Home' Trinidad and Tobago Guardian : October 5th 2014 Contents OCTOBER 5 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG11
The world stock markets limped
to the September finish line
and the end of the third quar-
ter. US stocks finished the
month with modest losses but
finished the quarter with mod-
est gains. The Dow Jones Industrial Average
finished the month down 0.23 per cent while
closing the quarter up 1.87 per cent. The S&P
500 traded -1.40 per cent lower in September
but added 1.13 per cent in 3Q. The Nasdaq
gave up 1.90 per cent in September and still
managed to produce a 3Q return of 1.93 per
The foreign markets had it worse in both
September and the third quarter. The MSCI
EAFE index (an index of large cap foreign
developed country stocks) fell 4.08 per cent
in September and -6.39 per cent for the quar-
ter. The worst performing group was small
cap stocks. The Russell 2000 index slid 6.19
per cent in September and down 7.65 per cent
for the quarter.
The US economy seems to be modestly
picking up steam. One report shows strong
growth while the next one shows it is now so
robust. These reports are not representative
of the negative volatility stocks have incurred
since September 19 all-time high. But if you
turn on CNN, you see a different world. Con-
flict in the Ukraine, a war against ISIS, Ebola
in Africa and protests in Hong Kong helped
send world equity markets lower for the second
week in a row.
For the week, it felt like a strong correction
was underway. By the close on Friday, the
damage was not bad. The Dow Jones Industrial
Average declined only 103.46 points or 0.6
per cent to 17,009.69 while the S&P 500 fell
0.75 per cent to 1967.90 and the Nasdaq -0.8
per cent to 4475.62. Interest rates finished
lower as the 5 yr, 10 yr, and 30 yr treasury
closed at 1.74 per cent, 2.45 per cent and 3.13
per cent, respectively. Crude Oil---WTI Cushing
declined $3.68 to $89.73 a barrel. Gold-Spot
finished US$26.63 lower to US$1191.30 an
On Monday, US stocks fell with the emerg-
ing markets when they watched new protests
in news. This time it was adding Hong Kong
to the list of geopolitical uncertainty. The Dow
declined 41.93 points or -0.25 per cent while
the S&P 500 and Nasdaq finished trading -
5.05 points and -6.34 points, respectively. A
4.5 per cent slide in Brazilian stocks and a 2.6
per cent decline in Russia s RTS index helped
push the MSCI Emerging Markets index lower
by 1.5 per cent. The dollar continued its rise
to four-year highs finishing the day at 1.268
to the euro and 1.624 to the pound.
Tuesday was the last day of the month
and it could not come quick enough. Weakness
in the energy sector caused the indexes to
finish modestly lower. The Dow gave up 28.32
points but held above the 17,000 level at 17,042.
Crude Oil---WTI Cushing fell US$3.07 to
US$91.50 a barrel which was the largest one
day drop in two years. The dollar continued
to drift higher.
October started with a bang. On Wednes-
day, the markets fell as the news reported the
first Ebola case in the US. The economic news
was mixed. Growth in factory activity slowed
more than expected in September while hiring
in the private sector increased.
Auto sales in the third quarter were the best
in eight years but September results were off
the summer pace.
The Dow on Wednesday dropped 238.19
points or 1.4 per cent to 16,804 which was
still above this summer s low established on
August 7 at 16,368.27. The S&P 500 declined
1.32 per cent while the Nasdaq fell 1.59 per
cent. Small cap stock, as measured by the
Russell 2000 index, traded into correction ter-
ritory (off 10 per cent from its high). Following
the lower than expected manufacturing growth
report, the 10-year treasury yield fell 0.10 per
cent to 2.38 per cent. Oil continued its three-
month decline on weak economic signals from
China and Europe in addition to ample global
supply. Crude Oil---WTI slipped another
US$0.36 to US$90.80 a barrel.
On Thursday, US weekly jobless claims
unexpectedly declined and the four-week aver-
age declined to just above the 8 ½ year low.
Equities battled their way back to even. The
Dow slipped only 3.66 points while the S&P
500 closed up 0.01 point. The Russell 2000
index, a small cap stock index, rebounded
approximately 1.0 per cent. Crude--WTI Cush-
ing started the day lower but managed to edge
up 0.28 to US$91.01 a barrel. Ahead of Friday s
unemployment reading, the 10 yr treasury
yield rebounded 0.05 per cent to 2.43 per cent.
Friday morning, all eyes were on the Sep-
tember unemployment report as the initial
report posted the lowest rate since July 2008
at 5.9 per cent. This set off a rebound rally
in US stocks. The Dow jumped 208.84 points
to 17,009.69 while the S&P 500 rose 21.73 to
1967.90 and the Nasdaq gained 45.43 points
to 4475.62. Crude Oil---WTI Cushing fell
US$1.28 to US$89.73 a barrel.
Stay tuned to see what happens next week.
David Fox is a financial adviser with Morgan Stan-
ley Wealth Management in Boca Raton, Florida. The
opinions expressed by the author are solely his own
and do not necessarily reflect those of Morgan Stan-
ley. The information and data in the article or pub-
lication has been obtained from sources believed to
be accurate and Morgan Stanley makes no repre-
sentations or guarantees as to the accuracy or com-
pleteness of information or data. Neither the infor-
mation provided nor any opinion expressed constitutes
a solicitation by Morgan Stanley with respect to the
purchase or sale of any security, investment, strategy
or product that may be mentioned.
© 2014 Morgan Stanley Smith Barney LLC. Mem-
The Dow Jones industrial average rose
208.64, or 1.2 per cent, to 17,009.69.
The Standard & Poor's 500 index rose 21.73
points, or 1.1 per cent, to 1,967.90.
The Nasdaq composite rose 45.43 points, or
1 per cent, to 4,447.62.
For the week:
The Dow is down 103.46 points, or 0.6 per
The S&P 500 is down 14.95 points, or 0.8 per
The Nasdaq is down 36.57 points, or 0.8 per
For the year:
The Dow is up 433.03 points, or 2.6 per cent.
The S&P 500 index is up 119.54 points, or 6.5
The Nasdaq is up 299.03 points, or 7.2 per
DAVID H FOX
European stocks regained some poise on Friday after the
previous day s sell-off, led by airlines buoyed by a sharp drop
in oil prices while exporters such as Airbus got a lift from
the euro s renewed slide after strong US jobs data.
Shares in British Airways owner International Airlines
Group rose 4.9 per cent and Air France-KLM added 3.6 per
cent, while easyJet, which upgraded its earnings forecast on
Friday, surged 6.4 per cent.
Brent crude oil futures fell below US$92 a barrel on Friday
as abundant supplies and a strong dollar continue to weigh
on the commodity market.
Jet fuel, derived from crude, can account for anywhere
between 20 and 50 per cent of an airline s operating costs,
which means the recent sharp drop in prices could become
a boon for the sector s earnings.
Shares in industrials and exporters also featured among
the top gainers on Friday, with planemaker Airbus rising 3.6
per cent, as the euro slipped to a two-year low around US$1.25
against the dollar after better-than-expected US jobs fig-
The data showed US non-farm payrolls rose by 248,000
last month and the jobless rate fell to 5.9 per cent, the lowest
since July 2008.
"These are pretty strong figures, especially the unemploy-
ment rate," Saxo Bank trader Andrea Tueni said.
"It s tempting to see this as the glass half-full : good news
for the economy means good news for the market. But
investors seem cautious because ultimately it could raise the
chances to see the Fed raising rates earlier than what the
market currently expects."
The sharp drop in the euro---down 11 per cent since early
May---has sparked hopes of a boost to the region s corporate
After proving a major headwind for exporters in the first
part of the year, the slide in the single currency should give
a lift of 3.0 to 6.0 per cent to corporate earnings, according
to analysts and fund managers.
For Airbus, one of Europe s most dollar-sensitive companies,
a 10-cent move in the euro against the dollar translates into
a 1-billion-euro swing in profits at the operating level.
The FTSEurofirst 300 index of top European shares ended
0.9 per cent higher on Friday, at 1,347.14 points, after dropping
2.4 per cent on Thursday.
UK s FTSE 100 index added 1.3 per cent and France s CAC
40 gained 0.9 per cent. Germany s market was closed due
to a public holiday.
Banking shares featured among the top gainers, with Italy s
Intesa SanPaolo up 2.9 per cent and Spain s Bankinter up
3.0 per cent.
The STOXX 600 euro zone banking index had tumbled
4.0 per cent on Thursday after the European Central Bank
gave no new hints on the prospect of an imminent sovereign
bond buying programme, leading some in the market to scale
back bets on this happening.
Investors were also rattled by the lack of specific details
about the ECB s plan to buy asset-backed securities (ABS).
"Market participants are disappointed. There are still a lot
of question marks on the ECB s action plan," said Judith
Danan, head of sales trading at CMC Markets France.
"Beyond the T-LTROs (targeted longer-term refinancing
operations) and the plan to buy ABS, the central bank doesn t
really seem ready to launch a quantitative easing programme,
at least not in the short term." Reuters
European shares regain poise after sharp sell-off
US stocks' decline not as bad as it felt
A man sits next to a monitor screen showing share index at a bank in Kuala Lumpur, Malaysia,
Friday, October 3, 2014. Hong Kong stocks fell further Friday as pro-democracy protests
entered a second week but most other Asian markets rose ahead of reports on US
employment and factory orders. (AP)
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