Weekly Markey Summary

By Raymond Chatlani

On Monday, European and US markets closed higher on US home sales that were sharply higher in June compared to May's slide to a record low since 1963. This reaction may have been overdone as new sales only comprise 7% of all house sales compared to an annual average of 15% of all house sales in the past. Also a better than expected profit outlook from transportation stock Fedex Corp also helped to boost market sentiment.

On Tuesday, Asia started mostly down on thin volume due to rumours that Chinese banks are facing rising default risks on loans to real estate developers, but recovered towards the end of the session. While European markets were up, US indices fell slightly as the Consumer Confidence Index fell as Americans worry about job prospects and skimpy wage growth. Spot gold fell to a three month low of $1,162 an ounce as deflation worries continue.

On Wednesday, Asian equities were positive at the end of the session after being neutral earlier due to mixed earnong reports from the USA and the drop in consumer confidence. European and US markets fell as orders for durable goods dropped 1 percent in June and the Federal Reserve beige book report painted a picture of a less than robust recovery.

On Thursday, Asian stocks were mostly higher as the US dollar dipped due to fears that the US economy is slowing. European and US markets fell due to these fears which may be confirmed if US second quarter GDP figures confirm this slowdown.

ON Friday, Asian markets fell due to reports out of Japan that the jobless rate unexpectedly rose, deflation deepened and industrial production fell the most in a year amid worries that US GDP growth would be lower than expected. Both European and US markets fell for a second straight day as second quarter US GDP growth was reported at 2.4% which was down from 3.7% in the first quarter of 2010.

Equities and especially commodities had a second consecutive positive week but have given up their gains over the past two days. Markets are going up and falling without any clear direction although July was mainly a positive month for stocks and commodities. Although reported earnings by companies have been good, this has largely been achieved by strict cost cutting without an increase in revenues. Without increasing sales, these earnings cannot be sustained in coming quarters. The present risk reward ratio is negative and a prudent stance should be taken for now. Also, we can expect thin volumes over the next 6 weeks as most traders will be away on their holidays.

Hopefully, we shall see opportunities materalise in September and go back in the market into the sectors that we feel offer value. After its recent pullback, gold look interesting. We expect the price of gold to fall back further over the next few weeks and are looking to launch a gold structured product with one of the institutions that we know.

Hollingsworth Daily Post

• A consortium headed by Hong Kong billionaire Li Ka-Shing has agreed a deal to buy the UK networks of French power group EDF for £5.8bn ($9.1bn).The group includes his holding company Cheung Kong Infrastructure (CKI), Hongkong Electric, which is 40%-owned by CKI, and the Li Ka-Shing Foundation.The bid has been mooted for a number of months.


• British Airways has revealed a steep loss for the April-to-June quarter after being hit by cabin crew strikes and disruption caused by the volcanic ash cloud from Iceland.BA reported a pre-tax loss of £164m, larger than the £148m loss it made in the same period last year.BA said the impact of all the disruptions was £250m in the quarter, in line with previous estimates.


• Entertainment giant Walt Disney has announced the sale of its Miramax film division for about $660m to a group of private equity investors.The investors, Filmyard, includes construction magnate Ron Tutor and investment firm Colony Capital.Disney has been negotiating with potential buyers for months to sell the division, which has made films such as Pulp Fiction and Shakespeare in Love.


• Assets bought by the US to bail out AIG and Bear Stearns are showing a paper profit for the first time, the Federal Reserve Bank of New York has said.This increases the likelihood that US taxpayers will get repaid the tens of billions of dollars used to stop the financial giants going bust.Only when the assets held by the bank are sold will any profit be realised.


• Banking giant Citigroup has agreed to pay $75m (£48m) to settle civil charges that it misled investors over potential losses from high-risk mortgages.It agreed the settlement with US financial watchdog the Securities and Exchange Commission (SEC).The SEC said Citigroup had repeatedly made misleading statements about the extent of its exposure to subprime loans as the housing market slumped.


• China has allowed the publication of an International Monetary Fund (IMF) staff report for the first time since 2006.China had previously blocked the annual report's release because it objected to the IMF's view that its currency, the yuan, needed to be a lot stronger.The report contained some criticism, saying "several directors agreed that the exchange rate is undervalued", but added that others disagreed.


• The Financial Services Authority (FSA) has announced plans to update its guidelines on bankers' pay, following the agreement of new European rules earlier this month.The rules include tighter restrictions on bonus payments and pension deals, and will now apply to more than 2,500 City firms.Previously, only the biggest banks were subject to FSA pay rules.The changes are due to come into force in October after consultation.

BBC Business News 30th July 2010

Hollingsworth Daily Post

• Second-quarter profits at oil giant Royal Dutch Shell have almost doubled after the firm completed a year-long corporate restructuring programme.The firm reported profits of $4.5bn (£2.9bn) on a current cost of supplies basis, up from $2.3bn a year ago.But it marked a drop from the $4.9bn it made in the first three months of the year as it continued to see "mixed signals" in the world economy.


• The Greek government has used a rare emergency order to force lorry drivers back to work after a three-day strike.The drivers have until later on Thursday to return to the roads or face arrest and the loss of their licenses.Most petrol stations in Athens are out of fuel and shops and factories are running low on supplies.


• Satellite TV group BSkyB has reported a sharp jump in annual profits, driven by new subscriptions, particularly for high definition (HD) services.Profit for the year to the end of June came in at £878m, up more than threefold on the £259m the broadcaster made in the previous 12 months.Revenue also rose to £5.9bn, up more than 10% on the £5.4bn recorded a year earlier.The company said it had doubled the number of HD customers over the year.


• Aircraft giant Boeing has reported a sharp drop in profits between April and June amid falling plane deliveries.Net profit for the quarter was $787m (£504m), higher than analysts had expected but down 21% on the $998m the firm made in the same period last year.
  Group revenue also fell, to $15.6bn from $17.2bn a year earlier.


• Russia has announced plans to sell minority stakes in 11 state-run firms which it says could raise about one trillion roubles ($30bn; £19.2bn).The part-privatisation scheme, its biggest since the 1990s, is set to begin next year and will include Sberbank and its oil firm Rosneft.But state railways operator RZhD will not be included, said Alexei Uvarov of the economic development ministry.


• Consumer products giant Procter & Gamble has signed up as a global Olympics sponsor.
  The deal with the International Olympics Committee (IOC) makes Procter & Gamble the 11th global sponsor of the London 2012 Olympics.It joins other 2012 sponsor companies, such as Coca-Cola and McDonalds.

BBC Business News 29th July 2010

Hollingsworth Daily Post

• French car giant Peugeot Citroen has reported a return to profit in the first half of the year, driven by strong demand in China and new models.Net profit came in at 680m euros ($885m; £567m) for the six months to the end of June, compared with a loss of 962m euros a year earlier.
  Revenues increased by 21% to 28.39bn euros.
• Steel giant Arcelor Mittal has reported a big jump in profits between April and June, with sales up as the global economy continues to recover.Net profit was $1.7bn (£1.1bn), compared with a loss of $792m in the same period a year earlier and a profit of $679m in the previous quarter.
  Revenue for the period rose by 43%, from $15.2bn to $21.7bn.
• South Korean electronics firm LG Electronics has reported a slump in profits of a third as it struggles to keep pace in the smartphone market.Net profit came in at 856.4bn won ($723m; £463m) for the three months to the end of June, down 33% on the 1.28bn won it made a year earlier.
• Defence group BAE Systems and engine supplier Rolls-Royce have signed a £700m deal to supply India's Hindustan Aeronautics with 57 Hawk training jets.Over £500m will go to BAE and £200m to Rolls-Royce in the deal that should create about 200 jobs in the UK.The jets will be used to train pilots in the Indian air force.
• David Cameron has begun a two-day visit to India with the aim of strengthening relations and creating jobs in the UK.The prime minister is leading what Downing Street describes as the largest UK trade delegation in living memory.Beginning his tour in Bangalore, Mr Cameron will say he wants to make the UK the "partner of choice" for India.
• BP will emerge from the Gulf of Mexico oil spill crisis a smaller and wiser company, according to the man who is due to take over the reins.Bob Dudley, currently in charge of BP's clean-up operation, will replace Tony Hayward as chief executive in October.Mr Dudley described the oil spill as a terrible tragedy from which the company and the industry would learn a lot.

BBC Business News 28th July 2010

Hollingsworth Daily Post

• BP says it has set aside $32.2bn (£20.8bn) to cover the costs linked to the oil spill in the Gulf of Mexico.The company said the charge gave it a loss of $17bn for the three months between April and June - a UK record.


• Deutsche Bank has reported a second-quarter net profit of 1.2bn euros ($1.56bn; £1bn), up from the 1.1bn-euro profit it made a year ago.Germany's biggest lender was helped by lower provisions for bad loans.


• The iPhone manufacturer Foxconn has temporarily shut a factory in India after some 250 workers fell sick.Spraying of pesticide could be the reason, and local authorities were investigating the incident, the Taiwanese company said in a statement.


• New home sales in the US rose sharply in June compared with the previous month, but the pace of sales was the second slowest on record, official figures show.The Commerce Department said sales rose to an annual rate of 330,000 in June from a revised 267,000 in May, which had been the worst month on record.


• The Unite union says it is planning legal action against British Airways over the removal of travel concessions from cabin crew who went on strike.Unite, which represents 11,000 cabin crew at the airline, said the management's action was a breach of European Human rights legislation.


• Rosneft, Russia's state oil giant, has reported a jump in profit thanks to a rise in output, higher oil prices and zero export duties for a key field.Its net profit rose to $2.6bn (£1.7bn) in the first half of 2010 from $1.6bn a year earlier.


• Japanese exports rose in June but at a slower pace than in recent months, raising questions about the strength of Japan's economic recovery.Exports climbed 27.7% to 5.87 trillion yen ($67bn; £43.4bn), the Finance Ministry said.

BBC Bubsiness News 27th July 2010

Hollingsworth Daily Post

• BP's chief executive Tony Hayward is expected to stand down following widespread criticism of his handling of the Gulf of Mexico oil spill.Mr Hayward has been widely criticised over the Gulf of Mexico oil spill.


• Japanese exports rose in June but at a slower pace than in recent months, raising questions about the strength of Japan's economic recovery.Exports climbed 27.7% to 5.87 trillion yen ($67bn; £43.4bn), the Finance Ministry said.


• Shares in India's Maruti Suzuki, the country's largest carmaker, have sunk more than 10% after it reported a 20% fall in quarterly profits.Shares fell to 1,218 rupees ($26; £17), from Friday's close of 1,358 rupees.


• Seven of the 91 European banks that underwent stress tests have failed the healthchecks, the Committee of European Banking Supervisors (CEBS) has said.They include five Spanish banks - Diada, Espiga, Banca Civica, Unnim and Cajasur. The other two were Germany's Hypo Real Estate and Greece's ATEbank.The tests assessed banks' ability to survive future economic shocks.


• Gordon Brown has said he wished his government had spotted the UK's financial crisis earlier, in his first interview since leaving Downing Street.The former prime minister told the BBC's Zeinab Badawi he "wasn't bruised" by losing the election, and that it was the "end of an era" for him.
  And he said it would have made a difference if the banking crisis had been acted upon earlier.
  Mr Brown gave his interview while in Kampala, Uganda's capital.

BBC Business News 26th July 2010

Weekly Market Summary

By Raymond Chatlani

Markets kept falling at the beginning of this week as investors anxiously waited for the results of stress tests on European banks due on Friday. A sharp drop in US consumer sentiment and Moody's cut of Ireland's credit rating added to the gloom in stock markets. Also fresh concerns over Hungary's ability to pay its debts and a fall of 1.3 percent in the Dow Jones home construction index contributed to markets' falls.

On Tuesday, Asian stocks rose for the first time in 4 days on optimism that China may relax policy tightening measures which could boost domestic demand in the last quarter of the year. European and US markets went down due to disappointing results from Goldman Sachs and news that housing starts had fallen in June 2010. Later the US market became positive as Apple reported earnings that exceeded expectations.

On Wednesday, Asian indices rallied and tech stocks were a major beneficiary due to Apple's stellar results. Also, domestic asian stocks and commodities were boosted as investors felt that China would relax tightening measures soon. Later on Ben Bernarke, chairman of the Federal Reserve Bank stated that although the US economy is weakening, no new steps were planned to bolster the economy without more signs of a slowdown. Consequently US indices fell and investors shifted money into the safety of US treasury bonds while asian markets slid on Thursday with the exception of China and Singapore.

On Thursday, European and US stocks surged on strong company earnings and some encouraging signs of growth in Europe. Statistics showing that sales of previously occupied homes fell in June and are expected to keep sinking did not derail the market. On Friday, Asian shares were positive and european and US markets are drifting as they wait for the EU banks' stress results.

These past four weeks, markets have been going up and down without any clear direction. Four weeks ago they were negative, three weeks ago positive, last week negative and this week positive. There are still no clear indications as to whether last year's bull market rally will continue or if we will soon face a double dip recession (Think 2008). Neither the bulls nor the bears can gain the upper hand.

At the time of writing, this weekly market summary is complete except for the most important news of the week. Today, the EU will release results of the stress tests that it has done on 91 of the Major banks within the European Union. These results will have a big impact on the market. If the results are perceived as positive, markets will probably rally. If they are analysed as being problematic, then fears of a double dip recession will resurface and possibly fuel fears of a depression. Investor perception of these results will probably drive the markets next week.