Weekly Market Analysis (August 23 – August 27)
Indicies
US stocks ended the weekly mildly lower after strong gains Friday helped ease the weekly losses shares had chalked up. The Dow Jones Industrial Average managed to end the week above 10,000 despite several dips below the key level at 10,150.65 a loss of 0.62% for the week. The S&P 500 shed 0.66% last week to finish at 1,064.59 while the Nasdaq underperformed dumping 1.2% for the week, closing at 2,153.63.
European stocks followed their American peers to late day gains which helped lift major indicies for the week. The FTSE 100 outperformed eking out a 0.12% rise, closing at 5,201.56, the French Cac lost 0.53% for the week, finishing at 3,507.44 while the German Dax shed 0.61% to finish at 5,951.17.
In Asian markets, the Nikkei dumped 2% last week as direction was once again correlated to the yen, which made strong gains through most of the week at the cost of regional equities. The Shanghai Composite Index lost 1.19% last week to end at 2,610.74.
Dow Jones Industrial Average (August 23 – August 27)
Forex
The focus last week remained on the yen last week after it broke below the psychological 85.00 level which was perceived to be a ‘line-in-the-sand’ for the Japanese administration. However, no intervention, except for the verbal variety, was coming and the yen traded in a position of strength for most of the week. The outsize gains came on the back of further re-allocation of assets for traders out of riskier, higher yielding currencies into safe haven currencies, the yen, franc and dollar. The franc and dollar also performed strongly last week against many of their trading partners as investors sought safety amid tumbling stock and commodity prices. As a result the commodity bloc and specifically the antipodeans didn’t perform very well last week and remained under relative pressure.
USD/JPY (August 23 – August 27)
Commodities
Gold added 0.7% last week after a roller coaster ride bringing its total monthly gains in August to 5%, effecting erasing July’s 5% drop. Gold see-sawed for much of the week as investors digested US and global data and attempted to effort how the third-quarter is going to pan out.
Oil pushed sharply higher on Friday to erase steep losses from earlier in the week and end with gains of almost 2%. Crude oil added 2.5% Friday and 1.8% for the week which comes after two consecutive weeks of losses. While the spike Friday was welcomed by traders, there are many who say that they cant see crude trading much above $75 since weak global fundamentals and a supply over-hang don’t support higher oil prices.
Oil (August 23 – August 27)
Equities
At the start of the week, Asian stocks started off badly as Tokyo led declines amid speculation that the administration won’t step in to halt the yen’s advance. Elsewhere in Asia Fosters Group jumps 7.6% after SABMiller is said to be mulling a bid. In Europe, miners and financials led most sectors to a higher close. Aviva and Old Mutual both rose more than 3% and HSBC rose 0.8%. In the North American session, stocks flitted between gains and losses but ended sharply lower. Among the few gainers was 3Par whose shares rockets 44.6% after HP made a $1.6 billion offer for the storage-solutions provider.
On Tuesday, the Nikkei breached the 9,000-point-level to end at a 15-month low, investors sold exporter shares and techs as Japan’s currency strengthened as the index entered bear-market territory. Canon, Sony and Tokyo electron paced losses as the each shed more than 3%. Stocks in Europe fared no better as worries regarding the economy were revived and investors rushed to the exits in favour of safer assets. In the North American session the sea of red continued as US shares made sharp losses, Sun Disk was among the major decliners after it was called “over-valued”, shares tumbled 5.8%.
Midweek, most Asian markets fell as risk aversion surged on weak US housing data and a downgrade in Ireland. The Nikkei ended at a 16-month low as the yen remained stubbornly strong and exports continued their downward trend. In London, shares fell broadly led by Tullow Oil who announced delays to its projects in Uganda, its stock shed 4.5%. North American shares managed to shake off early losses to snap a 4-session losing streak and finish higher. Among the gainers; Coldwater Creek rose 42% after it forecast firm 2010 earnings,
On Thursday, most Asian shares climbed led by Japanese exporters as the yen eased amid speculation that the administration will intervene to weaken the currency, Elpida, Cannon and Nikon all rose more than 1%. European shares cheered better than expected weekly jobless claims in the US and some solid earnings, L’Oreal posted a 21% rise in first half profits, their share price rose 3.9%. In the US session, markets opened brightly after weekly jobless data but lost momentum midday and ended the session much weaker as concerns about the economy offset the better jobs report.
On Friday, Asian stocks managed to pare early losses as Tokyo staged a rebound amid speculation that the Japanese administration will act to tackle yen strength decisively. Exporters in Tokyo were among the leaders of the rebound, as a weaker will help profits, Nissan climbed 3.2%, Honda 1.6% and Sony Corp 2.7%. Most of the region traded cautiously in higher ground ahead of the much awaited speech by Fed. Chair Bernanke. In Europe, shares were choppy after some strong regional data out of Germany and the UK, followed by US GDP which slowed significantly and Bernanke’s comments, the end result was a day of late gains in Europe, where volume remained very low. In the North American session, Fed. Chair Bernanke’s comments were received warmly on Wall St. and set a fire beneath the market which roared higher despite Intel’s lowering of sale forecasts for the upcoming period citing weak demand.
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