Coming back from a Bank Holiday-extended weekend, London has some catching up to do given the far-reaching events of the weekend. France has a new President, Msr. Francois Hollande, who has nailed his colours to a ‘non-austerity’ mast while voters in Greece’s elections have completely compromised the basis of the bail-out agreed with the Eurozone only a matter of months ago by ignoring the main-party signatories to the fiscal compact associated with the loans.
Compounded by heavy falls on Friday, the FTSE 100 lost 2.1%, the S&P 500 2.4% and the Eurostoxx 50 4.08% over the week. On Monday, London was closed and, with a rise of a mere 0.04%, the S&P 500 might as well have been although, the Dow Industrial did shed 0.23%. Perversely, the Eurostoxx 50 Index closed up 1.55 % although this ignored the collapse in Greece as the Athens General Index closed 6.7% lower with investors gripped by the uncertainty created by the election result.
Among the major fallers in the FTSE 100 on Friday amidst almost universal carnage as market psychology switched decisively to ‘risk-off’ ahead of the elections in Europe were BP (-3.1%), BG Group (4.2%), Rio Tinto (-4.4%)BHP-Billiton (-3.9%), Anglo American (-4.3%) and Xstrata (-3.1%). The marked weakness in mining sector stocks came on the back of a fall in the price of copper following the disappointing non-farm payroll numbers for April (115,000 jobs created against estimates that ranged erratically between 120,000 and 170,000).
The S&P 500 Index lost 1.6% on Friday – a notable casualty being Apple Inc, down 6.3% – and crawled marginally higher on Monday. By comparison, the Dow spread its decline over the two trading days – down 1.27% on Friday and a further 0.23% yesterday. Among the main contributors to Dow weakness were IBM (-9.38 points) and Caterpillar (-9.46 points) out of the near-30 point decline. Undoubtedly, Wall Street would have fallen further but for upbeat comments from Warren Buffett (Berkshire Hathaway CEO) who claimed that U.S. banks were in better shape than those in Europe while Barton Biggs (Traxis Partners founder) took the line that the democratic calls in Europe for policies for economic stimulus alongside fiscal reform were encouraging.
The dramatic events of the past few days have left markets in London and Europe with a weaker tone at today’s opening. The Eurostoxx 50 Index is 0.9% lower while the FTSE 100 is fluctuating between neutral to -0.3%. The weekend has left global markets with big uncertainties . During the week in prospect, London will be awaiting with interest Thursday’s decision from the Bank of England’s Monetary Policy Committee on whether to conduct further Quantitative Easing while inflation, 3.5% in March, refuses to subside.
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