Home' Trinidad and Tobago Guardian : August 3rd 2014 Contents AUGUST 3 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG11
US stocks fell for a sec-
ond day Friday, adding
to the massive sell-off
the day before and giv-
ing the market its worst
week in two years.
Investors found little reason to move money
into stocks, faced with the growing geopolitical
concerns in Israel and Ukraine, as well as
banking problems in Europe.
For the last two years investors have generally
wanted to step in to buy any major fall in the
stock market, traders said, causing any sell-
off to be met the following day with modest
buying. Traders said that the selling Friday,
on top of what happened the day before, is
not a good sign.
"The follow-through from yesterday s (mar-
ket drop) is very telling," said Jonathan Corpina,
a trader on the New York Stock Exchange with
Meridian Equity Partners. "The end of this
week could not come at a better time as the
weekend might provide some stability."
On Friday the Standard & Poor s 500 index
lost 5.52 points, or 0.3 percent, to 1,925.15.
The index fell 2.7 per cent this week, its worst
weekly performance since June 2012.
The Dow Jones industrial average fell 69.93
points, or 0.4 per cent, to 16,493.37. That s
on top of the 317-point drop the index had
on Thursday. The Nasdaq composite fell 17.13
points, or 0.4 percent, to 4,352.64.
Energy and financial stocks were among
the biggest decliners. Chevron, the nation s
second-largest oil and gas company behind
Exxon Mobil, fell $1.34, or 1 percent, to
US$127.90. While Chevron s earnings were
better than analysts had predicted, the com-
pany s oil and gas production fell in the quarter.
Exxon also reported lower production when
it released its own results Thursday.
Banking stocks also fell. JPMorgan Chase,
Bank of America, Morgan Stanley and Goldman
Sachs all slid roughly 2.0 per cent.
On Friday, the International Swaps and
Derivatives Association ruled that Argentina
had officially defaulted on its bonds for the
second time in 13 years, in what the ISDA calls
a "credit event." In a "credit event," investors
who own credit-default swaps, a type of insur-
ance that protects against a bond issuer default-
ing, are activated and the companies which
wrote the policies must pay the investors who
In Portugal, the struggling bank Banco Espir-
ito Santo plunged 40 per cent. Espirito Santo
reported Wednesday a 3.5 billion euro net loss
for the second quarter, and there were concerns
the bank is insolvent.
The concerns over the Argentinian default
and as well as with European banks were the
biggest driver of Friday s market decline, said
Jonathan Golub, chief US market strategist at
RBC Capital Markets.
"The market doesn t like anything that could
potentially disrupt the credit markets," Golub
said, noting that indicators of market volatility
jumped on Friday.
Adding to the uncertainty, investors had the
violence in Israel and Gaza as well as Ukraine
to worry about. A 72-hour ceasefire between
Israel and Gaza collapsed early Friday. In
Ukraine, violence between government and
pro-Russian separatists escalated.
Ukraine s unrest as well as the concerns
over Espirito Santo weighed heavily on Euro-
pean markets. Germany s DAX fell 2.1 per cent,
France s CAC 40 fell one per cent, and the
FTSE 100 index fell 0.8 per cent.
As global stock prices declined, traders
moved money into investments traditionally
seen as having lower risk Friday, such as US
government bonds, gold and utility stocks.
Investors did get some good news about
the US economy. The Labor Department said
that US employers created 209,000 jobs in
July, while the unemployment rate rose to 6.2
per cent from 6.1 per cent. July was the sixth-
straight month that US employers created
more than 200,000 jobs, a sign that the US
economy continues to recover. Economists
also pointed out that the rise in the unem-
ployment rate was likely due to more out-of-
work people actively looking for jobs.
"In a nutshell, it s a good report," said Dan
Greenhaus, chief strategist at brokerage firm
BTIG in New York. "Not too hot, not too cold."
The good news on the economy also means
the Federal Reserve isn t going to be there to
hold investors hands for much longer. The
central bank said Wednesday it would cut back
its bond-buying program again, and investors
now believe the Fed is looking to raise interest
rates starting next year.
The Fed s stimulus efforts, combined with
the growing US economy, have helped pushed
the stock market higher. The last time US
stocks had a correction, meaning a decline of
10 percent or more in a benchmark index like
the S&P 500, is nearly three years ago. They
typically happen every 18 months.
Proctor & Gamble was among the day s
winners. The stock rose $2.33, or 3.0 per cent,
to $79.65. The consumer products giant said
it earned an adjusted profit of 95 cents a share,
four cents better what analysts had expected.
P&G helped lift other consumer staples com-
panies, making the industry the best perform-
ing industry in the S&P 500.
In other trading, the yield on the 10-year
Treasury note fell to 2.49 per cent and the
price of gold rose US$12.30 to US$1,293.60
an ounce. Silver fell four cents to $20.37 an
The price of oil fell to the lowest level since
February 6. Benchmark US crude oil dropped
29 cents to US$97.88 a barrel, and ended the
week with a loss of US$4.21 a barrel, or 4.0
S&P 500 has
its worst week
in 2 years
Trader Timothy Nick works on the floor of the New York Stock Exchange on Friday, August 1,
2014. The US stock market is closing out its worst week in two years.
UK stocks slid the most in more than three weeks, led by
commodity producers, as a private report showed that Chinese
manufacturing expanded at a slower-than-expected pace last
BHP Billiton Ltd, Rio Tinto Group and Glencore Plc each
dropped. Schroders Plc fell 2.6 per cent after its assets under
management missed some analysts forecasts. IAG SA added
2.2 per cent as profit beat estimates. Smith & Nephew Plc rose
3.8 per cent after the medical-device company s revenue topped
The FTSE 100 Index lost 50.93 points, or 0.8 per cent, to
6,679.18 at the close in London, extending its decline this week
to 1.8 per cent. The benchmark gauge today pared earlier declines
of as much as 1.6 per cent after a U.S. Labor Department report
showed that employers added more than 200,000 jobs for the
sixth straight month. The broader FTSE All-Share Index fell 0.7
per cent, while Ireland s ISEQ Index retreated 0.7 per cent.
In China, HSBC Holdings Plc s measure of manufacturing
activity climbed to 51.7 in July, missing the median economist
estimate of 52. The government s purchasing managers index
beat projections compiled by Bloomberg News.
BHP Billiton, the world s biggest miner, lost 0.9 per cent to
2,011.5 pence, while Rio Tinto fell 1.1 per cent to 3,354.5 pence.
Glencore slid 1.1 per cent to 356.2 pence, and Randgold Resources
Ltd. lost 1.1 per cent to 5,065 pence.
UK manufacturing grew at the slowest pace in a year, a Markit
Economics report showed. The PMI retreated to 55.4 in July,
missing the median economist forecast of 57.2. Markit revised
its reading for June down to 57.2.
European stocks down as well
Meanwhile, European stocks fell to the lowest level in more
than three months as companies including ArcelorMittal (MT)
and Vinci SA posted worse-than-expected earnings.
ArcelorMittal dropped the most since October 2012 after also
lowering its full-year profit forecast. Vinci slipped the most in
almost three years. Iliad SA retreated 7 percent after offering $15
billion for a controlling stake in T-Mobile US Inc. Belgacom SA
gained 4.8 percent after raising its full-year earnings outlook.
Vinci slipped 6.3 percent to 48.36 euros. Europe s biggest
builder reported first-half earnings before interest and taxes of
1.54 billion euros ($2.1 billion), missing the median analyst pre-
diction of 1.63 billion euros. Vinci also forecast a drop in 2014
revenue, compared with an earlier projection of little change.
The Stoxx Europe 600 Index fell 1.2 percent to 331.91 at the
close of trading. It pared an earlier drop of as much as 1.5 percent
as worse-than-forecast U.S. payrolls data increased optimism
the Federal Reserve will keep interest rates low for longer. The
benchmark gauge trades at 15 times estimated earnings, near
last month s four-and-a-half year high of 15.7, data compiled
by Bloomberg show.
"In Europe, we re seeing a weak economy with very bad cur-
rency effects on companies and unattractive valuations," said
Jacques Porta, who helps oversee $780 million at Ofi Gestion
Privee in Paris. "That doesn t give investors a good feeling about
buying the market. We ve seen weak results in Europe, so sen-
timent is turning bearish."
A Markit Economics purchasing managers index of euro-
zone manufacturing was unchanged in July at 51.8. Economists
had called for 51.9. A reading above 50 means activity increased.
A PMI index for the U.K. fell to the lowest level in a year, while
a measure of manufacturing in Italy missed estimates, posting
growth at the slowest pace in eight months.
National benchmark indexes fell in 16 of the 17 western-Euro-
pean markets open today. Markets in Switzerland are closed for
the National Day holiday. The U.K. s FTSE 100 Index lost 0.8
percent, France s CAC 40 slid 1 percent and Germany s DAX
tumbled 2.1 percent. All three indexes have erased their gains
for the year.
UK stocks slide as miners drop
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