UK markets closed slightly lower on Friday, as investors remained cautious ahead of the results of European bank-stress tests and amid renewed concerns over the debt situation in the US.
Banks, Lloyds Banking Group, Barclays and Royal Bank of Scotland, lost between 1.0% and 2.5%, as risk aversion increased among investors.
Miners, Vedanta Resources, Antofagasta and Xstrata, dropped between 0.5% and 2.0%, amid worries over future metal demand, while BHP Billiton declined 1.9%, after the company agreed to buy Petrohawk Energy Corp for $12.1 billion in cash.
Among other stocks, Rolls-Royce Holdings lost 2.5%, after UBS downgraded the company to “Sell” from “Neutral”, while Fresnillo and Burberry Group paced gains, as various brokers took positive stance on these stocks.
FTSE 100 dropped 0.1% or 3.3 points to 5,843.7. FTSE 250 fell 0.2% or 19.8 points to 11,746.8.
European Trading Review
European markets ended lower on Friday, after data revealed an unexpected drop in the US consumer sentiment index for July, and as investors speculated that European banks might fail the stress test.
Banks, Credit Agricole, Commerzbank and Deutsche Bank, dropped between 1.5% and 3.1%, ahead of the release of bank-stress-test results.
Credit Suisse slipped 1.5%, after the bank revealed that the US Department of Justice is investigating into its private-banking services provided to Americans.
Among technology stocks, STMicroelectronics declined 3.3%, while Infineon Technologies dropped 2.4%, after Morgan Stanley downgraded the former to ‘Equal Weight’ from ‘Overweight’ and reiterated its ‘Equal Weight’ rating on the later.
However, automobile major, Volkswagen, rose 2.9%, after it reported record deliveries for the first half.
FTSEurofirst 300 index declined 0.2% or 2.5 points to 1,086.9. DAX 30 ended marginally higher, at 7,220.1. The CAC 40 declined 0.7% or 24.6 points to 3,726.6.
US Trading Review
US markets rose on Friday, as gains due to upbeat earnings reports from Citigroup and Google helped overcome persisting deadlock over the US debt limit talks and a sharp dip in the US consumer confidence.
Shares of Google surged 13%, as its sales revenue surpassed market expectations.
A rise in merger & acquisition activity also boosted the risk appetite among investors.
Petrohawk Energy jumped 62%, after BHP Billiton agreed to acquire the company in a deal worth $12.1 billion, while Clorox climbed 8.9%, after billionaire, Icahn, proposed to acquire the company for about $10.2 billion.
Stocks also rose, as the European Banking Authority stated that all banks in Italy, Germany and the UK passed the European Union stress tests.
DJIA rose 0.3% or 42.6 points to 12,479.7. NASDAQ climbed 1.0% or 27.1 points to 2,789.8. S&P 500 index closed 0.6% higher, at 1,316.1.
Forex Trading Review
At 0400 BST today, the GBP is trading 0.2% lower against the USD at $1.6089, 0.2% higher against the EUR at €1.1431 and 0.2% lower against the JPY at ¥127.17.
The EUR is trading 0.4% lower against the USD at $1.4075, on concerns that European leaders would fail to agree on measures to restrain the Eurozone debt crisis at a summit this week.
The EUR is trading 0.4% lower against the JPY at ¥111.25, as most Asian equity markets traded lower, decreasing the demand for high yielding assets.
The NZD is trading higher against AUD, after a report showed that New Zealand consumer prices rose 1% in the second quarter from the previous three months.
On Friday, the EUR ended lower against the USD, after the European Banking Authority stated that eight banks failed Europe’s second round of stress tests, with a combined capital shortfall of €2.5 billion.
The WON ended lower against the USD, after the Bank of Korea lowered its economic growth forecast for this year on an expected slowdown in domestic demand.
Commodities Trading Review
In Asia, crude oil for August delivery is trading 7 cents lower at $97.17 per barrel.
On Friday, crude oil for August delivery closed 1.6% or $1.55 higher at $97.24 per barrel, as the dollar fell against the major currencies, increasing the demand for the commodities as an alternative investment.
Gold for immediate delivery is trading marginally higher today, at $1,594.10 per ounce.
Gold prices for August delivery gained 80 cents to close at $1,590.10 per ounce on Friday
Persisting worries over the US and Eurozone debt crisis forced financial spread trading investors to purchase the precious metal as a safe haven asset.
Financial Trading News
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'US and Eurozone Debt Concerns Boost Gold Financial Spread Trading Market' edited by ETX Capital, updated 18-Jul-11
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