The Herald Bulletin

Morning Update

Breaking News

January 27, 2014

Stocks fall worldwide on emerging-market fears

NEW YORK — Shaky economies and plunging currencies in the developing world fueled a global sell-off in stocks Monday as fearful investors pushed prices lower across Asia and Europe, but many of the drops were not as steep as last week.

In the U.S. and other rich countries with healthier economies, investors also retreated, although the selling was more modest.

Major indexes in both Hong Kong and Tokyo fell more than 2 percent. The selling then spread to Europe and the U.S., as stocks slipped across the board, but the declines were much less than on Friday, when the U.S. market ended its worst week since 2012.

Jack Ablin, chief investment officer at BMO Private Bank, said he was encouraged that the U.S. losses were limited.

"We have an accelerating economy, low inflation and accommodative monetary policy," he said. "The world isn't falling apart."

The Dow Jones industrial average slipped 41.23 points, or 0.26 percent, to 15,837.88. The Standard & Poor's 500 index fell 8.73 points, or 0.5 percent, to 1,781.56. The tech-heavy Nasdaq was down the most in the U.S., falling 44.56 points, or 1.1 percent, to 4,083.61.

The market turbulence was set off last week by a report from China on a downturn in its manufacturing, more evidence that the world's second-largest economy is slowing. That's a big problem for Brazil, South Africa and other developing countries that have come to depend on exports to that country.

Adding to the troubles: The decision by the U.S. Federal Reserve last month to scale back its bond-buying stimulus for the American economy, which has helped keep interest rates low. Money that had flooded emerging markets looking for higher returns outside the U.S. has begun to come back now that rates may rise, battering those markets.

Despite Monday's widespread selling, experts say the troubles in China and elsewhere in the developing world are unlikely to derail a global economic recovery that appears to be gaining momentum. Growth in the world's wealthy economies is expected to pick up the slack.

"This year, growth will be driven by the dull and old economies — the U.S., the U.K., Germany and even Japan," said Nariman Behravesh, chief economist at IHS Global Insight.

The International Monetary Fund expects the global economy to grow 3.7 percent this year, up from 3 percent in 2013, carried along by faster growth in the United States and the 17 countries that use the euro. The IMF expects China's growth to decelerate from 7.7 percent last year to 7.5 percent in 2014.

"A lot of growth is shifting back to the developed world," said Jennifer Lee, senior economist at BMO Capital Markets.

Compared with a couple of years ago, the U.S. economy is in a better position to withstand a Chinese slowdown. American consumers have paid down debts and can spend more freely. The housing market is recovering from the depths of the Great Recession.

Helping investor spirits in the U.S. are decent corporate earnings. Caterpillar was the biggest gainer in the Dow on Monday, rising $5.12, or 6 percent, to $91.29, after the earth-moving equipment maker reported fourth-quarter net income that easily beat analysts' estimates.

After gains of nearly 30 percent in the S&P 500 last year, though, investors in U.S. stocks have been nervous, selling on any whiff of bad news.

"When they see a little negative news, they wonder, 'Is this going to continue or should I run for the doors?'" said Sean Lynch, global investment strategist at Wells Fargo Private Bank.

Losses in the U.S. eased Monday after a recovery in the battered currency of Turkey, one of the flash points of emerging market troubles. The Turkish lira initially sank to a low of 2.39 per dollar, then recovered to 2.29 per dollar after the country's central bank said it would hold an emergency policy meeting, raising hopes it will shore up the currency.

Other emerging market currencies continued to weaken against the dollar, including the South African rand and the Russian ruble, each down another 0.3 percent against the dollar.

On Monday, Germany's DAX fell 0.5 percent and France's CAC-40 declined 0.4 percent. Spain's benchmark index fell 1 percent.

In addition to a slowing China and a pullback by the U.S. Fed, there are country-specific reasons for dropping stocks.

In Argentina, where inflation is running as high as 30 percent, the peso has collapsed and the government is running short of U.S. dollar reserves it could use to buy its currency and prop it up.

In South Africa, a strike by tens of thousands of platinum miners is raising the specter of violence in the streets. And in Turkey, a corruption scandal has destabilized the government and scared investors into selling the currency, the lira.

The government of Argentina announced Monday that it citizens can buy up $2,000 per month, easing currency restrictions. The Argentine peso has fallen the most against the dollar in 12 years.

On Monday, a gauge of emerging market stocks, the MSCI Emerging Markets ETF, was down 0.7 percent. It has fallen 9 percent so far in 2014 after a nearly 5 percent loss last year.

 

 

1
Text Only
Breaking News
  • Missouri executes inmate for 1993 farm slaying

    Missouri executed an inmate early Wednesday only a few miles from the farm where prosecutors say he orchestrated the 1993 killing of a couple whose cows he wanted to steal.

    April 23, 2014

  • Pro-Russian insurgents hold US journalist captive

    Pro-Russian gunmen in eastern Ukraine admitted on Wednesday that they are holding an American journalist, saying he was suspected of unspecified "bad activities."

    April 23, 2014

  • Beautiful Bulldogs.jpg Lucey is tops in Iowa's 'Beautiful Bulldog' event

    Lucey is a slobbering 18-month-old pooch whose human family dreams of making her a therapy dog.

    April 23, 2014 1 Photo

  • IndyCar puts Castroneves on probation through June

    IndyCar has put Helio Castroneves on probation through June because he violated the series' social media policy.

    April 23, 2014

  • Sherpas leave Everest; some expeditions nix climbs

    Sherpa guides packed up their tents and left Mount Everest's base camp Wednesday in an unprecedented walkout to honor 16 of their colleagues who were killed last week in the deadliest avalanche ever recorded on the mountain, climbers said.

    April 23, 2014

  • FBI investigates suspected serial child molester

    The FBI asked for the public's help Tuesday to identify at least 90 potential victims of a suspected child predator who worked at 10 American and other international schools abroad for more than four decades before committing suicide last month in Minnesota.

    April 22, 2014

  • Australia signals deeper search for Malaysian jet

    Australia may use more powerful sonar equipment that can delve deeper beneath the Indian Ocean in the hunt for the missing Malaysia Airlines jet as the prime minister said Wednesday that failure to find any clue in the most likely crash site would not spell the end of the search.

    April 22, 2014

  • Car fleeing shooting hits Indianapolis school bus

    A car has struck a school bus in Indianapolis, injuring about a half-dozen children.

    April 22, 2014

  • Teen pleads guilty in southern Indiana fatal fire

    An 18-year-old southern Indiana woman faces the possibility of 20 years in prison after pleading guilty Tuesday in connection with a house fire that killed three young siblings, but an aunt of the victims said such a sentence would not be enough time.

    April 22, 2014

  • Tech boom presents new wrinkles for Wrigley Field

    During a recent game at Wrigley Field, John Weber was using a pencil and scorecard to expertly track the game between his hometown Cubs and the Pittsburgh Pirates. The 86-year-old retired transit worker figures he is an increasingly rare kind of baseball fan.

    April 22, 2014

Featured Ads
More Resources from The Herald Bulletin
AP Video
Raw: Deadly Bombing in Egypt Raw: What's Inside a Commercial Jet Wheel Well Raw: Obama Arrives in Japan for State Visit Raw: Anti-Obama Activists Fight Manila Police Motels Near Disney Fighting Homeless Problem Michigan Man Sees Thanks to 'bionic Eye' Obama to Oso: We'll Be Here As Long As It Takes Bon Jovi Helps Open Low-income Housing in Philly Pipeline Opponents Protest on National Mall Hagel Gets Preview of New High-tech Projects S.C. Man Apologizes for Naked Walk in Wal-Mart New Country Music Hall of Fame Inductees Named 'Piles' of Bodies in South Sudan Slaughter SCOTUS Hears Tv-over-Internet Case Chief Mate: Crew Told to Escape After Passengers Iowa College Finds Beauty in Bulldogs
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
Helium debate
Helium
Front page
Poll

Do you plan to attend any of the local Little 500 Festival events in May?

Yes
No
What events?
     View Results