RTTNews - One day after ending the brutal two-day losing streak that had cost it more than 270 points or 7 percent, the China stock market plummeted again on Wednesday - and its negative sentiment dragged most of the rest of Asia down with it. The Shanghai Composite Index crashed through support at the 2,800-point plateau and has given up more than 20 percent in the last two weeks to a 10-week low - although the market may find a bit of traction on Thursday.
The global forecast for the Asian markets is cautiously optimistic, with bourses likely to rebound modestly after sharp declines throughout much of the region in the previous session. The markets are likely to see strength in the oil and commodity stocks, as well as the pharmaceutical shares - while those gains may be offset by selling in the airline and property sectors. The European markets finished close to the unchanged line on either side, while the U.S. markets ended modestly higher - and the Asian bourses are forecast also to open slightly to the upside.
The SCI finished sharply lower again on Wednesday, continuing to be dogged by fears that the government will tighten liquidity. Property stocks, financials and commodities led the market to the downside.
For the day, the index plunged 125.30 points or 4.30 percent to close at 2,785.58 after trading between 2,761.40 and 2,929.06. The Shenzhen Index plummeted 563.38 points or 4.79 percent to finish at 11,209.92 for a combined turnover of 191.07 billion yuan. Losers outnumbered gainers by 799 to 78 in Shanghai and 685 to 64 in Shenzhen.
Among the decliners, Everbright Securities fell by the daily limit, while PetroChina lost 2.33 percent, China Construction Bank shed 3.68 percent and China Vanke was down 5.58 percent.
The lead from Wall Street is modestly positive as stocks were able to recover from early weakness and finished notably higher on Wednesday, largely driven by a report indicating a jump in oil demand. The major averages all closed in positive territory by solid margins, further offsetting Monday's losses.
With no significant news on the economic front, the day's crude oil inventories report received extra attention. Inventories unexpectedly fell in the week ended August 14, according to data released this morning by the Energy Information Administration.
Oil prices surged above $70 a barrel after the report was made public, resulting in significant strength among oil-related stocks, which largely spearheaded today's rally. Crude for September delivery eventually closed up $3.23 at $72.42 a barrel.
The EIA said crude oil inventories decreased by 8.4 million barrels, while analysts expected to see an increase of about 1.1 million barrels for the week. At 343.6 million barrels, however, crude oil inventories remain above the upper boundary of the average range for this time of year.
Earlier, traders reacted to the latest set of corporate quarterly results, with Hewlett-Packard (HPQ) reporting third quarter earnings of $0.91 per share after the closing bell Tuesday, beating the consensus estimate of $0.90 per share. The company expects to report fourth quarter earnings of $1.12 per share compared to the forecast of $1.07 per share.
Deere & Co. (DE) reported third-quarter net income of $0.99 per share, compared with $1.32 per share in the same period last year. The results topped Wall Street estimates of $0.57 per share. Looking forward, Deere said it expects full year net income of $1.1 billion despite expectations for the largest single-year sales decline in at least 50 years.
BJ's Wholesale Club (BJ) reported second quarter net income of $0.64 per share, compared to $0.61 per share in the prior year quarter. Analysts had expected the firm to earn $0.62 per share.
In other news, Ellen Hughes-Cromwick, chief economist of Ford Motor Co. (F), was quoted as saying that economic indicators in the U.S are showing that a recovery is already underway and that auto sales seem to be stabilizing. Hughes-Cromwick also predicted that Ford would see an improvement in sales in 2010.
The major averages saw choppy movement in late-session dealing, finishing near their best levels of the day. The Dow closed up by 61.22 points or 0.7 percent at 9,279.16, the NASDAQ climbed by 13.32 points or 0.7 percent to 1,969.24 and the S&P 500 rose by 6.79 points or 0.7 percent to 996.46.
In corporate news, Bank of Communications on Wednesday reported flat first-half earnings, posting a net profit of 15.56 billion yuan in the first six months of the year. That compared with 15.5 billion yuan a year earlier and beat analyst expectations for a profit of 15.3 billion yuan. Lending volume was up by 30.15 percent to 1.73 trillion yuan, while the company reported a second-quarter profit of 7.6 billion yuan.
Also, China-based vaccine developer Sinovac Biotech reported a 74 percent increase in second-quarter profit, as sales grew 21 percent driven partly by increased sales of inactivated hepatitis A vaccine following a purchase order from China's Ministry of Public Health Ministry. For the latest quarter, net income attributable to the stockholders of Sinovac Biotech soared to $5.81 million or $0.14 per share from $3.34 million or $0.08 per share in the prior-year period. Quarterly sales moved up 21 percent to $20.02 million from $16.52 million in the previous year.
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