Global Stocks Slump on Falling Exports, Earnings Reports (Washington Post)
TOKYO, Oct. 23 -- A continued flow of poor economic news undercut stocks across Asia and Europe again on Thursday, with Japan reporting its lowest trade surplus in 27 years, factory orders dropping in Europe and consumer products giant Sony slashing its expected profit by half.
The accumulating evidence of a slipping economy and possible recession has pummeled global stocks in recent days, even as the financial and credit crisis shows some signs of abating.
Markets in Japan and across most of Asia fell again Thursday, as grim government numbers showed the region's real economy sinking along with global demand for its exports.
The benchmark Nikkei average skidded 7 percent in initial trading before recovering to close down 2.5 percent. Stocks in Hong Kong also recovered slightly after falling more than 6 percent, closing down 3.5 percent on the day. Stocks in China rose for the first time in three days.
Government data suggested that the Asia-Pacific region is either headed for or mired in a recession.
Japan's trade surplus plunged 86 percent in the past six months and is the smallest in nearly 27 years, said the Finance Ministry, where officials acknowledged this week that Japan was probably in a recession.
A soaring yen, collapsing global demand and rising import costs are hobbling the world's second-largest economy, which depends for growth on exports to the United States, Europe and China -- and all three are facing economic slowdown.
The rise in the Japanese currency and falling global demand both led Sony to cut by well over 50 percent its expected profit for the year. Sales of some of the company's staple products -- flat-panel televisions and compact digital and video cameras -- will "be lower than the previous forecast due to a deterioration in the market environment brought on by the slowing global economy," Sony said in a press release.
Another telling measure of prospects for Japanese exports was the price of stock in Mazda Motor Corp., which fell 11 percent Thursday. Japanese exports to the United States have declined for 13 consecutive months.
As export demand slumps, so does the value of shipping companies. World shipping rates for commodities fell this week to a six-year low. The stock of Japan's third-largest shipping firm, Kawasaki Kisen Kaisha Ltd., fell Thursday to its lowest level in 5 years.
Reports from China this week showed declines in the country's once-booming real estate sector, as prices in 70 major Chinese cities fell for the second straight month, the government reported.
To prop up home prices, the government -- which only months ago was trying to cool an overheated market -- said it will relax rules for down payments and cut mortgage rates for first-time buyers. The announcement appeared to cheer investors, as stocks rose slightly in Shanghai.
In South Korea, the central bank announced Thursday that it will increase the amount of low-interest loans available to small businesses, which have been frozen out of credit markets in recent months.
The won is down about 34 percent against the dollar this year and is the worst-performing major currency in the world. Stocks in Seoul have lost about a quarter of their value this month alone. They were down more than 7 percent Thursday.
To bail out South Korea's ailing construction industry, the government this week announced a far-reaching program to buy land and unsold houses from builders. Small and medium-sized construction companies have been all but unable to borrow money since the summer. The industry accounts for 20 percent of the nation's economy.
Economic deterioration in South Korea -- or at least official recognition of that deterioration -- is moving at a brisk pace. Two weeks ago, South Korea Finance Minister Kang Man-soo said in an interview that the economic fundamentals in his country were sound, with booming exports and plenty of foreign currency reserves.
This week, he told reporters that the country faces more difficult conditions than during the 1997-98 Asian financial crisis, when South Korea had to be bailed out by a loan from the International Monetary Fund.
In Europe the news was little better. Stocks initially opened higher then turned for the worse, led down by mining and construction companies -- all facing dimmer prospects in a recession. Major indexes were registering losses of around 1.5 percent in London to more than 3.5 percent in Germany.
New reports from the showed that factory across the 15-nation Eurozone fell 1.2 percent in August, compared to expectations for a slight increase. Retail sales in the U.K., meanwhile grew less than expected.
