Monday, December 22, 2008
World markets fall as Toyota's second profit warning in 2 months hits auto stocks 
World stock markets fell Monday in light pre-Christmas trade as another profit warning from Toyota weighed on investor sentiment, particularly in Germany and France.
The FTSE 100 index of leading British shares closed down 37.77 points, or 0.9 percent, at 4,249.16 while Germany's DAX was down 57.68 points, or 1.2 percent, at 4,639.02. The CAC-40 in France fell 74.54 points, or 2.3 percent, to 3,151.36.
On Wall Street, U.S. stocks gave up early gains and the Dow Jones industrial average ended off 59.42 points, or 0.69 percent, to 8,519.69. The broader Standard & Poor's 500 index fell 16.25, or 1.83 percent, to 871.63.
The problems the world economy is about to face in 2009 were put in sharp relief earlier by the warning from Toyota Motor Corp., the world's biggest automaker, that it will likely post an operating loss of 150 billion yen ($1.66 billion) in the fiscal year through March, the first such loss since Toyota began reporting such numbers in 1941.
In the markets, Toyota is perceived as one of the world's best manufacturers -- and if it is experiencing times as bad as it says, then others will likely fare even worse, the reasoning goes.
"It wasn't the best of starts to the week for markets, I have to say," said Keith Bowman, equities analyst at Hargreaves Lansdown stockbrokers in London.
Automakers in Europe were badly hit by Toyota's warning, with Germany's BMW AG and Volkswagen AG falling 3 percent and 7 percent respectively. France's Renault SA and Peugeot SA and tire maker Michelin were also lower in the wake of Toyota's profits alert.
Sentiment in the U.S. was also hit by lower-than-expected profits at Walgreen Co. The drugstore chain said its profit fell 10 percent in the fiscal first quarter because of costs to open more than 200 new stores.
Wall Street has shown some signs of relative stability in the last few weeks. Since reaching multiyear lows on Nov. 20, the Dow is up 13.6 percent and the S&P 500 is up 18 percent.
Though global equities have made gains in three of the last four weeks following the preceding downdraft, analysts remain wary amid the mounting economic gloom.
Adrian Pankiw, analyst at Henderson Global Investors, noted that the rally has been led by consumer discretionary stocks at a time when global unemployment was on the rise.
"Such rallies have proved unsustainable in previous bear markets," he said.
Industrial orders data for the euro-zone earlier confirmed that manufacturing activity fell sharply in October and added to the evidence that the recession in the 15-nation single currency zone is deepening.
Eurostat revealed that industrial orders plunged by a monthly 4.7 percent in October for a 15.1 percent year-on-year decline. Most countries posted declines including industrial heavyweights Germany and France.
Brazil's Ibovespa index fell 3.9 percent to end at 37,618, while Mexico's IPC index slipped 0.7 percent to close at 22,059. Chile's IPSA dipped 0.5 percent to close at 2,335 and Argentina's Merval index gave back 4.6 percent to 1,046.
Earlier, Asian markets were mixed as Friday's announcement from the outgoing Bush administration to extend General Motors Corp. and Chrysler LLC $17.4 billion in loans brought a measure of relief to some investors.
But early gains in Asia soon faded amid worries about the U.S. and global outlook, as well as shrinking demand for Asian-made products like cars and electronics that keep the region's economies growing, analysts said. In Japan, new figures showed a record 26.7 percent plunge in exports last month compared to a year ago.
Hong Kong's Hang Seng Index dropped 3.3 percent to 14,874.61, while South Korea's Kospi dipped 0.1 percent. Singapore, Australia and mainland China benchmarks were each down over 1. 5 percent.
Tokyo bucked the downward trend, with its Nikkei 225 stock average rising 135.26 points, or 1.6 percent, to 8,723.78 despite the latest bad news about the country's exports.
Japanese investors seemed focused instead on the U.S. auto industry bailout, helping buoy Honda 5.4 percent and Nissan 2.7 percent, and the country's recent efforts -- including an interest rate cut Friday -- to counter the recession.
Oil prices fell with light, sweet crude for February delivery down $2.45, or nearly 6 percent, to settle at $39.91 a barrel on the New York Mercantile Exchange. Crude prices have tumbled 70 percent since peaking above $147 in July.
In currencies, the dollar slipped against the euro and the British pound but rose against the Japanese yen. The euro rose to $1.3958 in late New York trading Monday from $1.3887 it bought late Friday. The pound inched up to $1.4865 from $1.4859. The dollar advanced to 90.07 Japanese yen from 89.45 yen late Friday.
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