World Market Overview Report 20/1/2011
US markets
U.S. stocks pulled back Wednesday to session lows as softer-than-expected earnings from big banks weighed on sentiment. While the slide doesn't look so bad viewed through the prism of the blue chips, it's looking decidedly worse in some of the other indexes. Every sector is down, with materials and financials faring the worst.
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The Nasdaq Composite is down 1.6%, the S&P 500 is down 1.1%, and the S&P 600 is down 2%.
The Dow Jones Industrial Average is being held up by IBM primarily, but it's still down overall, by 30 points or about 0.3%. The Dow was dragged down by financial giants American Express and Bank of America, the two weakest components on the blue-chip index. Amex lost 2.6% after the card company projected fourth-quarter earnings that slightly missed Wall Street estimates and said it will cut about 550 jobs as it consolidates some facilities. Bank of America fell 3.3% ahead of its earnings results on Friday, amid general gloominess around the country's largest banks. A crop of disappointing bank earnings soured the market's mood on financials, one of the biggest beneficiaries of the recent rally on the stock market.
The biggest letdown came from Goldman Sachs, which saw its fourth-quarter earnings narrowly beat Street estimates but fall short on revenue. Shares of Goldman fell 3.1%, while rival Morgan Stanley sank 2.6%. The market's disappointment suggests that expectations for corporate profits may have climbed too high.
European markets
European stocks declined Wednesday, led by the auto and mining sectors, though pessimism also engulfed technology shares on a foggy outlook from ASML Holding NV. The Stoxx Europe 600 index spent the day in the red but the losses accelerated in the afternoon and the index finished down 1.4% at 282.72. In London, shares of Barclays PLC fell 3.8% as investors mulled the significance of Goldman's earnings disappointment. The fall made it one of the top decliners in the FTSE 100 index, which dropped 1.3% to 5,976.70. Among other key regional markets, France's CAC 40 index fell 0.9% to 3,976.71 and Germany's DAX 30 index declined 0.9% to 7,082.76. Technology stocks came under heavy selling pressure, led by ASML, which tumbled 6.8%. The Dutch maker of lithography systems for the chip industry reported record fourth-quarter profit, sales and bookings and forecast sales of EUR5 billion in 2011. In Paris, STMicroelectronics NV fell 3.9%, while Germany's Infineon Technologies AG lost 3.3%.
Asian markets
Most Asian markets advanced Wednesday, as upbeat results from Apple Inc. and International Business Machines Corp. inspired gains in the region's technology stocks, while a weakened U.S. dollar helped lift commodity sector shares. The Shanghai Composite climbed 1.8% and Hong Kong's Hang Seng Index rose 1.1%. Stocks in Shanghai and Hong Kong ranked among the big gainers as investors temporarily looked past concerns over Chinese monetary tightening, although they remained wary that inflation data due this week could bring back those worries. Japan's Nikkei Stock Average rose 0.4%, South Korea's Kospi edged 0.9% higher and Taiwan's Taiex added 1.1%.
Base metals
Base metals closed lower on the London Metal Exchange Wednesday after mixed U.S. housing data and record prices for the exchange's flagship copper contract prompted some long liquidation among participants. Some cautious investors also looked to square up ahead of Chinese consumer price index data, due Thursday. LME three-month copper, which hit a record of $9,781 a metric ton in early European trade, closed the day in negative territory, down 1.3% at $9,570/ton. Copper prices often react strongly to housing data--as the metal is widely used in construction--and while building permits figures were viewed as generally positive, they failed to support metal prices.
Crude futures retreated after early gains Wednesday as traders turned their gaze to key inventory data due later this week. Light, sweet crude for February delivery settled 52 cents lower at $90.86 a barrel on the New York Mercantile Exchange, after rising as high as $92.10 earlier in the session. Oil prices dropped ahead of important data on U.S. oil supplies, due Thursday. U.S. oil inventories are expected to fall by 1.4 million barrels in the weekly report from the Department of Energy. But the expected decline is partly due to the shutdown of the Trans-Alaska Pipeline, which restarted Monday. Fuel inventories are seen continuing their recent steep increase, with gasoline stockpiles expected to grow 2.2 million barrels and distillates, including heating oil and diesel, seen adding 500,000 barrels. Gold futures gained as investors sought an alternative to the U.S. dollar. The most actively traded gold contract, for February delivery, gained $2 to settle at $1,370.20 a troy ounce on the Comex division of the New York Mercantile Exchange. The front-month January contract rose $2.10, to $1,370.20.