* U.S. markets consolidated last week, with the blue chips in the Dow Jones holding up better than the broader S&P500 and Nasdaq markets.
* European markets finished the week lower. Key economic issues in the next few weeks include the extension to the EU bailout package and the introduction of revised “bank stress tests”.
* Asian markets traded lower for the week, led by the miners and financials, due to fears that strong Chinese data requires the government to further tighten monetary policy to rein in price pressures.
* Commodities prices fell again on concerns over Chinese demand moving forward.
The SPI Futures is testing the key level of 4800, and closed up marginally 0.2% (or 10 pts) at 4,746 (down -1.2% for week). The key levels for our index for this week are 4820 and 4680. M&A activity continues to drive specific stocks.
The ASX is set to trade flat, as we had generally negative leads from overseas markets. Miners are likely to again drag on the market again, but M&A activity is hotting up in the coal and iron ore sectors of the market.
Economics News Today
* Q4 Producer Prices Index
U.S. Markets
U.S. markets consolidated last week. The blue chips in the Dow Jones held up better than the broader S&P500, with GE up 7.1% after posting an outstanding jump of 50 percent in 4Q profits, and beter-than-expected revenue with a pickup in orders for big-ticket equipment and services. The tech-heavy Nasdaq led the pullback in the majors indices for the week.
In other corporate news: Bank of America fell 2% after a surprise fourth-quarter loss, weighed due to charges from pre-announced settlements and write-downs related to mortgage problems; Google fell 2.4% after it reported a 29% jump in 4Q earnings but announced a surprise management reshuffle; HP rose 1% after it said it was replacing four board members; and shares in Warner Music Group jumped 27%, after WSJ reported it had engaged Goldman Sachs to seek buyers for its business.
The sectors that outperformed were the Financials and Industrials, up 0.8%, while the Materials sector fell 0.3% for the session.
The Dow Jones and S&P500 continue to drift higher toward 12000 and 1300, respectively. Equities will be supported in the medium term while fund managers continue to move out of gold and bonds.
The Dow Jones added 0.7% for the week, however in the broader market the S&P500 lost 0.8% for its first weekly drop in 8 weeks, and the Nasdaq slumped 2.4%, while in the smaller caps the Russell 2000 was hammered, down 4.3% for the week.
The Dow closed up 0.4% (or 49 points) at 11,872, while in the broader market the S&P 500 index up marginally 0.2% (or 3 points) at 1,283 and the tech-heavy Nasdaq ended down -0.6% (or -15 points) at 2,690. Next week is another busy week on the corporate earnings front and traders will be reacting to those results as they are presented.
European Markets
European markets finished the week lower. There are a couple of key economic issues that are going be addressed in the next few weeks including: consensus EU agreement on the prospect of adding to the EUR750 billion bailout package needed to contain the region’s debt crisis and the introduction of revised “bank stress tests” in an attempt to reassure investors of the financial health of the euro-zone.
In the U.K. the FTSE 100 traded higher for the first day in three, with energy stocks trading up due to higher crude prices, and the Royal Bank of Scotland saying it will leave the U.K’s Asset Protection Plan by the end of 2011, earlier that expected. However December retail sales dropped 0.8 percent, the most ever. Meanwhile, the German market rose as investor fears over the euro-zone’s economic health eased, and Germany’s January business cofidence soared to 68, an all-time high since Germany reunified in 1991.
In London the FTSE 100 index closed up 0.5% (or 28 points) at 5,896 (down -1.8% for week), the German DAX closed up 0.5% (or 38 points) at 7,062 (down -0.2% for week), while in France the CAC was up 1.3% (or 53 points) at 4,038 (up 0.8% for week).
Asian Markets
Asian markets declined Friday and were down for the week. Traders sold-down their holdings on concerns about inflation in the region with Japanese, South Korean and Indonesian markets suffering big declines. Commodity-related shares in the region were hit hard on worries that the Chinese government’s policy tightening could dampen the domestic consumption and in turn global resource demand, which would lead to lower commodity prices.
In China the market finished higher on bargain hunting, despite worries that the government will be required to further tighten monetary policy in order to reign in domestic inflation, after the stronger-than-expected economic data released Thursday that showed the economy grew 10.3% in 2010.
In China the SSE Composite closed up 1.4% (or 38 points) at 2,715 (down -2.7% for week), while in Hong Kong the Hang Seng Index was down -0.5% (or -127 points) at 23,877 (down -1.7% for week), and in Japan the Nikkei 225 Index was down -1.6% (or -163 points) at 10,275 (down -2.2% for week).
Commodities
Commodities traded lower last week with Crude Oil losing 3.7%, Gold down 1.4%, Copper losing 2.4% and Silver slumping 3.2%. The US Dollar Index was down -0.8% at 78.12 on a higher Euro, while the Australian Dollar last traded at 98.92. Commodities were generally lower.
For the Friday session the Benchmark crude NYMEX for December delivery was down -0.5% (or $US-0.48) to settle at $US89.10. Copper prices backed off around 2-year highs, Copper for December delivery was up 0.9% (or 3.8 cents) at $US4.3035. Gold prices were off all-time highs again, with December gold down -0.4% at $US1,343.30.
Market Summary
ASX – to open lower
US & UK/Europe – Sharp falls in EU, while US was flat
US ADRs – Broadly Lower
Commodities Stock Index down -0.6%
Gold Stocks Index down -1.0%
Oil Stocks Index down -0.7%
By Michael Hevern
Head of Research
