Global stocks in shock
Fears of U.S. recession send media shares into skidFinancial markets around the world were in freefall Monday, signaling a looming global recession led by an economic decline in the U.S. and the return of a bear market in major territories.
Concern about a possible U.S. recession snowballed into fear of a full-fledged global downturn Monday as stock markets across Europe and Asia tumbled — some as low as seen after the Sept. 11, 2001 attacks. Media and entertainment stocks lost ground along with stocks in other sectors.
The losses wiped out more than $350 billion in market value in Germany, the U.K. and France alone, according to Bloomberg data.
U.S. stock markets were off Monday in observance of Martin Luther King Jr. Day, but stock futures posted their steepest drop since 2001, signaling that Wall Street might be in for another slaughter today following one of its worst starts ever to a new trading year.
U.S. media stocks have had a bad start to the year as well, with The Hollywood Reporter Showbiz 50 index down 13.5% year-to-date. Walt Disney shares are down 11.7% so far in 2008, News Corp. Class B shares have lost 8.9% compared with their 2007 close and Time Warner's stock is off 5.9%.
If U.S. markets open today at the levels that futures were indicating, major stock indexes would be close to officially hitting bear market territory, according to Reuters. A bear market is defined as a 20% decline from peak levels reached over the past 12 months. U.S. markets reached these peaks in October. The indicated declines could in the coming days sound the death knell for the most recent U.S. bull market that started its run in October 2002.
In Europe on Monday, the Dow Jones Stoxx 600 Index fell 4.1% to enter bear market territory.
In London, jitters about the U.S. economy and the woes of financial services giants sent the FTSE top 100 shares down 323 points to 5,578, a plunge of 5.5%, the index's lowest level since Sept. 11 territory.
Big media stocks were off, but not quite as much as the overall U.K. market. Shares in satcaster BSkyB lost 3.3% to close at £5.06 ($9.83), while shares in commercial broadcaster ITV were down 3.7% at £0.70 ($1.36).
On London's small- to mid-cap AIM exchange, Pinewood Shepperton, the studio facilities group that encompasses Pinewood, Shepperton and Teddington Studios, saw shares fall 2.5%. Among the biggest media outperformers were Intandem Films, whose stock was unchanged, while kids group Entertainment Rights saw shares rise 5%.
Germany's DAX index slid 7.2%. In line with that decline, shares of pay TV giant Premiere ended down 7.3% at €13.30.
Among other key European media and entertainment stocks, Italy's Mediaset traded down 5.8% in Milan.
Merrill Lynch said last week that its latest monthly survey of fund managers showed 19% now believing that a global recession is either "likely" or "very likely" during the next 12 months. The percentage of respondents saying such a recession has already started doubled over the previous month to 8%.
In Asia on Monday, Tokyo's Nikkei 225 index lost 3.9%. Shares of Sony Corp. fell 2.1%, ending closer to a 52-week low they had set in August. Last year's high-flyer Nintendo was hurt more, falling 4% to ¥53,100 ($499.86).
The global market panic also spread to Canada, where the Toronto Stock Exchange suffered one of its biggest one-day losses.
Among the most active media stocks to take a pounding was cable and wireless phone giant Rogers Communications, which fell 2.7% to CAN$37.76 ($36.75), while fellow cable giant Shaw Communications was off 5.6% to CAN$18.59 ($18). Both are seen by analysts to be vulnerable to a consumer downturn.
Canadian broadcasters also were hammered Monday given their dependency on ad revenue, which is generally dragged down in a sluggish economy. Shares in CanWest Global fell 4% to CAN$5.75 ($5.50), while Quebecor, the Quebec cable and broadcast giant, saw its stock slip 5% to CAN$30.60 ($29.60). Canadian exhibitors caught in the market downdraft included giant screen pioneer Imax, whose shares fell 13.3%.
The bloodletting of stock exchanges around the world seemed to give investors the answer to a question that business and political leaders at the annual World Economic Forum in Davos will discuss on Wednesday in a panel entitled: "If America sneezes, does the world still catch a cold?"
In Europe, market observers reported increased worries about the health of the continent's economies. Experts have said the U.S. recession and the strong euro likely will hurt exports from Europe and corporate earnings, adding to such woes as the long-running credit crunch and concerns about higher risk of corporate defaults.
In the U.S., Goldman Sachs and other key Wall Street players have predicted a recession to occur this year, though some have suggested it might be a fairly slight and short one, a notion that may be too optimistic, several experts said in a Wall Street Journal report Monday.
For the economy to be formally designated as in recession, it must bring in six consecutive months of declines in economic activity, according to the National Bureau of Economic Research.
In the U.S., Wall Street observers are now hoping for the Federal Reserve to cut interest rates in its Jan. 29-30 meeting. A $150 billion economic stimulus package proposed last week by the White House alone seemed unable to allay investor fears given Monday's market mayhem.
Mimi Turner in London and Etan Vlessing in Toronto contributed to this report.