US stocks skid as China sell-off rocks markets

NEW YORK: US stocks slumped Monday as a sharp Chinese equity sell-off weighed on sentiment amid worries over the global economic prospects of recovery from a steep recession.

The Dow Jones Industrial Average dropped 80.00 points (0.86 percent) to 9,462.20 at 1505 GMT.

The tech-rich Nasdaq composite skidded 22.94 points (1.13 percent) to 2,005.83 and the broad-market Standard Poor's 500 index lost 11.04 points (1.07 percent) to 1,017.89.

"Widespread losses in foreign markets, which were led by a 6.7 percent decline in the Shanghai Composite, have prompted valuation concerns that are interfering with the bullish sentiment," Patrick O'Hare of Briefing.com said.

"We suspect the understanding that September has been the weakest month historically for the stock market hasn't been lost on participants either," he added.

Wall Street stocks followed major European and Asian markets lower after the Shanghai Composite index saw its biggest one-day drop since June 2008, amid concerns over slowing lending growth and a new share supply glut, dealers said.

The Shanghai sell-off stoked worries over Chinese demand growth, driving crude oil prices lower.

"We are keeping a close eye on the global equity markets, expecting to see the pullback that has been in place in China for the last four weeks to possibly intensify and spill over into other global markets, including New York, as traders finally begin harvesting some trading profits generated over the last six months," said Fred Dickson of DA Davidson Co.

A historic victory by the Democratic Party of Japan on Sunday that ended more than half a century of almost unbroken conservative rule raised uncertainty about the direction of the world's second-largest economy.

In the US, the Institute of Supply Management-Chicago purchasing managers index rose to 50.0, the break-even point between growth and contraction, from 43.4 in July, adding to reports showing a pick-up in the battered manufacturing sector.

Wall Street had two big mergers to digest on the final day of August that kicks off a week heading into a long holiday weekend, with the US markets closed Monday for the Labor Day holiday.

The Walt Disney Co. announced it had agreed to buy Marvel Entertainment Inc., whose stable of characters includes "Spider-Man," "Iron Man" and the "X-Men," in a stock and cash deal valued at four billion dollars.

Disney fell 1.86 percent to 26.34 dollars and Marvel Entertainment soared 26.26 percent to 48.80 dollars.

DreamWorks Animation SKG gained 4.42 percent to 33.09 dollars.

Oilfield services giant Baker Hughes plummeted 6.90 percent to 35.46 dollars after announcing it had agreed to buy rival BJ Services in a cash-and-stock deal worth 5.5 billion dollars. BJ Services leapt 7.58 percent to 16.60 dollars.

Among stocks in focus, Caterpillar, sometimes seen as a bellwether of economic activity, dropped 1.91 percent to 45.82 dollars.

Aerospace giant Boeing skidded 2.55 percent to 49.74 dollars and aluminum maker Alcoa slid 2.48 percent to 12.19 dollars.

The Wall Street action came after the market closed Friday up some 50 percent from lows hit in March, but with investors beginning to turn cautious. The blue-chip Dow fell 0.38 percent, snapping an eight-day winning streak.

Bonds rose. The yield on the 10-year US Treasury bond fell 3.436 percent from 3.451 percent Friday and that on the 30-year bond advanced to 4.220 percent from 4.208 percent. Bond yields and prices move in opposite directions.

Britain's Brown eyes action on bonuses

LONDON: British Prime Minister Gordon Brown on Tuesday pledged action to crack down on excessive bonuses for bankers as part of international efforts, a key issue at this month's G20 meeting.
But Brown was unenthusiastic about France's proposal for a mandatory cap on bonuses in the wake of the financial crisis, saying it would be difficult to enforce, according to an interview with the Financial Times newspaper.
"I think that is very difficult in an international environment. But there may be ways... that we could do better," Brown said.
French President Nicolas Sarkozy has said he would call for limits on bonuses for bank executives when he takes his campaign for greater regulation to the G20 summit in Pittsburgh on September 24-25.
France and Germany want the European Union to agree on a common position on financial regulation ahead of the G20 summit.
Brown said pay and bonuses should be based on long-term success, not short-term speculative gain, and banks should "claw back" rewards for bankers if their performance suffered in subsequent years.
He also said regulators should be able to impose higher capital requirements on financial institutions, according to the FT.
"I think you?ve got to be absolutely clear that remuneration has got to be based on long-term success, not short-term speculative deals, that there?s got to be a clawback system in remuneration itself so that if things are not working in year two then there is a clawback that is possible as an example."
"And I think we?ve also got to look at whether the capital requirements of individual institutions would have to be increased in situations where the regulator thought that risk was higher," Brown said.
"Now, these are principles that I think we can more or less agree and they came out of (the G20 meet in) London in April.
"But they have not yet been implemented in the running of the institutions and they?ve got to be implemented as quickly as possible."
Brown, praised for his leadership at the G20 in London, stressed international cooperation on such issues was crucial.
Excessive risk-taking, resulting in massive bonuses for bankers, has been blamed for helping spark the global financial crisis that led to multi-billion dollar government bailouts of world banks.
Brown said he hoped leaders in Pittsburgh would agree a "global compact for growth" including coordinated steps to withdraw stimulus packages and government support for banks.
He also wanted to see a deal on "trigger points" where countries would be expected to act to address imbalances such as excessive current account deficits and surpluses.

France denies amnesty for Swiss bank tax evaders

PARIS: France denied on Monday it was planning an amnesty for up to 3,000 citizens on a list of suspected tax evaders in Switzerland, but said offenders would be given a one-off chance to come clean with the taxman.
Budget Minister Eric Woerth revealed in an interview at the weekend that Paris had obtained the names of 3,000 French taxpayers with assets in three Swiss banks worth a total of about three billion euros (4.3 billion dollars).
He told the Journal du Dimanche newspaper that at least some of the 3,000 were "very probably" tax evaders, who would be given until December 31 to pay any overdue tax -- after which they would face a full tax audit.
"We are not bluffing, we have a list of 3,000 names," Woerth told France's Radio Classique on Monday, although he said the government would not publicly name the banks nor the individuals concerned.
Left-wing opposition leaders immediately accused President Nicolas Sarkozy's right-wing government of planning a mass amnesty for tax evaders, but Woerth denied that offenders would be let off the hook.
"Of course there is no amnesty. When I call on people to square their situation with the authorities, that means they will pay tax. An amnesty is to pay no taxes, or very low taxes, which is not the case," he said.
The announcement comes two days after France signed an accord with Switzerland on data exchange to clamp down on tax cheats, in line with rules laid down by the Organisation for Economic Cooperation and Development.
Woerth told the Journal du Dimanche that most of the names had been obtained from the Swiss tax authorities, and others directly from the banking establishments concerned.
Faced with international pressure, Switzerland announced this year it would make excpetions to its banking secrecy rules in order to offer other countries more help on matters involving cross-border tax offences.
Banking secrecy laws traditionally prohibit Swiss banks from revealing information about their clients, except as part of a criminal investigation.
In Switzerland, only tax fraud is regarded as a crime, not tax evasion which is treated only as a more minor offence, a judicial distinction which does not exist in most other major economies.
But under its new deal with France, Switzerland agreed to offer assistance on all tax offences, as long as there is evidence of tax violations.
Similar deals have been negotiated with a string countries including Japan, the United States and Britain. Most still have to be ratified, while three -- with Denmark, Luxembourg and France -- have been signed.