World Market Overview 7/04/2011
US Stocks
U.S. stocks surged Friday, notching the biggest weekly gain in nearly two years, as a strong reading of manufacturing activity lifted investor spirits ahead of the long holiday weekend. The Dow Jones Industrial Average finished up 168.43 points, or 1.4%, at 12582.77. The blue-chip index rose all five days of the week, including four triple digit gains, and finished up 5.4%, the best weekly percentage rise since July 2009. The Standard & Poor's 500-stock index rose 19.03 points, or 1.4%, to 1339.67, as consumer discretionary, industrial and financial stocks led the rally. The index jumped 5.6% for the week, its biggest rise since July 2009. The Nasdaq Composite gained 42.51 points, or 1.5%, to 2816.03. The technology-heavy index has gained 7.6% over the last two weeks.
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Stocks rose sharply Friday after data released by the Institute of Supply Management showed the U.S. manufacturing sector expanded briskly in June. The ISM's manufacturing purchasing managers' index rose to 55.3 in June from 53.5 in May. Readings above 50 indicate expanding activity. Investors propelled the Dow to its biggest weekly rally since July 2009 behind promising news out of Greece and some improving economic news. The passage of Greek austerity measures Wednesday and Thursday is seen as paving the way for the heavily indebted country to get another round of aid and stave off a default, for the time being.
Amid the market euphoria, analysts cautioned that developments surrounding Greece are far from over. Financial stocks also surged during the week following the passage of banking capital requirements that were less onerous than expected. News that Bank of America reached an $8.5 billion settlement with holders of soured mortgage backed securities also boosted sentiment. Both were seen as persistent drags on bank stocks. Bank of America, a Dow component, rose 5.3% during the week. Financial stocks in the S&P 500 registered a 5.9% weekly gain. Still, weakness in the labor market remains a grave concern for investors.
European Markets
European stocks finished higher Friday, catching a tailwind after a gauge of U.S. manufacturing came in much stronger than economists had expected. The Stoxx Europe 600 index rose 0.8% to close at 274.92. The index extended gains after data showed that the Institute for Supply Management's U.S. factory index rose to 55.3% in June from 53.5% in May, defying expectations for a decline. The rise marked the fifth straight session of gains for the index, including a nearly 3% rally over the previous two days amid investor relief that Greece's parliament had approved new austerity measures. For the week, the Stoxx 600 gained 4.1%.
Bank stocks in particular continued to benefit. Commerzbank AG rose 6.1% in Frankfurt, BNP Paribas traded up 2.5% in Paris and Lloyds Banking Group PLC rallied 3.7%, the latter having announced heavy cost-cutting Thursday. Greek banks did even better as the threat of an immediate sovereign default receded. Shares of National Bank of Greece rose 5.5%, helping boost the ASE Composite index 2.3% to 1,308.48. Italy's FTSE MIB index rose 1.6%, buoyed by strong gains for banking shares, with Banca Popolare di Milano up 7.9%.
Data from China earlier Friday showed manufacturing activity had slowed to levels indicating only marginal growth in June, while closer to home, euro-zone manufacturing data slowed to the weakest pace seen in 18 months. On the downside, shares of ThyssenKrupp dropped 1.5% in Frankfurt. Germany's DAX 30 index rose 0.6% to settle at 7,419.44 as gains for bank stocks lifted the index. The French CAC 40 index rose 0.6% to end at 4,007.35, buoyed by gains for banks such as Societe Generale, up 3.7%, and Natixis, up 3.6%. The U.K.'s FTSE 100 index settled up 0.7% at 5,989.76, also led higher by banks. Barclays PLC rallied 3.5% and Royal Bank of Scotland Group PLC advanced 3.2%.
Asian Markets
Asian markets ended mostly higher Friday after U.S. stocks extended their rally Thursday, while concerns over Greece's debt problems took a back seat after its austerity program cleared a final hurdle in parliament. Japan's Nikkei Stock Average climbed 0.5% to 9868.07, South Korea's Kospi gained 1.2% to 2125.74, and Taiwan's Taiex added 1% to 8739.82. Stock markets in Hong Kong and Thailand were closed for holidays.
The Shanghai Composite, which had opened higher changed direction a few times and ended 0.1% lower at 2759.36. The drop came after an official reading of the country's manufacturing Purchasing Managers' Index activity in June weakened more than analysts expected, while a privately compiled version of the PMI from HSBC also showed weakness. Banking and airline shares were among the losers in Shanghai, with Industrial & Commercial Bank of China Ltd. dropping 1.8%, and China Merchants Bank Co. losing 0.6%, while China Eastern Airlines Corp. slid 0.8%.
Japanese stocks advanced for a fourth straight session even as the Bank of Japan's quarterly tankan survey showed business sentiment among large manufacturers dropped even more than feared in the wake of the March 11 earthquake and tsunami. Even so, some stocks were cheered by the survey, which also showed a firmer than expected outlook for capital spending. Shares of Fanuc Corp. jumped 5.5%, while Fuji Electric Co. added 3.2%, and Kubota Corp. rose 1%. Exporters gained in South Korea on positive cues from the global markets, with consumer electronics firms Samsung Electronics Co. up 3.5%, and LG Electronics Inc. up 2.4% in Seoul.
Base Metals
Copper closed slightly higher amid a slightly lower complex on the London Metal Exchange Friday as a mixed bag of economic data kept price action volatile throughout the session. LME three-month copper traded 0.2% higher at $9,445 a metric ton. The red metal swung between positive and negative territory Friday, reacting to a series of macro data releases and related currency moves.
Crude oil futures settled lower Friday, hit by new worries over the health of the global economy after weaker manufacturing data from China and the euro-zone nations. Prices recovered from deeper early losses as U.S. manufacturing data was stronger than expected and players adjusted positions ahead of the Fourth of July holiday Monday.
With the start of the third quarter, traders said they also detected inflows of cash from commodity funds that helped put a floor under prices near $95 a barrel after a drop at the start of the week to intraday four month lows below $90 a barrel. Light, sweet crude for August delivery on the New York Mercantile Exchange settled 48 cents lower at $94.94 a barrel, after trading in a range of $93.45-$95.39 a barrel. Crude rose 4.2% in the week, the largest weekly rise since April 8. ICE Brent crude oil for August settled 71 cents lower, at $111.77 a barrel, after moving in a range of $109.50-$112.48 a barrel.
Brent rose 6.3% in the week, also the biggest gain since the week ended April 8. Gold futures slid to six-week lows below $1,500 an ounce, pressured as optimism over Greece's debt situation and strength in global stock markets hit demand for the metal as a refuge. The most actively traded contract, for August delivery, settled down $20.20, or 1.3%, at $1,482.60 a troy ounce on the Comex division of the New York Mercantile Exchange, the lowest ending price for a most-active contract since May 17. The contract fell 1.2% on the week.
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