Stocks: Monday's review
Japanese stocks fell by the most in two weeks as U.S. unemployment unexpectedly increased, clouding the outlook for the global economic recovery and for earnings at the country’s exporters.
Toyota Motor Corp. (7203), which counts North America as its largest market, dropped 0.7 percent after U.S. payrolls grew at the slowest pace in nine months.
Canon Inc. (7751), a camera maker that gets more than 80 percent of its revenue outside Japan, slipped 1.4 percent after the yen strengthened.
Elpida Memory Inc. (6665) plunged 13 percent on record trading volume after the maker of memory chips said it will sell 79.7 billion yen ($987 million) in shares and convertible bonds.
The Nikkei 225 Stock Average fell 0.7 percent to 10,069.53 at the 3 p.m. close in Tokyo. The broader Topix index slid 0.5 percent to 870.16. Both gauges fell by the most since June 27.
The Topix rose eight times out of the past 10 trading days, recovering about two-thirds of its losses since the March 11 earthquake, as manufacturers including Toyota restart factories ahead of schedule. In the last month, the Topix has been the best performer among the world’s 10 biggest stock indexes, rising 6.5 percent.
Stocks also declined following a report showing inflation in China, Japan’s biggest export market, accelerated to a three- year high of 6.4 percent in June. Some analysts said price gains may moderate in the second half of the year.
European stocks tumbled the most in seven weeks, led by banks and insurers, as contagion from Greece’s debt crisis threatened to spread to the bigger economies of Italy and Spain.
Italy’s FTSE MIB Index plunged the most in more than a year, entering a bear market as its slide from this year’s high exceeded 20 percent. UniCredit Spa (UCG) and Intesa Sanpaolo SpA (ISP) lost more than 6 percent and Germany’s Commerzbank AG (CBK) sank to a two- year low as a gauge of banks had the biggest two-day drop in 14 months. British Sky Broadcasting Group Plc (BSY) fell as the U.K. government referred its purchase by News Corp. to regulators.
China’s inflation accelerated to the fastest pace in three years in June, highlighting the challenge for policy makers of sustaining growth while taming prices. The consumer price index increased 6.4 percent, the National Bureau of Statistics said on July 9, exceeding the 6.2 percent median estimate of economists.
National benchmark indexes declined in all 18 western European markets today. Germany’s DAX lost 2.3 percent and the U.K.’s FTSE 100 fell 1 percent. Portugal’s PSI-20 Index plunged 4.3 percent and Spain’s IBEX 35 sank 2.7 percent. Italy’s FTSE MIB Index slid 4 percent, bringing the retreat since February to 21 percent.
UniCredit, Italy’s biggest bank, tumbled 6.3 percent to 1.15 euros. Intesa Sanpaolo, the second-largest, plunged 7.7 percent to 1.53 euros as it was downgraded to “neutral” from “overweight” at HSBC Holding Plc.
Fiat SpA (F) tumbled 5.4 percent to 6.86 euros as the carmaker was cut to “sell” at Societe Generale (GLE) SA.
The near 2% drop suffered by US stock market this session was its worst single-day decline in more than a month. The aggressive sell-off came in response to concerns that the European Union is struggling to help countries in its periphery restore their financial health.
An emergency meeting during the weekend stirred speculation that European Union officials may be considering including Italy in any new bailout packages. Concerns about Italy's financial health began to intensify last week, as evidenced by the spike in yields there.
Worry that the EU remains so far from resolving the threats of countries in the region's periphery sank many of Europe's major bourses. Both France's CAC and Germany's DAX dropped more than 2% in their latest round of trade. Italy's FTSE fell 4%.
Such weakness imbued domestic stocks and prompted participants to sell any gains that they had scored during the course of the past couple of weeks. In turn, the broad-based S&P 500 dropped precipitously. It didn't really secure any support until it came into close contact with its 50-day simple moving average just below the 1320 line.
Financials fell the hardest. The sector's near 3% tumble came amid weakness in banks, insurers, and diversified financial services alike. Only a handful of stocks in the sector were able to limit their losses to less than 1%.
All 30 Dow components settled in the red. Alcoa (AA 15.92, -0.46) was one of the poorest performers ahead of its quarterly report, which marks the unofficial start to earnings season. A few other blue chips will report quarterly results later this week, but announcements won't begin in earnest for several more days.
The Dollar Index hit its best level since March as traders dumped the euro in pursuit of the relative safety offered by the greenback. At the end of the day the dollar was quoted with a 1.2% gain against a basket of competing currencies.
Gold had attracted strong buying interest in the early going, but the precious metal had to fight to settle with a gain. After gold prices had been up by about 1%, they retreated to the neutral line. The precious metal was able to rebound to $1549 per ounce for a 0.5% gain on the day.