Asia damped by US economic outlook

By Andrew Wood in Hong Kong 2 hours, 20 minutes ago

Asian shares were broadly lower on Thursday as worries deepened about the state of the US economy and its effects on global growth after home prices fell in a third of US cities. The Morgan Stanley Capital International index of Asia Pacific shares outside of Japan dropped 0.1 per cent, following Wednesday's loss of 3.4 per cent.

The National Association of Realtors said home prices declined in one third of US metropolitan areas last quarter, fuelling concerns that consumer spending may slow in Asia's biggest export market.

In Japan, the Nikkei 225 average drooped as much as 0.4 per cent as the yen held at 2-year highs against the dollar. But by early afternoon in Tokyo it had recouped its losses and was up 0.2 per cent at 14,869.34 as some investors looked for bargains.

The broader Topix index fell by 0.3 per cent in the morning, teetering on the edge of becoming a bear market by one definition as it has fallen by 20 per cent from its peak in February. But it too recovered, trading 0.3 per cent higher in the afternoon at 1,443.63.

As shares fell, Japanese investors shifted money to safer government debt and government bond futures rose to a 22-month high.

In the early afternoon in Tokyo, the yen was around Y108.45 versus the dollar. The euro hit a fresh record high against the dollar at $1.4871.

Australian shares fell for the third day in a row. Lower prices for base metals depressed mining companies and persistent worries about losses from the credit squeeze dragged down the financial sector. By early afternoon in Sydney the S&P/ASX 200 index was above the day's lows but still down 0.8 per cent at 6,330.90. National Australia Bank (NYSE:NAU) fell 2 per cent to A$40.44 and ANZ Bank lost 0.8 per cent to A$27.61.

Rams Home Loans, one of the Australian companies worst affected by the US credit squeeze in August when it could not roll over A$6.17 billion of debt, dropped as much as 22 per cent. Investors worried the mortgage lender might not be able to refinance some of its debt. Rams shares were down 18 per cent at A$0.21 by early afternoon, compared with their flotation price of A$2.50 in July.

Philippine shares dropped, tracking other markets. By early afternoon in Manila, the Philippine Stock Exchange index was 1.2 per cent lower at 3,459.61. The geothermal company PNOC-Energy Development was up 9.5 per cent at Pesos6.90, after rising as much as 15 per cent, as bids for the government's remaining 60 per cent stake in the company closed. Officials said Philippine power producer First Gen's joint venture with Iceland's Reykjavik Energy Invest offered the highest bid, of $1.35bn.

Hong Kong's Hang Seng index managed to end the morning up 0.4 per cent at 26,727.28, but mainland Chinese shares were sharply lower. The Shanghai Composite index was down 2 per cent at 5,108.12 and Shenzhen was 2.1 per cent lower at 1,286.24.

Shares of Value Partners Group, the first asset manager to sell shares in Hong Kong, were down 3 per cent in their market debut after a $373 million initial public offering.

Elsewhere, Korea's Kospi was down 0.6 per cent, while Taiwan shares were off 0.1 per cent. Singapore's STI was up 0.1 per cent.

Asia damped by US economic outlook

Oil prices steady above $97 a barrel

By THOMAS HOGUE, AP Business Writer 2 hours, 42 minutes ago

BANGKOK, Thailand - Crude oil prices were steady above $97 a barrel Thursday after failing to break above $100 as a U.S. weekly inventory report showed crude oil inventories rose at a key oil terminal.
The rise at the Cushing, Okla., the physical delivery point for oil contracts bought on the New York Mercantile Exchange, offset the impact from an unexpected drop in the overall stockpiles. Falling supplies at the terminal are seen as a symptom of a tight market, and the gain in Cushing eased those concerns.

Light, sweet crude for January delivery rose 6 cents to $97.35 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.

On Wednesday, the contract fell 74 cents to settle at $97.29 a barrel during the New York floor session, retreating from an intraday record of $99.29 a barrel during electronic trading earlier in the day.

Singapore Prime Minister Lee Hsien Loong said late Wednesday that the record high oil prices are a burden on Asian nations.

"For those of us who are not oil exporters, and we import all our oil, this is a burden which is growing," he said. "It is particularly a burden on the low-income groups, and it's also a factor in increasing the inflation rate and the cost of living for consumers in their countries."

Lee also quoted the leader of India, which subsidizes fuel, as telling other Asian heads of state during meetings in Singapore that the cost of energy is of greater concern to him than the effects of climate change.

A swoon in global stock markets also depressed oil prices Wednesday. Energy investors worry that falling equities are a symptom of weakening economies that would use less oil and gasoline.

Oil inventories fell 1.1 million barrels last week, according to the U.S. Energy Department's Energy Information Agency. Analysts surveyed by Dow Jones Newswires had forecast, on average, an increase of 700,000 barrels. Cushing inventories, though, rose 1.2 million barrels, their first substantial increase in weeks and the largest since the end of August.

The EIA also said refinery activity fell last week, countering expectations for a slight increase. Gasoline inventories grew less than expected, and distillate supplies fell by 2.4 million barrels, far more than expected.

The decline in overall crude supplies can be explained in part by imports, which fell by an average of 667,000 barrels a day, or about 6 percent, last week. Gasoline imports rose 11 percent.

Crude prices are within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

January Brent crude rose 26 cents to $95.10 a barrel on the ICE Futures exchange in London.

January heating oil futures rose 0.48 cent to $2.7025 a gallon, while January gasoline prices added 0.42 cent to $2.4395 a gallon. December natural gas futures rose 3 cents to $7.58 per 1,000 cubic feet.

The Nymex will be closed Thursday for Thanksgiving Day and will close early Friday, but electronic trading will not be affected.

Credit, economy woes wreck holiday mood on Wall St

By Kristina Cooke
NEW YORK (Reuters) - U.S. stocks fell on Wednesday on signs that trouble in the housing market could worsen and further harm the economy, unnerving investors as they headed into the Thanksgiving holiday.
U.S. Treasury Secretary Henry Paulson underscored a major theme for the week, telling The Wall Street Journal the number of potential U.S. home-loan defaults will be significantly bigger in 2008 than in 2007.

Financial services companies, including Goldman Sachs Group Inc (GS.N), led the sell-off alongside economic bellwether General Electric (GE.N).

Shares of mortgage lenders, including Countrywide Financial Corp (CFC.N), also tumbled while fears of even more subprime exposure at American International Group Inc (AIG.N) pushed the insurer's shares down as much as 6.58 percent.

"There just seems to be more evidence that financials are just in bigger trouble than we continue to think, and the write-offs are going to be worse than initially estimated," said Peter Dunay, investment strategist at Leeb Capital Management in New York.

The Dow Jones industrial average (.DJI) fell 211.10 points, or 1.62 percent, to end at 12,799.04, its lowest close since April.

The Standard & Poor's 500 Index (.SPX) was down 22.93 points, or 1.59 percent, at 1,416.77 -- the drop pushed the S&P into negative territory for 2007.

The Nasdaq Composite Index (.IXIC) was down 34.66 points, or 1.33 percent, to close at 2,562.15.

The prospect of $100-a-barrel oil hurt the shares of big manufacturers and retailers on concern about the impact of higher fuel costs on businesses and consumers. These worries were exacerbated by a survey that showed U.S. consumer sentiment fell in November to its lowest in two years, according to the Reuters/University of Michigan Surveys of Consumers.

U.S. crude oil for January delivery hit a record $99.29 earlier on Wednesday before retreating on the New York Mercantile Exchange. NYMEX January crude fell 74 cents, or 0.8 percent, to settle at $97.29 a barrel.

Risk aversion drove investors to seek a safe haven in U.S. government bonds. The yield of the benchmark 10-year Treasury note was 4.01 percent, down from 4.09 percent late on Tuesday. The note's price, which moves inversely to its yield, rose 20/32 to 101-29/32.

Earlier, the 10-year note's yield had dipped below 4 percent for the first time since September 2005.

Shares of Goldman Sachs dropped 3.7 percent to $209.50 on the New York Stock Exchange, while AIG fell 5.7 percent to close at $51.33 on the Big Board. Earlier in the day, AIG's stock tumbled to a session low at $50.86, a drop of 6.58 percent from its Tuesday close and its lowest level since April 2005. On Tuesday, an AIG shareholder sued several of the company's officials over the insurer's exposure to the subprime mortgage crisis.

"There is more of a focus now on balance sheets of financials rather than their earnings -- and that's never a good sign," said Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama.

Shares of Countrywide, the biggest U.S. mortgage lender, dropped 8.4 percent to $9.42 on the NYSE.

Among big manufacturers, General Electric (GE.N) fell 2.3 percent to $37.17, while among retailers, home improvement chain Home Depot Inc (HD.N) slipped 1.6 percent to $28.05.

Trading was thin on the NYSE, with about 1.61 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 2.05 billion shares traded, ahead of last year's daily average of 2.02 billion.

Declining stocks outpaced advancers by a ratio of about 3 to 1 on the NYSE and by 2 to 1 on Nasdaq.

(Editing by Jan Paschal)

Shoppers seek out lower-price stores

By ANNE D'INNOCENZIO, AP Business Writer
NEW YORK - That $3.20 latte at Starbucks or the $300 handbag at Coach may no longer be affordable luxuries. Feeling squeezed by gas prices and weak credit, the nation's shoppers are increasingly trading down to lower-price stores or cheaper items.
Such changes — which emerged this past summer and surfaced in the latest financial results for retailers — could alter dynamics of the holiday shopping season as it officially kicks off on Friday. For some shoppers, it could be as drastic as buying all their clothes at discounters instead of department stores. For others, it could be as subtle as buying a wallet instead of a handbag or one latte per week at a fancy coffee shop and deli coffee on the other days.

The trend could benefit discounters, warehouse clubs and drug stores while hurting department stores and mall-based apparel chains. Even Starbucks Inc. reported its first decline in traffic on record at its U.S. stores.

"People are so cash- and credit-concerned," said retail consultant Burt Flickinger III, noting that he hasn't seen "the trading down" phenomenon since the 1987 stock market crash resulted in massive job losses and the housing slump in the early 1990s.

The idea of trading down is different from cross-shopping, when shoppers buy kitchenware at Target and status handbags at Neiman Marcus. Shoppers cross shop to have a more eclectic style, but trade down to cheaper stores as a sign of financial stress, say experts.

Amanda Curry, a waitress and bar manager from Riverview, Mich., said she normally shops at Somerset, an upscale mall with Nordstrom and Macy's department stores. Now, she is looking at places that offer lower prices.

This year's destination? "Meijer, Wal-Mart — J.C. Penney, probably," she said. "My income's not as high as it used to be," she said, noting that she now has a 17-month-old daughter. Her financial situation has meant fewer trips to Starbucks and more bringing home coffee from home.

Monica Tang, a retail strategist at Kurt Salmon Associates, agrees that certain shoppers are trading down to less expensive stores, but she doesn't see it as a slam on the brakes.

They are finding easier ways to cut back if they are looking to reduce their spending, she said.

The trend is starting to play in the hands of Wal-Mart Stores Inc., which has stepped up discounting after suffering its worst holiday season on record last year. Last week, the discounter recorded an 8 percent profit increase, and analysts say it could benefit from shoppers trading down this holiday season even as its core customers pull back. Drug store chains like CVS Caremark Corp. and Walgreen Co. — both of which have been adding trendy items like funky jewelry — are also expected to be winners.

Meanwhile, department stores — which enjoyed a resurgence last holiday season — have seen their fortunes reverse. Home and apparel, categories sensitive to the economy, are struggling with sluggish sales and department stores are finding stiffer competition from the likes of offprice stores like TJ Maxx, Flickinger said.

Last week, Macy's lowered its sales outlook, while Kohl's Corp. and J.C. Penney Co. reduced their earnings projections as they recorded declining profits in the third-quarter. But TJX Cos. boosted its earnings outlook as it recorded an 8 percent profit gain in third-quarter profits.

Luxury stores like Saks Fifth Avenue should continue to fare well this holiday season. But the aspirational luxury buyer seems to be feeling pinched, hurting results at Coach Inc., considered a bellwether for the low-end luxury market. Coach cut its sales outlook after struggling with declining traffic.

In a bid to get shoppers to buy early, Wal-Mart and other stores have offered door buster specials starting the first weekend of November. The deals are only expected to get better the day after Thanksgiving with stores expanding shopping hours and offering more door buster items than last year.

With all the noise, shoppers still may be resigned to keep to their holiday budgets, which surveys show are not much different from a year ago. Those same surveys, however, show that shoppers plan to spend less per gift. According to a survey conducted by Deloitte & Touche USA LLP, consumers plan to spend $569 on 23 gifts compared to last year's $584 on 22 gifts. According to a survey conducted by the International Council of Shopping Centers, 60 percent of customers planning to spend less overall plan to buy less expensive gifts.

Then again, what they plan and what they actually do is another story.

"I don't have a whole lot of money to spend — with gas and everything, you can't — but I probably will overspend," said Kerry Weston of Hollywood, Fla., who was shopping in Burlington, Vermont.

Nevertheless, analysts will be watching how the holiday season shakes out. In particular, whether drug stores like CVS and Walgreens will be able to steal market share from department stores and other higher-end shops.

CVS is selling gifts such as a Sky Scrambler Wireless Indoor Helicopter for $19.99 and iCraig's iPod Alarm Clock Radio for $29.99.

"Rising gas and oil prices mean that consumers are looking to make fewer trips and cut costs anyway they can," said Eileen Howard Dunn, senior vice president, CVS/pharmacy. She added, "we seem to be in a very good place."

Shoppers seek out lower-price stores

By ANNE D'INNOCENZIO, AP Business Writer
NEW YORK - That $3.20 latte at Starbucks or the $300 handbag at Coach may no longer be affordable luxuries. Feeling squeezed by gas prices and weak credit, the nation's shoppers are increasingly trading down to lower-price stores or cheaper items.
Such changes — which emerged this past summer and surfaced in the latest financial results for retailers — could alter dynamics of the holiday shopping season as it officially kicks off on Friday. For some shoppers, it could be as drastic as buying all their clothes at discounters instead of department stores. For others, it could be as subtle as buying a wallet instead of a handbag or one latte per week at a fancy coffee shop and deli coffee on the other days.

The trend could benefit discounters, warehouse clubs and drug stores while hurting department stores and mall-based apparel chains. Even Starbucks Inc. reported its first decline in traffic on record at its U.S. stores.

"People are so cash- and credit-concerned," said retail consultant Burt Flickinger III, noting that he hasn't seen "the trading down" phenomenon since the 1987 stock market crash resulted in massive job losses and the housing slump in the early 1990s.

The idea of trading down is different from cross-shopping, when shoppers buy kitchenware at Target and status handbags at Neiman Marcus. Shoppers cross shop to have a more eclectic style, but trade down to cheaper stores as a sign of financial stress, say experts.

Amanda Curry, a waitress and bar manager from Riverview, Mich., said she normally shops at Somerset, an upscale mall with Nordstrom and Macy's department stores. Now, she is looking at places that offer lower prices.

This year's destination? "Meijer, Wal-Mart — J.C. Penney, probably," she said. "My income's not as high as it used to be," she said, noting that she now has a 17-month-old daughter. Her financial situation has meant fewer trips to Starbucks and more bringing home coffee from home.

Monica Tang, a retail strategist at Kurt Salmon Associates, agrees that certain shoppers are trading down to less expensive stores, but she doesn't see it as a slam on the brakes.

They are finding easier ways to cut back if they are looking to reduce their spending, she said.

The trend is starting to play in the hands of Wal-Mart Stores Inc., which has stepped up discounting after suffering its worst holiday season on record last year. Last week, the discounter recorded an 8 percent profit increase, and analysts say it could benefit from shoppers trading down this holiday season even as its core customers pull back. Drug store chains like CVS Caremark Corp. and Walgreen Co. — both of which have been adding trendy items like funky jewelry — are also expected to be winners.

Meanwhile, department stores — which enjoyed a resurgence last holiday season — have seen their fortunes reverse. Home and apparel, categories sensitive to the economy, are struggling with sluggish sales and department stores are finding stiffer competition from the likes of offprice stores like TJ Maxx, Flickinger said.

Last week, Macy's lowered its sales outlook, while Kohl's Corp. and J.C. Penney Co. reduced their earnings projections as they recorded declining profits in the third-quarter. But TJX Cos. boosted its earnings outlook as it recorded an 8 percent profit gain in third-quarter profits.

Luxury stores like Saks Fifth Avenue should continue to fare well this holiday season. But the aspirational luxury buyer seems to be feeling pinched, hurting results at Coach Inc., considered a bellwether for the low-end luxury market. Coach cut its sales outlook after struggling with declining traffic.

In a bid to get shoppers to buy early, Wal-Mart and other stores have offered door buster specials starting the first weekend of November. The deals are only expected to get better the day after Thanksgiving with stores expanding shopping hours and offering more door buster items than last year.

With all the noise, shoppers still may be resigned to keep to their holiday budgets, which surveys show are not much different from a year ago. Those same surveys, however, show that shoppers plan to spend less per gift. According to a survey conducted by Deloitte & Touche USA LLP, consumers plan to spend $569 on 23 gifts compared to last year's $584 on 22 gifts. According to a survey conducted by the International Council of Shopping Centers, 60 percent of customers planning to spend less overall plan to buy less expensive gifts.

Then again, what they plan and what they actually do is another story.

"I don't have a whole lot of money to spend — with gas and everything, you can't — but I probably will overspend," said Kerry Weston of Hollywood, Fla., who was shopping in Burlington, Vermont.

Nevertheless, analysts will be watching how the holiday season shakes out. In particular, whether drug stores like CVS and Walgreens will be able to steal market share from department stores and other higher-end shops.

CVS is selling gifts such as a Sky Scrambler Wireless Indoor Helicopter for $19.99 and iCraig's iPod Alarm Clock Radio for $29.99.

"Rising gas and oil prices mean that consumers are looking to make fewer trips and cut costs anyway they can," said Eileen Howard Dunn, senior vice president, CVS/pharmacy. She added, "we seem to be in a very good place."

Stocks fall amid economic jitters

By TIM PARADIS, AP Business Writer
EW YORK - Wall Street resumed its slide Wednesday as unease about the wilting mortgage market and the broader economy triggered selling ahead of the unofficial start of the holiday shopping season. The Standard & Poor's 500 index and the Dow Jones industrial average each fell by more than 1.5 percent, with the Dow giving up more than 210 points
The decline in the S&P 500 left the index in negative territory for the year. Many investments such as mutual funds either track or are measured against the S&P.

The worries over the economy sent investors rushing to the safety of government securities. The yield on the Treasury's 10-year note fell below 4 percent for the first time since 2005. The shift into bonds came as the Dow briefly sank below the lows seen in the market's August pullback.

The stock market has been thrashing about recently as investors attempt to gauge how companies will fare amid a further slowdown in the U.S. housing market, a deterioration of credit and record oil prices that crested above $99 a barrel ahead of Wednesday's session. Including Wednesday's slide stocks have fallen in eight of the 11 last sessions — forgoing the boost seen in recent years during Thanksgiving week, which is capped by the retail bonanza Black Friday.

Economic readings did little to instill confidence among investors. The Mortgage Bankers Association said mortgage application volume fell 3.6 percent last week. Meanwhile, the slump in housing suggested banks will continue to face souring mortgage debt.

Government-sponsored lender Freddie Mac, which reported a $2 billion quarterly loss Tuesday and saw shares plummet nearly 29 percent, declined again Wednesday after an analyst downgrade. Countrywide Financial Corp., the nation's largest mortgage lender, also lost further ground.

In other economic news, the Conference Board suggested an economic slowdown could accelerate in the coming months amid rising costs and further weakness in the housing market. Also, the Reuters/University of Michigan consumer sentiment survey showed its lowest reading in two years — an unwelcome development for retailers entering what is for many the most important period of the year.

The Commerce Department said jobless claims fell by 11,000 last week, a positive sign for U.S. employment, but the report didn't appear to alleviate anxiety about the potential for weaker consumer spending.

"People are buying and selling off the headlines. The market is so emotional," said Neil Hennessy, president and portfolio manager of Hennessy Funds. "You look at oil approaching $100. People are taking their money and going to the sidelines."

The Dow fell 211.10, or 1.62 percent, to 12,799.04. Several financial companies that are part of the 30-stock index hit fresh 52-week lows Wednesday and the blue chip index is now down 9.85 percent from its mid-October trading high. A 10 percent decline would meet the technical definition of a correction.

Broader stock indicators also fell. The S&P 500 index dropped 22.93, or 1.59 percent, to 1,416.77.

Meanwhile, the Nasdaq composite index tumbled 34.66, or 1.33 percent, to 2,562.15.

Investors turned to government bonds amid the uncertainty. The yield on the 10-year Treasury note, which moves inversely to its price, fell to 4.01 percent from 4.09 percent late Tuesday.

The dollar was mixed against most other major currencies, while gold advanced.

And with oil prices briefly reaching a high of $99.29 a barrel in overnight electronic trading, the question among investors is no longer if oil will reach $100 a barrel, but when — and how long it will stay there. Crude futures fell 74 cents to settle at $97.29 per barrel on the New York Mercantile Exchange after an Energy Department report showed supplies at a closely watched oil terminal in the Midwest rose for the first time in weeks.

"The high price of oil has hurt retail, entertainment, restaurants and clothing," said Don Hodges, chairman of Hodges Capital Management in Dallas. He attributes the market's recent retrenchment to concerns about energy, the consumer, housing and banking among other factors and notes that previous sharp drops in the market have occurred when investors have faced a similar confluence of worries.

An examination of the economic news offered little to boost investor sentiment. The Conference Board said its index of leading indicators fell by 0.5 percent in October to a two-year low, after ticking up by 0.1 percent in September and falling by 0.9 percent in August. And the Reuters/University of Michigan survey's final reading for November found consumer sentiment fell to 76.1 from 80.9 in October.

Wednesday's pullback ahead of the Thanksgiving holiday came after stocks finished with a gain Tuesday following a somewhat baffling pair of reports from the Federal Reserve. The Fed's minutes from its last meeting called its last rate reduction a "close call," but the central bank's economic forecast seemed to imply it is willing to keep lowering rates.

Wall Street is fairly confident the Fed will lower rates at its Dec. 11 meeting to keep the tight credit markets liquid, but it is uncertain about the health of the economy — particularly given big losses at Freddie Mac and its counterpart Fannie Mae, and possible liquidity problems at Countrywide.

Citigroup Inc., which has already announced write-downs of bad debt tied to mortgages, fell 67 cents, or 2.1 percent, to $30.73. The stock hit a fresh 52-week low of $30.50; its earlier low was $30.80. Meanwhile, JPMorgan Chase & Co. fell 95 cents, or 2.3 percent, to $40.68. It hit a low of $40.15, falling below an earlier 52-week low of $40.28.

Amid worries that both the private and government lending industries are struggling with the mortgage market implosion, Freddie shares fell 74 cents, or 2.8 percent, to $26. However, Fannie Mae, which had been down in the session, finished up 98 cents, or 3.5 percent, at $29.23; and Countrywide fell 86 cents, or 8.4 percent, to $9.42.

General Motors Corp. rose 10 cents to $26.39 and was the only Dow component to advance after GMAC's Residential Capital LLC said it had hired advisers to explore the possible sale of certain parts of its operations among other options. GM last year sold 51 percent of its GMAC financial services operation to Cerberus Capital Management LP.

Declining issues outnumbered advancers by 3 to 1 on the New York Stock Exchange, where consolidated volume came to 4.02 billion shares compared with 4.74 billion traded Tuesday.

The Russell 2000 index of smaller companies fell 9.03, or 1.21 percent, to 740.30.

Overseas, Japan's Nikkei stock average closed down 2.46 percent and Hong Kong's Hang Seng index fell 4.15 percent. Britain's FTSE 100 fell 2.50 percent, Germany's DAX index declined 1.47 percent, and France's CAC-40 lost 2.28 percent.