Japan’s Topix index fell for the first time in 10 days on speculation stocks’ gains have outpaced prospects for earnings and concern a rebellion among lawmakers will derail plans to cut corporate tax rates.
Prime Minister Naoto Kan proposed in December lowering the effective corporate tax rate by 5 percentage points this year, and is calling for debate on raising the consumption tax. Sixteen ruling-party lawmakers yesterday vowed to oppose Kan’s budget proposals.
The Topix has gained 8.3 percent this year, the most among major Asia-Pacific indexes. That’s driven the average price of stocks in the gauge to 16.5 times estimated earnings, the highest level since July.
European equities closed out the week on the back foot as weak trading on Thursday and Friday tempered the markets’ recent bullishness.
The FTSE Eurofirst 300 closed up 1.1 per cent at 1,187.03 for the week, after hitting its highest since September 2008 on Wednesday and then beginning to stall.
Equities have been rising steadily this year, and the pan-European index has gained 3.8 per cent since the beginning of the month.
But analysts say that investors’ bullishness on equities, following a strong run of macroeconomic data, has driven the market to the point that a slight downturn or correction seems increasingly likely.
Banks gained ground during the week, helped by positive earnings from Barclays in the UK and Société Générale in France, tempered slightly by losses on Friday following an uptick in talk of a potential bail-out for Portugal.
SocGen gained 7.3 per cent to €51.93 during the week. In Germany, Commerzbank gained 6.8 per cent to €6.15.
Shares in Nokia, the Finnish telecoms equipment group, began to stabilise after they plunged last week when investors questioned its proposed tie-up with Microsoft. Nokia shares fell 4.2 per cent to €6.70 over the week, with the bulk of the decline coming on Monday.
German and French carmakers also lost ground this week.
Daimler, which had reported disappointing profit figures on Wednesday, fell 6.9 per cent to €52.63 for the week. In France, Renault slipped 3.5 per cent to €44.99 after DZ Bank on Monday downgraded the group.
The S&P 500 was up 1 per cent over the week, led by oil and gas stocks. On Wednesday, the index reached the point where it had doubled from its recession low.
The Dow Jones Industrial Average 0.7 per cent over the week, while the Nasdaq Composite rose 1 per cent over the five-day period.
Energy stocks saw the strongest gains as oil prices edged higher on political uncertainty in north Africa and the Middle East. Murphy Oil was up 1.8 per cent to $73.94 while Chevron added 1 per cent to $98.18. The S&P oil and gas index was up 0.7 per cent.
Material stocks gave up ground, however, on news that China had raised its reserve ratio requirement by 50 basis points in a further move to combat inflation.
Freeport-McMoRan, the world’s biggest copper miner by market capitalisation, was down 1.7 per cent.
Progress Energy reported weak fourth-quarter earnings, weighing on the utility sector, but the wider market edged up to fresh two-and-a-half-year highs, led by oil stocks.
In earnings news, Newpark Resources, the provider of drilling fluids, reported fourth-quarter earnings of 15 cents a share, beating the average analyst estimate of 10 cents, and sending the stock up 6.3 per cent to $6.91.
Elsewhere in the wider energy sector, SunPower, the second-largest supplier of solar cells in the US, forecast 2011 earnings of as much as $2.20 a share, far surpassing the $1.74 cents a share estimated by analysts. The shares were up 7 per cent to $18.65.
Campbell Soup was down 4.9 per cent to $33.22 after the food company reported second-quarter earnings down 7.7 per cent and lowered its 2011 outlook.
Mergers and acquisitions activity dominated the week on Wall Street.
Monday kicked off with a $2.8bn acquisition by General Electric. The biggest US industrial group by market capitalisation said it was buying the well support arm of John Wood Group, the UK oil services company. GE was up 0.3 per cent to $21.43 over the week.
Along with high oil prices amid tensions in the Middle East and north Africa, this helped energy stocks see some of the strongest gains over the week. Among the leaders was Noble, the offshore driller, which was up 10 per cent to $42.87 while Schlumberger added 5.1 per cent to $94.98.
Sanofi-Aventis, the French pharmaceutical group, finally agreed its deal with Genzyme for $20.1bn in the biggest takeover in the pharmaceutical sector since 2009. This led Genzyme up 3.8 per cent over the week to $75.31.