Global Stocks Tumble on Economic Concern; Oil Falls, Yen Rises

By Lynn Thomasson and Sarah Jones


Oct. 24 (Bloomberg) -- Global stocks from Seoul to Stockholm tumbled to the lowest since August 2003 on concern the deepening economic slump will damage earnings. Oil dropped to a 16-month low and the yen reached the highest since 1995 against the dollar.

The Standard & Poor's 500 Index lost 3.5 percent, a smaller decline than European and Asian equities, even after futures on the U.S. measure fell so far that trading was curbed. The U.K.'s FTSE 100 Index sank 5 percent and the pound had the biggest drop versus the dollar since 1971 following a government report showing the economy shrank for the first time in sixteen years. South Korea's economy grew at the slowest pace in four years, driving the Kospi Index down 11 percent.

``There's a worldwide fear of a worldwide recession,'' said Michael Binger, Minneapolis-based fund manager at Thrivent Asset Management, which oversees about $70 billion. ``The concern has moved to being about which banks and companies will fail to which countries could fail, with Iceland and some of the smaller countries around the world being on life support.''

The MSCI World Index of developed markets declined 4.3 percent to 871.64. MSCI's emerging-markets benchmark fell 7.8 percent to 473.98, completing eight straight weeks of losses, the longest stretch since 1998. The MSCI index covering both regions slumped to the lowest since August 2003. Russia's Micex Stock Exchange halted trading until next week following today's 14 percent retreat.

$10 Trillion

More than $10 trillion has been erased from the market value of equities so far this month. That accounts for about one-third of the total value wiped off world equities this year. MSCI's measure tracking both developed and emerging markets is heading for the worst year on record, plunging 47 percent in 2008, amid $660 billion in global credit-related losses and the biggest financial crisis since the Great Depression.

The Chicago Board Options Exchange Volatility Index surged to 79.13, the highest in its 18-year history. The VIX measures the cost of using options as insurance against S&P 500 declines.

``We're getting very close to the emotional blow-off where everybody says, `I don't care; I want out,''' said E. Craig Coats Jr., who co-heads fixed income at Keefe, Bruyette & Woods Inc. in New York. ``Everybody seems to be saying `I want to be in cash or Treasuries.'''

More than 200 companies in the S&P 500 have reported quarterly results since the start of October, posting an average profit slump of 23 percent, according to Bloomberg data.

Auto Sales Slump

Toyota Motor Corp., Japan's biggest carmaker, tumbled 6.4 percent to 3,200 yen after saying quarterly sales fell for the first time in seven years.

U.S. auto sales this month may fall to the lowest rate in at least 25 years as tighter credit and falling home values decrease demand, said analysts at Deutsche Bank AG.

American International Group Inc. declined 19 percent to $1.70. The insurer said it has used $90.3 billion of a U.S. government credit line since it was bailed out last month, an amount exceeding the original loan meant to save the company.

Europe's Dow Jones Stoxx 600 Index slid 4.7 percent. The MSCI Asia Pacific Index fell 5.7 percent.

Air France-KLM Group slid 3.1 percent to 11.50 euros. The region's biggest airline said it will be ``very difficult'' to meet full-year earnings targets as the global credit crisis and slowing economic growth undermine demand for travel.

Yields on 30-year bonds touched the lowest in more than three decades amid speculation a global slowdown will drive U.S. policy makers to cut borrowing costs. Its yield rose 4 basis points to 4.09 percent, following a plunge as low as 3.8676 percent shortly before 6 a.m. in New York as stocks fell.

`Not Buying'

``The issue that drives prices now are the margin calls, redemptions and sales,'' said George Feiger, chief executive officer of Contango Capital Advisors, which oversees about $2 billion in Berkeley, California. ``I'm not buying now.''

Iceland secured an emergency bailout loan of $2 billion from the International Monetary Fund after the collapse of the island's banking system paralyzed much of its foreign exchange market, Prime Minister Geir Haarde said in Reykjavik.

Futures on the S&P 500 lost 6.6 percent before U.S. markets officially opened, triggering a Chicago Mercantile Exchange measure meant to limit losses.

Home Resales Jump

Pulte Homes Inc. gained 4.8 percent to $8.50 after home resales in the U.S. rose more than forecast in September. Cheaper prices on foreclosed property lifted purchases of existing homes up 5.5 percent last month to a 5.18 million annual pace, the highest level in a year, the National Association of Realtors said in Washington.

Oil tumbled 5.4 percent to $64.15 a barrel even after OPEC's decision to slash production by 1.5 million barrels a day. Energy stocks in the S&P 500 lost 3.9 percent. Exxon Mobil Corp. retreated 1.9 percent to $69.04.

National City Corp. plunged 25 percent to $2.07. PNC Financial Services Group Inc., Pennsylvania's largest bank, plans to buy the lender, Ohio's largest bank, for about $5.2 billion in stock with funds from the U.S. Treasury. The offer of $2.23 a share is 19 percent less than National City's closing price yesterday.

Fifth Third Bancorp had the biggest loss in the S&P 500, sliding 29 percent to $8.07. Ohio's second-biggest bank was cut to ``sell'' from ``neutral'' at Goldman Sachs Group Inc.

Extreme Pessimism

``There is an extreme level of pessimism and almost despair,'' said Barton Biggs, managing partner at hedge fund Traxis Partners LLC. ``We're at very, very cheap levels.''

The yen climbed to a 13-year high against the dollar as stock-market losses prompted investors to dump higher-yielding assets funded by low-cost loans in Japan.

Japan's currency rose 8.6 percent this week against the dollar, the biggest gain since October 1998. It surged 13 percent versus the euro, the greatest weekly advance. The euro headed for a 5.1 percent decline versus the dollar.

The pound depreciated as much as 5.9 percent to below $1.53. Sterling's intraday decline surpassed that on Black Wednesday in September 1992, when the U.K. was driven out of Europe's exchange-rate mechanism.