This article is exactly the sort of thing I'm talking about. One day and the market is happy about the stimulus - the next it's thinking it's not going to be enough.
Just watch everything go down with this bizarre market sentiment -----------
European Stocks Fall After Six-Day Rally; U.S. Futures Decline Email | Print | A A A
By Adam Haigh
Jan. 7 (Bloomberg) -- European stocks retreated for the first time in seven days on speculation deteriorating earnings will overshadow government efforts to revive the global economy. U.S. index futures fell, while shares in Asia advanced.
Alcoa Inc. slid 3.5 percent in Germany after the world’s largest aluminum maker reported its third major production cut in as many months. Commerzbank AG dropped 6.5 percent as JPMorgan Chase & Co. said the company’s acquisition of Dresdner Bank may curb profits. E.ON AG, Germany’s biggest utility, slumped 3.1 percent after Russian natural-gas exports through Ukraine to Europe were halted for the first time in three years.
The Dow Jones Stoxx 600 Index rebounded 17 percent since Nov. 21 through yesterday on speculation that U.S. President- elect Barack Obama will revive the world’s biggest economy with $775 billion of tax cuts and spending as central banks lower interest rates to combat the worst financial crisis since the Great Depression. Meanwhile, the 505 European companies tracked by Bloomberg that announced results since the Stoxx 600 began its rebound posted an average 75 percent decline in profit.
“The fourth-quarter reporting season will bring a huge wave of bad news flow,” said Bernd Meyer, the head of European equity strategy at Deutsche Bank AG. “A sustained upswing in the equity market is not likely in the shorter term of the next two or three months. I’m not convinced we are leaving the bottom soon,” he said in a Bloomberg Television interview in London. Deutsche Bank’s asset management division has $716 billion.
The Stoxx 600 lost 0.4 percent to 212.06 at 12:09 p.m. in London. Futures on the Standard & Poor’s 500 Index declined 0.7 percent.
$1 Trillion
The MSCI Asia Pacific Index rose 1.5 percent after Obama said U.S. stimulus spending will continue for years. India’s Satyam Computer Services Ltd. slumped as much as 82 percent after the company’s chairman Ramalinga Raju said he falsified accounts and assets.
The Stoxx 600 slid a record 46 percent last year as more than $1 trillion in losses at financial companies eroded profits and the U.S., Europe and Japan fell into the first simultaneous recessions since World War II. Unemployment in Germany rose for the first time in almost three years in December as the labor market caught up with an economy that shrank during most of 2008.
The global recession may prompt the Bank of England to reduce its key interest rate tomorrow to an all-time low of 1.5 percent from 2 percent, according to economists surveyed by Bloomberg. The European Central Bank has reduced its benchmark rate by 1.75 percentage points to 2.5 percent since October.
Alcoa, Rio Tinto
Alcoa slid 3.5 percent to $11.69 in German trading. The company will reduce its global workforce by 13,500 and cut production by 135,000 metric tons. That brings Alcoa’s total output cuts to 750,000 tons, or 18 percent of smelting capacity.
Alcoa and rivals Rio Tinto and Century Aluminum Co. are trying to pare costs as the global recession lowers demand for the lightweight metal used in autos, planes, appliances and power grids. The price of aluminum fell 36 percent last year as inventories more than doubled to a 14-year high.
Rio Tinto, the world’s third-biggest mining company, lost 3 percent to 1,870 pence. BHP Billiton Ltd., the largest, slid 5.2 percent to 1,374 pence. BHP had climbed 12 percent in 2009 through yesterday.
Earnings at basic-resource companies in the Stoxx 600 will fall 18 percent this year, according to analysts’ estimates compiled by Bloomberg. That’s the second-steepest decline among 10 industry groups after energy companies, the data show.
Commerzbank fell 6.5 percent to 5.98 euros. JPMorgan recommended selling shares of Commerzbank, which is facing further “capital erosion.” Dresdner Bank, which Commerzbank is taking over, may make a loss until 2011, JPMorgan wrote.
New Lows
Profits at European companies may drop at least 20 percent this year, according to strategists at Goldman Sachs Group Inc. and Merrill Lynch & Co. Earnings may tumble as much as 43 percent from their peak, according to Morgan Stanley.
The best start to a year for the Stoxx 600 in at least two decades will give way to losses as slumping corporate profits send equities to new lows, the securities firms say.
On the day the index reached its 2008 low, analysts projected profits at companies in the Stoxx 600 would climb 4.5 percent in 2009, data compiled by Bloomberg show. They now estimate earnings will slip 0.8 percent.
For U.S. companies in the S&P 500, analysts estimated a profit rebound of 4.3 percent this year, Bloomberg data show.
E.ON slid 3.1 percent to 29.06 euros. RWE AG, Germany’s second-largest utility, fell 2.1 percent to 66.03 euros.
European Gas Supplies
OAO Gazprom, Russia’s gas-export monopoly, cut off all gas supplies to Europe through Ukraine at 7:44 a.m. Kiev time today, according to Ukrainian utility NAK Naftogaz Ukrainy. Gazprom Deputy Chief Executive Officer Alexander Medvedev said Ukraine shut off a fourth pipeline after closing three others yesterday.
The move, stopping all deliveries to Austria, the Czech Republic and Slovakia, came after a halt in supplies to the Balkans yesterday and cuts to other countries. The dispute echoed a 2006 conflict which interrupted shipments to Europe.
RWE spokeswoman Annett Urbaczka said the company can’t yet determine what effect, if any, a disruption in supplies would have on profitability. Germany, Austria and the Czech Republic were among European countries that pledged to meet domestic demand.
Scottish & Southern Energy Plc, the U.K.’s second-biggest energy supplier, tumbled 7.2 percent to 1,172 pence after saying it will sell stock equivalent to 5 percent of its issued share capital to fund investment in power plants and acquisitions including wind energy projects.
Satyam Computer
Satyam Computer, India’s fourth-largest software-services provider, plunged as much as 82 percent to 32 rupees. Raju tendered his resignation and said in a letter to the board that profits from the main business have been inflated “over a period of last several years.”
Marks & Spencer Group Plc, Britain’s biggest fashion retailer, gained 4.7 percent to 250 pence after reporting a 7.1 percent drop in same store sales for the fiscal third quarter. That’s less than the 8.3 percent decline forecast by analysts surveyed by Bloomberg.
To contact the reporter on this story: Adam Haigh in London at [email protected]
