World stock markets down as yen hits new 15-year-high, Samsung forecast disappoints

By Pamela Sampson, AP
Thursday, October 7, 2010

World markets down as yen hits new 15-year-high

BANGKOK — World stock markets slipped Thursday as the yen hit a new 15-year high against the dollar, sparking concern that Asian nations will impose capital controls to stem currency strength.

Europe followed Asia down as Greece’s civil servants walked off the job in a 24-hour strike to demand the repeal of stringent austerity measures designed to pull the country out of a debt crisis.

Sentiment was also clouded by technology bellwether Samsung Electronics forecasting earnings short of expectations amid signs of waning global demand.

Oil, meanwhile, closed in on $84 a barrel as the weak U.S. dollar fueled gains in commodity prices. The euro jumped to an eight-month high against the dollar, and the yen hit a new 15-year high Thursday.

Gold reached another record as investors mulled whether individual countries — Japan, Thailand, Singapore and others — would take new moves to stem the strength in their currencies against the U.S. dollar, analysts said.

Futures pointed to a flat open on Wall Street.

“It’s a very edgy market,” said Tey Tze Ming, a trader at Saxo Capital Markets in Singapore. “Gold is being pushed to new highs because if the dollar starts weakening and the yen starts weakening, then there is really isn’t anything safe except gold.”

Ming said third quarter earnings season — which kicks off Thursday in the U.S. with Dow component Alcoa Inc. — might bring better results than expected, helping to lift markets in the short term.

But concern about measures being discussed in some countries — such as placing limits on capital inflows to help weaken currencies — will stifle trading, he said.

The greenback’s malaise comes amid expectations that the U.S. Federal Reserve will take steps to support the U.S. economy by buying U.S. government debt. That would drive down long-term interest rates and trigger economic activity. But lower rates also mean that assets bought in dollars offer investors lower returns, dragging down the dollar as investors send funds to Asia and other regions with more attractive returns.

In Europe, major benchmarks in France, Germany and Britain fell about 0.1 percent. Dow futures were down 5 points, or less than 0.1 percent, to 10,901.00.

South Korea’s Kospi fell 0.2 percent to 1,900.85 amid the downbeat news from Samsung Electronics.

The company, the world’s biggest seller of computer memory chips, said its third quarter operating profit would fall short of record earnings in the previous quarter amid signs that growth in global demand is waning. Samsung shares tumbled 2.9 percent.

Lee Min-hee, an analyst at Dongbu Securities in Seoul, said that Samsung’s earnings outlook is deteriorating amid falling memory chip prices and slowing momentum in the global information technology industry.

“Quarterly earnings peaked out in the second quarter in terms of operating profit,” said Lee, who predicted a sharp decrease in the final three months of this year.

Japan’s Nikkei 225 stock average closed marginally lower, dropping by 6.62 points, or 0.1 percent, to 9,684.81.

But it mostly held onto gains of more than 3 percent made over the last two days after the Bank of Japan cut interest rates to near zero and announced plans to establish an asset-buying fund to fight deflation and a stubbornly strong yen. The Japanese central bank last month bought dollars in an attempt to stem the export-sapping appreciation of the Japanese currency.

Australia’s S&P/ASX 200 gained slightly, by 0.1 percent to 4,691.3, as did Hong Kong’s Hang Seng index — rising 3.91 points — to 22,884.32. Markets in Singapore, Taiwan, Indonesia and India fell.

In New York on Wednesday, the Dow Jones industrial average rose 0.2 percent to close at 10,967.65. But broader indexes retreated. The Standard & Poor’s 500 fell 0.1 percent to 1,159.97, while the Nasdaq composite index fell 0.8 percent to 2,380.66.

Payroll company ADP said private employers cut jobs in September for the first time in seven months. Another jobs report — the more important Labor Department jobs survey — is expected Friday.

In currencies, the dollar hit a 15-year low against the yen in late Tokyo trading, falling as low as 82.25 yen before recovering slightly to 82.38 yen. The euro jumped to $1.3970 from $1.3917.

Benchmark oil for November delivery was up 51 cents at $83.74 a barrel in electronic trading on the New York Mercantile Exchange. The contract added 41 cents to settle at $83.23 on Wednesday.


AP Business Writer Kelly Olsen in Seoul, South Korea contributed.

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