The Securities Exchange Commission’s (SEC) fraud accusations at Goldman Sachs weighed on markets this week but investors chose rather to react to positive U.S. data which boosted confidence in the economic recovery. In particular, a report showing signs of growth in the housing market, strong company earnings and a decline in jobless claims, helped boost indices.
For the week, the Dow Jones Industrial Average rose 1.7 percent to 11,204.28, while the S&P 500 index gained 2.1 percent to 1,217.28.
Dow Jones Industrial Average (April 19-23)
European shares battled through the week as the cost of insuring against Greece defaulting on its debt soared, and as the euro-region’s budget deficit widened. The UK’s FTSE index fell 0.4 percent to 5,723.60, while Germany’s DAX rose 1.6 percent to 6,259.53. France’s CAC 40 dropped 0.3 percent to 3,964.53.
Asian stocks had a mixed week but were ultimately dragged down by the fraud charges leveled at Goldman Sachs, a stronger yen, and curbs on China’s real-estate market. Japan’s Nikkei 225 fell 0.14 percent, while Hong Kong’s Hang Seng index dropped 1.5 percent to 21,244.49.
Elsewhere, India’s Sensex index fell 0.6 percent to 17,694.20 and Australia’s All Ordinaries fell 1.5 percent to 4,913.50.
The euro fell to its lowest level in almost a year as the European Union revealed that Greece’s budget deficit was worse than expected. The euro rose Friday after Greece asked the European Union (NYSEARCA:EU) and the International Monetary Fund (NYSE:IMF) to activate a EUR 45 billion loan to help manage its deficit. The dollar was buoyed by positive reports from the U.S. jobs and real estate markets.
Through the week, the euro weakened by 0.8 percent against the dollar to close at $1.3382. The dollar rose 1.5 percent against the Japanese yen to JPY 93.935, while against the British pound, the greenback fell 0.3 percent.
Gold rose 1.5 percent to close the week at $1,153.10 an ounce largely due to gains on Friday as the dollar ended a six-day rally against the euro. The weaker U.S. currency boosted the appeal of gold as an alternative investment. Earlier in the week, the precious metal showed some volatility as worries about Greece’s fiscal problems spurred some safe-haven buying and on speculation that regulations arising from the lawsuit against Goldman Sachs may curb commodities demand.
Crude oil rose 1.9 percent to $85.12 a barrel for the week. The increase was spurred by the reopening of European airspace restoring some demand for jet fuel, after a volcanic eruption in Iceland caused a shutdown of air travel across Europe. A U.S. Energy Department report showed that crude-oil stockpiles unexpectedly increased the previous week by 1.89 million barrels, indicating lower demand from the U.S. However, signs of U.S. economic growth instilled optimism that demand from the world’s largest energy consumer will increase.
Crude Oil (April 19-23)
EUR-USD (April 19-23)
The week started with Citigroup gaining 7 percent after profits beat analyst estimates. Goldman Sachs rose 1.6 percent after plunging 13 percent in the previous trading session when the SEC sued the bank for fraud. Motor companies gained after Daimler said in Europe that it posted a strong first quarter profit. Sprint Nextel Corp. advanced 2.7 percent after an analyst raised its share to “outperform” from “market perform.” In Europe, UBS AG declined 2 percent in the aftermath of the SEC suit against Goldman Sachs. The Air France-KLM Group dropped 2.9 percent as the volcanic eruption in Iceland grounded planes. Asia’s financial shares came under pressure following the Goldman Sachs fraud case, with Sumitomo Mitsui Financial Group Inc. down 4.4 percent and Mitsubishi UFJ Financial Group Inc. declined 3.3 percent.
Tuesday saw Harley-Davidson and Marshall & Ilsley increase more than 7.3 percent, while Exxon Mobil Corp. led energy companies to strong gains as oil rebounded from a three-week low. The SEC suit against Goldman Sachs overshadowed the company’s 91 percent jump in earnings as its share fell 2.1 percent. European gains were led by Daimler shares rising 7.4 percent, while BMW and Renault rose 4.2 and 4.5 percent respectively. Energy stocks rose as some European flights resumed. In Asia, Sumitomo Mitsui Financial Group Inc. rose 1.4 percent as Morgan Stanley upgraded Japanese banks.
Mid-week, Apple jumped 6 percent after reporting that earnings nearly doubled. Morgan Stanley rose 4 percent, and Boeing Co. gained 3.9 percent. Banks in Greece, Portugal and Spain slipped after credit- default swaps on the nations’ debt gained. Elpida Memory climbed 3.9 percent in Tokyo after reporting its first annual profit in three years beat analyst expectations.
On Thursday, Goldman Sachs gained after a CNBC report eased the fraud allegations against the company. Starbucks Corp. rose on better-than-estimated earnings. Nokia Oyj led declines after reporting lower-than-expected first-quarter profits. Nestle SA led gains after first-quarter sales climbed faster than estimated. Sony Corp. lost 2.1 percent in Tokyo as the yen rose against the euro and the dollar, cheapening its export revenues. China’s Bank of Communications Ltd., fell 4.9 percent after saying it made fewer mortgages the past two months.
Friday had building shares increase after a strong report on new home purchases in March. Standard Pacific Corp. and Lennar Corp. each gained more than 5.9 percent. American Express Co. and Xerox Corp. rose on better than expected earnings, while Microsoft Corp. and Amazon.com Inc. fell as their results gave a less optimistic indication on consumer technology spending. Europe’s Adidas advanced 3.9 percent and Volvo jumped the most in 14 months. China Resources Land Ltd. sank 3 percent in Hong Kong after the Shanghai Securities News reported that China may tax third homes owned by individuals.