Global Markets Overview - 16 November 2012

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By Christine Gaylican | November 16, 2012 11:09 AM EST

U.S. Economy, STOCK MARKETS

U.S. blue chips pared their declines Thursday afternoon but remained in the red, hurt by middling economic data and global political uncertainty. The Dow Jones Industrial Average fell 42 points, or 0.3%, to 12529.

The Dow had slumped 185 points, or 1.5%, Wednesday to close at the lowest level since June 26.  The Standard & Poor's 500-stock index slipped three points, or 0.2%, to 1353.

The Nasdaq Composite shed nine points, or 0.3%, to 2838. Economic data provided a mixed view of the state of the U.S. recovery, with readings obscured by superstorm Sandy. 

Initial claims for jobless benefits in the latest week jumped to 439,000, well above the 375,000 claims expected by economists, because of the storm.

The Philadelphia Fed's manufacturing index for November came in lower than expected, with its reading of -10.7 indicating contraction. Amna Asaf, an economist with Capital Economics, wrote in a note the Philadelphia reading was also likely affected by Sandy. 

The consumer-price index for October rose 0.1% on the month, in line with economist expectations. The Federal Reserve Bank of New York's Empire State index of manufacturing activity for November improved slightly, to -5.2 in November from -6.2 in October.

However, it indicates the fourth-consecutive month of contraction.  Stocks hit their session lows around noon, as concerns spread about tensions in the Middle East, with reports circulating that a rocket fired from the Gaza Strip landed near Tel Aviv. 

Dow component Wal-Mart Stores dropped 3.7% after the discount retailer reported worse-than-expected third-quarter revenue and fourth-quarter projections.

It also indicated challenges regarding alleged violations of the U.S. Foreign Corrupt Practices Act appear to have expanded. Its big-box retail rival Target gained 2.2% after beating Wall Street estimates and providing an outlook that exceeded expectations. 

Diamond Foods skidded 22% after the company said it swung to a loss for the first three quarters of fiscal 2012, as the snack-food company completed a restatement of its financials required after an internal probe uncovered improper accounting of payments to walnut growers. 

NetApp rallied 11% after the data-storage company reported better-than-expected fiscal second-quarter earnings and revenue and provided a somewhat upbeat earnings outlook for the current quarter.

EUROPEAN STOCK MARKETS

European stock markets saw broad-based losses Thursday as data showed the euro-zone economy fell back into recession in the third quarter.

Worries that U.S. policy makers won't avert the so-called fiscal cliff also spooked investors.  Data showed euro-zone gross domestic product shrank 0.1% during the quarter, after having contracted 0.2% in the previous quarter.

A recession is widely defined as two consecutive quarters of shrinking GDP.  Markets in Europe extended losses in afternoon action, after U.S. data showed initial jobless claims soared to 439,000 last week.

The Stoxx Europe 600 index dropped 1% to close at 265.52.  Posting the biggest loss in the European index, shares of SBM Offshore NV tanked 13%.

The oil-services provider lowered its turnover forecast for 2012 and said project developers were slowing the pace of contract awards. 

Shares of H&M Hennes & Mauritz AB gave up 3% after the fashion retailer reported a 5% drop in same-store sales for October.  Shares of Electricite de France SA fell 2.1%. HSBC downgraded its rating to neutral from overweight. 

France's CAC 40 index dropped 0.5% to 3,382.40. In Germany, most shares traded in negative territory, with SAP AG down 1.4%.  The DAX 30 index dropped 0.8% to 7,043.42.

And among U.K. shares, BP PLC inched 0.1% lower. The company said Thursday it has agreed to pay about $4.5 billion to settle federal charges stemming from its 2010 oil spill in the U.S. Gulf of Mexico.  Also in the energy sector, shares of Royal Dutch Shell PLC fell 1%, taking a cue from declining oil prices. London's FTSE 100 index closed 0.8% lower at 5,677.75.

ASIA-PACIFIC STOCK MARKETS

Asian markets were mostly lower Thursday, although Japanese stocks jumped higher as the yen hit its lowest level in more than six months. 

Worries over the upcoming fiscal cliff in the U.S. continued to weigh on sentiment following comments from U.S. President Barack Obama Wednesday, who said that unless politicians can find a compromise, the resulting tax hikes and spending cuts could send the world's largest economy into a recession. 

The yen hit a six-and-a-half-month low versus the dollar Thursday amid expectations the Bank of Japan will take aggressive easing steps under a new government, after Prime Minister Yoshihiko Noda pledged Wednesday to dissolve parliament and call a snap election next month. 

The Liberal Democratic Party, currently in opposition, is expected to win and its stance of printing money to help the economy could weaken the yen more against the dollar. 

Japanese stocks responded well to the weaker yen, bucking broader regional weakness. The Nikkei Stock Average rose 1.9% to 8829.72.

Mazda Motor added 5.6% and construction equipment manufacturer Komatsu was 4.6% higher.  Sony Corp. sank 8.9% following an announcement that it will issue Y150 billion in convertible bonds to raise money for strategic investment and to repay loans. 

China presented its next generation of senior leaders. As expected, Xi Jinping took the top job on a seven-member Politburo Standing Committee, China's top decision making body. 

The Shanghai Composite Index finished 1.1% lower at 2030.29, a seven-week low, tracking weakness in regional markets and on disappointment over the lack of perceived strong reformist elements in the country's newly unveiled top leadership. 

Hong Kong's Hang Seng Index was caught up in the regional declines, dropping 1.6% to 21108.93.  Chinese internet company Tencent Holdings fell 7% in Hong Kong after releasing below-view earnings for the third quarter, while fashion retailer Esprit Holdings rocketed 22% on news former chairman Michael Ying increased his stake in the company, fueling speculation that he might make a return.  South Korea's Kospi Composite lost 1.2% to 1870.72.

COMMODITIES

Base metals on the London Metal Exchange closed in a mixture of positive and negative territory, but remained little changed on the day overall amid nervous trade. 

At the close of open-outcry trading LME three-month copper was flat at $7,639.50 a metric ton. Tin, zinc and lead made small gains, likely aided by the euro's strengthening against the dollar, despite news the euro-zone economy is back in recession.

Benchmark U.S. crude-oil futures ended lower Thursday amid worries about weak euro-zone economic activity, although a report showing a smaller-than-expected rise in weekly crude supplies held losses in check.

Crude oil for December delivery settled down 87 cents, or 1%, at $85.45 a barrel on the New York Mercantile Exchange.  Gold prices dropped 0.9% Thursday on signs that demand for the precious metal is sagging. The most actively traded contract, for December delivery, fell $16.30, or 0.9%, to settle at $1,713.80 a troy ounce on the Comex division of the New York Mercantile Exchange. Compiled from MORRISON SECURITIES PTY. LTD.

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