Apart from a 0.69% technical bounce in the Japanese Nikkei 225 Index, major market indices closed down on Tuesday. The FTSE 100 Index lost 1.78% to 5,554.55, the S&P 500 by 0.43% to 1,363.72 and the Eurostoxx 50 by 2.06% to 2,236.11. Significantly, the French CAC 40 Index fell by 2.8% in the wake of the Hollande election victory.
The Eurozone problems are back and this time it’s personal. In fact, it is generally recognised that the problems around the Eurozone never went away but conveniently slipped from memory momentarily. The new name for investors to get their minds around is Alexis Tsipras, leader of the left-wing Syriza Party that gained the second highest level of votes. Tsipras is tasked with trying to forge a coalition of support with other like-minded parties but he has indicated that he wants the current agreement with the EU over loans to be rescinded in favour of stimulatory policies.
As the perception of reducing global economic growth gained momentum, energy and mining stocks lost ground. In the FTSE 100, BP, Royal Dutch Shell and BG Group together accounted for 25 points of the 100-point index fall, losing between 1.7% and 3.5%. The miners, Rio Tinto, BHP and Anglo American accounted for another 15 points, falling by around 3% to 4%.
Among the banks, HSBC – after announcing underlying Q1 profit growth of 25% – lost just over 1% to be down 5.5% since the recent peak in mid-March of this year. Standard Chartered closed 3.5% lower, leaving the shares 17.5% down from their recent mid-March peak. In other Financials, Man Group shares continued their death-dive, losing 7% to 82.5P, a new 12-year low as concerns persisted about the level of investment fund outflows. Since July 2007, the shares have now lost over 88% of their value with still no sign of the mooted bid emerging. Significantly, for technicians, the October 2011 uptrend line was broken decisively yesterday. The next major support is seen to be the March 2009 uptrend line which could be reached at the 5,300 level.
The renewed Eurozone uncertainty and signs of economic slowdown got to Wall Street, leaving all three main market indices down by between 0.4% and 0.6%. Notable among the fallers was the U.S. watch designer and distributor, Fossil Inc, whose shares lost almost 38% on concerns about its sales prospects into Europe. Among the heavyweight stocks, IBM and Wells Fargo lost around 1% each in the generally risk-off mood although Google closed up almost 0.9% higher following a split verdict in the lawsuit with Oracle America and deemed to be glass half full.
During the day, the S&P 500 Index hit an intraday low of 1,347.75 (down 21 points or 1.6% from the open) before rallying, apparently on heavy short-closing, to finish just 5.4 points lower. Technically, the intraday move broke the October 2011 uptrend line but the rally has left the index to fight another day (unlike the breakdown in the case of the FTSE 100).
After a weakfish/sluggish start, the markets in Europe and London are generally positive this morning, despite lower closes of between 0.75% and 1.65% in Hong Kong, Tokyo and Shanghai on fears in Asia of slowing export growth. The Spanish Government 10-year bond yield , however, is edging back up towards the critical 6% level at 5.97%. Curiously, gold continues to ease in spite of the general uncertainty and, at U.S.$1,590 per troy ounce, now stands 16% down from its $1,900 high of September 2011.
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