BLBG: U.S., Europe Stocks Tumble; MSCI World Slumps for Sixth Day
Stocks in the U.S. and Europe tumbled, sending the MSCI World Index lower for a sixth day, as American retail sales slumped at twice the rate forecast by economists and investors speculated banks need more capital.
JPMorgan Chase & Co., Macy’s Inc. and American Express Co. sank at least 4.8 percent after the Commerce Department said purchases decreased 2.7 percent in December as job losses and dwindling access to credit forced consumers to reduce spending. Citigroup Inc. slid as much as 17 percent as Chief Executive Officer Vikram Pandit works to unravel the financial-services empire following four straight quarters of losses. Deutsche Bank AG fell 8 percent after the lender said it had a loss of 4.8 billion euros ($6.3 billion).
The MSCI World Index slid 3.4 percent to 858.34 at 11:18 a.m. in New York. The index of 23 developed nations has lost 9.6 percent in the past six days as companies from Alcoa Inc. to Intel Corp. spurred concern the profit outlook is worsening, while the unemployment rate in the U.S. climbed to the highest in almost 16 years.
“There seems to be more uncertainty than ever,” said John Carey, the Boston-based investor who runs the $4.64 billion Pioneer Fund that beat 74 percent of its peers last year. “There are still no signs of an upturn in the economy. There’s a desire among consumers to save some money and keep their powder dry, because they don’t know what’s ahead.”
The Standard & Poor’s 500 Index lost 3.7 percent to 839.42, while Europe’s Dow Jones Stoxx 600 Index slid 5 percent to 1931.54, the biggest retreat since Dec. 1.
Retail Sales
All 24 industry groups and 492 of the companies in the S&P 500 retreated following the sixth consecutive monthly decrease in retail sales, the longest stretch of declines in records going back to 1992.
The benchmark for U.S. equities is down 41 percent since the beginning of last year as credit losses and writedowns topped $1 trillion in the worst financial crisis since the Great Depression and the U.S., Japan and Europe fell into the first simultaneous recessions since World War II.
The loss of 2.6 million jobs and declining home and stock values are squeezing all American households, hurting retailers from Wal-Mart to Macy’s.
JPMorgan lost 4.8 percent to $25.07. Macy’s tumbled 7.8 percent to $9.27. American Express fell 5.7 percent to $17.91.
Citigroup, European Banks
Citigroup slid 92 cents to $4.98. The company may sell its CitiFinancial consumer-lending unit and rein in trading with the bank’s own capital after agreeing to cede control of its Smith Barney retail brokerage to Morgan Stanley, people familiar with the plan said.
Banks led declines in Europe after Deutsche Bank reported a fourth-quarter loss after taxes as the global financial crisis hurt debt and equity trading. HSBC Holdings Plc, Europe’s largest bank by market value, may have to raise as much as $30 billion and cut its dividend in the half as earnings sink, Morgan Stanley analysts said.
Deutsche Bank sank 7.8 percent to 22.09 euros. The bank had losses after the financial crisis pummeled its debt and equity trading results, according to a preliminary report.
Separately, Deutsche Post AG said it will take a stake of about 8 percent in Deutsche Bank as part of a revised deal to sell its Deutsche Postbank AG unit to Germany’s biggest bank.
Earnings at companies in the Stoxx 600 dropped 16 percent on average in 2008 and will fall 1.2 percent this year, according to forecasts compiled by Bloomberg. Analysts estimate profits at financial firms in the measure slumped 56 percent last year, the worst decline among 10 industries.
Commerzbank, HSBC
Commerzbank, the country’s second-largest lender, declined 11.1 percent to 3.84 euros. BNP Paribas SA, France’s biggest bank, lost 11 percent to 30.24 euros.
A measure of bank shares in the Stoxx 600 slid 5.1 percent, the steepest drop in more than a month.
HSBC tumbled 11 percent to 5725 pence. The bank’s profit is likely to fall “sharply” this year and won’t recover until 2011 at the earliest, Morgan Stanley analysts including Michael Helsby and Anil Agarwal wrote in a note yesterday. Gareth Hewett, an HSBC spokesman in Hong Kong, declined to comment.
UniCredit SpA, Italy’s largest bank by assets, decreased 7.4 percent to 1.61 euros while smaller rival Banco Popolare SC dropped 7 percent to 5.11 euros.
Anglo American led a retreat by mining companies as Citigroup Inc. downgraded the shares and base metal prices declined in London. The world’s fourth-biggest diversified mining company fell 10 percent to 1,284 pence. Xstrata Plc, the fourth- largest copper producer, slumped 13 percent to 676 pence as Citigroup cut its recommendation for both companies to “hold” from “buy.”
Siemens, Ericsson
Siemens sank 12 percent to 42.47 euros. Merrill Lynch & Co. downgraded the shares to “neutral” from “buy” after Europe’s largest engineering company said first-quarter orders dropped “significantly.”
Ericsson AB, the world’s biggest maker of wireless networks, slid 3.4 percent to 57.70 kronor. Nortel, North America’s largest maker of phone equipment, had more than $1 billion in assets and debt, according to today’s Chapter 11 filing in Wilmington, Delaware.
Investors from New York to Sao Paulo have grown less pessimistic about stocks over the next six months on speculation a U.S. stimulus plan and the lowest interest rates on record will revive the global economy, a survey of Bloomberg users from Jan. 5 to Jan. 9 showed. Fewer respondents in the Bloomberg Professional Global Confidence Survey are predicting declines for the S&P 500, Brazil’s Bovespa, the FTSE 100, the CAC 40, the DAX and Spain’s IBEX 35.
VIX, VStoxx
Still, concern that stock losses will deepen remains elevated even after falling from record levels.
A gauge of U.S. investor concern had its biggest increase this month. The CBOE Volatility Index, derived from prices options dealers are charging for insurance against market retreats, rose 19 percent to the highest since Dec. 13, according to data compiled by Bloomberg.
The benchmark index for European options, the VStoxx Index, climbed the most in two months, adding 13 percent to 52.29. The gauge, which measures the cost of using options as insurance against declines in the Euro Stoxx 50 Index, surged to 87.51 in October, the highest since at least 2001, data compiled by Bloomberg show.
