World stock markets register huge drops
A plunging dollar and hammered overseas stocks suggest congloms of all stripes — and even the world economy — could get pummeled by fallout from Tuesday’s terrorist attacks.
“The world changes forever starting today,” said David Davis, senior VP and analyst at investment firm Houlihan, Lokey, Howard & Zukin in Los Angeles. “There will be a major economic impact starting when the stock market reopens. This could be what triggers a real recession.”
Even the one-day impact on the entertainment business was dramatic, with most companies shutting operations through Hollywood and elsewhere. Disney closed its theme parks in California and Florida, as did Vivendi Universal.
Wall Street effectively closed, with no trading conducted on U.S. stock exchanges Tuesday and a decision made to keep the markets closed Wednesday. The terrorist attacks Stateside also ricocheted to indexes worldwide. Stock markets in the U.K. and France logged the biggest declines since the world market crash of October 1987. Germany’s main exchange, the Dax, lost 9% in late-day trading. And Japan’s Nikkei index fell more than 400 points in midday trading, dipping below 10,000 for the first time since 1984.
Many entertainment congloms are listed on exchanges abroad as well as on Wall Street, with Euro-listed shares in NBC parent General Electric sliding $2.81, or 7%, to $36.54 on Tuesday.
International investors feared the terrorist attacks could escalate and get “totally out of control,” said Ian MacFarlane of the Friends Ivory & Sime investment firm in London.
Martin Bayntun of Gartmore Investment Management in London suggested that the attacks make recession in the U.S. “more likely” by undermining consumer confidence.
There was no clear way to predict the impact of the attacks on individual stocks nor certainly the effect on future bottom lines.
Traditionally, news networks see ratings skyrocket in times of crisis and that tends to help corporate parents. But as most broadcast and cable webs are now part of much bigger congloms, the impact on corporate bottom lines could be more complex this time.
The U.S. dollar fell 1.7% against the euro — the biggest drop in five months against that currency — and 2.7% against the Swiss franc, for the biggest falloff in four years. With oil prices soaring at the same time, such slides could portend negative repercussions for entertainment congloms’ bottom lines over the longer haul.
Multinational corporations routinely cite currency fluctuations as affecting profitability.
Universal Studios’ parent is Paris-based Vivendi Universal, 20th Century Fox is owned by Sydney-based News Corp., and Sony Pictures is operated by Tokyo-based Sony.
There was no immediate way to say if a weakened dollar would help or hurt individual congloms, as such impact tends to depend on seasonal variations and other fluctuations.
Bertelsmann, the Germany-based media group, noted a third of its business is conducted in the U.S., where it has 18,000 employees, including 5,000 in New York’s Times Square.
Bertelsmann CEO Thomas Middelhoff issued a statement expressing sympathy for U.S. citizens.
“We are opposed to any acts of violence and terrorism in political and social conflicts, and we strongly condemn the terrorist activities that today so blatantly wreaked on the peaceful co-existence of our fellow humans in the U.S.,” Middelhoff said.
Among casualties in the mayhem were employees of Morgan Stanley Dean Witter, an investment bank with much showbiz involvement that had offices in the cratered World Trade Center. Merrill Lynch and Lehman Bros., two other such blue-chip firms, have large offices across the street from the trade center.
Mergers at risk
Meanwhile, stock declines — especially on U.S. exchanges when they reopen — could affect various pending or proposed business mergers.
Even before Tuesday’s dramatic events, General Motors was warning that the sinking share price of its Hughes Electronics unit was hindering talks with prospective suitors for its DirecTV operator.
Both Universal and Disney expected to reopen their theme parks today.
Elsewhere, there was little consensus on when a normal schedule of concerts and other public events might resume, pending clarification of the broader political and security ramifications of the terrorist attacks.
(Bloomberg News contributed to this report.)