US stocks slumped on Friday with the Dow closing at a three month low following rising oil prices and renewed worries about the credit market crisis.
The Dow Jones dropped 220.4 points to close at 11,842.7, the S&P 500 slid 24.9 points to end at 1,317.95. The Nasdaq tumbled 55.97 points to finish at 2,406.09.
Merrill Lynch set the tone for the day after its analysts forecast dividend cuts and the need to raise more capital at a number of banks including Wachovia and Bank of America. As a result, Wachovia fell 1.9% while Bank of America lost 3.7%.
Merrill Lynch itself also suffered along with a number of other investment banks after rumours surfaced that they may give a profit warning and be subject to further mortgage related write downs. Shares finished 4.6% lower.
In the tech sector the world's No. 1 suplier of flash memory-based data storage cards, Sandisk Corp, plummeted 9.7% following a downgrade from Citigroup. Analysts at the investment bank cited slower demand for the product.
General Motors ended nearly 7% lower after Standard & Poors announced that it may cut its debt rating on the company. Ford Motor also went lower, losing 8.1%, after saying that it will delay the launch of its redesigned pickup truck as well as warning that its 2008 loss will be bigger than its 2007 loss.
US light crude oil for July delivery gained $2.69 to settle at $134.62 a barrel. Prices were pushed higher following reports that Israel may be conducting test runs for an attack on Iran.
COMEX gold for August delivery slipped $0.50 to settle at $903.70 an ounce.
Treasury prices jumped, lowering the yield on the 10 year note to 4.17% from 4.21% late Thursday.
The Nikkei fell 84.6 points to close at 13,857.47 this morning, its third down day in a row, following a government report that showed sentiment among manufacturers was at its lowest level since the data was first compiled four years ago. Elsewhere, Mitsubishi Estate Co, Japan's second-biggest developer, dropped the most in six weeks on a newspaper report it may cut condominium prices.
The Hang Seng is currently 88.5 points lower at 22,657.1. Aluminium Corp of China Ltd leads the drop after saying that first half profit will fall by more than 50%. China Petroleum & Chemical Corp, the country's biggest oil refiner, dropped to a one week low on speculation crude costs will reduce earnings.
The London market ended a dire week with some hefty losses on Friday as more gloom for the banking sector and rising oil prices cast a cloud over the final session. Analysts hit HBOS with an earnings downgrade following the group's trading update yesterday, knocking it and rival shares into the red. Oil also reasserted itself above the $135-a-barrel mark, prompting a flight from the travel sector and leaving the FTSE 100 Index down 87.6 points to 5620.8 at the close.
HBOS was a top-four faller in the Footsie with a near 5% drop, or 14.5p to 282.25p, after broker Panmure Gordon cut its forecasts in the wake of Thursday's trading update. The firm was concerned about the outlook for bad debts and the prospect for further credit write-downs. Friday's fall left the bank's shares in touching distance of its 275p-a-share rights issue price. Rivals Royal Bank of Scotland and Barclays joined the slide, falling 5.5p to 219.25p and 7.5p to 308.25p respectively.
Fuel-thirsty stocks such as British Airways and Carnival saw some early session gains wiped out as oil prices climbed more than $3 during the day. This was despite a decision yesterday by China to raise energy prices, a move which some analysts expected to dampen down demand. BA fell 7.25p to 218.75p and rail and bus giant FirstGroup eased 11.5p to 510.5p. On the flip side, prospector Tullow Oil cheered 54.5p to 953p, with British Energy adding 15.5p to 706.5p.
Retailers were also on the back foot after high-street giant John Lewis warned that footfall in its regional shopping centre branches had suffered after consumers cut down on shopping trips amid fears of petrol shortages. Tesco slipped 10p to 374.5p, with B&Q owner Kingfisher falling 1.6p to 114.9p. Building materials giant Wolseley was the Footsie's biggest faller, shedding 24.75p at 445.5p.