While you were sleeping: World Bank outlook weighs on stocks, resources

Tuesday 23rd June 2009

Stocks fell in Europe and the US, prices of oil and metals dropped, and the greenback strengthened after the World Bank said the worldwide recession this year will be deeper than it had previously forecast.

The global economy may contract 2.9% in 2009, worse than the 1.7% pace it predicted in March. Growth may resume next year, with a 2% expansion, less than the 2.3% rate it earlier estimated. Angel Gurria, head of the OECD, told Reuters that 2009 will be “very difficult” with ongoing high unemployment.

The Reuters/Jefferies CRB Index of 19 raw materials declined 2.7% after the report.

The Standard & Poor’s 500 fell 3.1% to 893.04 and the Dow Jones Industrial Average declined 2.4% to 8339.01. The Nasdaq Composite slipped 3.4% to 1766.19.

Bank of America tumbled 9.7% to US$11.94, leading the Dow lower, after two board members resigned and aluminium producer Alcoa Inc. fell 8.9% to US$10.02.

Freeport-McMoRan Copper & Gold Inc. dropped 11% to US$45.18 and Exxon Mobil Corp. declined 3.1% to US$68.84.

Apple Inc. fell 1.5% to US$137.37 amid reports founder and chief executive Steve Jobs had a liver transplant this year.

In Europe, the Dow Jones Stoxx 600 declined 2.8% to 202.48. Among regional benchmarks, France’s CAC 40 fell 3% to 3123.25 and the UK’s FTSE 100 dropped 2.6% to 4234.05. Germany’s DAX 30 declined 3% to 4693.40, even after the Ifo institute’s business climate index rose for a third month in June.

BP Plc, Europe’s second-largest oil company, fell 3.8%. Royal Dutch Shell, the largest, declined 4.7%. Renault SA sank 7.9% after its credit rating was cut by Standard & Poor’s.

Anglo American Plc jumped 4.6% after Xstrata Plc proposed a merger of equals. The proposal was rejected by Anglo’s board as “totally unacceptable.”

Xstrata sank 6.7% after the copper producer said a merger with Anglo would lead to substantial cost savings, creating a company with more than US$54 billion of sales, and after the price of copper tumbled.

British Airways dropped 8.7% after Virgin Atlantic Airways owner Richard Branson told Bloomberg that he won’t bid for the rival airline because it has too many liabilities and may not survive the recession

The Chicago Board Options Exchange Volatility Index, or VIX, surged 9.9% to 31.18 while in Europe, the VStoxx Index jumped 17% to 36.05.

The US dollar and the yen strengthened after the World Bank’s global assessment spurred demand for the safety of the world’s biggest currencies.

The dollar rose to $1.3871 euro from $1.3937. The yen strengthened to 133.02 from 134.18. The yen gained to at 95.89 against the dollar from 96.27.

Twitter Inc. plans to garner revenue this year from companies including Dell Inc. and Starbucks Corp., via micro-messaging to its customers, Bloomberg reported. Twitter had about 18 million users as of last month, making it the world’s third-largest social networking site behind FaceBook and MySpace.

President Barack Obama signed legislation giving the US government the power to regulate tobacco products. At a White House ceremony, Obama said the changes will save lives, trim America’s health-care costs and deter teenagers from taking up smoking.

“I was one of these teenagers, so I know how difficult it is to break this habit when it’s been with you for a long time,” Obama said.

Copper dropped to a two-week low as the dollar gained and amid concern China, the biggest consumer of the metal, may trim purchases.

Copper for September delivery fell 2.2% to US$2.212 a pound, the lowest since June 4.

Crude oil for July delivery fell 2.4% to US$67.89 a barrel on the New York Mercantile Exchange. Gold futures for August delivery fell 1.7 percent to US$920.20 in New York.

Businesswire.co.nz

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