Monday, April 27, 2009

Stocks Drop on Swine Flu, Economy Concern; Yen Gain, Treasuries

April 27 - Stocks declined around the world, Treasuries gained and the yen strengthened as the swine flu outbreak spread and Lawrence Summers said the U.S. economy will keep shrinking.

Air France - KLM Group, Europe's largest airline, Autogrill SpA, the world's biggest manager of airport restaurants, and Spain's Banco Bilbao Vizcaya Argentaria SA dropped at least 3 percent after swine flu spread beyond Mexico and the U.S. government declared a public health emergency. Drugmakers Roche Holding AG and GlaxoSmithKline Plc advanced more than 2 percent as authorities seek a broader range of medicines to protect against a pandemic.

The MSCI World Index dropped for the first time in five days, slipping 0.5 percent at 10:07 a.m. in London. The gauge of 23 developed countries has rebound 27 percent since March 9 as companies from American Express Co. and Ford Motor Co. to Italy's Eni SpA posted earnings that beat analysts' estimates.

The outbreak of swine flu "is clearly something that is undermining the market in the short term but I am not sure it's going to de-rail the fact that the markets have their sights on a recovery ahead," said Mike Lenhoff, who helps oversee about $36 billion as chief strategist at Brewin Dolphin Securities Ltd. in London. "It could be just an excuse for some consolidation today."

Europe's Dow Jones Stoxx 600 Index fell 1.2 percent, led by travel and leisure companies, while the MSCI Asia Pacific Index slid 0.3 percent, reversing an earlier advance of 1.4 percent.

'Sharp Declines'

Futures on the Standard & Poor's 500 Index dropped 1.7 percent. The U.S. economy will experience "sharp declines in employment for quite some time this year," Summers, director of the White House National Economic Council, said yesterday on "Fox News Sunday."

The yen rose against the dollar and Treasuries advanced as investors sought havens from a prolonged recession. The yen strengthened to 96.74 per dollar in London from 97.17 last week in New York. Yields on 10-year Treasury notes fell six basis points to 2.93 percent, according to BG Cantor Market Data.

The Mexican peso declined 2 percent to 13.61 per dollar after more than 80 people died of swine flu in the nation. BBVA, which owns Mexico’s biggest bank, slid 3.2 percent to 7.81 euros. Sol Melia SA, which operates resorts in Mexico, slumped 9.7 percent to 3.80 euros.

Air France fell 8.2 percent to 8.24 euros. Four people in the country suspected of having swine flu have tested negative for the virus, an official at the French Health Ministry said today. Iberia Lineas Aereas de Espana SA, Spain's biggest airline, lost 6.6 percent to 1.42 euros in Madrid trading while Autogrill declined 4.7 percent to 5.76 euros in Milan.

Medicine Stockpiles

A growing number of swine flu cases led the U.S. government to release stockpiles of medicine. Japan, Malaysia and Singapore said they are screening passengers at checkpoints for fever, while Hong Kong raised its swine-flu response level.

Roche, which said it has an ample supply of the Tamiflu treatment that can reduce the symptoms of swine flu, added 3.8 percent to 144.9 Swiss francs. Glaxo, which said it is producing its Relenza flu treatment at “full capacity,” added 2.4 percent to 1,030.5 pence.

ArcelorMittal declined 4.1 percent to 19.78 euros after the Financial Times said the world's biggest steelmaker may have to reduce its steel capacity on a long-term basis by as much as 10 percent. The newspaper citied Peter Fish, managing director of steel analysts Meps.

Merck, Aviva

Merck KGaA added 2.2 percent to 67.84 euros even after the company posted a 76 percent drop in first-quarter profit to 56.7 million euros ($74.7 million) as the global recession damped demand for liquid crystals used in flat-panel televisions and monitors.

Aviva Plc climbed 4.6 percent to 285.75 pence. The U.K.'s biggest insurer said its capital surplus increased to 2.5 billion pounds ($3.6 billion) at the end of the first quarter from 2 billion pounds three months earlier.

The insurer's first-quarter revenue from its life and pensions business rose to 9.6 billion pounds from 8.6 billion pounds a year earlier, while sales in North America increased 84 percent.

Siemens AG fell 2.8 percent to 47.91 euros after the Financial Times reported Europe's largest engineering company is planning to lower a profit forecast this week as a deeper-than-expected recession hurts its earnings plans. The newspaper did not say where it got the information.


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