Global Markets Overview - 15/10/2012
U.S. STOCKS, BONDS
The Dow Jones Industrial Average squeezed out a modest advance to wrap up a tough week for the stock market, as worries about bank profits balanced off against a jump in consumer sentiment. The blue-chip Dow finished with a gain of 2.46 points, or 0.02%, to 13328.85 Friday, after rising by as many as 75 points in early trading.
The Standard & Poor's 500-stock index declined 4.25 points, or 0.30%, to 1428.59, while the Nasdaq Composite lost 5.30 points, or 0.17%, to 3044.11.
Throughout the day, investors weighed an unexpected jump in U.S. consumer sentiment to its highest level in five years against worries over U.S. banks. Financials were the heaviest weight on the downside, after earnings reports from Wells Fargo & Co. (WFC) and J.P. Morgan Chase & Co. (JPM).
Wells Fargo fell 2.6% after the fourth-largest U.S. bank reported third-quarter revenue that missed expectations, overshadowing a slight earnings beat. Particularly worrying for some investors was that net interest margin, the profit margin from lending and investing--by far the bank's biggest business--fell 0.25 percentage point, to 3.66%, far worse than the 0.17 percentage-point decline Chief Financial Officer Timothy Sloan had predicted only a few weeks ago.
Bank of America Corp. (BAC), American Express Co. (AXP) and J.P. Morgan were among the worst performers on the Dow. Also suffering were SunTrust Banks (STI), Regions Financial Corp. (RF), Huntington Bancshares (HBAN) and Fifth Third Bancorp (FITB), each of which fell 3% or more.
The declines for J.P. Morgan came even after the country's largest bank reported third-quarter earnings and revenue that handily beat analyst estimates, boosted by declines in provisions for credit losses and a jump in mortgage originations.
Also, losses in the quarter stemming from its "London Whale" trading debacle in April were less than feared. In U.S. economic headlines, a preliminary reading of the Thomson Reuters/Univ. of Michigan consumer sentiment index for October registered at 83.1, the highest level since September 2007 and well above expectations for a slight decline to 78, from 78.3 in September.
Separately, wholesale prices increased 1.1% in September from a month earlier, higher than estimates. But so-called core prices, which strip out volatile energy and food components, were unchanged from August, below expectations. In the euro zone, industrial production rose 0.6% in August from July, compared with expectations of a 0.4% decline.
In other corporate news, Advanced Micro Devices Inc. (AMD) declined 14%, making it the biggest decliner among the S&P 500 stocks, after the semiconductor maker slashed its third-quarter revenue outlook, citing weak overall demand.
J.B. Hunt Transport Services Inc. (JBHT) gained 6.5% after reporting third-quarter revenue that beat expectations, though earnings fell a bit shy of estimates. U.S.-listed shares of Aeterna Zentaris Inc. (AEZS, AEZ.T) tumbled 22% after the drug-development company said it launched a public offering of common stock and warrants to purchase common shares.
EUROPEAN STOCKS
European stocks fell Friday, as strong U.S. consumer sentiment data failed to brush away investor worries about the slowdown in global economic growth.
The Stoxx Europe 600 index dropped 0.5% to close at 269.43, ending the week with a 1.7% loss. Among notable movers in Europe, Dutch paint maker Akzo Nobel NV slumped 6.1%.
A representative from the company confirmed that Chief Executive Ton Buechner hasn't yet returned to work from his medical leave and that a supervisory board will discuss the situation on Oct. 17.
Also in the headlines, shares of Germany's Lanxess AG lost 4.4%, after Credit Suisse cut the chemicals firm to underperform from neutral. For the broader markets, stocks trimmed losses in afternoon action, after a gauge of U.S. consumer sentiment showed surprising improvement for October and jumped to a 5-year high.
Investors fixed on J.P. Morgan Chase & Co. and Wells Fargo & Co., both of which reported third-quarter financial results before the opening bell on Wall Street. They also digested industrial-production data out of the euro zone, which showed activity expanded 0.6% in August, and what it might mean for the region's gross domestic product.
Banks were in focus in Europe, after Deutsche Bank lifted the sector to overweight from neutral Shares of Lloyds Banking Group PLC gained 1.2% and Standard Chartered PLC rose 2.3% in London.
The U.K.'s FTSE 100 index, however, gave up 0.6% to 5,793.32, as oil firms fell. On the week, the index lost 1.3%. BP PLC fell 1.7% and Royal Dutch Shell PLC dropped 0.8%. It was a similar story for energy in Paris, where shares of Total SA fell 1.6%. The CAC 40 index lost 0.7% to 3,389.08, ending the week 2% lower. Germany's DAX 30 index closed down 0.7% at 7,232.49 and off 2.2% on the week. Siemens AG added pressure, off 1.1%, after Societe Generale cut its rating to hold from buy.
ASIA-PACIFIC STOCK MARKETS
Asian markets were mixed Friday as investors adopted a cautious stance before the beginning of China's data deluge, while sharp declines in Softbank and Fast Retailing limited the upside for Japanese stocks.
China was in focus Friday ahead of the release of economic data for September. Stocks in China rose ahead of the data, which includes inflation and growth figures.
In Hong Kong, the Hang Seng Index was up 0.7% at 21136.43, while the Shanghai Composite Index edged 0.1% higher to 2104.93. Chinese companies continued to outperform in Hong Kong, with the Hang Seng China Enterprises index up 1.1% to 10345.28.
The index, which tracks Chinese companies listed in Hong Kong, had a strong week--up 3.8% compared with a 0.6% gain in the Hang Seng Index. Chinese banks continued to perform well. Industrial and Commercial Bank was up 1.4% and China Construction Bank was 1.8% higher.
The week proved somewhat painful in Japan, where the Nikkei Stock Average was down 3.7% on week. Despite a positive start for the Nikkei, Japanese stocks ended the day slightly lower, down 0.2% at 8534.12, shrugging off a weakening yen, as large moves in individual companies weighed down on the broader market.
Softbank Corp. dropped 16.9% on news that the telecom company is in talks to buy a major stake in Sprint Nextel Corp., the third largest wireless carrier in the U.S.
Also in Japan, Fast Retailing, the company behind the Uniqlo chain of clothing shops, slumped 9.9% after announcing a consolidated operating profit that failed to meet guidance for the year ending August. South Korea's Kospi Composite was flat at 1933.26 and Taiwan's Taiex closed down 0.2% at 7437.04.
COMMODITIES
Base metal prices were lower at the close of London Metal Exchange trading Friday as investors squared books and reduced activity ahead of an annual week-long industry event in London.
At the close of open-outcry trading, LME three-month copper was down 1.4% at $8,125 a metric ton. Nickel lost the most, falling 3.7% to $17,075/ton. U.S. crude oil prices fell 0.2% Friday as a selloff in gasoline markets sparked some profit-taking among oil traders heading into the weekend.
Light, sweet crude for November delivery on the New York Mercantile Exchange settled at $91.86 a barrel, down 21 cents but finished the week with a 2.2% gain.
Brent crude on ICE Futures Europe, the overseas crude benchmark, settled at $114.62, down 0.9% for the day but up 2.3% for the week. Industrially focused precious metals slumped to multiweek lows on worries about global growth and the view that labor tensions in major producer South Africa would ease and limit supply disruptions.
Gold eased as traders pared their bullish bets after a week of indecisive trading. Platinum for January delivery, the most actively traded contract, fell 1.8%, to settle at $1,659.30 a troy ounce. Palladium for December delivery fell 1.8% to $639.05 a troy ounce. Silver December futures settled down 1.2% at $33.669 an ounce. Gold for December delivery fell $10.90, or 0.6%, to settle at $1,759.70 a troy ounce.