Global Stocks Tumble; Countrywide, Deutsche Bank, BHP Decline
Aug. 16 (Bloomberg) -- U.S. index futures followed stocks in Europe and Asia lower as concern deepened that a global credit crunch will sap earnings and erode economic growth. Bonds gained worldwide and the yen rallied against the dollar.
Countrywide Financial Corp., the biggest U.S. mortgage company, lost 11 percent after tapping an $11.5 billion credit line amid ``constrained'' liquidity for lenders. Deutsche Bank AG, Germany's largest bank, and BNP Paribas SA of France paced declines in Europe. Rams Home Loans Group Ltd. plunged in Australia after failing to refinance debt, while Macquarie Bank Ltd. led a drop in Asian financial stocks.
``We're in the eye of the cyclone,'' said Salah Seddik, who helps oversee about $5 billion at Richelieu Finance in Paris. ``There's now the question of what will happen with economic growth. It's too early to come back to the stock market.''
The Morgan Stanley Capital International World Index fell 1.2 percent to 1,476.09, while Standard & Poor's 500 Index futures sank 17.2 to 1,397.2 at 8:32 a.m. in New York. The MSCI World has declined 11 percent since reaching a record on July 19. The last time the measure dropped more than 10 percent in a so- called correction was in May and June of 2006, when expectations for higher interest rates rattled investor confidence.
Emerging-market shares and currencies also retreated. The MSCI Emerging Market Index lost 4.8 percent to 968.8, its steepest slide since April 17, 2000. South Korea's Kospi declined 6.9 percent, while Turkey's ISE National 100 Index slipped 7.3 percent.
The Turkish lira fell more than 4 percent against the dollar, the most since June 2006. Indonesia's rupiah, South Korea's won and South Africa's rand also retreated against the U.S. currency.
`Jitters'
The yen rose to a five-month high against the dollar and the euro as the slump in stocks and credit-market turmoil prompted traders to slash so-called carry trades, funded by loans in the Japanese currency.
Treasuries advanced, pushing two-year yields to the lowest in 22 months. The risk of owning European corporate bonds increased, according to traders of credit-default swaps.
``We don't know yet what could be the medium-term impact of the jitters in the credit market,'' said Karim Bertoni, who helps manage about $24 billion at Banque Syz & Co. in Geneva. ``Will the effect first hit the banks but then also spill over to the economy? The banks would lend less, the credit conditions would be harsher, and all this will reduce the growth rate.''
Metals Fall
Countrywide dropped $2.31 to $18.98 after losing 13 percent yesterday. The $11.5 billion loan is with 40 of the world's largest banks, the Calabasas, California-based company said.
``Demand for non-agency, mortgage-backed securities has been disrupted in recent weeks,'' David Sambol, president and chief operating officer, said in the statement. ``Liquidity for the mortgage industry has also become constrained.''
Goldman Sachs Group Inc., the world's most profitable securities firm and second-largest hedge-fund manager, fell $1.75 to $163.15 in Germany. Exxon Mobil Corp., the biggest energy company, fell 81 cents to $80.88 in trading before the open of U.S. exchanges as oil prices dropped.
Deutsche Bank sank 2.4 percent to 91.15 euros. BNP, France's biggest bank, fell 2.8 percent to 74.9 euros. International Personal Finance Plc, a U.K. provider of unsecured cash loans in six overseas countries, plunged 9.3 percent to 172.25 pence.
BHP, the world's biggest mining company, decreased 4.2 percent to 1,223 pence and Rio, the third largest, declined 4 percent to 3,023 pence.
Copper Drops
Copper for delivery in three months dropped for a third day, sliding as much as 1.9 percent to $7,172 a metric ton in London. The metal used in wiring and plumbing has retreated 3.7 percent in the last three days. Zinc, lead, nickel and aluminum prices also fell.
U.S. Treasury Secretary Henry Paulson said financial turmoil will ``extract a penalty'' on U.S. growth rates, though the world's biggest economy is strong enough to weather problems without falling into recession, the Wall Street Journal reported, citing an interview.
William Poole, president of the St. Louis Federal Reserve Bank, said yesterday the subprime mortgage rout doesn't threaten U.S. economic growth, and only a ``calamity'' would justify an interest-rate cut now.
Asian stocks headed for the biggest two-day drop in a year, paced by Rams Home Loans. The company failed to refinance A$6.17 billion ($5 billion) of short-term debt as buyers shun credit markets on concern that subprime losses will deepen. The stock dropped as much as 59 percent in Australia.
`Levels of Risk'
``We need to get through a period when all the relative financial institutions put their hands up and say `I've got some subprime, this is how big it is,'' said Nick Price, manager of the Fidelity Funds - Emerging Europe, Middle East and Africa Funds at Fidelity International Ltd., which manages almost $291 billion of assets. ``At the moment people don't know the levels of risk, and that's what makes people particularly nervous.''
Macquarie fell 4 percent to A$64. Woori Finance Holdings Co., South Korea's third-biggest financial services company by market value, dropped 2.3 percent to 21,500 won.
Macquarie Bank has lost 34 percent since its May 18 high of A$97.10. It said July 31 that investors in two of its leveraged credit funds may lose 25 percent of their money because of turmoil in credit markets.
Saint-Gobain, Lanxess
Cie. de Saint-Gobain SA slid 1.9 percent to 78.89 euros. JPMorgan Chase & Co. cut its recommendation on shares of Europe's biggest supplier of building materials to ``neutral'' from ``overweight.''
Lanxess AG retreated 6.1 percent to 34.01 euros. The German maker of chemicals for rubber products and leather tanning posted a second-quarter loss after it wrote down the value of its Lustran Polymers unit.
Ciba Specialty Chemicals AG dropped 7.5 percent to 63.9 euros. The world's largest maker of colors for plastics said selling prices dropped and costs for oil-based raw materials rose.
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