GM! U.S. Futures, Most European Stocks Retreat Before Jobs Report
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By Adria Cimino
Jan. 9 (Bloomberg) -- U.S. stock-index futures and most European shares declined on speculation a report today will show the American economy lost jobs for a 12th straight month. A slump in automakers sent the MSCI Asia Pacific Index lower.
General Motors Corp. slid 2.7 percent in Germany before data that economists estimate will confirm the biggest collapse in U.S. employment since the end of World War II. Deutsche Postbank AG, Germany’s biggest consumer bank by clients, fell 4.4 percent after saying its 2008 results will be “clearly negative.” Nissan Motor Co. retreated 5 percent after laying off workers in the U.K. following a “dramatic” slump in demand.
The MSCI World Index decreased 0.8 percent this week as signs from Wal-Mart Stores Inc. and Intel Corp. that profits are deteriorating overshadowed government efforts to revive growth with stimulus packages and interest-rate cuts. The U.S. probably lost 525,000 jobs in December, economists said, while American companies have posted an 85 percent drop in earnings since the start of that month, data compiled by Bloomberg show.
“We see bad economic news everywhere,” Philippe Gijsels, a Brussels-based senior equity strategist at Fortis Global Markets, which has $62 billion under management, said in a Bloomberg Television interview. “As people start to realize it’s a very long recession, the bear market will continue.”
Standard & Poor’s 500 Index futures retreated 0.2 percent at 11:02 a.m. in London, indicating the benchmark index for U.S. equities will extend this week’s 2.4 percent slide.
Almost three shares fell for every two that rose in Europe’s Dow Jones Stoxx 600 Index, which added less than 0.1 percent. A retreat by Fanuc Ltd. helped push the MSCI Asia Pacific Index down 0.4 percent.
$1 Trillion
The MSCI World Index of 23 developed countries slumped 41 percent since the start of last year as $1 trillion in losses at financial companies eroded profits and the U.S., Europe and Japan fell into simultaneous recessions.
The projected decline in U.S. jobs, based on the median estimate of 73 economists surveyed by Bloomberg News, would bring last year’s payroll drop to 2.4 million, the most since 1945. The unemployment rate likely jumped to a 15-year high of 7 percent. The report is set for release at 8:30 a.m. in Washington.
Speculation the U.S. recession is worsening sent investors to the relative safety of government debt for a second day. Ten-year note yields fell three basis points to 2.41 percent, according to BGCantor Market Data.
GM, the largest U.S. automaker, tumbled 2.7 percent to $3.93. The company’s European division said sales fell 14 percent in December as all of its brands posted declines in the region.
Ford Motor Co., the second-biggest U.S. car maker, retreated 3.3 percent to $2.60 in Germany.
Obama’s $775 Billion
President-elect Barack Obama warned in a speech yesterday that the U.S. risks sinking deeper into an economic crisis without an infusion of government spending and urged Congress to act quickly on his $775 billion stimulus package.
Earnings at S&P 500 companies have fallen for five straight quarters, matching the longest streaks of declines on record, and the slump is forecast to continue. According to estimates compiled by Bloomberg, profits probably decreased 12 percent last quarter and will drop 11 percent in the first quarter and 6.2 percent in the following three months before rebounding in the second half of the year.
The S&P 500 has rebounded 21 percent from an 11-year low on Nov. 20 on optimism the recession will end this year after the Federal Reserve cut interest rates to as low as zero and Obama proposed the largest infrastructure investment since the 1950s.
The deepening economic contraction in the U.K. spurred the Bank of England yesterday to slash its benchmark interest rate to the lowest since the central bank was founded in 1694.
Financial Shares
Deutsche Postbank declined 4.4 percent to 13.68 euros. The bank’s fourth-quarter was burdened by deteriorating capital markets and as the lender cut stock investments, the company said today.
Natixis SA, the worst performing French banking stock in 2008, sank 9.3 percent to 1.31 euros after Les Echos said it may have recorded as much as 1 billion euros ($1.37 billion) of losses last quarter. Corinne Lavaud, a spokeswoman for Natixis in Paris, declined to comment on the report.
Commerzbank AG, Germany’s second-largest bank, fell for a second day after saying the government will take a stake as part of a new state bailout, prompting analysts to recommend selling the stock. The lender lost 6.5 percent to 4.91 euros after tumbling 14 percent yesterday.
Societe Generale SA analysts cut Commerzbank to “sell” from “hold” today on concern repaying funds from the state will burden earnings amid a tough economic climate in Germany.
Nissan, Fanuc
Nissan, Japan’s third-biggest automaker, declined 5 percent to 343 yen after saying it will eliminate about 1,200 workers at a U.K. factory. The car market is “extremely challenging” this year, the Japanese automaker said.
Fanuc, the world’s largest maker of factory robots, plunged 7 percent to 6,250 yen. Orders for equipment from manufacturers are likely to continue to decline, Hidehiko Hoshino, an analyst at UBS AG, wrote in a report. The analyst cut his rating on Fanuc to “sell” from “neutral.”
Infineon Technologies AG, Europe’s second-largest chipmaker, sank 9.9 percent to 96 cents. Merrill Lynch & Co. cut its recommendation on the stock to “underperform” from “neutral.”
Nestle SA lost 2 percent to 41.22 Swiss francs. The company was cut to “underweight” from “neutral” by JPMorgan Chase & Co. analyst Pablo Zuanic, who said he expects the maker of Nespresso coffee to miss its 2009 sales target.
Concern that stock losses will deepen remains elevated even after falling from record levels in October and November.
VStoxx, TED Spread
The benchmark index for European options, the VStoxx Index, climbed for a third straight day, adding 0.7 percent to 42.04. 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.
The difference between what the U.S. government and banks pay to borrow for three months, the so-called TED Spread, is still about three times higher than before credit markets started freezing in August 2007, according to data compiled by Bloomberg.
Treasuries last year returned the most since 1995, according to Merrill Lynch & Co. indexes, with investors seeking the relative safety of government debt as losses and writedowns at the world’s biggest financial companies swelled. The rally has faded this year, with Treasuries falling 1.1 percent, amid concern debt sales will swell to unprecedented levels as Obama boosts spending to snap the recession.
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