World Market Overview 05/16/2011
US Stocks
U.S. stocks fell broadly Friday as worries over Greece's finances ramped up ahead of the weekend. The Dow Jones Industrial Average dropped 100.17 points, or 0.79%, to 12595.75. The Nasdaq Composite shed 34.57 points, or 1.21%, to 2828.47, while the Standard & Poor's 500-stock index fell 10.88 points, or 0.81%, to 1337.77, with every sector in the red. The financial and materials sectors posted the biggest declines. The market had been down more sharply earlier in the day, with the DJIA posting a drop of about 153 points at its intraday low, but the declines eased as the euro also pared its losses in the afternoon.
Crude-oil futures also bounced back from their intraday lows. In the U.S., consumer-price data met expectations and a reading on consumer sentiment rose above economists' estimates, but investors diverted their attention to the euro zone as they continued to mull the prospects for Greece's economy. Even as data showed stronger-than-expected economic growth in the 17-nation euro bloc, investors continued to worry about one of its smallest members. The European Commission said Greece's economy is expected to contract more than previously expected this year.
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The European Commission also warned that the embattled country's budget deficit would be sharply higher than government targets. The jitters come ahead of a big meeting in the coming week of the International Monetary Fund and top European officials in Brussels, with Greece's ongoing debt problems expected to be the center of attention. Euro-zone finance ministers also meet Monday. The day's declines wiped out weekly gains the DJIA and S&P 500 had coming into the session.
The DJIA fell 0.34% on the week and the S&P 500 slipped 0.18% on the week, marking the measures' second-straight week in the red. Among stocks in focus, Yahoo dropped 62 cents, or 3.6%, to $16.55, amid more questions over Alibaba, in which Yahoo owns a 43% stake. Rambus plunged 3.44, or 18%, to 15.83. An appeals court dealt a blow to the chip technology company, vacating its win in a patent case against Hynix Semiconductor.
European Stocks
European stock markets ended lower Friday as worries about sovereign debt in the peripheral countries trumped strong results from EADS and faster-than-expected economic growth in France and Germany. The Stoxx Europe 600 index dropped 0.5% to close at 280.50. The index had gained as much as 0.5% earlier in the day after data showed stronger than expected growth in France and Germany in the first quarter. But markets turned lower after the European Commission warned that the Greek economy will likely contract more than previously thought.
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Most peripheral markets felt pressure, with Spain's IBEX 35 index falling 1.3% as worries about the banking sector in neighbor Portugal brought Spain's situation back into focus. Standard & Poor's Ratings Services said Friday that most Portuguese banks will likely need to take "decisive action" to meet new capital requirements. Portugal's PSI 20 index fell 0.1% to 7,766.62, while the Greek ASE Composite held on to a 0.1% gain at 1,356.24. Shares in Spanish bank BBVA SA dropped 1.9%. The bank's chief operating officer, Angel Cano, reportedly said Friday that Spain will have to clean up its troubled savings banks, known as cajas, before they will be able to attract private investment.
Shares in aerospace and defense group EADS rallied 5.8%. The owner of Airbus swung to a first-quarter net loss due to the impact of exchange-rate moves. Shares of Vallourec SA surged 6.1% in Paris after the tubing producer reported a 35% jump in net profit late Thursday and offered a reassuring outlook. The French CAC 40 index ended down 0.1% at 4,018.85 as bank stocks moved mostly lower on peripheral debt worries. Commerzbank AG, which is seen as one of the European banks most exposed to Greece, dropped 3.3% in Frankfurt. The fall helped pull the DAX 30 index down 0.6% to 7,403.31. In the U.K., the FTSE 100 index fell 0.3% to close at 5,925.87, led by a nearly 3% drop for ITV PLC.
Asian Stocks
Chinese and Hong Kong stock markets advanced for the first time in three sessions a day after the People's Bank of China further increased banks' reserve requirements. Stocks in Tokyo dropped as banks were hit by speculation they may have to waive some loans to Tokyo Electric Power, while shares in Seoul declined after the Bank of Korea surprised the market by not raising a key interest rate. Hong Kong's Hang Seng index rose 0.9% to 23276.27 and China's Shanghai Composite index added 1% to 2871.03. Ending the week on a downbeat note, Japan's Nikkei Stock Average fell 0.7% to 9648.77, South Korea's Kospi slipped 0.1% to 2120.08, and Taiwan's Taiex gave up 0.3% to 9006.61.
Hong Kong and Chinese shares overcame volatile early trading to finish higher, as investors shrugged off the PBOC's decision to raise lenders' reserve requirements for the fifth time this year, continuing its efforts to drain excess liquidity from the market. Banks and property stocks advanced Friday, in apparent relief. Agricultural Bank of China and China Construction Bank rose 0.7% and 1% in Shanghai, respectively; in Hong Kong, the stocks rose 0.7% and 0.8%.
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Among developers, Poly Real Estate Group added 1.9% in Shanghai, while China Resources Land rose 0.5% in Hong Kong. In Japan, banks were pressured by speculation about a loan waiver for Tepco after Chief Cabinet Secretary Yukio Edano said unless banks waive debt dating from before the March 11 earthquake, the public will never accept using tax money to help the utility pay compensation for damage stemming from its nuclear-plant crisis. Sumitomo Mitsui Financial Group gave up 3.8%, Mizuho Financial Group Inc. lost 3% and Mitsubishi UFJ Financial Group shed 2.8%.
Tepco tumbled 5.4% even after the government announced a plan to rescue the company and fund compensation claims. Lending some support to the market, shares of Nissan Motor rose 3.5% after a solid fourth-quarter earnings report and bullish comments from Chief Executive Officer Carlos Ghosn.
Base Metals
Base metals closed mostly lower on the London Metal Exchange Friday after the euro took a tumble against the U.S. dollar, spurring a wave of risk aversion across global financial markets. Copper and zinc were the only metals to hold in positive territory as the stronger greenback weighed, driving aluminum 1.9% lower on the day, and tin down almost 2.4%. LME three month copper closed the open outcry session at $8,787 a metric ton up 0.7% on the day, but still far from a retest of the key $9,000/ton level.
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Crude oil futures settled modestly higher near $100 a barrel Friday, after a volatile session sparked by sharp moves in the dollar and euro. After a week long selloff, crude regained some footing near $100 a barrel, but failed to settle above that level for a third day straight. That's the longest string of sub $100 settlements since March 1. Light, sweet crude oil futures for June delivery settled 68 cents higher at $99.65 a barrel. The modest 2.5% week to week rise, the most in a month, belied the $9.35 a barrel intraday trading range in the week.
In the first two weeks of May, crude has traded in a $20.20 range amid fears that high prices are hurting demand. ICE Brent crude for June settled up 85 cents at $113.83 a barrel ahead of its expiration at Monday's settlement. Precious metals pared earlier losses alongside the euro, after a clarification of comments European Central Bank President Jean-Claude Trichet made in an interview with a Spanish television station.
The most actively traded gold contract, for June delivery, settled down $13.20, or 0.9%, at $1,493.60 a troy ounce on the Comex division of the New York Mercantile Exchange.
Thinly traded May-delivery gold ended up $13.20, or 0.9%, at $1,493.40 a troy ounce. The most actively traded silver contract, for July delivery, settled up 21.6 cents, or 0.6%, at $35.013 a troy ounce. Thinly traded May-delivery silver ended up 21.8 cents, or 0.6%, at $35.011 a troy ounce.
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