Global Markets Overview 08/22/2011
US Markets
U.S. stocks closed lower Friday and notched their fourth straight losing week, as investors continued worrying about a potential global recession and the health of the European banking system.
The Dow Jones Industrial Average closed down 172.93 points, or 1.57%, at 10817.65. The index swung 284.99 points from its session highs to the lows in another volatile session. The zigzag action comes after the blue-chip index tumbled 419.63 points Thursday. The 5.19% drop over Thursday and Friday's trading sessions is the biggest two-day percentage drop since March 2, 2009. For the week, the Dow tumbled 4% and is down 15% over the last four weeks. The index is down 6.6% for the year. Hewlett-Packard Co. (HPQ) was by far the Dow's biggest decliner Friday as the stock tumbled to a six-year low.
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Investors fretted about the world's largest personal-computer maker's extensive plans to reshape its business model. Shares dropped $5.91, or 20%, to $23.60. The stock took 45 points off the price-weighted Dow. Fellow blue chip International Business Machines Corp. (IBM) slumped $6.29, or 3.8%, to $157.54. H-P and IBM combined to account for more than half of the Dow's declines Friday.
The Standard & Poor's 500-stock index dropped 17.12 points, or 1.5%, to 1123.53, led lower by technology and financial stocks. All 10 of the S&P 500's sectors closed in negative territory. The index has tumbled 16% over its four-week losing skid.
The Nasdaq Composite slid 38.59 points, or 1.62%, to 2341.84, a fresh 2011 closing low. The technology-heavy index is down 18% over the last four weeks. For the year, it's off 12%. Friday's lull in market-driven headlines did little to assuage investor concerns about political gridlock in Washington, Europe's sovereign-debt troubles and the worsening U.S. economy.
Optimism early in the week proved fleeting as worries about global economic growth returned. A jarring mix of global growth warnings from several investment banks and broader systemic financial problems have prompted investors to recalibrate their expectations. The big worry now is that the problems surrounding European banks could spillover into the U.S. banking system. Investors are also concerned that European leaders aren't responding adequately to the debt crisis roiling the euro zone.
European Markets
European stocks slumped Friday, as global growth concerns continued to spook investors, with banking shares remaining under heavy selling pressure. The pan-European Stoxx 600 index fell 1.6% to end at 223.13, posting weekly losses of 6.1%. Essar Energy PLC sank nearly 9% and was the biggest decliner in the Stoxx 600 after Morgan Stanley downgraded the stock to underweight from equalweight, citing earnings risks.
European investors remained concerned Friday about a slowdown in global economic growth, with several investment banks cutting forecasts recently. Among them, J.P. Morgan warned that U.S. recession risks are clearly elevated. Additionally, there were worries that European leaders aren't responding adequately to the debt crisis roiling the euro zone.
Financial shares were among the biggest decliners in Europe. UniCredit SpA declined 5.8% in Milan, Banco Santander fell 3.1% in Madrid and Deutsche Bank AG declined 2.7% in Frankfurt. BNP Paribas fell 4.3% in Paris, pressuring the CAC 40 index, which finished down 1.9% at 3,016.99. Shares of Danske Bank dropped 5.2% in Copenhagen, as Morgan Stanley downgraded the bank to equalweight from overweight.
In London, shares of Lloyds Banking Group PLC dropped 4.8% and those of Royal Bank of Scotland Group PLC sank 5.4%. The losses weighed on the FTSE 100 index, which slipped 1% to 5,040.76. Germany's DAX 30 index dropped 2.2% to 5,480, with insurer Allianz SE the biggest loser, falling 4.1%. Shares of Volkswagen AG dropped 2.6% even after the firm said Friday it remained on track with vehicle deliveries. Also in the car sector, BMW AG fell 3.4%.
Asian Markets
The South Korean market led the way for hefty losses in Asia Friday, as risk appetite evaporated on a fresh wave of concerns about global growth, with shipbuilders, exporters and financials among the hardest-hit companies. South Korea's Kospi sank 6.2% to 1744.88, its worst one-day percentage loss since a 6.7% plunge on Nov. 20, 2008, with program trading briefly suspended in a bid to arrest the declines. Friday's loss sent the index's August decline to 18%, by far the worst performance among major regional indexes.
Several stocks in the shipbuilding, refining and petrochemicals and automotive sectors tumbled by more than 10%, including Daewoo Shipbuilding & Marine Engineering, Korea Kumho Petrochemical and Hyundai Motor. Hong Kong's Hang Seng Index fell 3.1% to 19399.92, Japan's Nikkei Stock Average lost 2.5% to finish at 8719.24, Taiwan's Taiex was down 3.6% at 7342.96 and India's Sensex fell 2% to 16141.67.
China's Shanghai Composite was among the region's best performers, dropping a relatively modest 1% to 2534.36. Deutsche Bank downgraded its China growth outlook Friday, saying the slowdown and even the potential for recession in Europe and the U.S. now outweighed domestic credit tightening as the biggest risk to China's economy. The call came on the heels of a downgrade to global growth forecasts by Morgan Stanley Thursday. In Tokyo, there was no respite for exporters from worries over a firm yen. Nissan Motor slid 4.4% and Sony fell 3.2%.
Commodities
Base metals ended a volatile week in positive territory on the London Metal Exchange Friday, supported by bargain hunting at lower prices and a softer dollar, although gains were pared in late trade as stock markets slipped back into the red. At the close, LME three-month copper traded at $8,820 a metric ton, up 0.6% on the day. The rest of the complex was also higher, except for nickel, which slipped 0.5% at $21,200/ton.
Crude futures settled nearly flat Friday, pausing after steep drops earlier in the week as traders weighed the threat of an economic slowdown against persistent oil demand.
Light, sweet crude for September delivery settled 12 cents, or 0.2%, lower at $82.26 a barrel on the New York Mercantile Exchange, in a session that saw prices dip as low as $79.17. Brent crude on the ICE futures exchange closed $1.76 higher at $108.75 a barrel.
Gold catapulted to another record as fears about the U.S. economy and concerns about Europe's banks added to bullish sentiment that gold is set to reach $2,000 a troy ounce. The most actively traded contract, for December delivery, settled $30.20, or 1.7%, higher at a record $1,852.20 a troy ounce on the Comex division of the New York Mercantile Exchange. This was the contract's ninth record settlement this month. Thinly traded August-delivery gold rose $30.00, or 1.7%, to settle at a record $1,848.90 a troy ounce.