08.09.2008 11:13

STOCKS: weekly review

Wall Street stocks were mixed on Friday after a rally in financials helped soften news that the unemployment rate reached a five-year high in August. The modest recovery on Friday brought to an end a volatile holiday-shortened week during which the the S&P 500 fell 3.2% as fears returned about the health of the global economy. That was the index’s third weekly drop and its biggest loss since February.

Financials were among the biggest casualties but climbed strongly, adding 3.2% amid speculation Blackstone Group and KKR, would buy some businesses from Lehman Brothers’ as part of a deal worth around $5bn. Lehman Brothers rose 6.8%. Selling was widespread, though sectors and companies most exposed to the prospect of a global slowdown were particularly badly hit. Industrials, materials and technology fell 3.9%, 5.4% and 6.5% respectively.

Among industrials, Terex was a big faller after the maker of construction and mining equipment cut its sales and profits forecast for the year. Its shares fell 23.8% over the week. Caterpillar fell 9.4%. In materials, steel stocks were shunned as Goldman Sachs issued a bearish outlook on the sector in a wide-ranging note. US Steel fell 14.6%. AK Steel declined 22.8%. The technology sector took more blows on Friday after Nokia warned on its market share outlook. Jabil Circuit and Adobe Systems lost 5.4% and 3% respectively.

The FTSE 100 had lost 2.3% by the close. The benchmark lost 7% for the week, and was just 90 points above the 2-year closing low reached in July. Over the week, the FTSE 350’s mining index fell 18%, the biggest weekly fall since 1987, while oil and gas was down 9.4%. Metals companies bore the brunt of heavy selling on Friday as the London market lurched to its worst weekly performance in more than six years. Fears of slowing global economic growth sank the wider resources sector, with Kazakhmys off 8.2% and ENRC down 7.6%. Lonmin sank 4.2% on talk that Xstrata had rejected an offer to buy a block of shares in the platinum miner at stg33 apiece – the same price as its hostile bid. Earlier this week, people familiar with the situation were playing down the chances of Xstrata increasing its offer.

Overall, the Nikkei 225 average finished down by 2.8% lower at a six-month closing low of 12,212.23 and the broader Topix index ended 2.6% lower at 1,170.84. The Nikkei has lost 20.2% in value so far this year. Banks accounted for nearly one-fifth of the market’s losses. Mizuho Financial fell by 6.3% and Sumitomo Mitsui lost 4.7%. Sony’s decision to recall 438,000 Vaio computers sent its shares to a three-year low on Friday. Investors seemed unconvinced by the company’s attempts to play down the effect on profits, and critics speculated about the damage to Sony’s reputation. Sony shares finished 4.2% lower at Y3,880 in Tokyo – their worst close since November 2005. The company has lost a third in value since the beginning of the year.