Global Markets Overview 08/17/2011
US Markets
U.S. stocks fell Tuesday after three straight sessions of sharp gains, as investors expressed disappointment over proposed measures from European officials to strengthen euro-zone fiscal governance. The Dow Jones Industrial Average dropped 76.97 points, or 0.67%, to 11405.93. The blue-chip index whipped around in another rocky trading day, although the volatility wasn't as extreme as last week's trading. The Dow, which briefly turned positive at one point, fell as much as 190 points Tuesday.
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Comments from German Chancellor Angela Merkel and French President Nicolas Sarkozy failed to alleviate investor concerns about the economic state of the euro zone. The Standard & Poor's 500-stock index lost 11.73 points, or 0.97%, to 1192.76. The technology-oriented Nasdaq Composite slumped 31.75 points, or 1.24%, to 2523.45. Financial stocks were hit the hardest as Merkel and Sarkozy pledged to launch a transaction tax. NYSE Euronext--which runs stock and derivatives markets in France, Belgium, the Netherlands and Portugal--was the S&P 500's biggest decliner. The stock dropped $2.43, or 8.4%, to 26.54. IntercontinentalExchange shares dropped 5.21, or 4.5%, to 111.22.
Nasdaq OMX Group dropped 65 cents, or 2.8%, to 22.97. In a joint appearance, Merkel and Sarkozy proposed a euro-zone economic council that would help strengthen national fiscal solvency. But both leaders opposed the issuance of euro-zone bonds, an idea that had gained traction in recent days, which disappointed investors.
The market's downbeat tone originated after data showed the euro-zone economy grew more slowly in the second quarter than at any time since the end of the recession in 2009. In particular, economic growth in Germany, Europe's largest economy, slowed sharply. On the U.S. economic front, the Commerce Department said home construction dropped slightly in July as the battered housing market continues to struggle.
Additionally, the Labor Department said U.S. import prices increased last month as both fuel and nonfuel costs rose, reversing some of June's declines but leaving the overall inflation picture subdued. Industrial production in the U.S. also rose slightly last month, as auto makers recovered from natural disasters earlier this year in Japan.
European Markets
A pan-European stock index closed slightly lower Tuesday, as Fitch Ratings's affirmation of its triple-A credit rating on the U.S. helped equities pare most losses that followed disappointing growth data from Germany and the rest of the euro zone. The Stoxx Europe 600 index fell 0.1% to 237.56, a reversal after rising 6.4% over the previous three sessions.
The Stoxx 600 significantly pared losses after Fitch said its rating on the U.S. is triple-A and the long-term outlook is stable. Germany's DAX 30 index fell 0.5% to 5,994.90. Data showed the country's gross domestic product grew just a seasonally adjusted 0.1% during the second quarter.
Economists polled by Dow Jones Newswires had expected a 0.4% growth rate. The euro-zone's gross domestic product was also below expectations, growing 0.2% in the second quarter against a consensus forecast of 0.3%. The disappointing figures weighed heavily on cyclical stocks such as car makers and industrial stocks. Shares of truck maker Man SE shed 3.2%, while steel producer and elevator manufacturer ThyssenKrupp AG fell 2.6%. E.On AG was unable to hold its gains and ended down 0.2%.
Goldman Sachs upgraded the electric utility to buy from neutral, saying it is trading at a material discount to the rest of the sector and has an attractive dividend yield. Car makers were among the biggest decliners in Paris, where Renault SA dropped 2% and PSA Peugeot Citroen fell 1.9%. The French CAC 40 index declined 0.3% to 3,230.90. Bucking the negative trend, London's FTSE 100 index gained 0.1% to 5,357.63, as shares of Randgold Resources Ltd. rallied 4.1%. The Greek ASE Composite rose 2.2% to 1,012.52, helped by a 7.1% jump for Coca-Cola Hellenic Bottling Co. as the stock continued to rebound from a 14% pullback in the first few sessions of last week.
Switzerland's SMI stock index rose 0.9%, as shares of food firm Nestle SA gained 2%. Italian energy companies were sharply lower on worries over the impact of new taxes that will be introduced as part of Italy's latest austerity plan. Shares of gas pipeline company Snam Rete Gas tumbled 9.9% and utility group Enel SpA dropped 4.3%. Italy's FTSE MIB index lost 0.9% to 15,750.60 after being closed Monday for a holiday.
Asian Markets
South Korean stocks soared and Japanese stocks edged higher after an extended rebound on Wall Street encouraged buyers, with mobile-handset makers getting a lift from Google Inc.'s acquisition of Motorola Mobility Holdings Inc. But caution prevailed in many other markets as investors looked toward a meeting of European leaders to discuss that region's debt troubles.
Chinese stocks ended lower after advancing for four straight days, while those in Hong Kong and Taiwan squandered away early gains. Playing catch-up after a three-day weekend, South Korea's Kospi made its biggest one-day percentage gain since January 2009, surging 4.8% to 1879.87 as bargain hunting foreign investors returned. Japan's Nikkei Stock Average ended 0.2% higher at 9107.43, Hong Kong's Hang Seng Index dropped 0.2% to 20212.08, and Taiwan's Taiex slipped 0.3% to 7798.59.
China's Shanghai Composite Index dropped 0.7% to 2608.17. Monday's Wall Street gains were spurred in part by Google's $12.5 billion purchase of Motorola Mobility, which also boosted sentiment toward many tech shares in Asia.
Foxconn International Holdings, a manufacturing partner for Motorola Mobility, surged 13% in Hong Kong. HTC, which sells handsets based on Google's Android platform, ended unchanged in Taipei, avoiding losses in a downbeat Taiwanese market, while in Seoul, stock market heavyweight and Android phone seller Samsung Electronics jumped 6.1%. Among other technology firms, Elpida Memory soared 5.1% and Renesas Electronics rose 1.9% in Tokyo.
Commodities
Base metals closed mostly lower on the London Metal Exchange Tuesday following a lackluster open outcry session characterized by hesitant, short-term trade. At the close, flagship three-month copper was 0.9% lower at $8,830 a metric ton. Just aluminum and nickel ended the day in positive territory, closing 0.04% and 1.9% higher respectively. Crude oil prices settled lower Tuesday, guided by continued doubts on the pace of global economic growth.
European data set a downward trend that prices couldn't shake, despite attempts to do so after some surprisingly strong U.S. industrial production figures. Light, sweet crude oil for September delivery on the New York Mercantile Exchange settled 1.4%, or $1.23, lower at $86.65 a barrel. ICE Brent crude for September delivery expired down 44 cents at $109.47 a barrel. The October contract, the incoming front month, settled at $109.13, down 71 cents.
Gold futures ended at a record high as slowing growth in the European Union sent investors looking for an alternate store of wealth. The most actively traded gold contract rose $27, or 1.5%, to settle at $1,785.00 a troy ounce on the Comex division of the New York Mercantile Exchange. The August contract rose $26.90, or 1.5%, to $1,782.40 a troy ounce, a record for a front-month contract.