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FTSE 100 falls on friday to post 1% weekly loss, Dow Jones, S&P 500 and NASDAQ close flat

31st Jul 2010, 12:45 pm FTSE 100 falls on friday to post 1% weekly loss, Dow Jones, S&P 500 and NASDAQ close flat

The FTSE 100 had a subpar week, which saw the blue chip index decline 1%, while US markets did better with the Dow Jones Industrial Average gaining more than 0.5% after closing flat on friday. US stocks got help from positive updates on the University of Michigan consumer confidence index and the Chicago PMI (purchasing managers index) following bearish US GDP data.

US GDP growth was shown to have slowed to 2.4% during Q2 from 2.7% in Q1, failing to match expectations of a decline to 2.5%. The Institute of Supply Management’s (ISM) index of business activity in New York failed to inspire optimism, revealing a drop to 58.4 in July from 69.3 in June, hitting the lowest level in nearly a year. However, the University of Michigan consumer confidence was revised to 67.8 compared to a previous reading of 66.5 for July, still marking a decline from June’s 76. More positive news came with the release of the Chicago PMI index for July, which beat expectations with an improvement from 59.1 to 62.3.

Another boost to the stocks was delivered by better than expected results from Chevron Corp (NYSE:CVX) and Merck (NYSE:MRK).

As a result, the Dow Jones Industrial Average closed flat after shedding more than 1% earlier in the session, as did the broader S&P 500 index, while the technology heavy NASDAQ composite rose 0.1%.

The FTSE 100 slipped 1% as the UK markets closed not long after the disappointing GDP and consumer confidence figures were released in the US. However, the Footsie is currently projected to recoup most of its Friday’s losses on Monday with financial bookmakers foreseeing a 0.7% gain in early trade.

Defensive stocks led the way on Friday with water companies United Utilities (LON:UU) and Severn Trent (LON:SVT) climbing 4.4% and 2.3% respectively. Airline British Airways (LON:BAY) and gold miner Randgold Resources (LON:RRS) were the only other FTSE 100 constituents to gain more than 1%, tacking on 1.4% and 1.1% respectively.

Essar Energy (LON:ESSR) was the heaviest faller in the index with a 3.5% loss. Insurer Legal & General (LON:LGEN) and hedge fund manager Man Group (LON:EMG) shed nearly 3%, while commercial property company Segro (LON:SGRO) lost 2.5%. Defence and aerospace systems manufacturer BAE Systems (LON:BA), packaging group Rexam (LON:REX) and specialist banking group Investec (LON:INVP) lost 2.4%. Pharmaceutical company Shire (LON:SHP) and publisher Pearson (LON:PSON) shed just over 2%.

The FTSE 100 posted its biggest monthly gain in a year in July, rallying 6.9%. The Dow Jones and S&P 500 indexes surged 7% in July, also marking the best month for US stocks in a year.

Markets in Europe and the US were off to a positive start this week, still riding last Friday’s stress test results that showed just 7 out of the 91 European banks tested failing. The Commerce Department bolstered equities further, reporting an increase in new home sales to an annualised rate of 330,000 in June. This helped offset declines in the Chicago Fed index and UK house prices, which were also reported on Monday.

Banking stocks performed very well this week after Swiss bank UBS (NYSE:UBS) reported a quarterly net profit of US$1.9 billion. Deutsche Bank’s (NYSE:DB) results were just as strong with a 6.2% jump in Q2 net income. The stress test results prompted the Basel Committee on Banking Supervision to relax its liquidity and capital requirements in its draft Basel III reform, providing strong support for the banking sector.

In another key economic update, the Fed’s Beige Book survey of regional economic conditions revealed growth in 10 out of the 12 Federal Reserve districts, however, the growth rate was “modest,” while the housing market and manufacturing remained weak.

Employment data was mixed, revealing an increase of 81,000 in continuing jobless claims to 4.56 million, while claims decreased by 11,000.

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