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FTSE 100, Dow Jones, S&P 500 and NASDAQ decline during week on weak US data

Published: 11:59 14 Aug 2010 BST

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The FTSE 100 rose 0.2% on Friday to trim its weekly losses to 1.1%. The US data release don the last day of trading mitigated fears over the strengths of the economic recovery in the US, showing a rise in the University Michigan consumer sentiment index, which improved from 67.8 to 69.6 in August, while US CPI (consumer prices index) rose 1.2% year on year in the previous month, which was in line with expectations.

Insurer Aviva (LON:AV), which has rejected an approach from peer RSA Insurance (LON:RSA) to buy its general insurance operations for £5 billion, led the blue chips with a 5.5% gain. Tour operator TUI Travel (LON:TT) and oil and gas producer Cairn Energy (LON:CNE) followed, climbing 4.5% ad 3.4% respectively. Insurance companies Legal & General (LON:LGEN) and Standard Life (LON:SL) added 3.2% and 3% respectively. Asset management company Schroders (LON:SDR) and interdealer broker ICAP (LON:IAP) advanced 2.8% and 2.6%, while banking group Barclays (LON:BARC) and pharmaceutical company GlaxoSmithKline (LON:GSK) tacked on nearly 2.5%.

Miner Vedanta Resources (LON:VED) declined 6% to slid to the bottom of the pile. Plumbing and heating equipment manufacturer Wolseley (LON:WOS) dropped 3%, while Home Retail Group (LON:HOME), clothing retailer Next (LON:NXT) and satellite telecommunications company Inmarsat (LON:ISAT) lost about 2%. Silver miner Fresnillo (LON:FRES), bank Standard Chartered (LON:STAN) and retailer Kingfisher (LON:KGF) added over 1.5%. Gold miner Randgold Resources (LON:RRS) and food manufacturer Unilever (LON:ULVR) moved up 1.5%.

US markets closed in the negative. The Dow Jones Industrial Average slid 0.15%, the broader S&P 500 index declined 0.4% and the technology heavy NASDAQ composite dropped 0.75%.

Bank of America Corp (LON:BAC) and Travelers Companies (NYSE:TRV) were the top performers in the Dow Jones index with gains of 1.3% and 1% respectively.

The notable fallers included Intel Corp (NYSE:INTC) and DuPont (NYSE:DD) with losses of 1.5% and 1.1%.

The latest economic data improved the mood in the markets following a big disappointment delivered by US employment data this and last week. On Thursday, the US Labor Department said that initial jobless claims increased by 2,000 to five month highs at 484,000, while analysts polled by Reuters expected a decline to 465,000. However, continuing claims declined from 4,570,000 to 4,452,000. Last week, the Labor Department said that non-farm payrolls declined by 131,000 in July, while the previous month’s loss of 125,000 jobs was revised upwards to 221,000.

Before helping the FTSE 100 with a strong performance on Friday, the insurance companies boosted the markets on Monday when Bank of America Merrill Lynch and stockbroker Panmure Gordon (LON:PMR) raised Aviva’s target price. The US dollar was in decline following the non-farm payrolls update, lifting the euro and commodity prices to give support to miners and oil and gas stocks.

Bearish news came from China, whose crude imports decreased by 3.27 metric tons month on month and 3.1% year on year in July to 19 metric tons. China’s CPI rose to 3.3% in July, eclipsing the government’s annual target of 3% and raising concerns that the government could implement more monetary policy tightening measures. The Footsie declined on Tuesday and Wednesday after the Federal Reserve expectedly left its interest rates unchanged at the current ultralow levels and said it would buy more US bonds in its latest attempt to bolster the economy, acknowledging that the recovery was progressing at a slow pace as was reflected in the jobs figures.

Governor of the Bank of England (BoE) Mervyn King added to the jitters on Wednesday, predicting that the recovery would be “choppy.” BoE slashed its growth forecasts for 2011 to 2.5% from 3.4%, which would go up to 3% in 2012.

Despite the weak jobless claims report, the FTSE 100 managed to finish in the positive on Thursday due to a strong performance in the mining sector. Energy company Centrica also contributed, tacking on over 3% after buying gas assets in Alberta from Suncor Energy (TSX:SU, NYSE:SU) for £229 million.

The FTSE 100 lost the 5,300 level it regained last week after rising 1.4%. The blue chip index is currently projected to open flat on Monday.

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