Major indexes gained more than 4% last week, even after a string of weak earnings reports. Now come reports from Microsoft, Bank of America and other big names.
April 20, 2008: 3:44 PM EDT
NEW YORK (AP) -- The stock market has reacted well to the recent stream of glum earnings. But this week, Wall Street faces an even bigger flood of first-quarter results, and as General Electric Co.'s bleak report earlier this month showed, bad earnings can even hurt a stock market with low expectations.
Out of the 30 components that make up the Dow Jones industrial average, Bank of America Corp., American Express Co., Merck & Co., McDonald's Corp., AT&T, DuPont, Boeing Co., 3M Co. and Microsoft Corp. will be reporting quarterly results this week.
Other big technology players besides Microsoft (MSFT, Fortune 500) are also scheduled to release earnings - notably Yahoo Inc. (YHOO, Fortune 500) and Apple Inc. (APPL)
So are toy makers Hasbro Inc. and Mattel Inc., homebuilder Pulte Homes Inc., and shipper UPS Inc.
Overall, Wall Street has been pleased with how companies fared during the first quarter. Their upbeat mood, however, is relative.
After months of shocking news, even poor earnings gave investors relief.
A case in point is Citigroup Inc. (C, Fortune 500), which along with Google Inc. and Caterpillar Inc. helped the stock market soar Friday. Citigroup posted a first-quarter loss that was wider than the average analyst estimate, but compared to its even-bleaker results in the fourth quarter, the first three months of 2008 looked practically decent.
"The takeaway from that is that the news is still bad, but it's not catastrophic," said Claire Gruppo, the co-founder of the boutique investment bank Gruppo, Levey & Co. "There's an underlying fear factor that it's going to be an unmitigated disaster. So when it just continued to be pretty bad, there's a 'phew' factor."
Last week, the Dow finished up 4.25%, the Standard & Poor's 500 index ended up 4.31%, and the Nasdaq composite index rose 4.92%.
Though sentiment on Wall Street is clearly better than it was earlier this year, the market can rise only so much due to mediocre news - no matter how much investors have already priced in a recession.
For retailers, Gruppo said, "the month of March was the worst March in 13 years. We haven't seen that reflected yet in the earnings for retail. That will be another blow to confidence."
And General Electric's profit decline and lowered forecast on April 11 caused the Dow to plunge more than 250 points.
Meanwhile, with the housing market still weakening, the nation's economic and credit troubles are likely to last for a while. Economists surveyed by Thomson Financial/IFR predict the National Association of Realtors will report on Wednesday that existing home sales fell in March, and that the Commerce Department on Thursday will report that new home sales also fell that month.
Sunday, April 20, 2008
Monday, April 14, 2008
Stocks in Europe and Asia Decline; U.S. Index Futures Retreat
April 14 (Bloomberg) -- Stocks dropped in Europe and Asia after Royal Philips Electronics NV's profit missed estimates, Goldman Sachs Group Inc. called U.S. earnings "awful" and the Group of Seven finance ministers said economic prospects have deteriorated. U.S. index futures retreated.
Philips, Europe's largest consumer-electronics maker, declined after saying earnings slumped 75 percent in the first quarter. KDDI Corp. sank in Tokyo as full-year profit missed its target. Wachovia Corp. slipped in Germany after bringing forward its earnings announcement. British Airways Plc led airlines lower as Morgan Stanley recommended selling the shares, while ABB Ltd. decreased in Zurich after Lehman Brothers Holdings Inc. downgraded the world's biggest builder of power networks.
The MSCI World Index lost 0.6 percent to 1,452.02 at 9:25 a.m. in London as all 10 industry groups decreased. Futures on the Standard & Poor's 500 Index fell 0.1 percent. China's CSI 300 Index dropped 6.5 percent, the most since Jan. 28 and the biggest slide among indexes tracked by Bloomberg worldwide.
"People are highly jittery," said Julian Chillingworth, London-based chief investment officer at Rathbone Brothers Plc, which has $21 billion. "We are likely to see more poor news in terms of earnings." Chillingworth spoke in a Bloomberg Television interview.
G-7 finance ministers said prospects for the global economy have weakened and financial market losses will continue. The ministers downgraded their outlook from two months ago, saying the economy faces "downside" risks, according to a statement on April 11.
Cutting Estimates
Concern $245 billion in writedowns and credit losses will slow growth has led analysts to cut profit estimates. Earnings for European companies will shrink in 2008 for the first time in six years as the credit-market crisis drags down the global economy, according to analyst estimates. Profit at companies in the S&P 500 are expected to fall 12.3 percent in the first quarter, according to data compiled by Bloomberg.
Europe's Dow Jones Stoxx 600 Index declined 0.7 percent today, while the MSCI Asia Pacific Index decreased 2.3 percent, set for its biggest drop since March 17.
U.S. stocks sank the most in three weeks on April 11 after General Electric Co. said the debt-market turmoil led to an unexpected earnings decline.
First-quarter U.S. earnings have had an "awful" start and are a "harbinger of things to come," a team led by New York- based David Kostin, Goldman's U.S. investment strategist, wrote today.
Philips, KDDI
Philips dropped 2.9 percent to 23.22 euros after the company reported net income fell to 219 million euros ($344.2 million) in the first quarter from 875 million euros a year earlier. Analysts had predicted a profit of 276 million euros, according to a Bloomberg survey.
"For Philips to come out with this, it doesn't really boost confidence," said Matthew Buckland, a trader at CMC Markets in London. "It's not a particularly good outlook with the G-7's concern about global growth."
KDDI, Japan's second-biggest mobile-phone operator, fell 7.8 percent to 641,000 yen, the largest loss since Feb. 22, after it reported full-year profit that missed its target by 1.8 percent because of costs to add customers.
Canon Inc., the world's biggest maker of digital cameras, lost 5 percent to 4,610 yen, its lowest close since March 31. Profit may fall as much as 35 billion yen ($350 million) during the three months ended March 31 because of the yen's gain, the Nikkei newspaper reported, without saying where it got the information.
Wachovia
Wachovia, the fourth-largest U.S. bank, dropped 15 cents to $27.66 in Germany.
First-quarter results will be announced today instead of April 18, the Charlotte, North Carolina-based bank said in a statement late yesterday. Wachovia may receive as much as $7 billion from investors to shore up capital, the Wall Street Journal reported earlier.
British Airways fell 2.9 percent to 217 pence as Morgan Stanley cut its recommendation on the shares to "underweight" from "equal-weight." Earnings may be hurt from cost pressure from the new Terminal 5 at London's Heathrow Airport and an "aggressive" pilots' union, according to London-based analyst Penelope Butcher in a note to clients today.
Air Berlin Plc slid 6.2 percent to 6.72 euros. Europe's third-biggest discount carrier was also downgraded to "underweight" from "equal-weight" at Morgan Stanley.
ABB, Swiss Re
ABB retreated 2.6 percent to 26.18 Swiss francs. Lehman Brothers cut its recommendation on the stock to "equal-weight" from "overweight."
Swiss Reinsurance Co., the world's largest reinsurer, declined 2.3 percent to 85.95 francs after UBS AG cut its recommendation on the stock to "sell" from "neutral."
"Swiss Re has been the best performer in the sector year to date," analyst Ben Cohen wrote in a research note dated today. "We see material pressure in the core operations."
Belgacom SA fell 2.1 percent to 29.96 euros. Belgium's biggest phone company said its forecast for earnings at the wireless unit Proximus are "no longer valid" after an appeals court suspended the Belgian regulator's decision to cut mobile connection rates.
Enodis Plc climbed 5 percent to 242.5 pence after Manitowoc Co., the biggest ice-machine maker in the U.S., agreed to buy it for 948 million pounds ($1.87 billion) to become the world's largest supplier of catering equipment.
Blockbuster Inc., the world's largest movie-rental chain, made an unsolicited bid for Circuit City Stores Inc., the second- largest U.S. electronics retailer, worth at least $1 billion. The stocks didn't trade in Europe.
Punch Taverns Plc gained 1.9 percent to 599 pence after Mitchells & Butlers Plc said it approached the larger pub owner and former suitor about buying outlets managed by the company. Mitchells shares rose 0.6 percent to 334 pence.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
Last Updated: April 14, 2008 04:34 EDT
Philips, Europe's largest consumer-electronics maker, declined after saying earnings slumped 75 percent in the first quarter. KDDI Corp. sank in Tokyo as full-year profit missed its target. Wachovia Corp. slipped in Germany after bringing forward its earnings announcement. British Airways Plc led airlines lower as Morgan Stanley recommended selling the shares, while ABB Ltd. decreased in Zurich after Lehman Brothers Holdings Inc. downgraded the world's biggest builder of power networks.
The MSCI World Index lost 0.6 percent to 1,452.02 at 9:25 a.m. in London as all 10 industry groups decreased. Futures on the Standard & Poor's 500 Index fell 0.1 percent. China's CSI 300 Index dropped 6.5 percent, the most since Jan. 28 and the biggest slide among indexes tracked by Bloomberg worldwide.
"People are highly jittery," said Julian Chillingworth, London-based chief investment officer at Rathbone Brothers Plc, which has $21 billion. "We are likely to see more poor news in terms of earnings." Chillingworth spoke in a Bloomberg Television interview.
G-7 finance ministers said prospects for the global economy have weakened and financial market losses will continue. The ministers downgraded their outlook from two months ago, saying the economy faces "downside" risks, according to a statement on April 11.
Cutting Estimates
Concern $245 billion in writedowns and credit losses will slow growth has led analysts to cut profit estimates. Earnings for European companies will shrink in 2008 for the first time in six years as the credit-market crisis drags down the global economy, according to analyst estimates. Profit at companies in the S&P 500 are expected to fall 12.3 percent in the first quarter, according to data compiled by Bloomberg.
Europe's Dow Jones Stoxx 600 Index declined 0.7 percent today, while the MSCI Asia Pacific Index decreased 2.3 percent, set for its biggest drop since March 17.
U.S. stocks sank the most in three weeks on April 11 after General Electric Co. said the debt-market turmoil led to an unexpected earnings decline.
First-quarter U.S. earnings have had an "awful" start and are a "harbinger of things to come," a team led by New York- based David Kostin, Goldman's U.S. investment strategist, wrote today.
Philips, KDDI
Philips dropped 2.9 percent to 23.22 euros after the company reported net income fell to 219 million euros ($344.2 million) in the first quarter from 875 million euros a year earlier. Analysts had predicted a profit of 276 million euros, according to a Bloomberg survey.
"For Philips to come out with this, it doesn't really boost confidence," said Matthew Buckland, a trader at CMC Markets in London. "It's not a particularly good outlook with the G-7's concern about global growth."
KDDI, Japan's second-biggest mobile-phone operator, fell 7.8 percent to 641,000 yen, the largest loss since Feb. 22, after it reported full-year profit that missed its target by 1.8 percent because of costs to add customers.
Canon Inc., the world's biggest maker of digital cameras, lost 5 percent to 4,610 yen, its lowest close since March 31. Profit may fall as much as 35 billion yen ($350 million) during the three months ended March 31 because of the yen's gain, the Nikkei newspaper reported, without saying where it got the information.
Wachovia
Wachovia, the fourth-largest U.S. bank, dropped 15 cents to $27.66 in Germany.
First-quarter results will be announced today instead of April 18, the Charlotte, North Carolina-based bank said in a statement late yesterday. Wachovia may receive as much as $7 billion from investors to shore up capital, the Wall Street Journal reported earlier.
British Airways fell 2.9 percent to 217 pence as Morgan Stanley cut its recommendation on the shares to "underweight" from "equal-weight." Earnings may be hurt from cost pressure from the new Terminal 5 at London's Heathrow Airport and an "aggressive" pilots' union, according to London-based analyst Penelope Butcher in a note to clients today.
Air Berlin Plc slid 6.2 percent to 6.72 euros. Europe's third-biggest discount carrier was also downgraded to "underweight" from "equal-weight" at Morgan Stanley.
ABB, Swiss Re
ABB retreated 2.6 percent to 26.18 Swiss francs. Lehman Brothers cut its recommendation on the stock to "equal-weight" from "overweight."
Swiss Reinsurance Co., the world's largest reinsurer, declined 2.3 percent to 85.95 francs after UBS AG cut its recommendation on the stock to "sell" from "neutral."
"Swiss Re has been the best performer in the sector year to date," analyst Ben Cohen wrote in a research note dated today. "We see material pressure in the core operations."
Belgacom SA fell 2.1 percent to 29.96 euros. Belgium's biggest phone company said its forecast for earnings at the wireless unit Proximus are "no longer valid" after an appeals court suspended the Belgian regulator's decision to cut mobile connection rates.
Enodis Plc climbed 5 percent to 242.5 pence after Manitowoc Co., the biggest ice-machine maker in the U.S., agreed to buy it for 948 million pounds ($1.87 billion) to become the world's largest supplier of catering equipment.
Blockbuster Inc., the world's largest movie-rental chain, made an unsolicited bid for Circuit City Stores Inc., the second- largest U.S. electronics retailer, worth at least $1 billion. The stocks didn't trade in Europe.
Punch Taverns Plc gained 1.9 percent to 599 pence after Mitchells & Butlers Plc said it approached the larger pub owner and former suitor about buying outlets managed by the company. Mitchells shares rose 0.6 percent to 334 pence.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
Last Updated: April 14, 2008 04:34 EDT
Wednesday, April 9, 2008
Banks lead Europe into the red
HBOS, IntesaSanpaolo downgraded; Deutsche Post slips on UPS update
By Sarah Turner, MarketWatch
Last update: 6:48 a.m. EDT April 9, 2008
LONDON (MarketWatch) -- Banks led the way as European shares traded lower Wednesday, with both the sector and the broader market weakening for a second session against a background of ongoing worries about the strength of the global economy.
The pan-European Dow Jones Stoxx 600 index (ST:SXXP: news, chart, profile) fell 0.6% to 316.74, with 12 out of 15 sectors trading in the red.
The German DAX 30 index (DX:1876534: news, chart, profile) declined 0.7% to 6,722.30 and the French CAC-40 index (FR:1804546: news, chart, profile) dropped 0.7% to 4,876.39, while the U.K.'s FTSE 100 index (UK:UKX: news, chart, profile) dipped 0.3% to 5,972.10.
U.S. stocks ended Tuesday's session on a downbeat note after quarterly earnings updates left investors disenchanted. See Tuesday's Market Snapshot.
United Parcel Service (UPS) cut its first-quarter profit range, with the package-delivery giant stung by the same economic headwinds affecting industriesfrom airlines and automakers to banks and retailers. See full story.
Shares of Germany's Deutsche Post (DE:555200: news, chart, profile) , which competes against UPS, fell 1.9% on Wednesday morning, while Dutch logistics firm TNT (NL:00906: news, chart, profile) saw its shares retreat 2.4%.
"Earnings reports from the States were a bit disappointing, and the Federal Reserve minutes did a bit of damage," said Bernard McAlinden, strategist at NCB Stockbrokers in Dublin, speaking about Wednesday's market action in Europe.
"Europe to some degree still tracks sentiment from the U.S., especially on a day-to-day basis," he noted.
Banks lower
The weakness in European banks came a day after the International Monetary Fund placed a value of about $945 billion on potential global losses for the financial sector growing out of the recent credit crisis. See story.
Broker downgrades on some lenders also hurt the midweek sentiment.
U.K. mortgage lender HBOS (UK:HBOS: news, chart, profile) led the sector lower, its shares tallying losses of 3.6%.
The bank was downgraded to underperform from neutral at Credit Suisse, which cited a weak outlook statement from HBOS and a sharp increase in the interest rate at which banks lend to each other.
"In an environment of a weakening housing and mortgage market, and the many different ways that it affects HBOS, we do not see how the shares can sustain any significant recovery for now," the broker added.
A downgrade also pressured shares of Italian lender IntesaSanpaolo (IT:ISP: news, chart, profile) , down 1.2% in Milan, as J.P. Morgan cut its stance to neutral from overweight.
"We still believe that IntesaSanpaolo is a high-quality stock with good earnings growth. but we believe that these good features are now priced in," the broker said.
There were also a few broker moves Wednesday in the brewing sector.
Shares of SABMiller (UK:SAB: news, chart, profile) fell 1.6% in London, retreating after Citigroup downgraded the brewer to hold from buy, saying input-cost pressures will hit margins by about 1.5 percentage points in 2009.
However, shares of Carlsberg rose 2.5%.
Morgan Stanley upgraded the Copenhagen brewer to overweight from equal weight, saying Carlsberg and InBev "look best placed to benefit from a more robust performance of the brewers than many expect."
Shares of Inbev (BE:000558253: news, chart, profile) rose 1.1%.
Sacyr-Vallehermoso, oils up
Also higher, shares of Spanish construction firm Sacyr-Vallehermoso (ES:018287021: news, chart, profile) added 2.5%.
The company decided to sell its entire 33% stake in Eiffage (FR:013045: news, chart, profile) , its French counterpart, to French investors for 1.95 billion euros ($3.1 billion), or 63 euros per share. Eiffage shares rose 0.7% to 60.24 euros.
Oil companies were also performing strongly on Wednesday as crude prices firmed atop $108 a barrel in electronic trading.
Shares in BP (BP) (UK:BP: news, chart, profile) advanced 1.6% in London, while Eni (E: 72.53, +1.37, +1.9%) (IT:ENI: news, chart, profile) climbed 1.3% in Milan.
Sarah Turner is a markets reporter for MarketWatch in London.
By Sarah Turner, MarketWatch
Last update: 6:48 a.m. EDT April 9, 2008
LONDON (MarketWatch) -- Banks led the way as European shares traded lower Wednesday, with both the sector and the broader market weakening for a second session against a background of ongoing worries about the strength of the global economy.
The pan-European Dow Jones Stoxx 600 index (ST:SXXP: news, chart, profile) fell 0.6% to 316.74, with 12 out of 15 sectors trading in the red.
The German DAX 30 index (DX:1876534: news, chart, profile) declined 0.7% to 6,722.30 and the French CAC-40 index (FR:1804546: news, chart, profile) dropped 0.7% to 4,876.39, while the U.K.'s FTSE 100 index (UK:UKX: news, chart, profile) dipped 0.3% to 5,972.10.
U.S. stocks ended Tuesday's session on a downbeat note after quarterly earnings updates left investors disenchanted. See Tuesday's Market Snapshot.
United Parcel Service (UPS) cut its first-quarter profit range, with the package-delivery giant stung by the same economic headwinds affecting industriesfrom airlines and automakers to banks and retailers. See full story.
Shares of Germany's Deutsche Post (DE:555200: news, chart, profile) , which competes against UPS, fell 1.9% on Wednesday morning, while Dutch logistics firm TNT (NL:00906: news, chart, profile) saw its shares retreat 2.4%.
"Earnings reports from the States were a bit disappointing, and the Federal Reserve minutes did a bit of damage," said Bernard McAlinden, strategist at NCB Stockbrokers in Dublin, speaking about Wednesday's market action in Europe.
"Europe to some degree still tracks sentiment from the U.S., especially on a day-to-day basis," he noted.
Banks lower
The weakness in European banks came a day after the International Monetary Fund placed a value of about $945 billion on potential global losses for the financial sector growing out of the recent credit crisis. See story.
Broker downgrades on some lenders also hurt the midweek sentiment.
U.K. mortgage lender HBOS (UK:HBOS: news, chart, profile) led the sector lower, its shares tallying losses of 3.6%.
The bank was downgraded to underperform from neutral at Credit Suisse, which cited a weak outlook statement from HBOS and a sharp increase in the interest rate at which banks lend to each other.
"In an environment of a weakening housing and mortgage market, and the many different ways that it affects HBOS, we do not see how the shares can sustain any significant recovery for now," the broker added.
A downgrade also pressured shares of Italian lender IntesaSanpaolo (IT:ISP: news, chart, profile) , down 1.2% in Milan, as J.P. Morgan cut its stance to neutral from overweight.
"We still believe that IntesaSanpaolo is a high-quality stock with good earnings growth. but we believe that these good features are now priced in," the broker said.
There were also a few broker moves Wednesday in the brewing sector.
Shares of SABMiller (UK:SAB: news, chart, profile) fell 1.6% in London, retreating after Citigroup downgraded the brewer to hold from buy, saying input-cost pressures will hit margins by about 1.5 percentage points in 2009.
However, shares of Carlsberg rose 2.5%.
Morgan Stanley upgraded the Copenhagen brewer to overweight from equal weight, saying Carlsberg and InBev "look best placed to benefit from a more robust performance of the brewers than many expect."
Shares of Inbev (BE:000558253: news, chart, profile) rose 1.1%.
Sacyr-Vallehermoso, oils up
Also higher, shares of Spanish construction firm Sacyr-Vallehermoso (ES:018287021: news, chart, profile) added 2.5%.
The company decided to sell its entire 33% stake in Eiffage (FR:013045: news, chart, profile) , its French counterpart, to French investors for 1.95 billion euros ($3.1 billion), or 63 euros per share. Eiffage shares rose 0.7% to 60.24 euros.
Oil companies were also performing strongly on Wednesday as crude prices firmed atop $108 a barrel in electronic trading.
Shares in BP (BP) (UK:BP: news, chart, profile) advanced 1.6% in London, while Eni (E: 72.53, +1.37, +1.9%) (IT:ENI: news, chart, profile) climbed 1.3% in Milan.
Sarah Turner is a markets reporter for MarketWatch in London.
Tuesday, April 8, 2008
IMF Says Credit Crisis Threatens Economy
Tuesday April 8, 11:43 am ET By Christopher S. Rugaber, AP Business Writer
IMF Says Credit Crisis, Despite Some Recent Improvement, Remains Threat to Economic Growth
WASHINGTON (AP) -- The International Monetary Fund on Tuesday said the global credit crisis, despite some recent improvement, remains a significant threat to economic growth.
Despite "unprecedented intervention" by central banks such as the Federal Reserve, "financial markets remain under considerable strain, now compounded" by a slowing economy, low levels of capital at financial companies and widespread efforts to unload debt, the fund said.
The U.S. mortgage and credit crises could cause almost $1 trillion in financial losses, the IMF said in an update to its Global Financial Stability Report, with $565 billion of those losses stemming from the residential mortgage market and related securities, and the rest from the commercial real estate, consumer credit and corporate debt markets.
That figure includes $200 billion in losses that banks have already announced, plus an additional $80 billion the banks have yet to write down, IMF officials said during a briefing.
The rest is held by other financial institutions, such as hedge funds and pension funds, the officials said.
"The deterioration in credit has moved up and across the credit spectrum to prime residential and commercial mortgage markets, and to corporate credit markets," said Jaime Caruana, director of the IMF's Monetary and Capital Markets department.
Credit markets have stabilized since last month, IMF officials said, when Bear Stearns Cos., the fifth-largest U.S. investment bank, was acquired by JPMorgan Chase & Co. at a fire-sale price.
Caruana said investments earlier this year by government-run investment funds in large U.S. and European banks "have helped, but more may be needed to restore their lending capacity."
Government funds, also known as sovereign wealth funds, from China, Singapore and the Middle East invested more than $40 billion in Citigroup Inc., Merrill Lynch & Co. Inc., and Swiss bank UBS late last year and early this year.
The IMF is developing a voluntary code of best practices for the funds, which have sparked some concerns in the United States and Europe because they are government-run. Critics fear they could invest for noncommercial reasons, such as to obtain sensitive technologies.
While some sovereign fund managers, such as China's, have criticized the IMF's efforts, Caruana said the code could "help ... to mitigate some of the concerns" about sovereign funds.
"We think that it is very important to keep the financial system open and competitive," Caruana said.
Government regulation and supervision of the financial sector, along with private sector risk management, "all lagged behind the rapid innovation" of banks and securities firms, which resulted in "excessive risk-taking, weak underwriting ... and asset price inflation," the IMF said in its report.
Among other steps, the IMF recommended streamlining regulation of the financial sector to avoid subjecting banks and other financial firms to multiple supervisors.
Treasury Secretary Henry Paulson has proposed a regulatory overhaul along those lines that would eliminate some agencies and consolidate others. Most of Paulson's blueprint would require congressional approval, however, and is unlikely to be enacted before President Bush leaves office.
The IMF issued the update in advance of the spring meetings of finance ministers and central bank governors from its 185 member nations, which takes place this weekend in Washington. The IMF conducts economic analyses and provides loans and technical assistance to developing countries.
IMF Says Credit Crisis, Despite Some Recent Improvement, Remains Threat to Economic Growth
WASHINGTON (AP) -- The International Monetary Fund on Tuesday said the global credit crisis, despite some recent improvement, remains a significant threat to economic growth.
Despite "unprecedented intervention" by central banks such as the Federal Reserve, "financial markets remain under considerable strain, now compounded" by a slowing economy, low levels of capital at financial companies and widespread efforts to unload debt, the fund said.
The U.S. mortgage and credit crises could cause almost $1 trillion in financial losses, the IMF said in an update to its Global Financial Stability Report, with $565 billion of those losses stemming from the residential mortgage market and related securities, and the rest from the commercial real estate, consumer credit and corporate debt markets.
That figure includes $200 billion in losses that banks have already announced, plus an additional $80 billion the banks have yet to write down, IMF officials said during a briefing.
The rest is held by other financial institutions, such as hedge funds and pension funds, the officials said.
"The deterioration in credit has moved up and across the credit spectrum to prime residential and commercial mortgage markets, and to corporate credit markets," said Jaime Caruana, director of the IMF's Monetary and Capital Markets department.
Credit markets have stabilized since last month, IMF officials said, when Bear Stearns Cos., the fifth-largest U.S. investment bank, was acquired by JPMorgan Chase & Co. at a fire-sale price.
Caruana said investments earlier this year by government-run investment funds in large U.S. and European banks "have helped, but more may be needed to restore their lending capacity."
Government funds, also known as sovereign wealth funds, from China, Singapore and the Middle East invested more than $40 billion in Citigroup Inc., Merrill Lynch & Co. Inc., and Swiss bank UBS late last year and early this year.
The IMF is developing a voluntary code of best practices for the funds, which have sparked some concerns in the United States and Europe because they are government-run. Critics fear they could invest for noncommercial reasons, such as to obtain sensitive technologies.
While some sovereign fund managers, such as China's, have criticized the IMF's efforts, Caruana said the code could "help ... to mitigate some of the concerns" about sovereign funds.
"We think that it is very important to keep the financial system open and competitive," Caruana said.
Government regulation and supervision of the financial sector, along with private sector risk management, "all lagged behind the rapid innovation" of banks and securities firms, which resulted in "excessive risk-taking, weak underwriting ... and asset price inflation," the IMF said in its report.
Among other steps, the IMF recommended streamlining regulation of the financial sector to avoid subjecting banks and other financial firms to multiple supervisors.
Treasury Secretary Henry Paulson has proposed a regulatory overhaul along those lines that would eliminate some agencies and consolidate others. Most of Paulson's blueprint would require congressional approval, however, and is unlikely to be enacted before President Bush leaves office.
The IMF issued the update in advance of the spring meetings of finance ministers and central bank governors from its 185 member nations, which takes place this weekend in Washington. The IMF conducts economic analyses and provides loans and technical assistance to developing countries.
Stocks in Europe, Asia Decline; U.S. Index Futures Retreat
April 8 (Bloomberg) -- Stocks fell in Europe and Asia, and U.S. index futures declined, after chipmaker Advanced Micro Devices Inc. said first-quarter revenue fell more than forecast and TomTom NV predicted lower sales.
STMicroelectronics NV, Europe's largest semiconductor maker, retreated as researchers cut sales estimates for memory chips. Advanced Micro dropped in Germany. TomTom, the world's biggest maker of car-navigation equipment, sank 10 percent in Amsterdam. Elpida Memory Inc. fell in Tokyo after Dramexchange Technology Inc. said memory makers failed to raise prices.
Barratt Developments Plc, the U.K.'s second-biggest homebuilder, dropped as a report showed house prices slumped by the most since 1992 in March.
The MSCI World Index lost 0.5 percent to 1,491.33 at 10:04 a.m. in London, decreasing for the first time in seven days. The index has climbed 8.2 percent from a 17-month low on March 17 as measures by the U.S. Federal Reserve supported banks suffering from $232 billion in losses and asset writedowns. Futures on the Standard & Poor's 500 Index fell 0.4 percent today.
"Judging by AMD and TomTom, I don't think that first- quarter earnings will provide the much-needed catalysts,'' said Jesper Kruger, a fund manager in Copenhagen at ATP, which has about $64 billion.
Earnings at S&P 500 companies probably fell an average of 11.3 percent from a year earlier in the first quarter, the third consecutive quarterly decline, based on analyst estimates compiled by Bloomberg. In Europe, profit for companies in the Dow Jones Stoxx 600 Index will rise 0.6 percent this year, down from 11 percent predicted at the end of last year, Bloomberg data show.
"Earnings downgrades will have to continue,'' said Bernd Meyer, head of pan-European strategy at Deutsche Bank AG. "There will be more bad news flow and more of this will feed through'' to stocks, he said.
STMicro, ASML
Europe's Stoxx 600 sank 1.2 percent, with all 18 industry groups retreating. The MSCI Asia Pacific Index also decreased 1.2 percent, declining from a five-week high.
STMicroelectronics sank 2.5 percent to 7.165 euros. ASML Holding NV, Europe's largest maker of semiconductor equipment, declined 5.7 percent to 15.80 euros after iSuppli Corp. reduced estimates for sales of memory chips this year.
Advanced Micro said first-quarter sales fell to about $1.5 billion and announced plans to cut about 1,650 jobs. The sales would be down 22 percent from a year earlier and 15 percent from the holiday period, a steeper slump than usual for this time of year. The stock dropped 39 cents to $5.95 in Germany.
Infineon Technologies AG fell 5.7 percent to 4.79 euros. Europe's second-biggest maker of semiconductors was downgraded to "neutral'' from "outperform'' at Credit Suisse Group.
Elpida, TomTom
Elpida, Japan's largest computer-memory chipmaker, tumbled 7.3 percent to 3,580 yen.
Chipmakers kept prices of the benchmark computer memory at 3 cents shy of a record low, Taipei-based Dramexchange, Asia's biggest spot market for the semiconductor, said yesterday.
Fukuoka Financial Group Inc., Japan's second-largest regional bank by assets, plunged 13 percent to 449 yen after saying it missed its profit forecast by 92 percent for the year ended March 31.
TomTom tumbled 2.85 euros to 23.58. The company lowered its sales outlook for this year as European shops reduce inventory more than anticipated. TomTom targets revenue of 1.8 billion euros ($2.8 billion) to 2 billion euros this year, the company said in an e-mailed statement today.
Alcoa Inc. dropped 33 cents to $37.11 in Germany. The world's third-largest aluminum company said first-quarter profit tumbled 54 percent on surging energy costs, a weaker U.S. dollar and lower metals prices.
Barratt Developments, the U.K.'s second-largest house builder by volume, dropped 5.6 percent to 372.25 pence. Bellway Plc, a U.K. homebuilder aimed at first-time buyers, slid 5.4 percent to 795.5 pence.
Home Prices
The average cost of a home in Britain fell 2.5 percent to 191,556 pounds ($379,000) from February, HBOS Plc, the U.K.'s biggest mortgage lender said in a statement on the Regulatory News Service today. Economists predicted a 0.3 percent decline, according to the median of 12 estimates in a Bloomberg News survey.
Home Retail Group Plc, the owner of Argos and Homebase stores, slid 3.4 percent to 263.5 pence. Marks & Spencer Group Plc, the largest U.K. clothes retailer, fell 3 percent to 380 pence. Tesco Plc, the nation's biggest supermarket chain, dropped 1.7 percent to 402.75 pence.
AstraZeneca Plc retreated 1.5 percent to 2,054 pence. Goldman Sachs Group Inc. analysts, including London-based John Murphy, downgraded shares of the U.K.'s second-largest drugmaker to "neutral'' from "buy,'' citing a "a 20 percent share-price move over the past three weeks.''
Michael Page International Plc declined 4 percent to 277.25 pence after the U.K.'s second-largest recruitment firm was cut to "sell'' from "neutral'' at UBS, which said first-quarter revenue "disappoints.''
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
Last Updated: April 8, 2008 05:15 EDT
STMicroelectronics NV, Europe's largest semiconductor maker, retreated as researchers cut sales estimates for memory chips. Advanced Micro dropped in Germany. TomTom, the world's biggest maker of car-navigation equipment, sank 10 percent in Amsterdam. Elpida Memory Inc. fell in Tokyo after Dramexchange Technology Inc. said memory makers failed to raise prices.
Barratt Developments Plc, the U.K.'s second-biggest homebuilder, dropped as a report showed house prices slumped by the most since 1992 in March.
The MSCI World Index lost 0.5 percent to 1,491.33 at 10:04 a.m. in London, decreasing for the first time in seven days. The index has climbed 8.2 percent from a 17-month low on March 17 as measures by the U.S. Federal Reserve supported banks suffering from $232 billion in losses and asset writedowns. Futures on the Standard & Poor's 500 Index fell 0.4 percent today.
"Judging by AMD and TomTom, I don't think that first- quarter earnings will provide the much-needed catalysts,'' said Jesper Kruger, a fund manager in Copenhagen at ATP, which has about $64 billion.
Earnings at S&P 500 companies probably fell an average of 11.3 percent from a year earlier in the first quarter, the third consecutive quarterly decline, based on analyst estimates compiled by Bloomberg. In Europe, profit for companies in the Dow Jones Stoxx 600 Index will rise 0.6 percent this year, down from 11 percent predicted at the end of last year, Bloomberg data show.
"Earnings downgrades will have to continue,'' said Bernd Meyer, head of pan-European strategy at Deutsche Bank AG. "There will be more bad news flow and more of this will feed through'' to stocks, he said.
STMicro, ASML
Europe's Stoxx 600 sank 1.2 percent, with all 18 industry groups retreating. The MSCI Asia Pacific Index also decreased 1.2 percent, declining from a five-week high.
STMicroelectronics sank 2.5 percent to 7.165 euros. ASML Holding NV, Europe's largest maker of semiconductor equipment, declined 5.7 percent to 15.80 euros after iSuppli Corp. reduced estimates for sales of memory chips this year.
Advanced Micro said first-quarter sales fell to about $1.5 billion and announced plans to cut about 1,650 jobs. The sales would be down 22 percent from a year earlier and 15 percent from the holiday period, a steeper slump than usual for this time of year. The stock dropped 39 cents to $5.95 in Germany.
Infineon Technologies AG fell 5.7 percent to 4.79 euros. Europe's second-biggest maker of semiconductors was downgraded to "neutral'' from "outperform'' at Credit Suisse Group.
Elpida, TomTom
Elpida, Japan's largest computer-memory chipmaker, tumbled 7.3 percent to 3,580 yen.
Chipmakers kept prices of the benchmark computer memory at 3 cents shy of a record low, Taipei-based Dramexchange, Asia's biggest spot market for the semiconductor, said yesterday.
Fukuoka Financial Group Inc., Japan's second-largest regional bank by assets, plunged 13 percent to 449 yen after saying it missed its profit forecast by 92 percent for the year ended March 31.
TomTom tumbled 2.85 euros to 23.58. The company lowered its sales outlook for this year as European shops reduce inventory more than anticipated. TomTom targets revenue of 1.8 billion euros ($2.8 billion) to 2 billion euros this year, the company said in an e-mailed statement today.
Alcoa Inc. dropped 33 cents to $37.11 in Germany. The world's third-largest aluminum company said first-quarter profit tumbled 54 percent on surging energy costs, a weaker U.S. dollar and lower metals prices.
Barratt Developments, the U.K.'s second-largest house builder by volume, dropped 5.6 percent to 372.25 pence. Bellway Plc, a U.K. homebuilder aimed at first-time buyers, slid 5.4 percent to 795.5 pence.
Home Prices
The average cost of a home in Britain fell 2.5 percent to 191,556 pounds ($379,000) from February, HBOS Plc, the U.K.'s biggest mortgage lender said in a statement on the Regulatory News Service today. Economists predicted a 0.3 percent decline, according to the median of 12 estimates in a Bloomberg News survey.
Home Retail Group Plc, the owner of Argos and Homebase stores, slid 3.4 percent to 263.5 pence. Marks & Spencer Group Plc, the largest U.K. clothes retailer, fell 3 percent to 380 pence. Tesco Plc, the nation's biggest supermarket chain, dropped 1.7 percent to 402.75 pence.
AstraZeneca Plc retreated 1.5 percent to 2,054 pence. Goldman Sachs Group Inc. analysts, including London-based John Murphy, downgraded shares of the U.K.'s second-largest drugmaker to "neutral'' from "buy,'' citing a "a 20 percent share-price move over the past three weeks.''
Michael Page International Plc declined 4 percent to 277.25 pence after the U.K.'s second-largest recruitment firm was cut to "sell'' from "neutral'' at UBS, which said first-quarter revenue "disappoints.''
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
Last Updated: April 8, 2008 05:15 EDT
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