The China stock market has finished lower now in back-to back sessions and in four of the last five trading days since touching a fresh eight-month closing high last week. The Shanghai Composite Index crashed through support at 2,500 points, and now investors are anticipating another day of sharp movement on Thursday.
The global forecast for the Asian markets is mixed with a touch of downside, thanks to a series of disappointing quarterly reports. Financials are expected to remain under pressure, although some of the bigger exporters and technology stocks may provide support. The European stock markets finished sharply higher and the U.S. markets ended mostly lower - and the Asian markets are predicted to see equal dichotomy.
The SCI finished sharply lower on Wednesday, thanks to continued profit taking from last week's winning streak. The oil refiners finished with significant losses, while the airlines and metals also ended in the red.
For the day, the index dropped 74.48 points or 2.94 percent to close at 2,461.35 points after trading between 2,449.90 and 2,579.22. The Shenzhen Index shed 4.06 percent to 9.249.08 points for a combined turnover of 271.18 billion yuan. Losses outnumbered gains by 736 to 77 in Shanghai and 616 to 60 in Shenzhen.
Among the decliners, China Petroleum & Chemical (Sinopec) shed 4.4 percent, while Air China dropped 5.6 percent, Jiangxi Copper fell 6.1 percent and Huludao Zinc Industry lost 4.9 percent.
The lead from Wall Street is modest pessimism as stocks experienced considerable volatility over the course of the trading day on Wednesday, with the major averages unable to sustain any significant moves. The choppy trading came as investors continued to digest mixed earnings news.
Early on in the session, traders reacted negatively to quarterly results from Morgan Stanley (MS), which became one of the few major financial companies to report weaker than expected first quarter results. Morgan Stanley reported a much wider than expected first quarter loss of $0.57 per share and revealed that it has slashed its quarterly dividend by 80 percent to $0.05 a share.
Separately, Boeing (BA) reported first quarter net income of $610 million, down 50 percent from last year quarter's $1.21 billion. Revenues for the quarter rose 3 percent to $16.5 billion from last year's $15.99 billion. Looking forward, the aerospace giant reaffirmed its full year revenue guidance but lowered its earnings guidance due to lower earnings at its commercial airplanes business.
Meanwhile, fast food giant McDonald's (MCD) reported first quarter net income of $0.87 per share, compared to $0.81 per share in the same quarter of last year, while analysts expected the company to report earnings of $0.82 per share.
In other news, Treasury Secretary Timothy Geithner spoke to the Economics Club of Washington earlier in the day, hinting that policymakers might be forced to alter their recovery strategies as the global financial crisis drags on. He explained that the revised estimate from the International Monetary Fund for global growth could spark a change in policy. The IMF lowered its 2009 outlook, now predicating a contraction of 1.3 percent for the year compared to its previous estimate of 0.5 percent growth.
The major averages pulled back sharply going into the close, with the Dow and the S&P 500 falling firmly into negative territory. While the NASDAQ managed to hold onto a modest gain, closing up 2.27 points or 0.1 percent at 1,646.12, the Dow closed down 82.99 points or 1.0 percent at 7,886.57 and the S&P 500 closed down 6.53 points or 0.8 percent at 843.55.
In corporate news, China-Biotics said on Wednesday that it reached an agreement with Dabeinong Group to supply probiotics as bulk additives for poultry feed products. Under the initial purchase order, which has already begun shipping, China-Biotics would provide probiotics such as lactobacillus acidophilus and streptococcus faecalis.
The bulk additives would be used in several of Dabeinong's products and would help enhance the avian immune system and increase poultry survival and egg production rates in commercially raised poultry, the company said.
Also, China Fire & Security Group said it has signed a contract worth approximately US$9.4 million with Jinan Iron & Steel for fire protection turn-key solutions. Under the contract, China Fire will serve as a total fire protection solution provider and be responsible for implementing the entire automated fire protection system, including engineering, procurement, construction, monitoring, technical guidance and maintenance.
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