European Stocks Fall Amid Renewed Fighting in the Middle East
Friday’s trading session saw the fall of many European stock market indexes. Part of this drop in share prices was attributed to two new developments in the United States and the Middle East. Reports came out that the White House was already engaged in planning for an alternative to the automatic spending cuts that are set to take place at the end of this year. Despite this development, many investors are still concerned about the perceived fiscal cliff issue. If the United States Congress cannot agree to a compromise, the world’s largest economy will suffer from debilitating tax hikes and spending reductions at the start of 2013.
The other issue facing markets today is the rising conflict in the Middle East. Militants in Gaza fired a series of rockets into Tel Aviv an Israel. This attack on the commercial centers of Israel forced the nation to call on thousands of reserve soldiers in order to prepare for retaliation.
Amid the growing conflict, share prices on the United Kingdom’s FTSE 100 index lost 1.27 percent to end at 5,605.59. The French CAC 40 fell 1.21 percent to 3,341.52 while Frankfurt’s DAX 30 Index dropped by 1.32 percent to end the day at 6,950.53. The euro decreased to $1.2714 United States dollars from its previous level of $1.2778 on Thursday. Meanwhile, the price of an ounce of gold advanced from $1,710.00 US dollars to $1,713.50.
US Stock Markets
The world’s largest economy saw losses in its major stock markets on Friday. The Standard & Poor’s 500 index retreated by 0.73 percent while the Nasdaq lost 0.65 percent by midday. In addition, the Dow Jones Industrial Average declined by 0.44 percent. This drop came after a report from the United States Federal Reserve Bank that said that industrial output decreased by 0.4 percent in October. Most of the fall in production levels was attributed to the impact of Superstorm Sandy which swept through the US Northeast last month. Before the storm hit, many market analysts had expected industrial output to be up by 0.1 percent.
In Asia, markets saw mixed results. Despite concerns over the recession in Europe and fiscal problems in the United States, Tokyo’s stock marked reported gains of 2.20 percent. Hong Kong’s Hang Seng saw its shares advance by 0.24 percent. Other Asian markets dropped with Seoul closing 0.53 percent lower and Sydney’s stock market down by 0.29 percent.
In Japan, the Nikkei index saw its second day of gains. The Japanese yen has continued to be sold off by investors due to an announcement by Japan’s future prime minister. Shinzo Abe told investors this week that he would be willing to start unlimited monetary easing to prop up the economy. Abe is expected to be the next prime minister of Japan following the upcoming elections. The current prime minister, Yoshihiko Noda, dissolved parliament on Friday. On December 16, Japanese citizens will vote in new political leaders.
After the Nasdaq logged its sixth week of losses, the Dow Jones came in with its fourth consecutive losing week. Individually, HP shares fell by 1.76 percent to $12.85. Among the blue chips, Home Depot reported a gain of 1.42 percent while Alcoa shares advanced by 1.61 percent or $0.13.
Facebook shares rose after its post-lockup expiration rally. The leading social media site announced on Friday that it would expand its Facebook Gifts program for the shopping season. After rising 20 percent since Tuesday, Facebook shares are not up 6.27 percent or $1.3907. They were at a level of $23.5607 by the end of the day.
Apple shares were up 0.39 percent, or $2.056, to a level of $527.678 after hitting a nine-month low during the session. Apple share prices are 25 percent away from hitting their September peak. Apple’s competitor, Google, is expected to release a map application for Apple’s iOS6 soon. Shares in Google held steady on Friday and ended the day 0.01 percent lower at $647.18.
Sears reported a lower than expected loss in revenues. Despite beating market predictions, the department store still saw its shares fall by 18.79 percent, or $10.99, to a level of $47.49. Gap also reported higher than expected revenue and raised its outlook for the remainder of 2012. Gap saw its stock rise by 0.99 percent or $0.33, to end at $33.59.
The computer giant, Dell, reported earnings that were less than expected by investors. Dell has been pressured in recent months by the weakened world economy. Dell lost 7.33 percent during the day to finish at $8.859.
UPS reported that it would be increasing rates on air and international services in 2013. The announcement caused share prices to fall by 0.44 percent, or $0.31, to a level of $70.02. Its competitor, FedEx, also saw share prices retreated by 0.47 percent to $86.13.
The greenback advanced by 0.22 percent versus the yen to 81.32 yen while the euro lost 0.58 percent versus the United States dollar. Currently, one euro fetches a rate of $1.2704. Ten-year treasury bonds were up 7/32 to a yield of 1.5707.
Oil prices advanced during the day during concerns over the conflict in the Middle East. US Oil rose by $1.20 a barrel to $86.65. At the same time, Brent crude advanced by $0.33 to $108.34.
Next week, United States stock markets will be closed to celebrate Thanksgiving on Thursday. The New York Stock exchange will shut its doors at 1 PM on Friday as well. Reports on existing home sales will be released on Monday as well as earning reports from Jack in the Box, Lowe’s, Urban Outfitters and Tyson Foods. Investors will receive US-based jobless claims, consumer sentiment surveys and the PMI manufacturing flash on Wednesday.
The Bloomberg Israel-US Equity Index dropped by 0.6 percent to 81.44 by 2:40 PM in New York. This index is on track for a drop of 2.6 percent for the week. Falling share prices of Israeli stock was attributed to the start of fighting between Gaza militants and Israel. Five-year credit default swaps advanced by 10 basis points to end at 167 basis points. This is the highest level for credit default swaps since August 30.
About the Author
Marcus Holland - Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.
Day Trading can carry a high risk to your capital can be very volatile and prices may move rapidly against you. Only speculate with money you can afford to lose as many trading methods carry leverage which mean you may lose more than your original deposit and be required to make further payments.