US stocks closed lower despite better than expected quarterly results from Google and bullish comments from Warren Buffet. Disappointing housing market and consumer confidence figures weighed on investor sentiment.
On Friday, the Dow closed 127.04, or 1.41 per cent lower at 8852.22 despite gaining as much as 301 points earlier in the day. The S&P 500 dropped 5.88 points, or 0.62 per cent at 940.55. The NASDAQ was down 6.42, or 0.37 per cent at 1711.29.
However, the major indices posted gains for the week. The Dow rose 4.8 per cent, the S&P 500 added 4.6 per cent and the NASDAQ was up 4.1 per cent.
Late Thursday, Google met Wall Street estimates with third-quarter revenues and topped expectations with profits. On Friday, the search giant’s shares closed 5.5 per cent higher.
In other earnings news, Advanced Micro Devices reported a smaller than expected quarterly loss and IBM announced higher than expected profits. Advanced Micro Devices shares added 2.2 per cent, while IBM was down 0.8 per cent.
Many of the other technology heavyweights closed below the line. Microsoft fell 1.1 per cent, Yahoo! was down 0.7 per cent and Apple slid 4.4 per cent.
Even bullish comments from billionaire investor Warren Buffet didn’t inspire a positive session on Wall Street. He told The New York Times that he was shifting his personal portfolio from Treasury bonds to equities.
Mr Buffet said the credit crisis and fears about the economy had battered stocks and created good equity valuations.
Warren Buffet’s Berkshire Hathaway gained US$6650, or 5.88 per cent to US$119,800.
The broader financial sector struggled. Bank of America slid 4.2 per cent, Citigroup was down 6.4 per cent and JPMorgan gave up 2.9 per cent. Wells Fargo dropped 5.4 per cent, while Goldman Sachs and Morgan Stanley bucked the trend to add 1.7 per cent and 2.9 per cent.
Meanwhile, AIG tumbled 13.6 per cent. Late Thursday, the embattled insurer borrowed an additional US$12 billion in emergency funding from the Federal Government.
General weakness among financial stocks masked improving credit market conditions.
Overnight Libor, the rate banks charge each other for overnight loans, fell to 1.67 per cent from 1.94 per cent on Thursday. Meanwhile, the three-month Libor fell to 4.42 per cent from 4.5 per cent.
Weak economic data overshadowed thawing credit markets and positive earnings news.
A government report found that housing starts fell to a 17-year low of 817,000 September. Meanwhile, applications for building permits fell to a seasonally adjusted rate of 786,000. Both readings were worse than economists had expected.
Homebuilders, D.R. Horton, Lennar and Pulte Homes dropped 8.3 per cent, 0.6 per cent and 3 per cent respectively. Caterpillar, which provides machinery and other capital goods for construction, fell 7.2 per cent.
Home improvement retailer Home Depot managed to add 2.6 per cent despite the disappointing housing market data. The company also shrugged off a downbeat consumer confidence report.
The University of Michigan's consumer sentiment index fell to 57.5 in October from 70.3 at the end of September. Economists had expected a reading of around 65 points.
Elsewhere, Chevron fell 1.2 per cent and Exxon Mobil lost 2 per cent despite a rise in crude futures. NYMEX light crude oil for November delivery added US$2 to settle at US$71.85.
Meanwhile, COMEX gold for December delivery slumped US$16.80 to settle at US$787.70 an ounce.
UK Markets
British stocks made solid ground on Friday as oil producers rebounded on the back of recovering crude prices. Miners and financials also made progress as fears of recession were cast aside.
The FTSE 100 added 201.62 or 5.22 per cent to 4063.01, ending 3.3 per cent higher for the week.
Royal Dutch Shell climbed 9.3 per cent and BP rose 8.6 per cent. Goldman Sachs recommended investors switch from BP into Shell, upgrading Shell to buy from neutral and downgrading BP to neutral from buy.
Miner Anglo American, which reports results this week, climbed 12.3 per cent. Rio Tinto added 9.8 per cent and BHP Billiton was up 10.4 per cent.
In the banking sector, Royal Bank of Scotland rose 5.5 per cent, Barclays gained 3.5 per cent and HSBC put on 3.3 per cent. On the downside, HBOS shed 4.9 per cent.
Insurers were under pressure again with Aviva down 12.7 per cent and Prudential off 9.3 per cent, extending sharp losses made Thursday.
Pharmaceuticals were on the rise with GlaxoSmithKline 8.6 per cent higher, Shire up 7.4 per cent and AstraZeneca adding 5.2 per cent.
European Markets
European shares jumped on Friday as investors went shopping for bargains. Energy stocks were in favour, as were pharmaceuticals ahead of key results due this week.
France’s CAC 40 added 148.92 or 4.68 per cent, to 3329.92, while Germany’s DAX gained 158.52 or 3.43 per cent to 4781.33.
France’s GDF Suez rose 21 per cent, Total climbed 9.7 per cent and EDF added 12.4 per cent. Italy's ENI rose 14.5 per cent and Spain’s Gas Natural gained 13.5 per cent and Iberdrola climbed 14.3 per cent. In Germany, E.ON added 13.4 per cent.
Swiss drugmaker Novartis gained 23.7 per cent, while in France, Sanofi-Aventis climbed 17.2 per cent.
Novartis is due to report its third-quarter earnings on Monday.
Ericsson jumped 5 per cent after its mobile-handset joint venture Sony Ericsson reported better-than-forecast results.
Germany’s BMW was boosted 4.3 per cent after an upgrade from Goldman Sachs.
Bucking the trend, Dutch bank and insurer ING Group plunged 27.5 per cent amid speculation the Dutch government, like others in Europe, may inject capital into the company. France's BNP Paribas reversed earlier losses to close up 1.7 per cent.
Japanese Markets
Japanese stocks advanced on Friday to combat its biggest ever one-day loss the day before. Investors flocked to defensive stocks in the face of a global recession.
The benchmark Nikkei 225 gained 235.37 points or 2.78 per cent to 8693.82.
Telecos NTT DoCoMo, Nippon Telegraph and Telephone and KDDI Corp advanced 7.4 per cent, 9.8 per cent and 7.1 per cent respectively after Nikko Citigroup upgraded the stocks to buy from hold.
Pharmaceutical group Astellas Pharma surged 9 per cent, while Eisai and Chugai Pharmaceutical added around 4.7 per cent.
Canon and Honda gained 5.7 per cent and 5.2 per cent respectively.
Mitsui & Co slid 3.5 per cent and Sojitz closed down 1.8 per cent.
Hong Kong Markets
Chinese shares fell to a three-year closing low on Friday as stocks were sold off before the weekend. Investors worried that recent volatility was a sign that the financial crisis had shifted to Asia.
The benchmark Hang Seng closed down 676.31 points or 4.44 per cent to 14,554.21.
China Unicom lost 6.7 per cent after the company said its merger with China Netcom may hurt earnings.
PetroChina shed 6 per cent after lower oil prices signalled a dent in profits for the oil producer. CNOOC also declined 6.2 per cent.
Amongst financials, China Construction Bank and Bank of China dropped 6.7 per cent and 7.8 per cent respectively.
Zijin Mining eased 7.5 per cent after the price of the precious metal eased further on Friday.
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