While you were sleeping: Stocks tumble in Europe, US on jobs data

Friday 3rd July 2009

Stocks tumbled in Europe and the US as rising unemployment quelled optimism the end of recession is closer.

The jobless rate climbed to 9.5% in both Europe and America, a 10-year and 26-year high respectively. Eurostat, the region’s statistics office, said 3.4 million people in the euro-zone lost their jobs in the 12 months through May, while in the European Union the losses were 5.1 million.

In the US, payrolls dropped by 467,000 last month, after companies shed 322,000 jobs in May, according to Labor Department. The decline is milder than the peak month of January, when 741,000 jobs were lost.

Europe’s Dow Jones Stoxx 600 Index fell 2.6% to 204.12 and regional benchmarks tumbled. The DAX 30 fell 3.8% to 4718.49 in Germany, France’s CAC 40 slipped 3% to 3116.41 and the UK’s FTSE 100 shed 2.5% to 4234.27.

Volkswagen AG fell 7.8%, Daimler AG dropped 5.5% and PSA Peugeot Citroen SA declined 5.4% after Credit Suisse Group lowered its ratings on European automakers to ‘market weight’ from ‘overweight.’

BHP Billiton, the world’s biggest mining company, fell 4.7% and Rio Tinto, the third-biggest, slid 5.7% as prices of raw materials declined. Rio sold 97% of the London-listed shares it was offering in a US$15.2 billion capital raising to repay debt.

Xstrata fell 4.2% and Anglo American declined 5.8%. Royal Dutch Shell Plc slipped 3.3% and Total SA fell 3.8% as the price of crude oil dropped. Commerzbank tumbled 6.5%.

Elan Corp. soared 25% after Johnson & Johnson agreed to invest in Ireland’s biggest drugmaker.

The European Central Bank kept interest rates at a record low of 1%, as expected, and President Jean-Claude Trichet said the region’s economy will resume growth in mid-2010. The ECB doesn’t plan to cut interest rates again soon, he said.

The ECB will start buying bonds next week, beginning its unorthodox plan to buy mortgage and public sector bonds ranging from three to 10 years and rated as low as BBB-. National central banks will make 92% of the purchases.

Clariant AG led the Stoxx 600 lower, shedding 8.6% on the chemical maker announced plans to sell 225 million Swiss francs of convertible bonds.

On Wall Street, the Standard & Poor’s 500 dropped 2.9% to 896.43 and the Dow Jones Industrial Average declined 2.6% to 8280.74. The Nasdaq Composite fell 2.7% to 1796.52.

Aluminium producer Alcoa Inc., the first major US company to post earnings for the second quarter with a release scheduled for July 8, dropped 4.5% to US$9.88, leading the Dow lower as metal prices fell. Caterpillar shed 4.2% to US$31.81 and Travelers Cos. declined 4.4% to US$39.33.

Earnings in the S&P 500 probably dropped 34% in the second quarter and are heading for an average 21% decline in the third, Bloomberg reported. Profits will rebound 61% in the final quarter of 2009.

Home-improvement chain Home Depot fell 3.8% to US$22.81.

General Motors Corp. may file for an initial public offering next year, Bloomberg said, citing an adviser to President Barack Obama. The automaker is selling most of its assets to the Treasury.

The US dollar and yen gained against the euro as rising jobless rates sapped demand for higher-yielding, or riskier assets and after Trichet’s comments that economic growth won’t return in Europe until mid-2010.

Helping lift the greenback, China called for a stable US dollar, soothing concern it will mount a strong push for a new global reserve currency when the Group of Eight meets in Italy.

The dollar rose to $1.4008 per euro from $1.4142. The euro weakened to 134.31 yen from 136.70. The dollar slipped to 95.84 yen from 96.65.

The Dollar Index, which tracks the greenback against the currencies of six major trading partners, gained 0.8% to 80.26.

US Treasuries rose after the unemployment figures. The yield on the 10-year notes fell 5 basis points to 3.5% and the 30-year bond yield slipped 0.2% to 4.32%.

The Reuters/Jefferies CRB Index fell 2.1% to 245.86 and has declined from a peak of 266.17 in June 11.

Crude oil for August delivery tumbled 3.7% to US$66.72 a barrel on the New York Mercantile Exchange. Gold traded at US$929.60 an ounce and copper for September delivery fell 0.5% to US$2.319 a pound.

Businesswire.co.nz

Comments from our readers

No comments yet