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Panic selling abroad; US futures plunge
Fear of recession strikes Asian investors. European markets fall as economy slows. OPEC is expected to cut 1 million barrels a day of oil production.
By Andrew Rosenbaum
There is panic selling on the markets abroad, and the U.S. open looks grim as stock index futures have fallen so low that trading in most of them has been halted.
The most significant stock index futures--the S&P 500 Index futures, Dow Jones industrials futures, and Nasdaq-100 Index ($NDX.X) futures have all dropped more than 6%, which is the maximum amount permitted. Trading in these future, except for stop contracts, has been halted.
In Asia, major indexes have hit record lows, as investors flee the equities markets and grab for government paper. The Nikkei 225 Index ($JP:N225) closed down 9.6% falling to levels it hasn't hit since April, 2003. The MSCI Asia Pacific Index fell 9.5%, remaining at levels last seen in 2004 for the second day in a row.
In Europe, the Dow Jones Stoxx 600 Index crashed 9.5%; the FTSE Eurofirst plunged 8.1% and London’s FTSE 100 Index ($GB:UKX) lost 7.6%.
"All bets are off," says David Jones, chief market strategist at London brokerage IG Index. Jones says there's no telling how low the markets may fall. "We thought we'd seen the worst, but we haven't, and there's no telling how long the sell-off may continue."
Much of the volatility on world stock markets had been attributed to margin calls and redemption selling by hedge funds, or other big investors. Now everyone seems to want to get into the act, and panic selling has taken over.
Concern about OPEC
Investors will be closely watching the OPEC meeting taking place this morning. The oil producers' group, which accounts for about 40% of world oil, is expected to cut production by at least a million barrels per day, subject to a review in a few weeks, or to cut 1.5 million today.
The Saudi-owned newspaper al-Hayat reports that OPEC wants the price of oil per barrel, which has fallen below $70, to rise above that level. A cut in oil production could hurt investor sentiment today, but with oil demand declining and recession impending, investors might also just shrug it off.
Asian markets test bottom levels
Clearly, markets in Asia are testing levels for bottom.
We've seen that major Asian indexes held a diving contest. Hong Kong's Hang Seng Index ($HSIX) also was down 8.3% to a four-year low.
Exporters were worst hit in Japan. Sony Corp. (SNEJF, news, msgs) shares plunged 14% to a 13-year low on Friday after the electronics maker halved its profit forecast. Canon (CAJ, news, msgs), the world's largest digital camera maker, dropped 12.6%. In Hong Kong, banks led the declines with HSBC shares dropping 12.5%.
European markets drop again
In Europe, markets also saw a second day of sharp declines.
Vehicle makers were worst hit on poor results announcements. France's Peugeot (PEUGF, news, msgs) lost 11%; truckmaker Volvo AB plunged 19%. Also on concerns about fuel pricesAir France (AFLYY, news, msgs) dropped 6%.
All eyes on corporate reports in the US
All eyes will be on earnings reports in the U.S. today.
Reporting today are:
Fortune Brands (FO, news, msgs),will report third-quarter earnings today. Analysts expect earnings of $1.07 cents per share on revenue of $2.1 billion. Fortune Brands makes consumer products like Sauza and Jim Beam, and Makers Mark, as well as products for the home and golf equipment. Goldman Sachs analyst Lindsay Mann thinks that Fortune Brands portfolio is getting some boost from down-trading, but that sales volume will climb about 1 to 2 percent, instead of a previously forecast 2 to 3 percent.
SAMSUNG (SMSNF, news, msgs) reported a 44% drop in profit for the third quarter today, on revenue of $863 million. The chipmaker warned that the outlook is gloomy, as chip sales are hurt by the decline in consumer electronics sales in a slowing economy. The entire sector is suffering from the decline in chip prices as well.
Gannett (GCI, news, msgs)Gannet will report third-quarter earnings before the market opens today, with a conference call scheduled for 10:00 a.m. ET. Analysts are expecting earnings of 75 cents per share on revenue of $1.61 billion for the media company. Advertising revenue is down 11% at Gannet for the first five months of the year, but the company has cut 1000 jobs this year, and the drop in print advertising is somewhat compensated for by broadcast advertising revenues. Analysts say the company has a sound financial position but must take steps to deal with the decline in ad sales.
Ingersoll Rand (IR, news, msgs)is to report third-quarter earnings today before the market opens, with a conference call scheduled for 10:00 a.m. ET. Analysts expect earnings per share of 99 cents on revenue of $4.34 billion. The machinery maker could experience a drop in sales, analysts say, because the heavy industry companies that predominate in its customer base are themselves cutting funds for equipment purchases and suffering from the economic slowdown. The company warned last week that weaker than expected sales in its climate control, security and industrial technology businesses in North America and Western Europe would lead its third-quarter and year-end results to come in below analyst expectations.
Hold on to your hats; it looks like it's going to be a bumpy ride at today's open.
