Ayodele Aminu With Agency Reports
6 November 2008
Lagos — Stock markets around the world recorded mixed performance yesterday after Barrack Obama was elected the 44th president of the United States of America, the world's largest economy.
While the European, London and Wall Street stocks faltered, the Asia Pacific stock market and the South African stocks rallied yesterday as investors broadly welcomed Obama's victory.
Even in Nigeria, the stock market recorded 20 price gainers, while the index fell by only 1.7 per cent compared to 2.5 per cent fall the previous day. That of the Ghana Stock Exchange, however, closed flat.
In Europe, the stock market snapped their six-day winning streak as all eyes swung back to the economy.
Analysts said an Obama win had been largely priced in after six days of gains for European shares.
At midday, the pan-European FTSE Eurofirst 300 trimmed early losses, sliding 1.6 per cent to 958.80 after dropping more than 2 per cent in early trade. In Frankfurt, the Xetra Dax slid 1 per cent to 5,239.98 and France's CAC 40 added 1.8 per cent to 3,625.29.
Investors took profits in commodity stocks after the pan-European index climbed almost 20 per cent in the space of a week to close last Tuesday at a one-month high of 974.15.
The world's largest steelmaker ArcelorMittal tumbled 14.8 per cent to -20.88 after it forecast weaker fourth-quarter earnings, cut production further and put its growth plans on hold in the face of a global economic slowdown.
The news dragged down German peer Salzgitter by 7.2 per cent to -56.54, while ThyssenKrupp fell 6.5 per cent to -15.81.
Crude oil fell 4 per cent to below $68 a barrel, dragging down oil companies. Austria's OMV tumbled 5.7 per cent to -25.07, while France's Total slid 2.2 per cent to -43.49 and Portugal's Galp Energia dropped 2.9 per cent to -8.25.
There was no respite for defensive stocks either, with pharmaceuticals retreating after their recent advance. Switzerland's Novartis fell 4.3 to SFr57.25 while Roche lost 2.8 per cent to SFr173.
However, there are expectations of rate cuts from the European Central Bank and the Bank of England today, following a recent string of rate cuts from policy-makers around the world.
The BoE and ECB were both expected to cut rates by at least half a percentage point, according to a poll by Reuters news agency.
The pattern was similar in London where equities fell because investors took profits from a six-session rally, which came in anticipation of an end to the uncertainty about who will be the United States' president.
The FTSE 100 gave back 59 points to 4,578.77 in midday trade, after the rebound took the benchmark index to its highest level for a month during its best run since December. At its lowest point during morning trade, it lost 145 points. The resource sector, which led the advance, gave up some ground to profit taking. The FTSE 250, seen as more representative of the UK economy, was 0.3 per cent weaker at 6,757.68, a loss of 21 points.
"Given the much bigger economic picture there is little chance of a post-election rally, "said Martin Slaney, head of derivatives at GFT.
"Although the slight element of uncertainty over the identity of the new president has been removed - the result was already 'baked in the cake' as they would say in the US - the short term implications of Obama's victory, for the financial markets at least, are intangible. There is even an element of 'buy the rumour, sell the news' that is driving some profit-taking to kick in."
Kazakhmys, the eastern European miner at the forefront of the recent gains moved to the vanguard of the profit taking. Its shares fell 8.6 per cent to 363.3p. Xstrata was also weaker, down 5.8 per cent at £12.28.
Transport companies were stronger after FirstGroup, the operator of the Great Western train franchise, reported a 44 per cent increase in underlying interim profit. Its shares were 2.1 per cent stronger at 454_p. Its rival Stagecoach Group was 3.6 per cent higher at 190.8p.
News of a sharp contraction in business activity in the service sector attracted attention on trading floors. The monthly Purchasing Managers' Index fell to a new survey low of 42.4, well down on September's 46. A reading below 50 signals declining activity, while 50 represents no change on the previous month.
Howard Archer, chief UK and European economist at IHS Global Insight said the data added to pressure on the Bank of England's monetary policy committee to cut interest rates on Thursday:
"With the data indicating that the downturn is deepening and inflationary pressures are waning, we believe there is an extremely strong case for the MPC to slash interest rates from 4.50 per cent to 3.50 per cent".
Ditto for Wall Street stocks, which were set for a lower start yesterday as traders took profits following the historic US presidential election win by Obama and attention turned back to an economy in peril.
Futures were lower after a strong market rally in the previous session, when investors anticipated an end to the uncertainty about who would lead the world's largest economy during a severe slowdown.
The prospect of strong political leadership to deal with the financial and economic crisis had helped lift equities to their highest level in three weeks in the previous session.
Underlining the scale of the challenges awaiting the president elect, the latest economic data pointed to further signs of stress in the housing market, which lies at the root of the global financial crisis.
Mortgage applications dropped 20.3 per cent on a seasonally adjusted basis last week to the lowest level in almost eight years, driven by a near 30 per cent slump in demand to refinance home loans.
US companies cut an estimated 157,000 jobs last month, according to the National Employment Report of ADP, the payroll services firm.
Less than an hour before Wednesday's opening bell, S&P 500 futures were down 11.1 points at 992.10. Nasdaq 100 futures were down 14.25 points at 1,366.25, while futures for the Dow Jones Industrial Average were down 80 points at 9,507.
Futures were little changed as US television networks declared victory for the Democratic candidate on Tuesday evening but fell from their highs overnight.
Ian Griffiths, dealer at CMC Markets, said the futures market indicated "there's not going to be an immediate Obama bounce" but added "Wall Street arguably remains on a generally strong footing."
"Yesterday's solid gains will be presenting the opportunity for some profit taking whilst the fact Europe is trading broadly lower too is adding to the rather more cautious nature," he said.
The reverse was however, the case in Nigeria as the excitement of Obama's victory appeared to have impacted positively on the Nigerian stock market. At the close of business yesterday, 20 stocks recorded price gainers, compared to the five the previous day.
Although the Nigerian Stock Exchange All-Share Index fell by 1.7 per cent, it was a major improvement on the 2.5 per cent fall recorded the previous day.
The volume of trading rose to 232.368 million shares worth N1.609 million traded in 6,420 deals, from 163.968 million shares worth N1.536 billion exchanged in 6,188 deals the previous day.
The companies that recorded gains include Nigerian Breweries Plc, First Bank of Nigeria Plc, Stanbic IBTC Bank Plc, Syke Bank Plc, Access Bank Plc, Starcomms, University Press Plc, Union Homes Plc, Japaul Oil Plc, Custodian Insurance Plc and Hallmark Insurance Plc. Others include ABC Transport Plc, Aso Savings and Loans Plc, Cornerstone Insurance Plc, Costain West Africa Plc, Dunlop Plc, Unic Insurance Plc, RT Briscoe Plc, UAC Property Plc and International Energy Assurance Plc.
South African stocks also ended sharply higher yesterday, rising for the sixth successive day following a broad rally overseas as a result of US presidential election. Stocks erased earlier profit taking-induced losses on optimism that central banks in Europe - the Bank of England and the European Central Bank - will once again be in the spotlight with their slashing of interest rates , traders said.
Boosted by firmer commodity prices amid the weakening dollar, mining counters added the most points to JSE's all share index, which ended 2.43 per cent, or 514,31 points higher at 21649,580.
The Asia Pacific stock market also rallied yesterday as investors broadly welcomed Obama's victory.
In Japan, the Nikkei 225 average ended on the day's high with a gain of 4.5 per cent. Hong Kong shares rose by 6.5 per cent in their first hour of trading. Singapore gained as much as 5.7 per cent and South Korea's maximum gain was 5.6 per cent.
Trading in Asia had at first taken its cue from an election day rally on Wall Street last Tuesday night, where the S&P 500 index rose 4.1 per cent to a three-week high.
That was not sustained. Markets had been falling from their early highs shortly before John McCain formally acknowledged that Obama had won, but then bounced back a bit. Gains were more modest as markets closed.
Overall, the FTSE Asia Pacific index was 4.7 per cent higher at one stage, before falling back to 176.7 - a gain of 4.4 per cent.
In Japan, the Nikkei 225 average closed 4.5 per cent higher at 9,521.24 and the broader Topix index was 6.2 per cent higher at 966.91
Exporters put in a strong performance, as investors hoped Obama's $175bilillion plans for tax credits and public spending would boost confidence in a major market.
Japan's biggest car maker, Toyota Motor rose by 10.4 per cent to Y4,250 and Honda gained 13.4 per cent to Y2,745. The electronics company Canon increased by 12.8 per cent to Y3,970 and the games maker Nintendo was up 10.9 per cent at Y36,000. The chipmaker Elpida Memory rose by 17.4 per cent to Y674.
Banks also benefited, as credit markets have eased substantially over the past few days as central banks from Japan to Australia have cut the cost of borrowing, and pumped billions of dollars into the financial system.
Mitsubishi UFJ Financial Group, Japan's biggest, rose by 10.8 per cent to Y698, Mizuho Financial was 16.1 per cent higher at Y288,400 and Resona climbed 13.3 per cent to Y124,200.
Obama's backing for alternative energy helped makers of wind turbines. Mitsubishi Heavy Industries gained 14 per cent to Y388 and South Korea, Yonghyun BM, rose 15 per cent to Won14,650. Solargiga, a Chinese maker of electricity-generating solar panels, rose by 5.5 per cent to HK$2.51.
Overall in Hong Kong, the Hang Seng index, which had led the region's rally during the morning session, closed 3.2 per cent higher at 14,840.16; the main sub-index of mainland companies listed in the territory was 5.3 per cent higher at 7,225.69.
One of the biggest gains had nothing to do with the US election: PCCW, Hong Kong's biggest phone company, rose by 26.9 per cent to HK$3.68 after the chairman, Richard Li, offered HK$14.9bn to take the company private in partnership with China Network Communications.
BHP Billiton, which is the world's largest miner and Australia's biggest oil producer, rose by 8.5 per cent to A$31.60. Macarthur Coal rose by 11.1 per cent to A$7.60. Overall the S&P/ASX 200 index closed 2.9 per cent higher in Sydney at 4,336.60.
Elsewhere in Asia, in Seoul, the Kospi closed 2.4 per cent higher at 1,181.50 and in Singapore, the Straits Times Index was 2.4 per cent higher late in the afternoon session at 1,874.28.
In India, the Sensex was 2.4 per cent lower by mid afternoon in Mumbai at 10,380.41.
But the Ghana Stock Exchange All-Share Index remained closed flat at 10,752.34.The GSE has recorded a growth of over 62.95 pre cent from the beginning of the year to date.
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