Stocks: Weekly review
Battered Asian markets reeled under the impact of fresh blows on Friday as higher-than-forecast Chinese inflation sparked fears of interest rate rises while the massive Japanese earthquake accelerated a session of selling.
The day’s losses set the seal on the worst week for the region’s markets in seven months, the FTSE Asia-Pacific index falling 3.3 per cent to 258.82, breaking below a 10-point trading range that prevailed for all of 2011.
Tokyo’s Nikkei 225 Average had its steepest weekly decline for eight months, leading the region’s equity markets lower after tumbling 4.1 per cent to 10,254.43.
Although the Japanese benchmark fell just 1.7 per cent on Friday, more selling could be on its way next week as the tremors only hit Tokyo just before the market close. Stock futures lost 3.3 per cent in after-hours trading.
A broad sell-off was led by carmakers and financials with Toyota, the world’s biggest carmaker, falling 5 per cent over the week to Y3,595, Sony, Japan’s biggest exporter of electronics, declining 5.8 per cent to Y2,806 while Mitsubishi UFJ Financial, the country’s largest listed lender, sank 5.1 per cent to Y431.
Hong Kong’s Hang Seng index led the region’s emerging markets lower on Friday, tumbling 1.6 per cent to 23,249.78 as exporters slipped on waning confidence over global economic growth.
But the Hang Seng lost just 0.7 per cent over the five trading days as the index hit a five-week peak on Wednesday when hopes were raised that the worst of the oil price shock had been priced into global stocks.
Hong Kong exporters hit by the growing retreat in risk appetite over the course of the week included Li & Fung, the biggest supplier to US giant Walmart, which sank 2.3 per cent to HK$44.35, while Esprit Holdings, a global fashion retail group, slid 0.9 per cent HK$37.90.
Metal producer shares, often a barometer of sentiment for global growth, slumped with Jiangxi Copper down 7.6 per cent to HK$23.10 while aluminium group UC Rusal tumbled 7.2 per cent to HK$11.84.
European reinsurers were hit sharply as investors expected higher claims on the sector following the Japanese earthquake and resulting tsunami.
The 8.9 magnitude quake hit the north-east of the country, causing many injuries, fires and damage to buildings, and triggered a tsunami wave whose impact on Japan and other countries and islands in the Pacific is still to be fully realised.
Munich Re, the German reinsurer, said on Thursday that natural catastrophes in the first quarter, including the February earthquake in New Zealand, had cost it in the region of $1.5bn. The company added that its target of €2.4bn net profit for 2011 would only be achievable if “random losses in the further course of the year remain below expectations”. Shares in Munich Re fell 4.3 per cent to €111.75, down 6.3 per cent over the week.
Swiss Re, which announced last week that it expected to face about $800m in claims from the Christchurch quake, fell 3.5 per cent to SFr51.70, off 6.9 per cent over the five sessions. Hannover Re, the third-largest reinsurer, which reported on Wednesday forecast-beating profits for 2010, slid 4.3 per cent over the week to €38.65.
Over the week, Germany’s Allianz was down 4.6 per cent to €99.82, while France’s Axa shed 2.7 per cent to €14.61. Aegon of the Netherlands shed 3.4 per cent to €5.35 and Switzerland’s Zurich Financial lost 4.8 per cent to SFr255.
The FTSE Eurofirst 300 was down 2.3 per cent over the week to 1,122.53.
There were a couple of outstanding performers over the week. Iberdrola Renovables, the Spanish green energy group, rose 13.6 per cent to €3.01 after Wednesday’s announcement by its parent company that it would buy back minority holdings.
Delhaize rallied 5.9 per cent to €59.65 after the Belgian supermarket group published forecast-beating 2010 results.
In spite of downgrades by Moody’s to the sovereign debt of both Greece and Spain this week, the banks of these countries were not heavily sold. Banco Español de Crédito rose 7.2 per cent over the week to €6.56, while National Bank of Greece put in two strong sessions on Thursday and Friday to end the week flat at €6.52.
Spain’s Ferrovial gained 4.4 per cent to €9.03 over the week on speculation a Chinese airport operator was considering taking a stake in BAA, the British airport authority owned by the Spanish construction and concessions group. Ferrovial said it was studying offers for a 10 per cent stake in the operator of Heathrow and Stansted airports.
Following the devastating earthquake and tsunami that hit north-east Japan, the strongest in 140 years, the US’s KBW property and casualty index fell 0.7 per cent, even as the broader market saw gains.
Insurance analysts said that losses to private insurers would be limited, in part because Japan maintains a government quake insurance fund. The KBW index recovered from an earlier 2.2 per cent tumble.
Aspen Insurance Holding, which has exposure to Japanese quakes, fell 4.2 per cent to $27.59. Platinum Underwriters fell 4.6 per cent to $37.83. ACE Ltd, which recently purchased protection to limit earthquake losses, was up 0.5 per cent to $61.37.
However, US refineries and steelmakers were seeing sharp gains as the price of oil fell further, partly on expectations that consumption in Japan would fall.
Tesoro, the petrol refiner, led the S&P 500 risers, gaining 8.5 per cent to $24.51. AK Steel rose 5.7 per cent to $15.46. US crude oil dipped below $100 a barrel at one point.
Verizon, which provides WiFi to tablets, fell 1.5 per cent to $35.85. Technology was still the biggest loser for the week, with the Nasdaq Composite index falling 2.5 per cent. It was the worst week for the index since last August.
JDS Uniphase, which makes fibre optic connections for large telecoms companies, slid 22 per cent to $21.26. Technology groups have overtaken financials as the largest sector in the S&P 500. Finisar lost 46 per cent to $23.21, after it warned that the next quarter would see a sharp drop in activity in China.
For the week, the Dow was down 1 per cent, and the S&P 500 fell 1.3 per cent. Losses were led by energy stocks, which fell 4 per cent as oil prices eased.