Monday, October 6, 2008

GLOBAL MARKETS UNDER SERIOUS PRESSURE; MORE QUESTIONS SURROUND MUSIC

The now-global financial crisis dragged exchanges across Asia, Europe, and the United States on Monday, despite the recent passage of a massive bailout package. During a roller-coaster day, the Dow Jones Industrial Average tanked more than 800 points, a one-day record that dragged the needle below 10,000. That prompted a late-day buying rally, leaving the exchange at a more mild, 350-point drop for the day.

US legislators finally approved a rescue initiative that exceeds $700 billion, though expectations of a successful resolution appeared baked into pre-Monday valuations. Instead of gains, the market collectively appeared doubtful that the bailout would reinvigorate markets, and indeed, some time will be required to unfreeze a tightening credit climate.

Music-related stocks were battered by the broader malaise, though the late-stage rally mitigated the declines. Warner Music Group (WMG) slipped to $6.09 before recovering to $6.61, down 4.21 percent. Apple (AAPL) had its ups and downs, dropping to a 52-week low of $87.54 before landing at $98.14, up 1.1 percent.

European and Asian indices offered a dreary prelude to the profound intraday drop. Banking bailouts, aggressive deposit guarantees and aggressive interventions are now part of the European reality, and markets expressed little confidence in the future. Asian markets also stumbled, and Russia actually closed its markets prematurely.

The backdrop is rippling into the music industry, though the exact fallout remains difficult to predict. Issues related to consumer confidence undoubtedly impact the CD, already a tanking commodity. Music-focused entrepreneurs may also be forced to scrape together funding from sources outside of Sand Hill, including benevolent angels and even credit cards. The new reality could thin the field a bit and slow the entrance of startups, though troubled markets are frequently weathered by profitable, financially-disciplined companies.

SOURCE