Home' Trinidad and Tobago Guardian : August 10th 2014 Contents AUGUST 10 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG 11
Aburst of buying Friday in US
stocks defied slumps in other
markets and offered hope
for investors shaken by
geopolitical turmoil. Major
US stock indexes closed up
around 1.0 per cent, buoyed by signs that ten-
sions in Ukraine might be easing.
The rally on Wall Street contrasted with
price declines in European and Asian stock
markets. Fear has been creeping into stock
and bond markets around the world in recent
weeks against a backdrop of escalating global
News Friday of US fighter jets dropping
bombs in Iraq and the end of a three-day
cease-fire in Gaza weighed further on European
markets. Asian markets also had a bad week,
including a 5.0 per cent drop in Japan s bench-
mark stock index.
As anxieties have risen in recent days, money
has been flowing from around the world into
US. Treasurys, the perennial safe haven for
US stock markets bucked the trend Friday
as investors snapped up shares that had been
beaten down in recent days. The buying surged
late in the day on reports that Russia had
ended military exercises near Ukraine. The
Dow Jones industrial average surged 1.1 per
cent, its biggest gain since March. The index
remains 3.4 per cent below its record high set
Jim Paulsen, chief investment strategist at
Wells Capital Management, said he wasn t
surprised by the Wall Street rally.
"The US economy will grow at 3 per cent
or 4 per cent for the rest of the year," Paulsen
said. "Are geopolitical risks really going to have
an economic impact?"
It s a question that s been unsettling
In June and most of July, prices in major
stock indexes in the United States rose even
in the face of the widening conflicts around
the world. Some experts warned that markets
had grown dangerously complacent.
But then the West imposed increasingly
crushing sanctions on Russia for supporting
rebels in Ukraine. Israel s bloody war in Gaza
dragged on. And Sunni extremists made
advances in northern Iraq.
Prices then began a sustained decline, even
in resilient US markets. US stocks in July posted
their first monthly loss since January.
The fear has driven up various government
bond prices, too, and sent yields down. The
yield on German government notes maturing
in 10 years, for instance, hit an all-time low
Friday. The yield on US notes of the same
maturity has reached its lowest level in about
Another sign of worry, the VIX, a gauge of
expectation of future US stock volatility, has
climbed nearly 50 per cent since early July.
One fear is that Europe could fall back into
another recession after having emerged from
one last year.
The economies of the 18 countries that share
the euro currency are barely growing, and
many of them depend on Russia for natural
gas imports. Germany imports nearly all its
natural gas from Russia.
This week, the head of the European Central
Bank, Mario Draghi, warned that the crisis in
Ukraine could hurt the fragile recovery in the
The troubles in Iraq also threaten oil supplies.
A report from Citigroup to clients early Friday
noted that Iraq is the fastest-growing supplier
among OPEC members.
Benchmark US crude oil rose 31 cents
to close at US$97.65 a barrel on the New
York Mercantile Exchange. Brent crude,
a benchmark for international oils used
by many US refineries, fell 42 cents to
close at US$105.02 on the ICE Futures
exchange in London.
The Citi report also noted, though, that
there was reason to keep buying stocks, not
the least of which is strong corporate earn-
An announcement from Gap on Friday
underscored that trend. It reported that sales
increased 3 per cent in the second quarter as
growth at Old Navy offset lower sales of the
company s namesake brand. Its stock jumped
US$2.37, or 6 per cent, to US$42.57.
With nearly all second-quarter results for
S&P 500 companies out, analysts are calling
for earnings in that index to jump 10 per cent
from a year earlier. At the beginning of July,
they expected a gain of less than 7 per cent,
according to S&P Capital IQ, a data provider.
On Friday, the Dow ended up 185.66
points, or 1.1 per cent, to 16,553.93. The
Standard & Poor s 500 index rose 22.02
points, or 1.2 per cent, to 1,931.59. The
Nasdaq composite rose 35.93 points, or
0.83 per cent, to 4,370.90.
In economic news, the US Labor Department
reported that workers were more productive
in the April-June quarter and that labor costs
rose slightly, a sharp turnaround from grim
first-quarter figures. Productivity increased
2.5 per cent at a seasonally adjusted annual
rate, after plummeting 4.5 per cent in the first
In Europe, Germany s DAX fell 0.3 per
cent while the FTSE 100 index of British
shares dropped 0.5 per cent. Both indexes
are down about 2 per cent for the week,
capping three weeks of losses.
France s CAC-40 was flat, but ended
the week down 1.3 per cent. That was its
third straight weekly loss.
In corporate news, shares of Lululemon
Athletica rose $1.08, or 3 per cent, to $40.11.
The company s founder and former chairman,
Dennis "Chip" Wilson, has agreed to sell half
his stake as part of a truce to avert a potentially
battle for control of the retailer of yoga apparel
and other exercise gear.
In metals trading, gold fell $1.50 to
$1,311 an ounce and silver fell five cents
to $19.94 an ounce. Copper was flat at
$3.17 a pound.
The yield on the 10-year Treasury note
edged up to 2.42 per cent from 2.41 per cent
US stocks closed higher Friday as investors
were relieved by reports of easing tensions
between Ukraine and Russia. The gain in the
S&P 500 was the biggest since March 4 and
turned the index higher for the week.
The Dow Jones industrial average rose
185.66 points, or 1.1 per cent, to 16,553.93.
The Standard & Poor s 500 index rose
22.02 points, or 1.2 per cent, to 1,931.59.
The Nasdaq composite rose 35.93
points, or 0.8 per cent, to 4,370.90
For the week:
The Dow rose 60.56 points, or 0.4 per
The S&P 500 rose 6.44 points, or 0.3
The Nasdaq rose 18.26 points, or 0.4
For the year:
The Dow is down 22.73 points, or 0.1
The S&P 500 index is up 83.23 points,
or 4.5 per cent.
The Nasdaq is up 194.31 points, or 4.7
LONDON---UK stocks dropped to a nearly four-month
low Friday, underpinning losses for a week during which
investors wrestled with geopolitical tensions and signs of EU
The FTSE 100 index UK:UKX -0.46 per cent declined 0.5
per cent to 6,567.36, its lowest close since April 15, according
to FactSet data. The FTSE lost 1.7 per cent for the week, a
second straight losing week.
Shares in oil companies fell, not getting any traction from
the gain in oil prices CLU4 +0.01 per cent. Those gains came
after US President Barack Obama on Thursday authorised
targeted airstrikes in northern Iraq, and after data showed
China s oil imports rose in July.
The Pentagon said Friday airstrikes targeting Islamist mil-
itants in Iraq had begun.
Shares of oil major BP fell 1.1 per cent, BG Group UK shed
2.3 per cent and Royal Dutch Shell UK moved 1 per cent
UK and other European stocks dropped this week as
investors sought safety in bonds and other so-called safe-
haven assets. The moves came as a trade war between Russia
and the West escalated, with the action expected to hurt the
euro zone more than any other region.
Closer to home, the UK s Office for National Statistics on
Friday said the country s trade deficit widened in June to
£9.4 billion (US$15.8 billion) as exports declined more rapidly
than imports. The trade deficit grew with other members
of the EU, but narrowed with countries outside of the currency
union. The ONS also said construction output rose by 1.2
per cent in June from May.
The construction-side gain "may prevent expectations of
Q2 GDP revisions, but the deterioration of the trade balance
underscores an economic headwind," said analysts at Brown
Brothers Harriman in a note Friday.
The pound fell to $1.6776, extending losses from $1.6833
Advancers on the FTSE 100 included investment services
firm Hargreaves Lansdown UK and miner Fresnillo PLC UK,
whose shares each ended 3.2 per cent higher. (MarketWatch)
FTSE 100 logs weekly loss, hits four-month low
US stocks buck
on global markets
Nico Li demonstrates a ribbon dance as she visits the trading floor of the New York Stock
Exchange, in conjunction with the 24th Annual Hong Kong Dragon Boat Festival on
Wednesday. US stocks are little changed in early trading Wednesday as investors worry about
escalating tensions between Russia and the Ukraine. Investors were also holding back after
two larger merger bids were pulled.
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