Merrill Lynch & Co (MER.N) will likely incur
$5.4 billion of write-downs in the second quarter, mainly from
its exposure to monolines, said an analyst at Lehman Brothers,
who also saw higher quarterly losses at the world's largest
Analyst Roger Freeman raised his write-down view by $3
billion for Merrill, making his estimate the highest among Wall
Street analysts. Analysts have till date expected write-downs
to range from $3.5 billion to $4.2 billion.
"We did a deeper review of Merrill's monoline exposures on
non-ABS CDO (asset-backed security and collateralized debt
obligation) assets... this incremental $1.7 billion of
writedowns constitutes the majority of our adjustment," Freeman
In addition to the monoline write-down, the analyst said he
was now incorporating a larger CDO/subprime write-down
following a sharp decline in the ABX index over the past few
days. ABX, a synthetic index of home equity asset-backed
securities tied to credit default swaps, is comprised of risky
Freeman widened his second-quarter loss estimate to $2.78 a
share from 64 cents. For 2008, he sees higher losses of $2.99 a
share, from his prior view of a loss of 53 cents.
The analyst cut his price target to $44 from $47, and rates
the stock "equal weight."
Shares of Merrill closed at $33.05 Thursday on the New York
Stock Exchange. Through Thursday, they have plunged 38 percent
(Reporting by Tenzin Pema in Bangalore; Editing by Jarshad
The sell-off spread across the entire region, with every key index in the red.
Shanghai's benchmark plunged more than 5 percent to 16-month low. India's Sensex was down 3.8 percent in afternoon trade. Japanese stocks dropped for a seventh day to a two-month low. Markets in Hong Kong, South Korea, New Zealand and the Philippines were off around 2 percent.
Sentiment took a hit after U.S. stocks sank Thursday, with the Dow Jones industrial average sliding more than 3 percent to its lowest level in almost two years.
Worries about the outlook for the U.S. economy — a vital export market for Asia — intensified after dismal news about a number of industries. Analysts downgraded General Motors Corp., Citigroup and Merrill Lynch & Co., while tech companies Oracle Corp. and BlackBerry maker Research In Motion Ltd. offered disappointing forecasts.
Oil prices, which climbed above $140 a barrel late Thursday, surged above $141 in Asian trading Friday, spurring further concern about inflation and rising costs.
"We've still got bad news on the credit crunch, we've got bad news about consumers," said Garry Evans, pan-Asian equity strategist with HSBC in Hong Kong. "The macro environment is not a good one and people are very risk averse."
In China, the Shanghai Composite Index sank 5.3 percent to 2,748.43 points, the lowest close since February 9, 2007. Aside from record crude prices, reports of speculation about possible bank rate hikes were spooking investors.
Institutional investors are becoming disappointed with the authorities for staying hands-off during this year's slide, said Xu Zhiyuan, strategist at Capital Edge Investment and Management in Shanghai.
"Investors are selling shares regardless of the loss," he said.
Huaneng Power International Inc. was one of the hardest-hit stocks, falling nearly 10 percent. Airlines also suffered from the oil news, with China Eastern Airlines falling 9.7 percent and China Southern Airlines falling 9.5 percent.
Tokyo's benchmark Nikkei 225 index shed 2 percent to 13,544.36, the lowest finish since late April. Honda Motor Co. lost 2.7. Sony Corp. dropped 4.3 percent.
Indian stocks sank as investors worried about inflation that has risen to 13-year highs and that recent interest rate hikes would temper consumer spending.
"Sentiment is bearish. There are fears that crude will touch $180, this is a worry that cannot be stamped out easily," said Gul Tekchandani, a Mumbai-based investment adviser. "Few can stomach this volatility, plus there are weak global cues with the U.S. economy also down."
Hong Kong's Hang Seng index trimmed earlier losses to close down 1.8 percent at 22,042.35. Refiner China Petroleum & Chemical Corp, or Sinopec, lost 3.6 percent, and airline Cathay Pacific was down 1.7 percent.
Mobile phone maker Foxconn International Holdings, Motorola's primary contract manufacturer, tanked almost 8.5 percent amid fears over consumer demand.
Elsewhere, the main Philippine Stock Exchange Index ended 2.2 percent lower, it's lowest finish in 21 months.
In currency trading, the dollar stood at 106.86 mid-afternoon in Tokyo, little moved from 106.91 yen in New York late Thursday. The euro stood at $1.5772 in mid-afternoon in Tokyo, compared with $1.5751 in New York.
Associated Press writer Ramola Badam Talwar in Mumbai and Cara Anna in Shanghai contributed to this report.
S&P 500 futures rose 0.2 percent, Dow
Jones industrial average furtures were up 0.2 percent and
futures for the Nasdaq 100 were up 0.2 percent early on Friday.
U.S. benchmark indexes (.DJI) (.SPX) (.IXIC) fell 3 percent on
* Anheuser-Busch (BUD.N) said its board of directors
unanimously rejected the $46.3 billion takeover bid from
Belgian-Brazilian rival Inbev (
lawsuit in Delaware Chancery Court to confirm that shareholders
can remove without cause all 13 board members of
* Accenture (ACN.N) shares rose 1.7 percent after hours as
the consulting giant raised its outlook for year earnings.
* Verizon Communications (VZ.N) wants full ownership of its
Verizon Wireless joint venture with Vodafone (VOD.L) in the
U.S., the Financial Times reports.
* Homebuilder KB Home (KBH.N) will release second-quarter
earnings before the bell and analysts expect a loss of $0.90 a
* Reuters/University of Michigan final consumer sentiment
final for June due at 9:55 a.m. EDT. Economists expect the June
estimate for consumer sentiment to come in at 57 compared with
a reading of 59.8 in May.
* Core PCE for May is due at 8:30 a.m. EDT.
(Reporting by Patrizia Kokot; Editing by Quentin Bryar)