The FTSE 100 dropped 1% on Friday to tri its weekly gain to just 0.5%, while the two main stock market indexes in the US, the Dow Jones average and the broader S&P 500 lost about 1%.
Essar Energy (LON:ESSR) led the blue chips with a 2.3% gain on Friday. BP (LON:BP), engineering group Invensys (LON:ISYS) and fashion house Burberry (LON:BRBY) followed, tacking on just over 1%. No other FTSE 100 constituent gained 1% or more. Caterer Compass Group (LON:CPG), insurer Standard Life (LON:SL) and defence and aerospace systems manufacturer BAE Systems (LON:BA) came close, rising 0.7%.
Banking group Barclays (LON:BARC) was the heaviest faller, shedding 5.2%. Silver miner Fresnillo (LON:FRES) and part-nationalised bank Lloyds (LON:LLOY) declined 3.7%. Royal Bank of Scotland (LON:RBS), gold miners Randgold Resources (LON:RRS) and African Barrick Gold (LON:ABG) lost just over 3%, as did private equity group 3i (LON:III). Plumbing and heating materials manufacturer Wolseley (LON:WOS) and hedge fund manager Man Group (LON:EMG) lost 2.8%.
US stocks suffered heavy losses. The Dow Jones Industrial Average slipped 2.5%, the broader S&P 500 index tumbled 2.9% and the technology heavy NASDAQ composite plummeted 3.1%.
While the stocks in Europe and the US were under pressure from Europe’s debt woes for most of the year, Friday’s selloff was triggered by weak corporate data that came out in the US coupled with persisting concerns over the strength of the ongoing economic recovery in the US.
The corporate reporting season took another turn following a surge on strong results from America’s largest aluminium producer Alcoa (NYSE:AA) and chipmaker Intel (NYSE:INTC) that were leased earlier in the week. On Thursday, JP Morgan (NYSE:JPM) said its profits soared 76% to US$4.8 billion to kick off the reporting season in the banking sector. However, Bank of America (NYSE:BAC) and Citigroup (NYSE:C) disappointed investors on Friday after their results failed to meet expectations.
The weak corporate data added to disappointing updates released on Thursday. the Empire State general business conditions index declined by 15 basis points to 5.1 in July, sliding to the lowest level since December 2009, while the Philly Fed index slid from 8.0 to 5.1, reflecting a lower growth rate in the manufacturing sector. The markets got some support from a US employment update, which showed a decline in initial claims to 429,000.
Jitters over the European fiscal crisis were subdued after Spain was able to raise €3 billion in an oversubscribed bond auction. The capitalisation of Spanish banks has been a concern after the European Central Bank (ECB) provided €136.49 billion in loans to the country’s banks in June. The debt situation in several euro zone states once again became an issue this week after Moody’s downgraded Portugal’s bonds by two notches.
Oil and gas supermajor BP (LON:BP) continued its climb this week after a new containment cap placed on the Macondo well stopped the leak for the first time since the crisis kicked off in late April, when the explosion of a Transocean operated offshore drilling platform leased by BP for its Gulf of Mexico operations exploded, killing 11 workers and resulting in the disastrous oil spill that has wiped out more than a third of BP’s share price.
BP is reportedly in talks with US energy giant Apache Corp (NYSE:APA) over the sale of its Alaskan sales, which could generate proceeds of US$12 billion to help it pay for the cost stemming from the spill.
The University of Michigan consumer sentiment index declined from 76.0 to 66.5 in July, putting yet more pressure on the markets.
The FTSE 100 is currently projected to open 0.4% lower on Monday, while the Dow Jones index is seen 0.15% higher.