Global markets plunge

Equities markets in the Asia-Pacific region were mostly lower again on Thursday. The Shanghai Composite was again an exception as it added 0.52 percent to 4,346.46, a new record high, on corporate profits reports that have been better than anticipated in the first half of the year. The other exception was India’s Sensex, which gained 0.49 percent to 15,776.31. South Korea’s Kospi index, which closed above the 2,000 level for the first time on Wednesday, dropped 2.03 percent to 1,963.54 on profit-taking. It was the biggest drop on the Kospi in four months.

Other losers included the Hang Seng index in Hong Kong, which was 0.64 percent lower to 23,211.69. In Australia, the Sydney Ordinaries dropped 1.2 percent to 6,301.4 and the S&P/ASX200 was 1.29 percent lower to 6,258.5. The Taiex index fell 1.78 percent to 9,566.42 in Taiwan, while the Straits Times Index in Singapore was down 1.8 percent to 3,592.68. There were declines in Tokyo as well as the Nikkei 225 was 0.9 percent lower to 17,702.09 and the Topix index dropped 1 percent to 1,737.18, while the Mothers market was down 0.66 percent to 852.13.

Tokyo’s declines came as investors worried about the outcome of parliamentary elections scheduled for Sunday, where polls suggest that the ruling Liberal Democratic party could have a difficult time of it. Domestic sectors were particularly affected. In the real estate sector, Mitsui Fudosan (TYO: 8801; NAS: MDSFF) dropped 1.9 percent to ¥3,160, while among retailers Seven & I (TYO: 3382) was 1.7 percent lower to ¥3,430. In the semiconductors sector, Advantest (TYO: 6857; NYSE: ATE) dropped 5.2 percent to ¥4,920 after it said that net profits were down 13 percent in the most recent quarter. Earnings reports helped games maker Nintendo (TYO: 7974; NAS: NTDOY; FWB: NTO), which upped its earnings guidance for the full year by 41 percent as it reported sharp profits in the quarter to June from its Wii games console. Nintendo added 8.8 percent to ¥61,800. A profits report also aided Nomura Holdings (TYO: 8604; NYSE: NMR; SGX; N33), which gained 6.6 percent to ¥2,260.

Declines extended beyond Asia to most other global markets as investors grew more worried about the cost of borrowing and they became less and less willing to make risky investments. They are concerned that the increasing cost of borrowing will mean more defaults, lower earnings, and less willingness for companies to pursue mergers. European markets saw their biggest losses in five years. The FTSE Eurofirst 300 dropped 2.62 percent to 1,530.56. Among continental markets, the Dax was 2.39 percent lower to 7,508.96, while the IBEX was down 2.66 percent to 14,540.4 in Madrid and the Paris CAC-40 fell 2.78 percent to 5,675.05. There were no winners reported on the CAC-40, while the best performance on the Dax came from electricity and natural gas utility RWE (FWB: RWE) only amounted to a gain of 1.49 percent to €79.52. Elsewhere on the Dax, rival utility Eon (FWB: EOA; LSE: EON; NYSE: EON) was 0.38 percent higher to €117.26. The chemicals sector was also a bit higher in Frankfurt as BASF (FWB: BFA; NYSE: BF) added 0.26 percent to €95.07 and Altana (FWB: ALT; NYSE: AAA) gained 0.7 percent to €17.35. Car and truck makers were lower on the session. BMW (FWB: BMW) was 2.62 percent lower to €36.73 and truck manufacturer Man (FWB: EDF1) fell 2.74 percent to €103.43, while Peugeot (Euronext: UG; OTC: PEUGY) was down 4.28 percent to €59.06 and Renault (Eurofirst: RNO) dropped 4.83 percent to €102.88. The worst performer on the CAC-40 was tire maker Michelin (Euronext: ML), which fell 6.07 percent to €93.56. Other decliners included hotels operator Accor (Euronext: AC), which was 4.75 percent lower to €62.95. Construction group Vinci (Euronext: DG) was down 4.93 percent to €52.60, while drinks maker Pernod-Ricard (Euronext: RI) dropped 5.18 percent to €152.59.

Losses in London were even bigger than they were in continental Europe. The FTSE 100 was 3.15 percent lower on the session, to 6,251.2, while the FTSE 250 dropped 3.35 percent to 11,033.4. Insurers were in focus, as companies in the sector provided both the best and worst performances on the 100. On the winning side, Resolution (LSE: REL) added 2.84 percent to 633.5p, while Legal & General (LSE: LGEN) fell 8.24 percent to 138.1p. The decline for Legal & General came after it reported that margins had fallen to 3.6 percent and that its non-life unit had lost £38 million on household claims due to flooding. L&G also disappointed when it announced a share buyback program worth £1 billion, much less than had been anticipated by analysts. Also in the insurance sector, Friends Provident was down6.65 percent to 181.2p as UBS (NYSE: UBS; SWX: UBSN; TYO: 8657) cut its recommendation from “buy” to “neutral”. Other sectors seeing declines on the 100 included hotels operators, as Intercontinental Hotels (LSE: IHG; NYSE: IHG) fell 7.34 percent to £11.11. In the telecommunications sector, Vodafone (LSE: VOD; NYSE: VOD; FWB: VOD) dropped 7.23 percent to 145p. Airplane engine manufacturer Rolls Royce (LSE: RR) fell 6.46 percent to 496.25p after it reported that profits in the first half were down by 51 percent, affected by the weakness of the US dollar. The biggest loser on the 250 was retailer GAME group (LSE: EBQ), with a drop of 7.22 percent to 176.75p.

Wall Street also suffered big losses in early afternoon trade. At just past 1:30 p.m. in New York, the Dow Jones Industrial Average was down 290 points, or 2.11 percent, to 13,494.46, while the Nasdaq Composite had lost 2.32 percent to 2,586.65 and the S&P 500 was 2.35 percent lower to 1,482.47. The declines were largely fallout from more bad news on the housing market and on higher oil prices. The Commerce Department released new data showing that new home sales were down 6.6 percent in June to an annualized rate of 834,000 units. Homebuilders declined. DR Horton (NYSE: DHI) was 3.03 percent lower to $16.95, while Beazer Homes (NYSE: BZH) was down 11.21 percent to $15.13 and WCI Communities Inc (NYSE: WCI) had fallen 20.67 per cent to $8.98 by early afternoon. Banks were also lower, feeling the effect of the ongoing concerns over the subprime mortgage sector. Bank of America (NYSE: BAC; TYO: 8648) was down 80 cents to $47.13, while JP Morgan Chase (NYSE: JPM; TYO: 8634) dropped $1.51 to $43.76, Citigroup (NYSE: C) was $1.95 lower to $47.26 and Merrill Lynch (NYSE: MER; TYO: 8675) fell $3.57 to $74.53. At the same time of day there were a few gainers. Ford Motor (NYSE: F) had added 25 cents to $8.22 on a report that it had returned to profit in the second quarter, while consumer goods group Procter & Gamble (NSYE: PG) was 52 cents higher to $63.50. On the Nasdaq, Amazon.com (NAS: AMZN) was 16 cents higher to $86.34, while Apple (NAS: AAPL) had gained $8.09 to $145.35. Because of the big losses on the day, the New York Stock Exchange imposed trading curbs aimed at stopping large-block sales when shares are falling.