World Market Overview
U.S. stocks rose slightly Friday, extending their climb to fresh two year highs as investors were encouraged by a report of stronger than expected job growth for October. The Dow Jones Industrial Average rose 9.24 points, or 0.08%, to 11444.08. The measure's gain was led by its financial components following reports that the Federal Reserve is poised to allow healthy banks to increase dividend payments for the first time since the financial crisis. J.P. Morgan Chase climbed 2.9% and Bank of America added 1.9%.
The measure was weighed down by Kraft Foods, which fell 2.2%. The food giant posted an 8.5% decline in third quarter profit as higher taxes, jumps in advertising spending and costs for integrating Cadbury weighed on its shares. Also, Starbucks plans to discontinue its arrangement to use Kraft as a distributor for its coffee products.
The Nasdaq Composite tacked on 1.64, or 0.06%, to 2578.98. The Standard & Poor's 500 stock index rose 4.79, or 0.39%, to 1225.85, with its financial sector posting the biggest gains. The small gains Friday, which represents the 100 year anniversary of the drafting of legislation for the creation of the Federal Reserve, came at the conclusion of a strong week that saw the Dow surge to its highest levels since early September 2008, prior to the Lehman Brothers collapse.
The Dow climbed 2.9% during the week, while the S&P 500 rose 3.6% over the period. Fueling the climb, the Republican Party won control of the House of Representatives and the Fed pledged to give the economy a $600 billion stimulus shot, dubbed by market participants as QE2. Investors were encouraged Friday by data from the Labor Department showing nonfarm payrolls rose by a greater than expected 151,000 last month as private sector employers added 159,000 jobs.
In addition, the September number received a positive revision to show payrolls fell 41,000, less than an original estimate of a 95,000 decline. However, data on the housing sector served as another reminder of continued troubles in the economy. A report from the National Association of Realtors showed U.S. pending home sales slipped for the first time in three months in September as foreclosure moratoriums spurred by shoddy mortgage-documentation practices slowed sales.
European stocks finished mostly lower Friday, with peripheral markets such as Ireland and Spain posting steep losses, and the banking sector coming under heavy selling pressure. Equity indexes in Germany and the U.K. managed to eke out small gains after stronger than expected U.S. jobs data. The Stoxx Europe 600 index gained 0.4% to 271.97.
Most European markets, however, were showing signs of strain a day after a global rally inspired by a $600 billion bond buying program from the U.S. Federal Reserve. He added that there is a 50/50 chance the market will move 5% either higher or lower in the next two weeks. The 5% downside move, he said, would require a trigger and something he'd watch out for is higher commodity prices, which would spook the markets. Peripheral markets fell sharply.
In Dublin, the ISEQ index dropped 1.3%, as shares of Allied Irish Banks PLC tumbled nearly 10%. Irish Finance Minister Brian Lenihan late Thursday said he plans more budget cuts to reassure investors in bonds, where prices have been under pressure. The Spanish IBEX 35 index slumped 1.7%. Banking giants Banco Santander SA and BBVA dropped 2.6% and 5.2%, respectively.
The Bank of Spain on Friday said the economy stagnated in the third quarter. In London, the FTSE 100 index edged up 0.2% to 5,875.35. In the mining sector, Vedanta Resources PLC rallied nearly 6% and Eurasian Natural Resources Corp. rose more than 4%. In France, the CAC 40 index ended unchanged at 3,916.73.
Shares of AXA SA gained 2.1% after reports that Australian wealth manager AMP Ltd. has resumed talks over a $10 billion bid to buy AXA Asia-Pacific, whose majority shareholder is the French group. The German DAX 30 index rose 0.3% to 6,754.20, as shares of HeidelbergCement AG gained 2.2%.
Most Asian stock markets ended higher Friday, with resource-related shares advancing around the region after crude oil and gold prices surged Thursday while robust earnings from Nissan Motor helped spur a rally in Tokyo. Japan's Nikkei Stock Average climbed 2.9%, its largest percentage increase since June 3. China's Shanghai Composite Index advanced 1.4% and Hong Kong's Hang Seng Index tacked on 1.4%, while South Korea's Kospi Composite shed 0.2%.
The Federal Reserve's decision Wednesday to launch a fresh round of bond-buying to kickstart an anemic U.S. economy spurred a rush into risky assets, dubbed quantitative easing. Regional markets' sentiment got a sharp lift after the DJIA surged 2.0% to 11,434.84 on Thursday, its highest closing level since September 2008. Commodity related plays were higher across the region. In Tokyo, Sumitomo Metal Mining added 6.1% and Inpex rose 2.3%, while South Korea's Posco gained 1.4%.
Base metals on the London Metal Exchange ended mostly lower Friday, as better than expected U.S. jobs data dragged copper back from a 28 month high and sent other metals into the red. The jobs figures stirred doubts that the U.S. Federal Reserve will need to buy more Treasurys than the $600 billion announced Wednesday. Copper closed 0.6% higher at $8,654 a metric ton, having touched a high of $8,769.50/ton before profit-taking dragged it back.
Crude oil inched up Friday to settle at a two year high, after the Labor Department said the U.S. economy added 151,000 jobs last month. Light, sweet crude for December delivery settled up 36 cents, or 0.4%, at $86.85 a barrel on the New York Mercantile Exchange, the highest settlement since October 2008.
Brent crude on the ICE futures exchange was up 12 cents, or 0.1%, at $88.12. Oil prices are heavily influenced by employment data, as rising employment would boost gasoline demand by increasing the number of commuters on the road. Crude settled higher every day during the week, finishing up 6.7%.
Gold futures settled at a record high near $1,400 as participants began questioning how long gains in U.S. employment will last. The most actively traded gold contract, for December delivery, gained $14.60, or 1.1%, to settle at a record $1,397.70 a troy ounce. It gained 3% on the week.
Newsletter: Subscribe to receive this report daily