US House rejects rescue plan, global stocks sink (8.40am) 30 September 2008
US stocks skidded on Monday, with the Dow slumping nearly 778 points, in the biggest single-day point loss ever, after the House rejected the governments $700-bn bank bailout plan. Britains top share index plummeted on Monday to a 3-year closing low, part of a global equities slide triggered by tottering banks and ahead of a vote by US lawmakers on a $700-bn rescue plan. European shares slumped to a 3-and-a-half year closing low on Monday, with banks weighing heavily, as the fallout from the credit crisis escalated on both sides of the Atlantic. Stocks across the Asia-Pacific region tumbled on Tuesday, extending the worst global sell-off in 21 years, after the rejection of a $700-bn bank rescue plan by US lawmakers deepened concern more economies will slide into a recession. Chinas markets are closed this week for holidays. All other markets open for trading across the region fell. Crude oil extended declines on Tuesday after falling the most in almost 7 years yesterday as US lawmakers rejected a $700-bn financial rescue plan, raising concern commodities demand will drop. Gold futures traded near the highest in 2 months after the US House of Representatives rejected the $700-bn bailout bill for the US banking system, stoking concern of a worsening credit crisis. The Rand is steady in early trading today as at 8.20am.
Asia
Stocks across the Asia-Pacific region tumbled on Tuesday, extending the worst global sell-off in 21 years, after the rejection of a $700-bn bank rescue plan by US lawmakers deepened concern more economies will slide into a recession. Japanese bonds and the Yen climbed. The MSCI Asia Pacific Index plunged 2.7% to 108.38 as of 12.56pm in Tokyo, adding to a 5-day, 4.9% retreat. The Yen rose against the Euro as investors cut holdings of higher-yielding assets funded in the Japanese currency, trading at 149.56 per Euro from 150.38. Taiwans Taiex index dropped 4.1%, the most in the region. Chinas markets are closed this week for holidays. All other markets open for trading across the region fell.
The Nikkei index slid 4.12% to hit a 3-year closing low on Tuesday after US lawmakers rejected a $700-bn bailout plan for the financial system. The benchmark Nikkei index shed 483.75 points to end at 11,259.86, the lowest finish since June 2005. It earlier lost nearly 5%. The broader Topix declined 3.6% to 1,087.41, after tumbling more than 5% at one stage. Some commentators warned that even with the bailout plan approved, fundamental problems would remain. The real issue is that the economy is bad. It is hard to see how far things may worsen, said a fund manager. On the domestic front, Japans jobless rate hit a 2-year high while spending and industrial output fell more than expected in August, adding to the gloom for an economy on the brink of a recession amid a global market meltdown. The government has effectively acknowledged that Japan is in recession, ending a growth cycle that began in early 2002.
Hong Kong shares cut steep early losses on Tuesday as sellers, anticipating US lawmakers will ultimately approve a stalled financial rescue plan, moved to cover short positions after a 2-day, 10% slide. The benchmark Hang Seng Index ended the morning down 2.4% or 433.02 points at 17,447.66 after dropping more than 6% earlier as US lawmakers held up a $700-bn bank rescue plan, knocking hopes for an economic revival. If you watched the congressional vote last night, you would know that the rescue plan got stuck essentially because of dirty politics, said a commentator. Expectations are high that the bailout will be approved soon with amendments and that should spur a big rally. Main board turnover rose to HK$39.2-bn ($5.02-bn) as compared with HK$ 24.7-bn at midday on Monday. The China Enterprises Index of top Mainland Chinese companies dropped 3.8% to 8,615.61.
NIKKEI 225 11,259.86 -483.75 -4.12%
HANG SENG INDEX 17,447.66 -433.02 -2.42%
S&P/ASX 200 INDEX 4,600.50 -206.90 -4.30%
Commodities
Crude oil extended declines on Tuesday after falling the most in almost 7 years yesterday as US lawmakers rejected a $700-bn financial rescue plan, raising concern commodities demand will drop. Oil slumped more than $10 yesterday, helping send the Reuters/Jefferies CRB Index of 19 commodities to the biggest tumble since at least 1956, as the House of Representatives voted down the plan and European governments bailed out 3 more banks. Corn, nickel and platinum also fell. Crude oil for November delivery fell as much as 97 cents or 1% to $95.40/barrel, and was at $95.50 at 12.09pm Singapore time in after-hours electronic trading on the New York Mercantile Exchange. Prices have declined 35% from the record $147.27 reached on July 11 and have fallen 32% this quarter, the 1st quarterly drop since the end of 2006. Yesterday, oil fell $10.52 or 9.8% to $96.37/barrel. Brent crude oil for November settlement tumbled as much as $1.01 or 1.1% to $92.97/barrel on the London ICE Futures Europe exchange. Futures yesterday declined $9.56 or 9.2% to settle at $93.98/barrel.
Gold futures traded near the highest in 2 months after the US House of Representatives rejected the $700-bn bailout bill for the US banking system, stoking concern of a worsening credit crisis. Gold for immediate delivery rallied to $925.10 an ounce yesterday, the highest since July 31, and traded at $902.50 an ounce at 10.57am in Singapore. December-delivery gold advanced 1.4% to $906.70 an ounce in after-hours electronic trading on the COMEX division of the New York Mercantile Exchange. Silver for immediate delivery was little changed at $13.11 an ounce. Platinum fell more than 3% on Tuesday as poor car sales sparked fears of falling demand for the metal used in auto catalysts. By 01H35 GMT, platinum was trading at $1,045 an ounce, down $35 or $3.24% from New Yorks notional close. It was the metals weakest level since Sept. 19. Car sales growth in China slowed to 17.07% in the 1st half after rising 20% or more annually since 2005. Palladium was down 0.7% at $210/218. Both metals are used to make auto catalysts to clean car exhaust fumes.
Gold $904.12 -0.02%
Platinum $1060.50 -1.81%
Brent Crude $93.82 -0.17%
R153 9.58% +0.74%
JSE Report
The JSE Securities Exchange South Africa (JSE) plumbed the depths in afternoon trade to finish deep in the red. Investors had nowhere to hide as the JSE was slammed on the back of a stalled US bailout plan. Dual-listed insurer Old Mutual led the sinking stocks, losing more than 10% by 17H00 on Monday. The JSE Top 40 index of blue chips plummeted 1369 points or 6.52% to close at 21 008, while the broader All Share index ended 6.12% lower at 23 088, with resources sinking 8.96%; platinum miners were 4.21% weaker and gold stocks were down 4.62%. Industrials lost 3.73%, financials dropped 4.65% and banks shed 3.80%. Markets were concerned on Monday morning when it was announced that UK lender Bradford & Bingley Plc was to be nationalised. This was compounded by announcements that Belgiums largest financial services firm, Fortis, was to be bailed out in a joint initiative between the Belgian, Dutch and Luxembourg governments to the tune of $16.3-bn. Further fuel was added to the market when rumours circulated that Germanys 2nd largest property lender, Hypo Real Estate, was on the brink of collapse. The current volatility and uncertainty in the market prompted stockbrokers Barnard Jacobs Mellet to warn clients about current market conditions. The firm said in its morning brief to traders: Due to the extreme volatility, we would encourage active traders to significantly adjust their risk downwards. Traders should rather take smaller positions and trade more often using tight stop-loss strategies. Stockbrokers Imara SP Reid warned clients that local equities would mirror the lack of traction on global markets and resources would suffer meaningful losses. Sectors such as banking, insurance and financial counters will also lose traction. These predictions came to pass and the market was swamped with sellers as indices across the board fell sharply. A bullish US based banker and regular commentator on one of the local South African internet trading forums felt that this sell-off was not the collapse of world stock markets. In reference to some jibes that the ambitious US$700-bn bailout of financial institutions, was going to fail he said: One does not receive $700-bn and then see the recipient of that $700-bn disappear. This is the cleansing that is needed - a financial enema so to speak. Much attention has been focused on Old Mutual in recent weeks, with the company coming under criticism following write-downs in its US life operations and exposure to failed US financial services firms such as AIG, US mortgage lenders Freddie Mac and Fannie Mae and Lehman Brothers. The company on Monday announced the appointment of Chris Chapman to head up its US Life operations. Fund managers and analysts have felt that the Old Mutual share price is becoming undervalued despite its problems in the US with Investec being a big buyer of the share earlier this year. Since October last year, Old Mutuals share price has fallen around 60% from a high of 2 496c to its current price around 1 090c. Problems in the US prompted analysts to quiz former CEO Jim Sutcliffe at the companys August interim results announcement around future downgrades by ratings agencies such as Moodys. Investors look at these ratings to provide some guidance as to the quality of the underlying businesses. A lowered credit rating may increase borrowing costs for the business. At the time Sutcliffe dismissed this as unlikely, but 6 weeks later, global markets tumbled and Sutcliffe resigned. Despite the weakness in Old Mutuals share price and ongoing problems in the US, a leading South African insurance analyst dismissed these concerns in a report to clients. The analyst argued that Old Mutual enjoyed healthy liquidity and cash flow generation from its other operations that it would comfortably be able to weather the problems it faced in the US market. Typical insurance companies act as a proxy for stock markets. When markets move up, the stocks enjoy huge profits on their funds. In current market turmoil these companies are out of favour with investors which prompted one local stock broker to say that they were about as attractive as bully beef.
Financial Index 17 412 -810 -4.65%
Nedbank R99.06 -394c -3.83%
Stanbank R85.80 -270c -3.05%
Bidvest
South African services group Bidvest said on Monday it will reconsider its bid for Nampak after the packaging company rejected its offer for 25% of its shares as too low. Bidvest said it believed Nampaks announcement on Friday about the offer contained information that may have a material adverse change on Nampak, and said it needed to evaluate the announcement. Once the evaluation is complete, Bidvest will decide whether to proceed with the pro rata offer at the price, or at all, Bidvest said in a statement.
Sappi
South African-based global pulp and paper producer Sappi announced on Monday that it has entered into an agreement to acquire the coated graphic paper business of M-real for 750-mn Euros - about R8.9-bn. M-real is a Finnish-domiciled company listed on the OMX Nordic Exchange, Helsinki and a leading producer of paper-board and paper. The acquisition will be financed through a combination of equity, assumed debt, the cash proceeds from a rights offering and a vendor note. M-real has announced plans to discontinue the production of coated wood-free paper at its Hallein and Gohrsmuhle mills, located in Austria and Germany respectively - approximately 0.6-mn tons of capacity per annum. The business is Europes 3rd and 4th largest coated wood-free and coated magazine paper producer respectively and in 2007 it generated revenues of 1.333-bn Euros. The acquisition also includes the purchase of 4 graphic paper mills with a total production capacity of 1.9-mn tons per annum - the Kirkniemi Mill in Finland which has an annual paper capacity of 740 000 tons; the Kangas Mill in Finland which has an annual paper capacity of 210 000 tons; the Stockstadt Mill in Germany which has an annual paper capacity of 420 000 tons, via the acquisition of 100% of the share capital of M-real Stockstadt GmbH; and the Biberist Mill in Switzerland which has an annual paper capacity of 505 000 tons, via the acquisition of 100% of the share capital of M-real Biberist AG. All of the shares in CN Papiervertriebs GmbH in Germany. As part of the acquisition, Sappi has also entered into an arrangement for the long term supply agreements for pulp and other services with M-real and a long term wood supply agreement with MetsAliitto and transitional supply agreements with M-real for the output of Husum Mill PM8, located in Sweden, and AAnekoski Mill PM2, located in Finland, which will both remain under M-reals ownership.
AECI
Industrial group AECI said today that after much discussion with the consortium that had planned to purchase the nylon light decitex (LDI) business of SANS Fibres (Proprietary) Limited, the parties have agreed that under the present circumstances the envisaged transaction is no longer feasible. With mutual regret, therefore, the parties have agreed to terminate any further discussions regarding the sale of the business, the company said. The sale was expected to have been concluded by the end of September 2008. Since the last announcement, there have been a number of major adverse developments in the nylon market that have impacted negatively on the value and prospects of the SANS business. These developments include increases in raw material and other input costs, customers resistance to higher product prices required to offset these increases, and labour unrest at Bellville. AECI said it will, by year-end, re-evaluate all options for the business and will make a final decision on exiting the nylon LDI business at that time.
Sovfood
Food group Sovereign Food Investments has blamed an operating loss of R11.7-mn in the 6 months to August on a 52% increase in the cost of broiler feed as a result of increases in the cost of maize, soya and other feed ingredients. The groups sales value per kilogram of poultry sold decreased 3% as a result of an oversupply in the poultry industry and reduced consumer spending in the 1st quarter of the year, which led to a decrease in pricing of 12% for the 1st quarter. But pricing in the 2nd quarter was stronger as a result of reduced imports, a balanced national supply and demand and higher red meat prices. Overall sales volumes were 31% higher than in the corresponding last year as a result of an expansion the group had undertaken. Sovereign said it ended the period with increased net working capital. Revenue rose 28% to R365-mn, while headline earnings per share dipped 102,9c. The net debt:equity ratio was 170%, partly as result of the decrease in equity because of the loss incurred in the period under review and partly as a result of the increase in debt in order to complete the bulk of the expansion. The group said national supply and demand for its products was well balanced and the weakness in the rand-dollar exchange rate had led to extremely low imports.
Bidvest R102.01 -548c +5.10% 12H00
Nampak R14.51 -39c -2.62% 12H00
Sappi R81.20 -30c -0.37% 12H00
AECI R62.00 -100c -1.59% 12H00
Sovfood R5.01 -39c -7.22% 12H00
London
Britains top share index plummeted on Monday to a 3-year closing low, part of a global equities slide triggered by tottering banks and ahead of a vote by US lawmakers on a $700-bn rescue plan. The FTSE 100 index ended down 269.7 points or 5.3% at 4,818.8, after losing 2.1% on Friday. The blue chip index has fallen 12 percent in September, on track for its biggest monthly fall since the stock market crash of 1987. The credit crisis that has roiled markets over the past year claimed another victim. The British government was forced to buy up the 50-bn Pounds of loans, mostly mortgages, held by Bradford & Bingley. The government brokered a takeover of lender HBOS earlier this month and nationalised Northern Rock in February. Banking shares accounted for a quarter of the indexs slump. Miners were the 2nd-biggest loser on the British index, tracking a sharp decline in key base metals prices.
European shares slumped to a 3-and-a-half year closing low on Monday, with banks weighing heavily, as the fallout from the credit crisis escalated on both sides of the Atlantic. Financials were battered by news of the part nationalisation of 2 major European banks and the sale in the United States of Wachovia Corps bank operations to Citigroup, in addition to ongoing liquidity concerns. Hopes that a US rescue plan could solve the financial sectors problems, as US lawmakers met to vote on the $700-bn bailout proposal, failed to help bank stocks. The FTSEurofirst 300 index of top European shares closed down 5.23% at 1,047.04 points - its lowest closing level since January 2005. National benchmark indices fell in all of the 18 Western European markets.
FTSE 100 INDEX 4,818.77 -269.70 -5.30% 09/29
CAC 40 INDEX 3,953.48 -209.90 -5.04% 09/29
DAX INDEX 5,807.08 -256.42 -4.23% 09/29
New York
US stocks skidded on Monday, with the Dow slumping nearly 778 points, in the biggest single-day point loss ever, after the House rejected the governments $700-bn bank bailout plan. The days loss knocked out approximately $1.2 trillion in market value, the 1st post-$1 trillion day ever, according to a drop in the Dow Jones Wilshire 5000, the broadest measure of the stock market. The Dow Jones industrial average lost 777.68, surpassing the 684.81 loss on Sept. 17, 2001 - the 1st trading day after the September 11 attacks. However the 7% decline does not rank among the top 10% declines. The S&P 500 index lost 8.8%, its 7th worst day ever on a percentage basis and the biggest 1-day percentage drop since the crash of 1987, when it lost 20.5%. The NASDAQ composite index fell 9.1%, its 3rd worst day on a percentage basis and also its worst decline since the crash of 1987. Stocks tumbled ahead of the vote and the selling accelerated on fears that Congress would not be able come up with a fix for nearly frozen credit markets. The frozen markets mean banks are hoarding cash, making it difficult for businesses and individuals to get much-needed loans. The stock market was definitely taken by surprise, said an analyst, referring to the House vote. If you watched the news stream over the weekend, it seemed like it was a done deal. But the money is being held hostage to the political process. On Monday afternoon Treasury Secretary Henry Paulson said markets around the world are under great stress and that a plan needs to be passed as soon as possible. People do expect that there will be some plan put in place, but even before this vote, there was doubt as to whether it would be enough to avert the crisis, said a portfolio manager. Market breadth was negative. On the New York Stock Exchange, losers beat winners 19 to 1 on volume of 2.05-bn shares. On the NASDAQ, decliners topped advancers by over 5 to 1 on volume of 2.88-bn shares. The 3-month Treasury bill, seen as the safest place to park money in the short term, fell to 0.34% from 0.83% late on Friday. Earlier this month, the 3-month bill fell to a 68-year low around 0% as panic gripped financial markets. Long-term Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.58% from 3.82% late on Friday. Treasury prices and yields move in opposite directions. All 30 Dow components ended lower and all lost at least 3%. US light crude oil for November delivery fell $10.52 to settle at $96.37/barrel, in the 2nd-biggest 1-day plunge ever. COMEX gold for December delivery rose $5.90 to $894.40 an ounce. In currency trading, the Dollar gained against the Euro and fell against the Yen.
DOW JONES INDUS. AVG 10,365.45 -777.68 -6.98% 09/29
S&P 500 INDEX 1,106.42 -106.85 -8.81% 09/29
NASDAQ COMPOSITE INDEX 1,983.73 -199.61 -9.14% 09/29
Quotes & Indicators
The Rand is steady in early trading today as at 8.20am. The Rand was sharply weaker against major currencies in late trade on Monday amid rising risk aversion in the wake of suggestions that the banking crisis is spreading to Europe. The Rand is finally catching up with other currencies. But I am a bit surprised that it has not weakened more. It is as if the Rand is being largely ignored at the moment. But I think we could expect to see it go higher (weaker), a local currency trader said. Dow Jones Newswires reports that the Dollar fell to an intraday low versus the Yen on Monday as worries about the US banking sector trumped any market confidence inspired by the US government bailout bill. The Dollar fell as low as 105.50 Yen.
Rand / Dollar 08H10 8.3256 -0.04%
Rand / Pound 08H10 15.0319 +0.0%
Rand / Euro 08H10 11.9837 -0.28%
South African Market
At 5.00pm the JSE All-Share index had plummeted 1412 points or 6.12% to finish at 23 088. Just over 274.7-million shares changed hands in 81 015 deals, worth just over R10.95-bn. Market breadth was negative, with declining issues leading those advancing by 357 to 76.
Basic Materials Index 23 673 -2076 -8.77%
Platinum Index 69 -2.90 -4.21%
Angloplat R716.00 -5000c -6.53%
Implats R161.20 -80c -0.49%
Gold Index 1 806 -83 -4.82%
Anglogold R191.01 -899c -4.50%
Goldfields R77.80 -192c -2.41%
Harmony R80.00 -500c -5.88%
Industrial Index 20 600 -770c -3.73%
Anglo R270.48 -2739c -9.20%
Richemont R36.52 -182c -4.75%
Didata R6.20 -38c -5.78%
Telkom R105.00 -350c -3.23%
Sasol R337.98 -2702c -7.40%
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