Stocks Take Biggest Hit Since 9/11

[Gold9472]

Stocks take biggest hit since 9/11

http://www.smh.com.au/news/business/stocks-take-biggest-hit-since-911/2006/06/13/1149964535789.html

Matt O'Sullivan
June 14, 2006

CONTINUED worries about US inflation sent shockwaves through the local sharemarket as stocks had their biggest one-day fall in almost five years.

Investors rushed for the sell buttons for the second trading day in three after Wall Street fell to a four-month low after another inflation warning from a Federal Reserve official.

Resource companies and banks led the slide as the market slumped almost 2.6 per cent - worse than last Thursday's rout - the biggest single-day fall since the aftermath of the terrorist attacks on September 11, 2001.

Analysts warn that the market will remain volatile until the Fed clarifies the direction of interest rates in the US.

Since reaching a record on May 11, the local market has fallen almost 10 per cent.

Few companies were spared from the sell-off yesterday as falls in metal prices compounded investors' woes.

The ASX 200 index slumped 127.1 points, or 2.56 per cent, to 4838.9 and the broader All Ordinaries dropped 119.6 points to 4807.2.

ABN Amro's head of Sydney sales trading, Justin Gallagher, said the sell-off was primarily due to continued concerns in the US about inflation.

"There is an element of emotion that has definitely crept into the market and that has added to the magnitude of the fall," he said. "[But] investors haven't completely turned their backs on this market."

BHP slumped $1.48, or more than 5.5 per cent, to $25.25 and Rio Tinto fell $2.87 to $70.90.

The two miners have fallen more than 21 per cent and 19 per cent respectively since reaching record highs in early May.

Some Asian markets fared worse as they reacted to concerns about inflation and central banks' attempts to combat it by raising interest rates. Japan's Nikkei fell more than 4 per cent and Hong Kong's Hang Seng 2.5 per cent.

The rout continued last night in Europe as Britain's FTSE shed about 1.6 per cent and Germany's DAX about 1.7 per cent in early trading.

Shaw Stockbroking's head dealer, Jamie Spiteri, said the Australian indices had become more susceptible to overseas markets than several months ago when they could often repel negative leads because of the performance of resource companies.

"You've got a situation where the [bullish] sentiment that was very evident in the market a couple of months ago has now largely evaporated," he said.

"We now have a market that is extremely sensitive to overseas leads, particularly from the US."

Wallace Funds Management's portfolio manager, Michael Birch, said the "shake-up" was likely to continue for the next two weeks until the Fed clarified the direction of US interest rates.

[Gold9472]

Nikkei suffers biggest fall since 9/11

http://business.guardian.co.uk/story/0,,1796579,00.html

Justin McCurry in Tokyo
Tuesday June 13, 2006

The Nikkei share index suffered its biggest single-day point loss on Tuesday since the September 11 2001 terrorist attacks, as concern mounted that a possible rise in US interest rates could impede Japan's economic recovery.

The Nikkei lost 614.41 points — 4.14% — to end the day at 14,218, its lowest close since November 16 last year. The Tokyo stock market has now dropped about 20% since early April.

Ructions were also felt in other markets across Asia and in Europe ahead of the release later this week of key US economic inflation data that the US Federal Reserve uses to set interest rates.

Fed officials have repeatedly warned that US inflation is too high, prompting speculation that the Federal Reserve will decide to raise interest rates at its policy meeting on June 28-29 — a move that would adversely affect US sales of key Japanese products such as cars and consumer electronics.

The Nikkei was further jolted by the revelation by the Bank of Japan chief, Toshihiko Fukui, that he had invested 10m yen (£50,000) in MAC Asset Management before he was appointed governor of the central bank. The president of MAC, Yoshiaki Murakami, was arrested last week for alleged insider trading.

Mr Murakami, who has resigned from the firm — better known as the Murakami Fund — is accused of buying shares in Nippon Broadcasting System (NBS) after learning in late 2004 that the internet company Livedoor, which is the subject of a separate case of accounting fraud, was about to make a bid for the media firm.

The fund sold most of its shares in NBS after the price rose during Livedoor's ultimately unsuccessful takeover bid.

Major Japanese electronics firms, meanwhile, were left reeling on Tuesday by the fall in the price of flat panels used in liquid-crystal display (LCD) televisions. Shares in Sharp, the world's biggest maker of LCD TVs, plunged by 7.1%. Shares in Sony fell by 3.3% to ¥4,770 and Matsushita by 5.5% to ¥2,215.

Analysts warned of further falls as investors appeared more determined than usual to offload stocks in traditionally resilient sectors, especially after news emerged of the Bank of Japan chief's investment in the Murakami fund amid opposition party demands for his immediate resignation.

Yoshihisa Okamoto, of Fuji Investment Management, said: "If investors are worried about economic recovery, defensive stocks such as utilities and drug shares should hold firm. But even these shares were sold — this is not a good sign."

Mr Fukui told a parliamentary committee that he had invested ¥10m in the Murakami fund in 1999, while he was still chairman of the Fujitsu Research Institute. In widely broadcast comments, the BoJ governor insisted that the investment was in no way improper and stressed that he had never worked for any of the fund's companies or earned money as an adviser.

"Murakami asked me for advice, so I gave him friendly advice on issues such as corporate governance, but I never gave him any advice on his investment activity," Mr Fukui said.

The opposition Democratic party called for Mr Fukui's resignation but Japan's economics and financial services minister, Kaoru Yosano, said that the government had no plans to replace him. "There is no problem with an investment by an individual in the private sector who did not know he was going to become the central bank governor," Mr Yosano said.