Stocks: Weekly review
Asia’s regional benchmark index recorded its first weekly gain after seven consecutive weeks of declines as hopes rose that China may have seized control of its economy and can end its cycle of rate increases.
China’s premier Wen Jiabao said in the Financial Times on Friday that Beijing was “confident price rises will be firmly under control this year”, and added that he expected inflation to drop steadily in the coming months.
The comments helped the Shanghai Composite index climb 2.2 per cent on Friday to 2,746.21 – its best daily performance in four months, and lifted it 3.9 per cent over the week – the best weekly rise since early November.
The broader FTSE Asia Pacific index climbed 2.1 per cent over the week to 256.1, ending seven straight weeks of losses.
Tokyo-listed exporters had a good week as companies with heavy exposure to European economies moved higher after investors rushed to cover short positions.
Sony climbed 1.7 per cent to Y1,407, while Toshiba added 2.7 per cent to Y344.
Japan’s power generators had a turbulent week as hopes for a resolution to the compensation claims issue surrounding Tokyo Electric Power were first raised on hopes of help from the government, then dashed by comments from an adviser, who told parliament it would be difficult to pass legislation.
Tepco’s shares have see-sawed violently since the March 11 earthquake that caused a leak of radioactive material, forcing nearby residents to leave their homes. But Tepco and its peers ended the week higher on hopes that mothballed nuclear reactors could soon return to production.
Shares in Tepco were up 6.2 per cent to Y308, while Chubu Electric Power added 3.8 per cent to Y1,474 and Kansai Electric Power gained 9.9 per cent to Y1,495.
The Nikkei 225 Average ended 3.5 per cent higher on the week at 9,678.71.
European shares extended their run of weekly losses to eight this week as the sell-off in the financial sector accelerated on concerns over the exposure of banks to the Greek debt crisis.
During early trade on Friday it had looked like the FTSE Eurofirst 300 index might break the losing streak, getting off to a strong start after Greece agreed new austerity measures.
Wall Street’s weak start, however, prompted selling and the pan-European benchmark finished down 0.1 per cent on the day – resulting in a 1.2 per cent loss over the week to 1,074.16.
Italy’s Banca Monte dei Paschi di Siena, down 11.4 per cent over the week to €0.53, was among the worst performing of the financial stocks.
Italy’s banks were under pressure after Moody’s on Friday warned that it had changed its outlook on 13 mid-sized and smaller Italian banks to negative and warned that it could downgrade the ratings on 16 others.
But there were strong gains for carmakers and aerospace stocks that helped limit the overall losses on the FTSE Eurofirst.
Porsche gained 10.4 per cent over the week to €52.77 while VW preference shares added 3.4 per cent to €122.95.
BMW gained 4.6 per cent on the week to €67.13 after it was reported to be pushing to increase its deliveries in the coming years, to 2m units in 2016, and up to 2.6m units by 2020.
French pair Renault and Peugeot made noteable gains also, up 5.8 per cent to €39.17 and 3 per cent to €29.87, respectively.
European aerospace group EADS climbed 4.5 per cent to €22.40 over the week after its wholly owned subsidiary Airbus on Monday announced an order for 60 of its A320 aircraft from General Electric’s commercial leasing and financing arm.
Risk assets took another beating in the final session of a volatile week on Wall Street, with technology stocks suffering particularly sharp losses after disappointing earnings from some of the key players in the industry.
Micron Technology, the chipmaker, saw the deepest losses on the S&P 500, falling 14.5 per cent to $7.21 after reporting a 92 per cent drop in earnings late in the previous session.
Oracle, the business software and hardware giant, fell 4.1 per cent to $31.14 after reporting lacklustre growth in its hardware segment. The losses came despite a 36 per cent rise in overall fourth-quarter earnings.
These losses helped weigh on the technology sector, which was down 1.8 per cent, the worst performing on Wall Street.
Other cyclical sectors also suffered as investors continued to worry about the uncertain situation in Europe and were mostly reluctant to buy in case of bad news over the weekend.
The industrial and financial sectors were down 1.2 per cent and 0.7 per cent, respectively. Among those stocks to lose ground were General Electric, which fell 2.2 per cent to $17.97, and Morgan Stanley, which declined 0.6 per cent to $22.21.
These losses left the S&P 500 down 1.2 per cent to 1,268.45, a loss of 0.2 per cent over the week, leaving it on track for its worst month of losses in a year.
The declines came despite some slightly better than expected economic data. The session saw GDP growth for the quarter revised up to 1.9 per cent from 1.8 per cent by the Bureau of Economic Analysis. This was an improvement, but still a far cry from the 3.1 per cent GDP growth posted in the fourth quarter of last year.
Durable good orders also rose by a stronger-than-expected 1.9 per cent in May on a rebound in demand for transportation equipment.
The Dow Jones Industrial Average was down 0.9 per cent to 11,937.30, leaving the index down 0.6 per cent over the week. The Nasdaq Composite was 1.3 per cent lower to 2,652.89 on Friday, but still up 1.4 per cent over the week.
In deal news, Williams, a natural gas group, launched a $4.9bn cash bid for Southern Union in an attempt to break up an already agreed deal between the target and Energy Transfer Equity.
The prospect of a bidding war left shares in Southern Union up 16.9 per cent to $39.92 and ETE down 5.6 per cent to $43.03. Williams was down 2.3 per cent to $28.55.
Airline stocks suffered substantial losses in the session led by United Continental Holdings, which fell 8.5 per cent to $23 after providing a disappointing guidance. Delta Airlines declined 4.9 per cent to $9.45 while Southwest Airlines lost 0.4 per cent to $11.36.
Airline stocks pared all of the gains that has been won in the previous session on the sharp drop in the oil price.
The week on Wall Street began upbeat as investors bought into a depressed market that had seen nearly seven straight weeks of losses.
But sentiment reversed on Wednesday after Ben Bernanke gave a cautious assessment of the US economy in a news conference, which then set the tone for the rest of the week.
The markets reacted badly to news that the Federal Reserve had cut US growth forecasts, raised inflation estimates and offered no hope that there would be another round of monetary stimulus.
Sentiment throughout the week was also weighed on by concerns over the sovereign debt crisis in Europe, which absorbed much of the interest and attention of traders.
Financial stocks were some of the worst performers of the week, weighed on by these concerns.
Bank of New York Mellon was down 6 per cent over the week to $24.64 while SunTrust Banks fell 4.5 per cent to $25.