Stocks Under Considerable Pressure In Early Trading
Stocks have
shown a notable move to the downside over the course of early trading
on Friday after ending the previous session sharply higher. The major
averages have slid firmly into negative territory, offsetting
yesterday's gains.
The major averages have seen some further downside in the past few minutes, hitting new lows for the young session. The Dow is down 106.51 points or 0.8 percent at 13,379.46, the Nasdaq is down 20.23 points or 0.6 percent at 3,116.37 and the S&P 500 is down 10.39 points or 0.7 percent at 1,436.76.
The
early weakness on Wall Street is partly due to continued concerns about
the financial situation in Europe, with traders waiting on the results
of stress tests of Spanish banks.
While the unveiling of Spain's
budget for 2013 contributed to the rally that was seen on Thursday,
analysts have noted that the country still faces difficult times ahead.
Peter Boockvar,
managing director at Miller Tabak, said, "The initial reaction
yesterday was that maybe the Spanish news was enough to satisfy any
potential conditions brought upon them with an eventual bailout request.
Either way, Spain will be asking for help."
"Noon time we'll see
how much money the Spanish banking system will be thought to need for
recaps, with 60 billion euros expected," he added. "The ESM though won't
give Spain the money until banking oversight in the Euro zone is up and
running and that may not be until 2013."
Further selling
pressure was recently generated by a report from the Institute for
Supply Management - Chicago showing an unexpected contraction in
Chicago-area business activity in the month of September.
The ISM Chicago said
its business barometer dropped to 49.7 in September from 53.0 in
August, with a reading below 50 indicating a contraction in business
activity. With the drop, the barometer fell to its lowest level in three
years.
Transportation stocks are seeing considerable weakness in
early trading, dragging the Dow Jones Transportation Average down by
1.4 percent. With the loss, the average has fallen to its lowest
intraday level in over three months.
Housing, trucking, and steel stocks are also posting notable losses, moving lower along with most of the major sectors.
In overseas trading, stock market
across the Asia-Pacific region moved mostly higher on Friday, although
Japanese stocks bucked the uptrend. While Japan's Nikkei 225 Index fell
by 0.9 percent, Hong Kong's Hang Seng Index rose 0.4 percent and China's
Shanghai Composite Index jumped 1.5 percent.
Meanwhile, the major European markets have turned lower over the course of the trading day. The French CAC 40 Index has tumbled 1.2 percent, while German DAX Index has dipped 0.3 percent and the U.K.'s FTSE 100 Index has edged down by 0.1 percent.
In the bond market, treasuries are moving modestly higher after ending a recent winning streak on Thursday. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 1.3 basis points at 1.627 percent.
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European Markets Lower Ahead Of Spain Stress Test Results
The European markets are
lower in afternoon trading Friday, as yield on Spanish 10-year bonds
rose above 6 percent, ahead of the announcement of the results of the
stress tests conducted on the country's banks.
The Spanish
government on Thursday unveiled its budget for 2013, which focused on
spending cuts rather than tax hikes. Under the new budget, government
ministries will have their budgets slashed by 8.9 percent in 2013, while
public spending will be cut by 58 percent overall. The government will
also establish an independent fiscal authority to oversee the deficit
cutting plans.
In Greece, the leaders of the three political
parties supporting the coalition government have reached a tentative
agreement on a new 11.5 billion euros package of spending cuts and tax
increases demanded by international creditors in exchange for two major
bailouts.
Retail sales in Germany recovered in August following a
modest decline in the previous month. Sales rose 0.3 percent in August
from a month earlier when adjusted for seasonal and calendar variations.
This was a tad above the 0.2 percent growth expected by economists.
Eurozone
inflation rose unexpectedly in September due to an increase in energy
and food prices, flash estimate from Eurostat showed. Inflation increased to 2.7 percent in September from 2.6 percent in August. The rate was forecast to slow to 2.4 percent.
French President François Hollande,
who unveiled details of his country's budget, said he aims to cut 2013
deficit to 3 percent of GDP. The country raised taxes on the super rich.
The Euro Stoxx 50
index of eurozone bluechip stocks is losing 0.90 percent, while the
Stoxx Europe 50 index, which includes some major U.K. companies, is
falling 0.60 percent.
The German DAX is falling 0.37 percent and Switzerland's SMI is losing 0.30 percent. The French CAC 40 is declining 0.97 percent while the UK's FTSE 100 is dropping 0.07 percent.
In Frankfurt, steel maker ThyssenKrupp is
gaining 2.6 percent and tire manufacturer Continental is advancing 1.2
percent. HSBC upgraded Linde to "Overweight" from "Neutral." The shares
are modestly up.
Krones is gaining 3.5 percent. Berenberg raised the stock to "Buy" from "Hold." Commerzbank and Deutsche Bank are moderately down.
HSBC cut Basf to "Neutral" from "Overweight." The stock is down 0.4 percent. Cheuvreux cut its rating on HeidelbergCement. The stock is falling 1.8 percent. Infineon Technologies, Lufthansa and Volkswagen are notably lower.
In Paris, construction materials maker Saint-Gobain is losing 2.4 percent. Builders Bouygues and Vinci are moderately down. Credit Agricole and Societe Generale are moderately lower while BNP Paribas is gaining 0.8 percent. CapGemini, Publicis Groupe and Essilor International are rising notably.
HSBC
raised Air Liquide to "Overweight" from "Neutral." The stock is up 0.2
percent. UBS raises Air France-KLM to "Buy" from "Neutral." The stock is
adding 3.3 percent. UBS removed Renault from 'European Key Call List.'
Renault shares are gaining 0.7 percent.
In London, Fresnillo is gaining 3.4 percent and Antofagasta is advancing 2.4 percent. Vedanta, Rio Tinto and Randgold are notably higher. Barclays is up 1 percent and Royal Bank of Scotland is rising 0.5 percent.
Travel operator Thomas Cook Group
maintained its full year guidance, and said the UK turnaround plan is
delivering against its goals. The stock is rising 3.3 percent. Compass Group is declining 1.9 percent. Admiral Group and Tesco are notably lower.
Electrocomponents
is plunging over 9 percent. The distributor of electronics and
maintenance products expects sales growth in the first half to be flat
on the prior year.
Heineken is up 1.2 percent in Amsterdam
after winning Fraser & Neave's shareholder approval for the
purchase of the remaining shares of Tiger beer maker Asia Pacific
Breweries Ltd. Syngenta is up 1.9 percent in Zurich, following a broker upgrade.
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Asian Stocks Rise As Spain Budget Eases Debt Worries
Asian stocks
posted widespread gains on Friday as news from both Spain and Greece
where the respective governments outlined plans to further cut spending
and raise taxes sent positive signals to financial markets. The proposed
austerity measures announced amid fierce public protests and continued
hopes for fresh Chinese stimulus following a record amount of liquidity
injection into the banking system by China's central bank this week
spurred some bargain hunting in beaten down shares following recent
losses.
Spain unveiled yesterday a crisis budget for 2013 based
mostly on severe budget cuts aimed at meeting deficit-reduction targets
before the debt-laden nation formally requests a bailout. The
publication of bank stress results later today will reveal how much more
money is needed to recapitalize the Spanish banking system.
Meanwhile
after reaching a "basic agreement' on a multibillion-euro austerity
plan demanded by its international lenders, Greece's three-party
coalition government said it would need an extra 13-15 billion euros to
finance a two-year extension to its bailout.
Japanese stocks
reversed early gains to end lower, weighed down by the strong yen
against the dollar. The Nikkei average lost 0.9 percent, while the
broader Topix index fell 1.1 percent. Auto makers were among the worst
hit, with Toyota Motor and Honda losing 2-3 percent after data released
today showed Japanese auto exports fell 5.4 percent in August following
seven months of upturn. Heavyweight Fanuc edged down 0.9 percent, while
semiconductor-related shares such as Sumco, Tokyo Electron and Advantest
lost 2-3 percent.
Among those that gained, Fast Retailing edged up 0.2 percent and Japan Tobacco
added 1.7 percent. Aozora Bank shares rallied 3 percent following the
previous session's steep losses after the lender announced that top
shareholder Cerberus Capital Management LP would sell its 55 percent
stake in the bank. Steel maker Kobe Steel rallied 3.3 percent on
reports the company may buy back part of its stake from the new company
that will be created through the merger of Nippon Steel Corp. and Sumitomo Metal Industries.
China's Shanghai Composite
index rallied 1.5 percent, extending gains for a second consecutive
session, led by metal stocks and property developers. Hong Kong's Hang Seng index gained 0.4 percent. Mainland Chinese
markets will be closed for week-long holidays from Oct. 1 to Oct. 7,
while the Hong Kong market will remain closed on Monday and Tuesday.
Australian stocks posted modest gains, led by cyclical stocks as concerns over Europe eased. Both the benchmark S&P/ASX 200 and the broader All Ordinaries index ended up about 0.1 percent each. BHP Billiton edged up marginally, but Rio Tinto slid 0.4 percent and Fortescue shed 0.9 percent. Gold miner Newcrest climbed 3.3 percent as gold prices hovered near one-week high.
Oil & gas exploration company Santos rose 0.7 percent and Aurora Oil and Gas added
2 percent after crude futures rebounded about 2 percent from two-month
lows overnight on rising geopolitical tensions in the Middle East. Among
major banks, ANZ, NAB and Westpac rose modestly, while Commonwealth edged down 0.1 percent.
South Korea's Kospi
average rose 0.4 percent, with talk of fresh Chinese stimulus moves and
relief over austerity measures outlined by Spain and Greece
underpinning sentiment ahead of two local holidays next week. Shares of Korea Aerospace Industries soared 14.8 percent after Korean Air Lines and Hyundai Heavy Industries
placed preliminary bids to buy a combined 41.8 percent stake in the
company worth $1.02 billion. Tech shares also gained ground, with
heavyweight Samsung Electronics up 0.6 percent, while LG Electronics added 2 percent.
New Zealand
shares rose notably, led by Air New Zealand following its share buyback
announcement. Shares of the national carrier climbed 5.5 percent, while
the benchmark NZX-50 index ended 0.7 percent higher amid
relatively light volumes. Fletcher Building, the nation's largest
construction company, rose 1.6 percent, SkyCity Entertainment, the
casino and hotel operator, gained 1.6 percent, container terminal
operator Port of Tauranga added 1.9 percent and outdoor clothing and
equipment retailer Kathmandu Holdings jumped 4.2 percent.
NZX
rose 0.9 percent after the stock exchange operator appointed former
commerce minister Simon Power and 2015 Cricket World Cup head Therese
Walsh to its board. Retailer Pumpkin Patch, which reported a 20 percent
decline in full-year earnings yesterday, fell 1.7 percent, heavyweight Telecom slid 1.7 percent and would-be bank Heartland New Zealand lost 1.5 percent.
Elsewhere, India's benchmark Sensex was last moving up 1.2 percent, Indonesia's Jakarta Composite index rose 0.9 percent, Malaysia's KLSE Composite added half a percent and the Taiwan Weighted average gained 0.4 percent, while Singapore's Straits Times index was little changed.
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Crude Extends Gains
The
price of crude oil was extending gains Friday morning on supply
concerns amid tensions between Israel and Iran, while plans for economic
reform in Spain temporarily eased investors' worries over the euro zone
debt situation.
Light Sweet Crude Oil (WTI) futures for
November delivery added $0.14 to $91.99 a barrel. Yesterday, oil snapped
its three-session losing streak to settle higher on renewed supply
concerns from the Middle East even as the Israeli Prime Minister is
expected to raise the level of rhetoric against the Iranian nuclear
program when he addresses the U.N. General Assembly later in the day.
This morning, the U.S. dollar
was leveling off from its 2-week high versus the euro and ticking
higher against sterling. The buck was recovering from a 2-week low
versus the yen, while ticking lower against the Swiss franc.
In economic news, euro zone
inflation rose unexpectedly in September due to an increase in energy
and food prices, flash estimate from Eurostat showed. Inflation
increased to 2.7 percent in September from 2.6 percent in August. The
rate was forecast to slow to 2.4 percent.
Meanwhile, retail sales
in Germany recovered in August following a modest decline in the
previous month, reviving expectations that private consumption, one of
the main drivers of growth for euro zone's largest economy, could steer
the economy through the turbulence in the rest of the single-currency
bloc.
Traders will look to the Commerce Department's
release of its personal income & outlays report for September at
8.30 a.m ET. Economists expect the report to show that personal income
rose 0.2 percent, while personal spending is expected to have increased by 0.5 percent. In July, personal spending rose 0.4 percent.
The price of gold was
steady near its seven-month high Friday morning as risk appetite
increased after the Spanish government revealed a tight 2013 budget
focused on spending cuts rather than tax hikes.
Gold for December
delivery, the most actively traded contract, edged up $1.20 to
$1,781.70 an ounce. Yesterday, gold rebounded sharply to settle at a
seven-month high after some soft economic data out of the U.S. and
buyers back on track with the low prices for the precious metal. The
gold miners strike in South Africa also helped push gold prices up with
investors weighing the euro zone financial crisis as Spain revealed its
2013 budget.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, were unchanged at 1,320.78 tons.
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