Stocks: Weekly review
Shares rose for a fourth day this week on Friday amid renewed optimism about the global economic recovery and strong corporate earnings.
For this holiday-shortened week, the Topix rose 3.3 percent, the most since July, and the Nikkei 225 increased 3.6 percent.
The Nikkei 225 plunged 10 percent last week on concern damage from the quake would hurt the world’s third-largest economy, and the yen gained to a post-World War II high against the dollar.
In Seoul, chipmakers advanced on foreign buying after recent losses, helping the Kospi rise 0.9 per cent, while in Sydney banks and resource stocks gained ground with Woodside Petroleum 2.5 per cent firmer on speculation about Royal Dutch Shell’s 24 per cent stake in the group. The S&P/ASX 200 rose 0.9 per cent, its sixth consecutive gain.
In Hong Kong, robust bank earnings pushed the Hang Seng up 1.1 per cent. Bank of China jumped 2.6 per cent after reporting a 29 per cent rise in 2010 net profit. Financials were also one of the main drivers behind a 1.1 per cent advance for the Shanghai Composite. India’s Sensex has jumped 2.5 per cent to a two-month high. Buyers returned after the index heavily lagged behind the global market since the start of the year on inflation concerns.
European equities finished a week of strong trading positively, as investors’ bullishness on economic growth overcame concerns about Japan and Libya.
The FTSE Eurofirst 300 rose 3.3 per cent to 1,124.65 over the week, including a 0.1 per cent gain on Friday.
Cyclical stocks performed well with the FTSE Eurofirst construction and materials index rising 5.1 per cent to 1,525.38 over the five days and the general industry sub-index up 3.8 per cent to 2,667.67.
Carmakers had a volatile week, gaining ground as they were lifted by increasing optimism about growth but damped by concerns that the Japanese crisis would disrupt their supply chains.
The FTSE Eurofirst 300 auto and parts sub-index gained 4.7 per cent to 1,137.14 during the week. In Germany, Daimler rose 6.7 per cent to €49 and BMW was up 3.9 per cent to €57.46.
Banks closed the week ahead as eurozone ministers continued to make progress on structuring a bail-out mechanism acceptable to Germany, as well as nations with weaker credit, including Spain and Italy.
The FTSE Eurofirst 300 banking sub-index gained 2.5 per cent to 552.13 for the week, though fell 0.5 per cent in Friday trading. Deutsche Bank analysts found that sentiment towards financial stocks in Europe had improved strongly throughout February – investors are the least underweight in financials for two years.
For the week, Commerzbank in Germany gained 1.2 per cent to €5.76 while Banco Santander in Spain gained 2.7 per cent per cent to €8.52.
The Lisbon equity market proved a counterpoint to the country’s debt markets as stocks closed the week down only slightly, even as a political crisis and the spectre of a bail-out drove the cost of Portugal’s short-term borrowing to euro-era highs.
The main Portuguese index closed down 0.1 per cent at 7,854.18 for the week. Nuno Serafim, an analyst with IG Markets in Lisbon, said that the withdrawal of investors from the market was being tempered by the fact that they had largely priced in the chances of the bail-out.
Yet Portugal’s banks dragged down the market on Friday as their liquidity problems were seen to deepen after rating agency Standard & Poor’s downgraded the nation’s debt.
Espirito Santo, Portugal’s biggest bank by market capitalisation, fell 1.9 per cent to €3.07 and Banco BPI fell 0.3 per cent to €1.30.
Also on Friday, Edison, the energy group, jumped 4.5 per cent to €0.78 after the Italian media reported that it was discussing a plan with Enel, the Italian utility, under which Enel would buy some assets from Edison if it were unable to resolve restructuring talks with its largest shareholders.
Enel retreated 0.8 per cent to €4.27.
Wall Street began the week in recovery mode. The first three days of last week had seen sharp losses on the S&P after the disaster in Japan. But the index then began to recover as worries about the financial impact of the disaster on US companies subsided and the 1.5 per cent gains on Monday were a continuation of that rebound recovery. By Tuesday, the index was back to where it had been before the earthquake hit.
The markets paused for breath midweek before allowing optimism to gain sway. As the week went on, traders turned their attention away from global pressures and focused more on the strengthening domestic economy.
On Thursday data showed that the number of people in the US taking jobless benefits had fallen by 5,000 to 382,000 the previous week. The four-week average of claims fell to its lowest point since July 2008.
The S&P 500 has put on 1.4 per cent since the disaster in Japan, though it is still 2.2 per cent lower than before the eruption of conflict in north Africa and the Middle East in the middle of February. The Vix index, a measure of market volatility, was down 27.1 per cent over the week but was still up 8.5 per cent since before the tensions surfaced in the Middle East
Among those stocks in focus over the past five days was AT&T, which announced it was buying T-Mobile USA from Deutsche Telekom for $39bn in a deal that would create the largest wireless carrier in the US. The stock was up 3.3 per cent over the week to $28.85.
Its rival Sprint Nextel, which had also been in talks with Deutsche Telekom to merge with T-Mobile, tumbled 7.1 per cent to $4.69 over the week and was the worst performing stock on the S&P over the period. Overall, the telecoms sector added 2.2 per cent.
Technology stocks saw gains after strong earnings results from a number of key industry players.
Red Hat, the developer of open source software, was up 18.5 per cent to $46.34 while Micron Technology, the chipmaker, added 14.7 per cent to $11.55 over the week. Oracle was up 6.1 per cent to $32.64.
Bank of America was in focus following news that the Federal Reserve had “objected” to its planned dividend increase. The stock was down 4.5 per cent to $13.34 over the week. The sector, however, was up 0.8 per cent over the week.