Global markets fall on Toyota’s profit warning

Global markets fall on Toyota’s profit warning

London: World stock markets fell modestly on Monday in light pre-Christmas trade as another profit warning from Toyota and lower-than expected-profits at US drugstore chain Walgreen weighed on investor sentiment.

The FTSE 100 index of leading British shares was down 11.31 points, or 0.3%, at 4,275.62 but Germany’s DAX was down 24.74 points, or 0.5%, at 4,671.96. The CAC-40 in France fell 45.70 points, or 1.4%, to 3,180.20.

On Wall Street, US stocks gave up early gains and the Dow Jones industrial average was down 38.55 points, or 0.5%, at 8,540.56. The broader Standard & Poor’s (S&P) 500 index fell 9.30 points, or 1.1%, to 878.58.

Sentiment in the US was hit by lower-than-expected profits at Walgreen Co. The company said its profit fell 10% in the fiscal first quarter because of costs to open more than 200 new stores.

Wall Street has shown some signs of relative stability in the last few weeks. Since reaching multiyear lows on 20 November, the Dow is up 13.6% and the S&P 500 is up 18%.

Though global equities have made gains in three of the last four weeks following the preceding crash, analysts remain wary amid the mounting economic gloom around the world.

Adrian Pankiw, analyst at Henderson Global Investors, noted that the rally has been led by consumer discretionary stocks at a time when global unemployment was on the rise.

“Such rallies have proved unsustainable in previous bear markets," he said.

The problems the world economy is about to face in 2009 were put in sharp relief earlier by the warning from Toyota Motor Corp., the world’s biggest automaker, that it will likely post an operating loss of US $1.66 billion in the year to end-March, the first such loss since Toyota began reporting such numbers in 1941.

In the markets, Toyota is perceived as one of the world’s best manufacturers and if it is experiencing times as bad as it says, then others will likely fare even worse, the reasoning goes.

Industrial orders data for the euro-zone earlier confirmed that manufacturing activity fell sharply in October and added to the evidence that the recession in the 15-nation single currency zone is deepening.

Eurostat revealed that industrial orders plunged by a monthly 4.7% in October for a 15.1% percent year-on-year decline. Most countries posted declines including industrial heavyweights Germany and France.

Earlier, Asian markets were mixed as Friday’s announcement from the outgoing Bush administration to extend General Motors Corp. and Chrysler LLC $17.4 billion in loans brought a measure of relief to some investors.

But early gains in Asia soon faded amid worries about the US and global outlook, as well as shrinking demand for Asian-made products like cars and electronics that keep the region’s economies growing, analysts said. In Japan, new figures showed a record 26.7% plunge in exports last month compared to a year ago.

Hong Kong’s Hang Seng Index dropped 3.3% to 14,874.61, while South Korea’s Kospi dipped 0.1%. Singapore, Australia and mainland China benchmarks were each down over 1.5%.

Tokyo bucked the downward trend, with its Nikkei 225 stock average rising 135.26 points, or 1.6%, to 8,723.78 despite the latest bad news about the country’s exports.

Japanese investors seemed focused instead on the US auto industry bailout, helping buoy Honda 5.4% and Nissan 2.7%, and the country’s recent efforts, including an interest rate cut on Friday, to counter the recession.

Oil prices were steady, with the February contract up 13 cents at US $42.49 on the New York Mercantile Exchange.

In currencies, the US dollar strengthened 0.5% to 89.74yen while the euro rose 0.6% to US $1.3993.