Archive for October, 2008

Japan’s Nikkei stock index closes down 5 percent (AP)

Friday, October 31st, 2008 | Finance News

TOKYO – Japan's benchmark stock index closed down 5 percent Friday as investors shrugged off an interest rate cut by the central bank and instead unloaded shares for quick profits ahead of a long weekend.

Although losses accelerated after the Bank of Japan lowered its key interest rate from 0.5 percent to 0.3 percent — less than the quarter-point cut expected — market reaction was muted, said Harushige Kobayashi, equity strategies at Maruwa Securities.

Nervousness about the days ahead was what prompted investors to sell, he said. Tokyo markets will be closed Monday for a national holiday.

"Investors have no idea what could happen over the next three days," he said. "And stocks gained so much yesterday that some pullback was inevitable."

The Nikkei 225 index lost 452.78 points to close at 8,576.98 points after soaring 10 percent Thursday.

Yumi Nishimura, market analyst at Daiwa Securities SMBC said the Bank of Japan's policy move fell short of the widely expected cut to 0.25 percent, but added that "the market also welcomed the move as a step to stay in line with the rest of the world."

The central bank warned that "adjustments in the world economy stemming from financial crises in the United States and Europe have further increased in severity."

Exporters including autos and technology issues were among decliners Friday as the yen gained against the dollar.

A strong yen hurts exporters by eroding their dollar-denominated overseas earnings when converted back to the Japanese currency. The dollar bought 96.8 yen at late afternoon in Tokyo, down more than 1.9 yen from late Thursday in New York.

Honda Motor Co. fell 13 percent, and Mazda Motor Corp. declined 13.8 percent. Electronics maker Pioneer Corp. dropped 15.2 percent, and Nikon Corp. lost 18.1 percent.

Mizuho Financial Group Inc. lost more than 5 percent after the Japanese megabank said Friday it slashed its profit forecasts. It now expects 250 billion yen ($2.6 billion) in group net profit for the fiscal year, almost half of its previous forecast of 560 billion yen ($5.7 billion).

The broader Topix index of all first section issues closed down 3.6 percent to 867.12 points.

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World shares head for worst month ever (Reuters)

Friday, October 31st, 2008 | Finance News

LONDON (Reuters) –
Shares in Asia and Europe fell on Friday, heading for their worst month ever, while the low-yielding yen surged as Japan's interest rate cut failed to erase concerns about the deteriorating global economic outlook.

The Bank of Japan joined a global easing cycle by trimming interest rates by 20 basis points to 0.3 percent, but disappointed many who had expected a bigger quarter point cut.

The move followed the Federal Reserve's decision to cut interest rates to 1 percent -- its lowest level since June 2004 -- to stave off a prolonged recession. China, Hong Kong and Taiwan also lowered the cost of borrowing this week, with the euro zone, Australia and Britain seen following suit next week.

However, investors feared a round of rate cuts was not enough to stem the flow of worsening corporate earnings and bolster consumer consumption in major economies which might be already in recession.

In response, oil and commodities fell sharply.

"Volatility is the watchword today," said Adam Cole, global head of currency strategy at RBS Capital Markets. "The usual risk aversion plays will also come into play given losses in Asian shares." MSCI world equity index (.MIWD00000PUS) fell 0.9 percent. The index has fallen 21 percent this month, on track for its worst monthly performance in the index's 20-year history.

Asian stocks (.MIAPJ0000PUS) ticked down on the day and European stocks (.FTEU3) were down 0.7 percent. Both indexes also headed for their worst month ever.

U.S. crude oil fell 3 percent to $63.96 a barrel, falling all the way from its record high around $147 set only in July. Gold fell to $724.10 an ounce.

Emerging stocks (.MSCIEF) rose 0.4 percent. The December bund futures fell 30 ticks.

YEN, DOLLAR SURGE

The yen surged 1.7 percent to 96.98 per dollar even as the BOJ cut interest rates.

Risk-averse investors were chasing the low-yielding Japanese currency across the board, sending the yen up nearly four percent to 122.69 per euro.

The dollar (.DXY) rose 1.3 percent against a basket of major currencies.

"The gradual shift in market attention from credit issues to real economic concerns suggests that market stability and releveraging will be some months away," Calyon said in a note to clients.

"The economic news is set to worsen, implying only a very gradual easing in risk aversion in the months ahead and potentially negative feedback to credit markets. Against this background the dollar is set to remain firm."

(Editing by Mike Peacock)

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‘Buck-breaking’ fund returns initial $26 billion (AP)

Thursday, October 30th, 2008 | Finance News

NEW YORK – A money-market mutual fund that "broke the buck" amid a rush of orders to pull out cash has begun returning an initial $26 billion to investors who had been unable to access their money for more than a month.

The first in an unspecified number of distributions from the Reserve Primary Fund began Thursday with checks being mailed to retail-direct shareholders, Reserve Management Co. said. Payments to all other shareholders will be made by wire on Friday.

Each investor is getting about half their current account balance, the company said. It said all investors are being treated the same, whether or not they tendered redemption orders, and that the payout is being done on a pro-rata basis.

"This distribution marks a significant step in the process of liquidating the Primary Fund and distributing money back to shareholders," Reserve Management Co. President Bruce R. Bent said in a statement. "We are committed to making future distributions when more cash becomes available."

The fund had total assets of about $51 billion as of Sept. 30. It held $64 billion in assets on Sept. 12, before a soured investment in Lehman Brothers debt triggered a rush of institutional investors pulling out cash.

On Sept. 16, the rapid sell-off of assets caused the value of fund assets to fall to 97 cents for each investor dollar put in — the first instance in 14 years of a money-market mutual fund "breaking the buck," or having its per-share value fall below $1.

Reserve Management froze redemption orders. That led institutional investors to pull out cash from that fund and others, creating fears about the safety of the $3.4 trillion in assets held in money-market funds, and a new temporary government money fund guarantee program.

Reserve Management said it is "focused on liquidating the fund's holdings at amortized cost as quickly as possible."

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