Global Markets Overview - 6 February 2013

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By Christine Gaylican | February 6, 2013 10:39 AM EST

U.S. STOCKS, BONDS

The Dow Jones Industrial Average slumped toward its first triple-digit drop this year, as weakness in technology stocks helped derail a five-week rally for the blue chips.

The Dow sank 126 points, or 0.9%, to 13883 in afternoon trading Monday. The declines, which sent each of the 30 blue chips lower, follow a robust run. The Dow closed above 14000 for the first time since October 2007 on Friday and had climbed 6.9% so far in 2013.

The Standard & Poor's 500-stock index lost 15 points, or 1%, to 1498. All 10 S&P 500 sectors lost ground, with particular weakness in technology stocks such as Dell, which slid 2.6%. Oracle dropped 2.6% after agreeing to buy Acme Packet, which makes telecommunications equipment, in a deal valued at $1.7 billion. Shares of Acme Packet shot up 22%.

The technology-oriented Nasdaq Composite Index fell 41 points, or 1.3%, to 3147. Facebook fell 4.9%, continuing a slide that began last week, after its shares hit their highest level since July.

In U.S. economic news, orders for manufactured goods rose in December, according to the Commerce Department, but the 1.8% increase was shy of a 2.2% rise expected by economists.

Stock-rating downgrades from analysts pressured a trio of Dow heavyweights. Drug maker Merck was among the worst performers on the Dow, falling 2%, after analysts at Morgan Stanley cut their rating on the stock, voicing pessimism about the company's drug pipeline.

Wal-Mart Stores fell 1.3% after analysts at J.P Morgan Chase cut its stock rating to "neutral" from "overweight," noting that the recent expiration of payroll tax cuts could hamper sales growth.

Chevron fell 1% after analysts at UBS cut its stock recommendation, noting that the stock no longer looks cheap after gains of nearly 10% over the past 12 months.

In other corporate news, Clorox rose 1.2% after the consumer-products company reported that improved sales and price increases drove profit margins higher, and it issued an optimistic estimate for its full-year earnings.

Leading the S&P 500 lower was Gannett, which slumped 6% after the publisher of USA Today and other newspapers saw its quarterly earnings fall 12%. The company's print advertising revenue continued to fall, while revenue perked up in digital subscriptions.

EUROPEAN STOCKS, BONDS

Political jitters in Spain and Italy hammered European stocks Monday, with sovereign-bond yields rallying in those countries, while investors also digested mixed data from China and the U.S.

The Stoxx Europe 600 index slumped 1.5% to 283.90, closing at its lowest level in 2013. Italian shares came under heavy selling pressure as Silvio Berlusconi gained in opinion polls after he vowed to reduce taxes if the former prime minister's coalition wins elections later this month, stoking fears that the country will diverge from its current reformist drive.

The FTSE MIB index tanked 4.5% to 16,539.00, while the yield on 10-year government bonds rose 15 basis points to 4.47%, according to electronic-trading platform Tradeweb.

Shares of UniCredit SpA dropped 8.3% as UBS cut the Italian bank to neutral from buy. In Spain, the IBEX 35 index erased 3.8% to 7,919.60, also on the back of political concerns.

Minister Mariano Rajoy sought to contain political fallout amid allegations of a corruption scandal involving secret payments, while a poll showed support for his center-right People's Party dropped to 23.9%, the lowest in its history.

The yield on 10-year Spanish government bonds rose 24 basis points to 5.42%, according to electronic-trading platform Tradeweb.

Elsewhere, Germany's DAX 30 index closed 2.5% lower at 7,638.23, marking its worst daily performance since July 2012. In France, the CAC 40 index dropped 3% to 3,659.91, while in the U.K., the FTSE 100 index lost 1.6% to 6,246.84.

Shares of Royal Imtech NV sank 48% in Amsterdam after the infrastructure company said it would take a write-down of at least 100 million euros ($135.7 million) on its Polish projects as it investigates "possible irregularities."

It also said that its 2012 earnings statement scheduled for Tuesday would be delayed. Shares of heavyweight Vodafone Group PLC shaved off 1.7%. Citigroup cut the wireless-telecom carrier's rating to neutral from buy.

Commerzbank AG shares sank 5.9% after the bank said it would post a loss of around EUR720 million in the fourth quarter. Deutsche Post AG fell 3.1% after HSBC lowered its rating to underweight from neutral.

On a more upbeat note, shares of Swatch Group AG picked up 5% after the world's largest watchmaker reported a 26% increase in full-year profit and said it had gotten off to a healthy start in 2013.

ASIA-PACIFIC STOCKS, BONDS
 
Asian stock markets were mixed Monday, with reassuring data from the U.S. helping Singapore reach a five-year high before profit-taking set in, while Panasonic Corp. soared after returning to a profit in the third quarter.

Singapore's 30-share Straits Times Index ended up 6.23 points, or 0.2%, at 3297.37 after rising as high as 3319.19 intraday--its highest since Jan. 11, 2008, prior to the euro-zone sovereign debt crisis.

Singapore "has always been seen as a safe-haven. So even though the economy barely grew last year, it still managed to perform well," said Lorraine Tan, vice president  of Asia research at S&P Capital IQ in Singapore, who currently has an underweight rating on the market as she said it could lose out as investors move into more cyclical markets.

Markets across the region started the session by tracking Friday's gains on Wall Street, where reassuring numbers pushed stocks up to new multi-year highs.

Japanese stocks were supported throughout the session by the dollar's gains against the yen on Friday, with the Nikkei Stock Average closing up 0.6% at 11260.35, its highest level in almost 34 months.

Earnings reports continued to influence shares in Tokyo, after two of Japan's most high-profile electronics companies reported third-quarter earnings.

Panasonic Corp. soared 16.9% after swinging back to profits, due to aggressive cost cutting measures and a weaker yen.

Shares in Sharp Corp. added 5.5% as the company's latest earnings report failed to meet analyst expectations, though it beat the management's own predictions.

South Korea's Kospi Composite dropped 0.2% to 1953.21, with local automakers retreating as the yen continued to weaken, benefiting their Japanese rivals. Hyundai Motor was down 1.5%, and Kia Motors Corp. lost 2.5%. Stocks in China were mixed, with Hong Kong's Hang Seng Index down 0.2% at 23685.01 and the Shanghai Composite adding 0.4% to 2428.15.

COMMODITIES

Base metals on the London Metal Exchange closed mostly slightly higher, holding onto upbeat sentiment generated by positive economic data readings in previous sessions.

At the close of open-outcry trading, flagship metal LME three-month copper closed 0.1% higher at $8,300 a metric ton. Crude-oil prices dropped Monday, pausing after last week's rally, while a stronger greenback fueled selling in dollar-denominated commodities as they became more expensive for holders of other currencies.

Crude for March delivery settled $1.60 lower at $96.17 a barrel on the New York Mercantile Exchange. Gold futures finished higher, extending their gains to a second straight session, with the metal's attractiveness as a safe-haven asset in the wake of a steep drop in U.S. equities offsetting pressure from strength in the dollar.

Gold for April delivery climbed $5.80, or 0.4%, to $1,676.40 an ounce on the Comex division of the New York Mercantile Exchange. COMPILED FROM MORRISON SECURITIES PTY.LTD.

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