BLBG: Global Stocks Retreat, Led by Banks; Gold, Treasuries Advance
Stocks in Europe and Asia dropped and U.S. futures slumped on concern banks may face rating downgrades and further losses as the recession deepens. Gold climbed to a seven-month high, while Treasuries gained.
Swedbank AB and UniCredit SpA declined more than 4 percent and the euro fell to a 10-week low after Moody’s Investors Service said it may downgrade banks with units in eastern Europe. Woori Finance Holdings Co., which yesterday applied for state funding, sank 6.8 percent as the cost for South Korean banks to borrow dollars rose to a record. Daimler AG slid 1 percent after the maker of Mercedes-Benz trucks and cars posted earnings that missed analysts’ estimates.
“We all recognize that ‘09 is going to be a very difficult year,” said Stephen Pope, chief market strategist at Cantor Fitzgerald Europe in London. “Banks that have exposure to the eastern European side are perhaps going to come under pressure,” he said in a Bloomberg Television interview.
The MSCI World Index decreased 1.1 percent to 821.80 at 10:19 a.m. in London, extending its 2009 retreat to 11 percent. The gauge of 23 developed markets has dropped for six straight days as companies from Electricite de France SA to Diageo Plc posted disappointing results and U.S. Treasury Secretary Timothy Geithner failed to convince investors his bank rescue will work.
The MSCI Emerging Markets Index of 23 developing nations declined 3 percent, the biggest slide in almost a month. Poland’s WIG20 Index slipped for a fifth day, losing 2.8 percent, while the Czech Republic’s PX Index tumbled 5.4 percent.
Nakagawa Resigns
Europe’s Dow Jones Stoxx 600 Index slipped 1.2 percent as, Givaudan SA and Yara International ASA fell. Austria’s ATX Index slid 3.2 percent after Moody’s said the country’s banking system is the “most exposed” to the deteriorating economies in east and central Europe.
The MSCI Asia Pacific Index dropped 2.7 percent. In Japan, where Finance Minister Shoichi Nakagawa said he will resign amid accusations he was drunk at a Group of Seven press conference, the Nikkei 225 Stock Average lost 1.4 percent.
Futures on the Standard & Poor’s 500 Index decreased 1.8 percent. U.S. markets were closed yesterday for Presidents’ Day.
Treasuries advanced, dragging yields on 10-year notes down by eight basis points, as economic concerns prompted investors to seek safer assets. Gold for immediate delivery rose 2 percent to $960.38 an ounce, the highest since July.
The euro touched $1.2603, the lowest since Dec. 4, after Moody’s said eastern European banks are likely to come under “downward pressure” which may weaken their parent companies.
Swedbank, Raiffeisen
Stockholm-based Swedbank, the biggest bank in the Baltic states, dropped 4.2 percent to 29.50 kronor. Italy’s UniCredit, which owns Poland’s Bank Pekao SA as well as operations in Ukraine, Kazakhstan and Russia, declined 4.7 percent to 1.15 euros.
Raiffeisen International Bank-Holding AG of Austria, which operates solely in former Communist countries, slid 5.3 percent to 14.23 euros.
Banks from Sweden, Italy, Austria, France, Belgium, Germany and Sweden account for 84 percent of western European bank loans in eastern Europe. The region’s economies are weakening, with the International Monetary Fund already offering aid to Latvia, Hungary, Serbia and Ukraine.
“Central Europe has now been in focus for a number of weeks,” said Beat Siegenthaler, chief emerging-markets strategist at TD Securities in London. “Anything connected with these markets has been under pressure. Banks have been very active and very aggressive in the region. At the moment it doesn’t look good.”
Woori, Shinhan
Woori retreated 6.8 percent to 6,550 won. The bank said yesterday it plans to raise more than 2 trillion won ($1.4 billion) from a state-backed recapitalization fund as the nation’s slowing economy pushes bad loans higher.
Shinhan Financial Group Co., which controls the third- largest bank in South Korea, lost 4.6 percent to 25,050 won. KB Financial Group Inc., the holding company for Kookmin Bank, sank 4.8 percent to 30,600 yen.
The one-year cross-currency swap rate on the won slumped to a record minus 1.6 percent today from minus 1.3 percent yesterday, before trading at minus 1.1 percent. A minus figure shows borrowers of dollars need to make interest payments.
Daimler dropped 1 percent to 23.31 euros. The world’s second-largest maker of luxury cars reported a fourth-quarter net loss of 1.53 billion euros ($1.93 billion), or 1.61 euros a share, wider than analysts’ 227 million-euro loss estimate.
‘Substantial Burdens’
The company said shrinking car markets will impose “substantial burdens” on earnings this year and cause sales at its Mercedes-Benz Cars division to drop.
Givaudan sank 7.4 percent to 763.5 francs after the world’s biggest maker of fragrances and flavors reported a full-year profit of 111 million francs. That fell short of analysts’ estimates as consumers bought less shampoos and ready-made soups.
Yara International dropped 4.6 percent to 155.5 kroner. The world’s largest fertilizer producer posted a 2.11 billion-krone ($300.6 million) fourth-quarter loss after it wrote down the value of inventory and closed a plant in Lithuania.
Profits have declined 64 percent for 633 companies in western Europe that have released earnings since Jan. 12, data compiled by Bloomberg show.
Aegon NV decreased 4.6 percent to 3.55 euros after the insurer that got a 3 billion-euro lifeline from the Netherlands in October posted a fourth-quarter loss of 1.2 billion euros. That exceeded analysts’ estimates for an 818 million-euro loss.
