News
Wall Street in sharp rebound as market bounces off lows
Posted: 14 November 2008 0602 hrs By Channel News Asia
NEW YORK: US stocks staged a powerful rebound on Thursday in highly volatile trade as traders shook off grim economic news and were buoyed by a successful test of market lows hit last month.
The blue-chip Dow Jones Industrial Average leapt 552.59 points (6.67 percent) to end at 8,835.25, battling back from intraday losses of more than 300 points.
The Nasdaq vaulted 97.49 points (6.50 percent) to 1,596.70 and the broad Standard & Poor's 500 index climbed 58.99 points (6.92 percent) to close at 911.29.
The market swung wildly but a rally gained momentum late in the day as investors looked for bargains after a punishing three-day market sell-off and brushed aside more bleak economic and corporate news from the US and around the globe.
Paul Nolte, analyst at Hinsdale Investments, said there was no specific news that sparked the rally but that the apparently successful retesting of the lows hit last month catalyzed buyers who sensed that selling pressure was exhausted.
"We got down 300 points (for the Dow) which was a retest of the lows in early and late October and as the markets bounced off that, you heard traders starting to cheer and then the market just took a life of its own," he said.
"They believed that the bottom is in."
But Nolte said he expects further tests of the market lows as occurred after big rallies in the past few weeks.
"I would have more confidence if we can break above 1,000 (for the S&P index) and meaningfully stay there."
Earlier, the markets digested a forecast of weaker results from tech giant Intel and profits in line with forecasts from retail sector leader Wal-Mart.
On the economic front, the US trade deficit fell 4.4 percent to 56.5 billion dollars in September, which would normally be seen as positive but the data showed steep declines in both imports and exports.
Another grim reminder of the economic troubles came with data showing weekly jobless claims rose 32,000 to an alarmingly high reading of 516,000.
Al Goldman at Wachovia Securities said investors were willing to hunt for bargains after some heavy selling in the past three sessions.
"Stocks changed directions several times before investors capitalised on what appeared to be attractive valuations," he said.
"The rebound gathered steam after the S&P 500 dropped below its lowest closing price in five years and the Dow briefly dipped below 8,000. The Dow traded in a huge range of 900 points."
The market managed to shake off a raft of troubling economic data. In addition to the US data on unemployment claims and trade, German data showed the third-largest economy officially in recession as the rest of Europe appeared to teeter toward economic decline.
Among stocks in focus, Intel reversed early losses and climbed 6.6 percent to 14.43 dollars after the computer chip giant cut its fourth-quarter revenue projections, saying the economic slowdown would hurt its business across the board.
Wal-Mart added 4.39 percent to 54.93 after it reported a 10 percent rise in quarterly earnings but said a stronger dollar would weigh on future results from fast-growing international sales.
In the financial sector, JPMorgan Chase leapt 7.6 percent to 37.19 dollars as investors shook off comments from the banking giant that its results may be hurt by rising unemployment.
In energy, Chevron jumped 12.5 percent to 75.71 dollars as crude oil prices firmed.
The bond market weakened. The yield on the 10-year US Treasury bond increased to 3.818 percent from 3.665 on Wednesday and that on the 30-year bond rose to 4.333 percent from 4.190. Bond yields and prices move in opposite directions. - AFP/de
Japan ready to lend US$100b to IMF
Posted : 14 Nov 2008 1049 hrs By Channel News Asia
TOKYO: Japan will propose to lend up to 100 billion dollars to the International Monetary Fund at the financial crisis summit in Washington that begins Friday, as gloom spread over an imminent worldwide recession.
Japanese Prime Minister Taro Aso is set to propose the multi-billion dollar package to help boost emerging countries hit hard by the financial crisis, according to a statement issued by his office, while signs around the world pointed towards further downturns.
New US data released Thursday showed an alarming drop in trade, and Germany, the world's third largest economy, announced it had officially plunged into recession as output contracted for the second quarter running, by 0.5 per cent in the third quarter, according to figures from the national statistics service Destatis.
In the United States, data showed a steep drop in both imports and exports, highlighting the slowdown in the world's biggest economy and a likely global recession.
The Commerce Department said the US trade deficit narrowed 4.4 per cent in September to 56.5 billion dollars. What normally would be seen as an improvement in the trade balance set off alarms with a record drop in imports and a plunge in exports.
"Trade can no longer prop up the US economy," said Peter Kretzmer, an economist at Bank of America in New York.
"If we look out over the next 12 months, both export and import volumes will drop -- meaning not just slower growth, but outright declines -- as the global recession reduces trade activity."
The news didn't stop Japan's Nikkei index from rising almost five per cent in morning trade. A powerful overnight trade, after a surging rally on Wall Street late Thursday, prompted the benchmark to climb 351.15 points to 8,589.79.
Hong Kong likewise opened 4.0 per cent higher Friday, as investors hunted for bargains.
But in Paris, the director of economic policy studies for the 30-nation OECD club of rich countries, Joergen Elmeskov, told media that "the OECD as a whole is currently in recession and will likely stay there for some time."
The Organization for Economic Cooperation and Development (OECD) forecast that the United States would suffer a huge 2.8 per cent contraction in the fourth quarter of this year and shrink 0.9 per cent in 2009.
The Capital Economics research group said as the German data was published that "the world economy is heading for the worst recession since the 1930s."
The European Union is expected to report the 15-nation eurozone's plunge into recession Friday, with a string of economic indicators pointing downwards and European governments struggling for a unified response.
France was widely expected to announce Friday that it, too, is in recession, and on Wednesday the Bank of England said the British economy was probably already there.
The Royal Bank of Scotland (RBS) said it is planning to cut some 3,000 jobs worldwide over the next few weeks, the BBC reported, despite it being one of the three high-street banks bailed out by the British government last month.
The Japanese economy, the world's second biggest, will be in recession at the end of 2008 and will contract 0.1 per cent in 2009, the OECD said.
US President George W. Bush said that world leaders will "lay the foundation for reforms" at the Washington talks, but said the effort was "too large" for just one summit of the Group of 20, which includes the big industrialized and emerging economies.
"This summit will be the first in a series," Bush said.
According to the OECD, major economies should recover to post modest growth in 2010. The United States will not start growing again until the third quarter of 2009, it said, calling for new government stimulus measures and steps to shore up financial markets.
But Bush said the global crisis was not "a failure of the free market system" and warned against seeing government intervention as "a cure-all."
German Chancellor Angela Merkel said in an interview she expects "difficult talks" at this weekend's G20 summit but said it was crucial that the first steps towards improved financial regulation are taken soon.
Stock markets showed volatile trade after a string of punishing losses this week.
On Wall Street, stocks zig-zagged before surging in late trade amid a sense of relief that the market had successfully tested last month's lows.
The Dow Jones Industrial Average leapt 552.59 points (6.67 per cent) to end at 8,835.25, surging back after intraday losses of more than 300 points.
The Nasdaq vaulted 6.50 per cent and the broad Standard & Poor's 500 index climbed 6.92 per cent.
Following the Dow rally, Tokyo's benchmark Nikkei index had climbed up 351.15 points by the lunch break Friday, or 4.26 per cent, to 8,589.79, after opening slightly higher.
South Korea's KOSPI share prices opened 3.4 per cent higher, trading up 38.50 points to 1,126.94.
London's FTSE 100 index ended Thursday with a loss of 0.31 per cent but most European bourses gained. The Paris CAC 40 climbed 1.1 per cent and Germany's DAX added 0.62 per cent.
- AFP/yt
G20 seeks team response to global financial crisis
By Channel News Asia
WASHINGTON: Leaders of the Group of 20 richest economies and emerging economic heavyweights will hold their first meeting in Washington on Friday to craft a joint strategy to deal with the rapidly spreading global financial crisis.
A very reluctant host initially, the United States now wants a plan of action to overhaul the international financial system to come out of the summit, which starts late Friday with a working dinner at the White House and ends Saturday.
"The leaders attending this weekend's meeting agree on a clear purpose: To address the current crisis, and to lay the foundation for reforms that will help prevent a similar crisis in the future," US President George W. Bush said on Thursday.
The summit is expected to set down a number of economic goalposts and a dateline to prevent the ongoing financial meltdown from turning into a long recession.
The crisis broke out a year ago when the US real estate market went bust, and spread to the financial sector when it was swamped by subprime mortgages turned sour. A cash crunch in the banking sector dried up the credit market in mid-September, hurting businesses and sending stock markets crashing.
Commitments on an action plan won't be easy to make for the outgoing Bush administration, however, since the president will be ending his eight years in office in January. His successor, Democrat Barack Obama, is set to replace him at the White House on January 20.
In a speech on the economy in New York City on Thursday, Bush in a show of good will outlined some thinking points: improve banks' risk management practices, improving accounting rules for securities so that their "true value" is clear and harmonizing accounting laws among nations.
The United States would also like the International Monetary Fund and World Bank to undergo reforms to give emerging economies a greater voice.
The summit could also take a stab at harmonizing the G8 and the G20, which group the richest countries in the world.
The Bush administration, however, is adamantly opposed to a world regulating authority, and rejects major government intervention on the markets as well as fingers that point to the United States as the culprit of the current crisis.
The Europeans, especially the French, believe the summit will just be a starting point and will not lead to another Bretton Woods II, the 1944 agreement that gave rise to the current global financial structure.
"Of course these are going to be difficult talks," said German Chancellor Angela Merkel in an interview the Sueddeutsche Zeitung published Thursday.
She said it was crucial that the first steps towards improved financial regulation are taken soon, as Germany, Europe's foremost economy, has just gone into a recession that will likely spread to every other rich nation next year.
"We have to implement the first steps in the coming months. The target is that in the future all areas, all products and all businesses are properly regulated and supervised," Merkel said.
Several products and financial institutions are largely if not completely unregulated at present: hedge funds, credit default swaps (CDS) and rating agencies.
France, who advocates increased oversight of international financial transactions, would like to have tax havens added to the list.
The G20 summit will also likely discuss coordinated efforts to revive the global economy, after China unveiled a four trillion yuan (586 billion dollars) economic stimulus plan.
Created in 1999, the Group of 20 richest economies and emerging heavyweights account for 85 per cent of the world economy and about two-thirds of its population.
Its members are the United States, Germany, Japan, France, Italy, Britain and Canada, the European Union, Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey.
International Monetary Fund and World Bank officials are also due to attend.
- AFP/yt
