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World stocks on quicksand

Posted on: January 15, 2009


By Natsuko Waki Natsuko Waki – 24 mins ago

tokyo-brokerage-by-reutersLONDON (Reuters) – World stocks hit a one-month low on Thursday while the yen rallied and Japanese bond futures rose to their highest since Lehman Brothers collapsed in September as concerns grew over the banking sector and the broader economy.

U.S. stocks hit a six-week low on Wednesday, with Bank of America (BAC.N) and Citigroup (C.N) plunging as investors questioned whether the firms have enough capital to cover losses from toxic assets.

Technology bellwether Apple (AAPL.O) tumbled after the firm said its chief executive Steve Jobs will take medical leave of absence until June.

Expectations for a euro zone interest rate cut later in the day offered little help as investors grew nervous about the scale of losses banks and other firms might unveil in their fourth-quarter earnings reports.

“It is looking bleak today and not a very nice picture. We are going into the Q4 reporting season so investors are nervous anyway,” said Bernard McAlinden, market strategist at NCB Stockbrokers. MSCI world equity index (.MIWD00000PUS) fell more than 1 percent to hit its lowest since early December. The FTSEurofirst 300 index of leading European shares fell 0.8 percent (.FTEU3).

Barclays (BARC.L) was the major loser in Europe, falling more than 7 percent. Emerging stocks (.MSCIEF) fell 3.4 percent.

SURGING BONDS

March 10-year JGB futures rose to 140.19, the highest for a lead contract since September 16, when JGBs jumped on safe-haven buying and futures soared by their daily limit of 3 full points in wake of the collapse of Lehman Brothers.

The March bund future was up 36 ticks, having hit a new contract high earlier in the session.

The ECB is widely expected to lower its benchmark target rate by 50 basis points to 2.0 percent.

“I don’t think anyone is looking for anything too aggressive but it’s more what he (ECB President Jean-Claude Trichet) says about the outlook going forward that is going to set the tone for now,” a trader in London said.

Peripheral euro zone government debt remained under pressure a day after ratings agency Standard & Poor’s cut Greece’s credit ratings and warned on Portugal’s credit worthiness while its peer Moody’s said it was reviewing triple-A sovereigns.

S&P recently said Spain, Portugal, Greece and Ireland’s credit ratings were under threat as the global economic crisis strained public finances, but the rating agency affirmed those of Germany, France, Italy, Belgium and The Netherlands.

The low-yielding yen rallied across the board. The euro hit a 6-week low of 116.45 yen while the dollar hit a 4-week low of 88.49 yen. The dollar (.DXY) against a basket of major currencies fell 0.1 percent.

Crude oil prices extended losses, making it easier for central banks’ to cut interest rates because of its benign effect on inflation.

U.S. light crude for February delivery was down 67 cents at $36.61 a barrel, having earlier fallen by as much as $1.15.

Oil was $147 a barrel in July but has toppled as the economic crisis has sliced into global energy demand. World consumption is now projected to drop by more than 800,000 barrels per day this year.

(Additional reporting by Blaise Robinson and Emelia Sithole-Materise)

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1 Response to "World stocks on quicksand"

Jobs has been such an inspiration to a lot of people… i hope he gets well soon

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