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02.01.2012 09:23

Stocks: Weekly review

Asian stocks edged higher, lifted by signs of U.S. economic recovery, as the region’s benchmark index ended 2011 with its first annual decline in three years.
The Asia Pacific gauge has lost about $1.78 trillion this year amid concern Europe’s three-year debt crisis will drag the global economy into recession.
Utilities have fallen 26% this year, dropping the most among the 10 industry groups on the Asian gauge. Japanese power producers tumbled amid a nuclear crisis at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant. The utility has lost 91% this year, the biggest drop on the MSCI All Country World Index.
Gains in stocks were limited after Italy yesterday fell short of its target in a debt auction. Prime Minister Mario Monti said his government won’t “rule out” more aggressive efforts to reduce debt.
Exporters to the U.S rose. Sony added 2%, Techtronic Industries rose 0.9%.
Inpex advanced 0.4% after West Texas Intermediate crude for February delivery gained as much as 0.5 percent to $100.16 a barrel on the New York Mercantile Exchange.
Power Finance rose the most on the Asia Pacific index after R. Nagarajan, executive director for finance, said the New Delhi-based company plans to sell at least 1.5 billion rupees ($28 million) of bonds next week. The stock gained 5.1%.
Among other stocks that advanced, Japanese engineering company Chiyoda Corp. gained 2.1%. The Nikkei newspaper reported the company will likely beat its forecast for operating profit by up to 3 billion yen ($39 million) in the year ending March due to lower-than-expected costs on a liquefied natural gas project in Qatar.

European stocks climbed in the last week of 2011 as U.S. data showed the recovery in the world’s largest economy is gathering pace and optimism grew that euro- area policy makers will contain the debt crisis.

Reports this week showed business activity in the U.S. expanded more than forecast and confidence among American consumers rose in December to the highest level in eight months.

The Stoxx 600 gained 5.6% from the start of the year to its peak on Feb. 17. From there, the index tumbled 26 percent to its low on Sept. 22, entering a bear market. The gauge had its worst third quarter since 2002, dropping 17 percent, as U.S. leaders wrangled over deficit cuts and European policymakers remained divided on their response to the debt crisis.

An Oct. 26 agreement to bolster the region’s bailout fund, the European Financial Stability Facility, stalled as Germany and France differed over how tackle the crisis. France called for using the ECB as a backstop, while Germany rejected it. Chancellor Angela Merkel listed using the ECB as the lender of last resort, issuing joint euro-area bonds and going in for a “snappy debt cut” as unworkable proposals.

Banks had the biggest drop among 19 industry groups this year, sinking 32 percent, amid growing concern that the fiscal crisis will force at least one nation to default on its debt. Health-care and food stocks advanced as investors sought companies whose earnings are less tied to economic growth.

Banco Comercial Portugues advanced 16%. Chinese banks may be interested in investing in the lender, news agency Lusa reported citing Cao Guangjing, chairman of China Three Gorges Corp.

Banco Espirito Santo rose 15%. Portugal may recapitalize the country’s banks without becoming a shareholder, Jornal de Negocios reported, without saying where it got the information. The state may subscribe contingent convertible bonds sold by the banks, the newspaper said. So-called CoCos are bonds that convert into equity if a bank’s capital drops below a set level.

Britvic rallied 4.7%. Unilever climbed 1.6%. Nestle SA added 1.5%.

Rio Tinto Group declined 1%, as copper slid on the London Metal Exchange this week.

U.S. stocks fell, leaving the Standard & Poor’s 500 Index virtually unchanged for the year, as concern over Europe’s debt crisis overshadowed optimism that the American economy will expand in 2012.
The benchmark index for American equities capped its smallest annual change since 1947. The S&P 500 started the year with a rally, rising as much as 8.4 percent to a three-year high by the end of April and extending its rebound from a March 2009 bear-market low to 102 percent.
The index tumbled throughout the summer as Congress and President Barack Obama struggled over U.S. deficit cuts, and sank further amid concern that Europe’s debt crisis was threatening the global economic recovery. The S&P 500 fell as much as 19 percent from April to its low for the year on Oct. 3.
The market rebounded amid tumbling valuations and data signaling that the world’s largest economy was weathering Europe’s crisis. The U.S. unemployment rate fell to 8.6 percent in November, the lowest since March 2009, after lingering at 9 percent or above for seven straight months. The S&P 500’s price- earnings multiple reached the lowest level in more than two years on Oct. 3, falling to 11.6, a 27 percent decline from its high in February of 15.8.
Stock fell on Friday after Spain said its budget deficit will reach 8 percent of gross domestic product this year, more than the previous forecast of 6 percent. Luxembourg’s Jean-Claude Juncker, who leads the group of euro- area finance ministers, said economic growth in the euro region “isn’t good” and the world economy is growing only in some Asian and African countries.
China’s official Xinhua News Agency reported the world’s second-largest economy may face “downside pressure” next year, even though growth will be more than 9 percent in 2011.
Financial shares have fallen the most among the 10 main industries in the S&P 500 this year, losing 18% as a group, followed by a decline of 12% in raw-material producers. Utilities, consumer-staples providers and health-care companies, among stocks considered the least sensitive to economic prospects, rose at least 10% for the top gains.
AMR Corp. tumbled 32%. NYSE Euronext said shares of the parent of American Airlines will be removed from the New York Stock Exchange before trading begins on Jan. 5, following the Fort Worth, Texas-based company’s bankruptcy filing on Nov.29.
The fast food giant McDonald's was the best performer on the Dow Jones industrial average in 2011, up 31%. That was enough to beat out Warren Buffett's newest favorite, IBM (IBM), No. 2 among the blue chip winners.
At the other end of the spectrum was Bank of America (BAC), which suffered a 58% plunge to lows not seen since 2009. That slump gave it an easy win over Alcoa (AA), whose shares lost 44%, in the competition for dubious distinction of 'biggest loser.'

Market Focus

  • Euro Area trade balance surplus declined significantly in August
  • Consumer prices in China were up 1.6 percent on year in September,
  • US consumer sentiment surged in early October, reaching its highest level since the start of 2004 says UoM
  • Earnings Season in U.S.: Major Reports of the Week
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