 per cent, with mid-caps JD Wetherspoon and Mitchells & Butlers off 3.8 per cent and 5.5 per cent respectively.
The homebuilding sector reversed gains, with shares of Barratt Developments down 5.8 per cent, Taylor Wimpey off 9.1 per cent and Persimmon 4 per cent lower.
European markets
European shares sank as more uncertainty about economic growth had investors on the back foot. Banks, technology and consumer related stocks were among the worst hit.
Data showed that falling investment and private consumption led to the first ever quarterly contraction in the euro zone economy from April to June, while July retail sales and August services sentiment signalled more weakness ahead.
Germany’s DAX dropped 50.98, or 0.78 per cent to 6467.49, while France’s CAC 40 slipped 91.94, or 2.03 per cent to 4447.13.
In the tech and consumer space Nokia fell 4.6 per cent, LVMH lost 3.1 per cent, Unilever was down 3.4 per cent and Danone shed 4.4 per cent on worries of the outlook of the euro zone.
The banks were hurting with BNP Paribas off 1.3 per cent, Deutsche Bank slipped 4.1 per cent and Credit Suisse fell 0.9 per cent.
France’s Natixis was down 4.1 per cent after press speculation that the bank could put its rights issue price at below 3 euro a share.
Meanwhile, UBS gained 2.4 per cent after its head of private banking said none of the company’s divisions were up for sale, in spite of heavy write downs this year.
Rival Credit Suisse fell 0.9 per cent and Belgo-French bank Dexia added 3.2 per cent after its German arm postponed the sale of a 1 billion euro covered bond.
Airline stocks were among the biggest losers, surrendering some of their recent gains sparked by the drop in oil prices.
The International Air Transport Association said the global airline industry was set to post losses of US$5.2 billion this year and US$4.1 billion in 2009 as high oil prices take their toll.
Ryanair fell 4.2 per cent and Air France-KLM shed 1 per cent.
Energy shares were also hit, falling along with crude oil prices. Repsol dropped 1.2 per cent and Total lost 2.3 per cent.
French wind-power company Theolia, part-owned by GE, fell 1.8 per cent after reporting a first-half loss on higher costs and cutting a target for full- year operating profit.
On the plus side Michelin gained 2.3 per cent after Credit Suisse raised its rating on the French tyre maker's stock, citing improved margin stability and a fall in oil prices.
Japanese markets
Japanese stocks snapped a two-day losing streak, finishing the day up 0.7 per cent after a sharp fall in the price of oil helped ease inflation fears and exporter's concerns. The day’s gains were largely driven by bargain hunters.
The benchmark Nikkei gained 80.12 points, or 0.7 per cent to 1220.55.
Among exporters, Honda was the largest gainer adding 5.1 per cent, while Toyota and Canon were 2.1 per cent and 1.7 per cent dearer.
Mitsui & Co tumbled 7.3 per cent while Marubeni Corp dropped 6.1 per cent.
Trading house Mitsubishi Corp took its week’s loss to 11 per cent with a fall of 4.6 per cent.
Hong Kong markets
Hong Kong investors saw the market close at a two-week low on Wednesday, with resource stocks pulled down by weaker oil prices. Shipping stocks also tumbled on fears of further slowing global demand.
The benchmark Hang Seng Index closed down 457.40 points or 2.2 per cent lower at 20585.06.
China Huiyuan Juice shares soared on news of a $2.5 billion takeover bid by Coca-Cola. The juice maker jumped 164 per cent, with 224 million shares changing hands.
Oil producer, CNOOC added to its week’s loss falling 6 per cent while PetroChina shed 3.2 per cent.
Shipping company, China Cosco sunk 9.5 per cent as a result of a 3.4 per cent fall in the global freight index overnight.
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