GE profits hurt Japanese stocks




Electronic producer General Electric and a downgrade of computer component and printing manufacturer Canon led to lower stock prices in Japan this week.

General Electric earnings report brought on a 13% drop in share price, the biggest drop since the stock market crash of 1987.

The company faced huge write downs on its credit holdings, namely from its GE money bank and slower demand for products, such as washing machines and refrigerators, which make up a large part of its business. Higher costs for metals and other products needed for manufacturing large appliances also cut into its profits..

Canon also faced a sharp downturn after it said it may report a 16% drop in earnings amidst a lower demand for electronics.

GE as economic indicator

General Electric is praised for being a diverse investment, indicative of the overall economic outlook for the United States. It holds investments in nearly every industry, from a huge credit portfolio with GE Money bank, as well as the manufacturing of goods from appliances to light bulbs and media holdings. When GE issues its forecasts, the market listens as it encompasses many of the large staples of the American economy.

Japan operates a nearly $100 Billion trade surplus with the United States. Decreased profits stateside easily contradicts growth in Japan. With Canon posting slower sales, the slowdown in the American economy is far more than domestic. Also, General Electrics recent statement shows that consumers are spending less and failing to make payments, scaring manufacturers into thinking that a US slowdown will affect all investments overseas.

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About the author: Grace Chen