Concerns that Greece’s debt crisis will spread to Portugal and Spain sent stocks spiraling while a positive jobs report did little to quell fears of the European snowball.
U.S. stocks plummeted this week erasing much of the gains achieved this year. The Dow Jones Industrial Average lost more than 9 percent in one-session on May 6, the biggest drop since the crash of 1987, as a combination of European concerns and a reported trading glitch brought waves of electronic selling.
For the week, the Dow fell 5.7 percent to 10,380.43, while the S&P 500 index dropped 6.5 percent to 1,110.88.
Dow Jones Industrial Average (May 3–7)
European stocks took a battering with all major indices losing ground on fears that in addition to Greece, Portugal and Spain may default on their debt and require a bailout. The UK’s FTSE index fell 7.7 percent to 5,123.00, while Germany’s DAX declined 6.7 percent to 5,715.09. France’s CAC 40 dropped 10.6 percent to 3,392.59.
Asian stocks followed the spiral of U.S. and European markets, weighed also by China raising its reserve ratios and Australia imposing heavy taxes on mining companies. Japan’s Nikkei fell 4.5 percent to 10,364.59, while Hong Kong’s Hang Seng declined 4.2 percent to 19,920.29. Elsewhere, Australia’s All Ordinaries index fell 6.3 percent, and India’s Sansex dropped 4.3 percent.
The euro slumped to its lowest level in more than a year as Greek workers declared a 48-hour strike to protest budget cuts that included wage decreases and tax hikes. Fears that Greece’s debt crisis will spread also weighed on the currency.
The euro fell 3.4 percent against the dollar to close the week at $1.2752. The dollar lost 3.5 percent against the Japanese yen to JPY 91.605, while against the British pound, the greenback rose 2.9 percent.
EUR-USD (May 3-7)
Gold prices rose 2.5 percent to close the week at $1,210 an ounce as investors sought a safe haven from the turmoil in Europe. The yellow metal almost reached record levels in New York after posting its third straight week of gains.
Crude oil fell 12.7 percent to $75.11 a barrel following the plunge of the Dow on European debt concerns. Earlier in the week, an Energy Department report showed U.S. stockpiles of crude oil rose 2.76 million barrels in the week ending April 30, to the highest level since June.
Crude Oil (May 3-7)
Warren Buffet helped Goldman Sachs rise 3 percent Monday when he said the bank should not be blamed for betting against mortgage losses, currently the subject of a Securities and Exchange Commission (SEC) fraud lawsuit. UAL Corp., the parent of United Airlines, and Continental Airlines each rose more than 2 percent after agreeing to a merger. Apple gained 2 percent after saying it sold 1 million iPads in the first month after its release. In Europe, chemical maker Lanxess climbed 4 percent after WestLB recommended buying its shares while Banco Santander led a decline in Spanish and Portuguese bank shares. Mining companies BHP Billiton and Rio Tinto dropped at least 3 percent in Australia, while the Industrial & Commercial Bank of China fell 1.6 percent in Hong Kong.
Tuesday saw Alcoa down 4.3 percent and Exxon Mobil Corp drop 2 percent as raw materials and energy producers lost ground as metal and oil prices fell. Bank of America Corp. and JPMorgan Chase & Co. led banking declines following their European counterparts. Spain’s Banco Santander fell, while National Bank of Greece tumbled 13 percent. Aluminum products maker China Zhongwang Holdings dropped 4.4 percent in Hong Kong, while BHP Billiton and Rio Tinto slumped again after Australia announced heavier taxes on resources earnings.
Midweek, Walt Disney Co., American Express Co. and General Electric Co. led declines on the Dow after European Central Bank council member Axel Weber warned that Greece’s debt crisis may spread. News Corp. sank 5.2 percent after forecasting a decline in profits. In Europe, Greece’s EFG Eurobank Ergasias SA and Spain’s Banco Popular Espanol SA slid more than 4 percent, after Moody’s Investor Services warned that it may downgrade Portugal’s credit rating. Hong Kong-based Esprit Holdings fell 5.2 percent, while Chinese off shore oil producer Cnooc declined 4.6 percent as commodity prices sank.
A technical glitch and European caused saw the Dow to lose around 1,000 points within an hour Thursday before pulling back slightly. Bank of America Corp led U.S. financial shares lower, while Chevron Corp. led a decline in the energy stocks as oil prices slumped. JDS Uniphase Corp. tumbled 19 percent after sales missed analyst estimates. European banks continued their fall with Banco Santander, Barclays and Societe Generale down between 1.6 and 2.3 percent. Japanese camera maker Canon dropped 3.1 percent on deteriorating prospects in Europe, while Chinese developer China Vanke fell 4.1 percent on expectations home prices may fall significantly.
The week ended with Express Co., Hewlett-Packard Co. and Cisco Systems Inc. leading declines on the Dow, each losing more than 3 percent. Apple lost 4.2 percent as Nokia Oyj said it sued the company for patent infringement. European banks slid again with Royal Bank of Scotland Group down 5.7 percent after reporting a first-quarter loss. French bank Credit Agricole dropped 7.2 percent after reporting its risks in Greece. Asia’s Nintendo sank 10 percent after forecasting that profit will fall more than analysts estimated.
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