Souring U.S. economy sparks stocks fall overseas

April 14, 2008 5:41:08 AM PDT
Overseas stock markets fell Monday amid concerns about the U.S. economy and corporate profits.

In Asia, the biggest declines were in China, where the Shanghai Composite Index plunged 5.6 percent and the Shenzhen index lost 6.3 percent. Elsewhere in the region Japan's Nikkei 225 index closed 3.1 percent lower and Hong Kong's Hang Seng index fell 3.5 percent.

In Europe, the London market's FTSE 100 was down 0.7 percent in midday trading, while Germany's DAX fell 0.8 percent and France's CAC 40 slipped 0.3 percent.

The declines extended a slump on Wall Street on Friday after reports of weak consumer sentiment and disappointing earnings from General Electric Co., which cast a gloomy light on a slew of earnings reports expected this week including those from banking giants J.P. Morgan Chase & Co., Citigroup Inc. and Merrill Lynch & Co.

Before the markets opened Monday, Wachovia Corp. reported an unexpectedly large first-quarter loss of $393 million, tainted by exposure to credit markets. The fourth-largest U.S. bank said it will cut its dividend by 41 percent to 37.5 cents per share and plans to raise $7 billion from sales of preferred shares.

The Dow Jones industrial average futures were down 56, or 0.45, at 12,283, ahead of the open Monday after falling 2 percent on Friday.

Investors are also waiting for U.S. economic data for March, including retail sales and the consumer price index.

In London, mining and oil shares led the index lower as metal prices fell. BP PLC was down 0.3 percent, Royal Dutch Shell dipped 0.9 percent and Cairn Energy PLC dropped 3.8 percent.

In Japan, high-tech shares were dragged down by a Nikkei report that said Canon Inc.'s net profit for the January-March quarter is likely to fall 16 percent due to a rising yen. Canon slid 4.9 percent. Sony Corp. fell 4.5 percent, while Nikon Corp. dropped 4.6 percent.

Automakers were also weak as the dollar traded below 101 yen. Toyota Motor Corp. slipped 2.6 percent; Honda Motor Co. declined 3.6 percent.

In China and Hong Kong, property developers and other blue chips also fell on fears that authorities may further tighten credit to combat inflation.

On the Shanghai exchange, property sector leader China Vanke and Poly Real Estate Group both fell by the daily 10 percent limit. Market heavyweight PetroChina fell 3.3 percent.

Banks and insurers were also hit by selling in China's largest city. Shenzhen Development Bank lost 10 percent. Industrial & Commercial Bank of China slipped 5.2 percent. Ping An Insurance shed 6.6 percent.

Analysts said losses in Hong Kong were milder than those on mainland bourses, because fund houses took advantage of lower share prices to return to the market.

"Locally the underlying sentiment is much firmer (than overseas). A lot of funds will be eyeing a market pullback as a chance to get in," ICEA Securities Ltd. strategist Ernie Hon told Dow Jones Newswires.

Among Chinese developers listed in Hong Kong, China Overseas Land dropped 5.6 percent, Shimao Property fell 7.3 percent and Guangzhou R&F Properties tumbled 11.4 percent.

Analysts and traders said they expect the Hong Kong market to trade in a narrow range for the remainder of the week.

China will report first quarter gross domestic product data Wednesday, and will also issue other economic indicators.

DBS Group Research said China's economy likely grew at a slower pace in the first quarter, rising 10.5 percent from a year earlier. China's GDP has been growing in access of 11 percent, and last week, the government raised its estimate of 2007 growth to 11.9 percent from the previous estimate of 11.4 percent.

The U.S. will also report retail sales later Monday and initial jobless claims data Thursday. DBS expects both figures to decline, showing a slight economic slowdown.

Elsewhere in Asia on Monday, Australia's market fell 1.8 percent and South Korea's key index sank 1.9 percent. In Singapore, the Straits Times Index fell 2.7 percent.

Markets were closed in India, Vietnam and Thailand for public holidays.