Global Markets Overview - 05/10/2012
FROM MORRISON SECURITIES PTY. LTD:
U.S. STOCK MARKETS
The Dow Jones Industrial Average tumbled for a sixth straight day Wednesday as investors remained focused on fresh concerns about Greece and Spain. The blue-chip Dow fell 97.03 points, or 0.75%, to 12835.06. It had been down as many as 184 points earlier in the session.
The day's loss extended the Dow's losing streak to six days, the longest such slide since August. Over that streak the Dow has lost 444 points, or 3.3%, and it remains 9.4% off its all-time high.
Investors were whipsawed throughout the day by ongoing political negotiations in Greece, and worries that the troubled Mediterranean nation wouldn't get its latest package of bailout funds.
Late in the U.S. trading day, euro-zone governments said they would release EUR4.2 billion in previously agreed financing for Greece, but held back EUR1 billion that will be paid out by June, depending on Greece's funding needs.
The decision appears to reflect worries by some governments that the political backlash against austerity is threatening to undo the bailout deal Greece negotiated with the euro zone and the International Monetary Fund just months ago.
For investors, the reprieve was welcome, though temporary. The Standard Poor's 500-stock index, meanwhile, gave up 9.14 points, or 0.67%, to 1354.58 and the Nasdaq Composite slipped 11.56 points, or 0.39%, to 2934.71. Both indexes sustained sharp earlier declines before recovering. Leading the U.S. stock declines were industrial and financial stocks.
Among Dow components, United Technologies lost 2.3%, General Electric declined 1.8% and J.P. Morgan Chase retreated 1.8%. Shares of Walt Disney Co. rose 1.6% to lead the Dow gainers, pushing the stock to an all-time high, after the blue-chip entertainment company reported fiscal second-quarter earnings and revenue that exceeded expectations.
Cisco Systems finished up 0.4% ahead of its first-quarter earnings, which came in roughly in line with expectations. Shares were down 2.6% in after-hours trading. Private-equity firm Carlyle Group fell 1.1%, marking its first significant move below its IPO price after one week of trading in a razor-thin band.
EUROPEAN STOCK MARKETS
Spanish stocks plunged to their lowest level in 8 1/2 years and yields on the government's bonds jumped above 6% amid expectations that the country's fourth-largest bank would effectively be nationalized. That came on top of Greek political uncertainties that have plagued European investors all week, expanding Wednesday to a debate among other euro-zone members over whether to delay a payment due Thursday that is part of the country's bailout.
Spain's IBEX 35 index sank 2.8% to 6812.70, its lowest closing price since autumn 2003, while the broad Stoxx Europe 600 index fell 0.3% to 249.73, its lowest close in nearly four months.
Bankia tumbled 5.8% as a senior government official said the lender's management plans to ask the country's government to take a stake, effectively nationalizing it.
A separate government cleanup plan for the banking sector, weighed down by billions of euros in soured real-estate loans, is expected Friday. Among other Spanish banks, CaixaBank slid 6.7%, Bankinter lost 5.3% and BBVA declined 4.7%. Investors were also concerned with the impasse in Greek politics following Sunday's election and the inability so far to form a coalition government.
The latest to try is Alexis Tsipras, the leader of the Coalition of the Radical Left who has vowed to renegotiate Greece's bailout conditions. Credit Suisse raised its probability of a euro breakup to 15% from 5%.
It said there is a considerable risk that a left-leaning coalition is formed at the next Greek election, with a more explicit mandate to reject the European Union and International Monetary Fund program.
Citigroup put the odds at 50% to 75%, noting that nearly 70% of Greece's debt is owned by the official sector. Pressure on banks spread across Europe. In France, BNP Paribas dropped 2.4% and Credit Agricole lost 3.5%. But Commerzbank rose 1.6% in Frankfurt after the lender said it exceeded capital requirements by the European Banking Authority and had filled the capital shortfall determined last year.
Among major national benchmarks, France's CAC-40 index eased 0.2% to 3118.65, while the DAX 30 index rose 0.5% to 6475.31.
The FTSE 100 index shed 0.4% to 5530.05. Sage Group slid 5.5%. The software firm reported a 3% rise in pretax profit for the first half of the year but remained cautious on the outlook for its business in France and the U.K. Carlsberg advanced 3.8% in Copenhagen after the brewer's first-quarter revenue beat expectations.
Kloeckner & Co. plunged 8.2% on a larger-than-expected loss for the first quarter. Also in Frankfurt, specialty chemicals group Lanxess surged 6.4% after reporting a rise in first-quarter sales and profit.
ASIA-PACIFIC STOCK MARKETS
Asian markets slid Wednesday on fresh worries about the fragility of European monetary union following failed coalition talks in Greece, while a decline in commodity prices pushed down metal, mining, and oil stocks across the region.
Japan's Nikkei touched its lowest intraday level in almost three months, and closed down 1.5% at 9045.06. Korea's Kospi slipped 0.9% to 1950.29, Hong Kong's Hang Seng Index was down 0.8% at 20330.64, China's Shanghai SE Composite fell 1.7% to 2408.59, and India's Sensex dropped 0.4% to 16,479.58, its lowest finish since Jan. 18.
Inconclusive coalition talks between political parties in Greece failed to create a new government, raising the likelihood of fresh elections and stirring fears the country may not stick to austerity measures, and could even leave the euro zone.
The cost of crude continued its slide, pushing oil companies down in Japan. Petroleum and petrochemicals company JX Holdings dropped 2.7%, and oil company Inpex Corp. slipped 2.7%. Chinese oil giant Cnooc fell 2.4% in Hong Kong.
Cheaper oil proved a positive for airlines because of the lower fuel costs, with All Nippon Airways up 1.8% and Cathay Pacific up 0.5%. Mining and metal companies fell sharply on falls in commodity prices, with Aluminum Corp of China down 5.1% and gold miner Zijin Mining Group down 4.5% in Hong Kong.
The Hang Seng's losses were limited by gains in its largest constituent, HSBC, one of a handful of companies that rose. The bank climbed 0.7% after announcing late Tuesday that first quarter profit before tax rose slightly more than expected.
A strong finish by China Mobile, the Hang Seng's second largest component, also helped prop up the market. The stock finished up 1.4%. Japan's worst performer was NTT Data, which fell 11.8% after releasing a disappointing earnings outlook. There was some positive news there, though, as a number of major firms rose on upbeat profit guidance. Watch and clock maker Seiko leaped 9.7% and Panasonic climbed 1.7%, as investors responded favorably to guidance that indicates the companies will return to profit.
COMMODITIES
Base metals closed lower on the London Metal Exchange Wednesday, extending the previous session's losses as concern over political and economic tensions in the euro zone continued to batter risk appetite and drive the euro lower against the dollar.
At the close, LME three-month copper was 0.5% lower at $8,053 a metric ton, having earlier hit a three-week low at $7,950/ton. Thinly traded tin fell the most to close at $20,605/ton, down 4.2% on the day.
U.S. crude futures edged lower Wednesday, recovering from much steeper losses earlier in the day, in the wake of a mixed report on U.S. oil inventories.
European crude, meanwhile, ended higher after a production halt at a major oil field in the North Sea.
Light, sweet crude for June delivery settled 20 cents, or 0.2%, lower at $96.81 a barrel on the New York Mercantile Exchange. It dropped to as low as $95.17 a barrel, its weakest level since December.
Brent crude on the ICE futures exchange, meanwhile, settled 47 cents, or 0.4%, higher at $113.20 a barrel, recovering from a low of $111.31.
Prices began their recovery after the Department of Energy reported a mixed view of U.S. petroleum inventories. The closely watched survey found U.S. oil inventories rose more than expected last week, though gasoline stockpiles fell sharply and gasoline demand picked up.
Worries about political and economic turmoil in the Euro zone pushed gold futures to their lowest settlement price of 2012, as investor demand for the perceived safety of the U.S. dollar limited the appeal of precious metals. The most actively traded gold contract, for June delivery, fell $10.30, or 0.6%, to settle at $1,594.20 a troy ounce on the Comex division of the New York Mercantile Exchange, the lowest settlement price since Dec. 30.