World Market Report-Overview (7/25/ 2011)
US Markets
The Dow industrials' decline came as most major market indexes around the world finished with gains. Even so, the blue-chip index finished with a strong weekly advance after several days dominated by concerns over debt negotiations in Washington and Brussels. The Dow added 1.6% during the week, and is up 2.2% for July, falling just short of a multiyear high. Hurting stocks on Friday was a belief that U.S. debt talks would fail to come to a quick conclusion.
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The White House and Republicans in Congress were scrambling Sunday to get a deal to raise the U.S. federal borrowing limit before Asian markets open, with leaders in both parties expressing concern about a rocky market reaction to the apparent collapse Friday of talks between President Barack Obama and House Speaker John Boehner. While U.S. stocks fell Friday, global markets staged a broad advance after leaders from the bloc of euro-using nations agreed on a new financing package for Greece, as well as on steps to keep the debt crisis from spreading.
European Markets
Germany's DAX index rose 0.5%, while France's CAC 40 tacked on 0.7%. Hong Kong's Hang Seng index leapt 2.1%. Friday's U.S. trading was dominated by a handful of blue chips. Leading on the downside was Caterpillar, which sank $6.45 a share, or 5.8%, to $105.15 a share after the construction-equipment maker reported second-quarter earnings that surged 44%, but fell short of expectations.
European stocks snapped a three-session losing streak as solid earnings from Novartis, a rebound by bank stocks and advances by technology companies helped the region's indexes recover some of Monday's steep declines. The Stoxx Europe 600 index rose 0.8% to 264.28, a day after slumping 1.8% as worries about the financial health of some euro-zone governments and disappointment over Europe's bank stress tests hammered stocks. Even so, it was the index's fifth-lowest close of the year. In London, the FTSE 100 rose 0.6% to 5789.99. Lloyds Banking Group rallied 4.3% as bank stocks took a break from two weeks of selling. Lloyds has skidded 7.5% on Monday. Johnson Matthey, whose main business is making vehicle catalysts, climbed 4% after reporting a 19% rise in underlying pretax profit for the fiscal first quarter and saying that its first-half results should be "significantly ahead" of a year earlier.
In Frankfurt, the DAX increased 1.2% to 7192.67, lifted by chip maker Infineon Technologies, which surged 4.8%. European technology stocks were lifted by earnings from International Business Machines that bested forecasts. In Paris, the CAC-40 gained 1.2% to 3694.95. Telecommunications-gear maker Alcatel-Lucent was the index's biggest advancer, rallying 5.9%. Novartis rallied 3.2% in Zurich as growth from recently launched products helped the Swiss pharmaceuticals company report a 27% jump in second-quarter sales. Electrolux slumped 15% in Stockholm after its second-quarter results fell short of expectations because of rising raw-materials prices and lower demand.
Asian Markets
Asian shares rose Friday after euro-zone leaders Thursday struck a deal on a second bailout package for Greece, delivering a much needed shot in the arm to stocks around the region, and sending regional bank stocks and some oil plays higher. Euro-zone leaders' package for Greece amounts to EUR159 billion in aid, including official loans and contributions from the private sector and takes steps to contain the possible knock-on effects to other weak economies in the 17-nation bloc from Greece's debt burden. But enthusiasm was reined in a bit as the White House and a spokesman for House Speaker John Boehner denied Thursday reports that a U.S. budget bargain was near. The Aug. 2 deadline to strike a deal is fast approaching; if nothing gets done by then, the U.S. faces a default and a likely credit downgrade. Japan's Nikkei Stock Average tacked on 1.2%, Australia's S&P/ASX 200 added 1.1%, South Korea's Kospi rose 1.1%, Hong Kong's Hang Seng Index tacked on 1.7% and China's Shanghai Composite rose 0.5%. The Greece bailout deal boosted banks around the region as the global financial sector stands to benefit the most from a lessening of risk aversion.
Base Metals
Base metals closed mixed on the London Metal Exchange Friday as early gains were scaled back by a strengthening dollar, although aluminum held its ground, closing the day firmly in positive territory. LME three-month aluminum traded 2.0% higher at $2,590 a metric ton, having earlier risen 2.2% to hit a two-week high of $2,597/ton. In contrast, copper was just $1 higher at $9,674/ton. Crude oil futures climbed for a fourth straight day Friday and settled at a fresh six-week high, on anticipation of higher prices this week if progress is made in weekend talks to raise the U.S. debt ceiling. For the second day in a row crude topped $100 a barel in intraday trading but couldn't hold triple digits at the settlement amid lingering doubts about the strength of near term oil demand in the U.S., the world's largest oil consumer.
Top Treasury Department and Federal Reserve officials huddling Friday said they remain confident lawmakers will reach a deal to raise the $14.29 trillion debt ceiling by Aug. 2, even as they discussed the potential fallout if an accord can't be reached. Light, sweet crude oil for September delivery on the New York Mercantile Exchange settled 74 cents higher, at $99.87 a barrel, after hitting a high of $100.19 a barrel, the highest level since June 10. ICE September Brent settled up $1.41 at $118.67 a barrel.
Gold futures rebounded above $1,600 an ounce and silver reclaimed $40 Friday as investors sought refuge ahead of the weekend, with the deadline to raise the U.S. debt limit looming. Precious metals have received a boost from the view that the dollar and U.S. government debt, both widely considered safe haven assets, might not be so safe as doubts surface about whether the U.S. will meet all its obligations to creditors.
Gold for August delivery climbed $14.50, or 0.9%, to settle at $1,601.50 a troy ounce on the Comex division of the New York Mercantile Exchange. That is just short of the record settlement of $1,602.40 hit Monday.
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