Risk aversion continued to weigh on equity markets today, as negative US macroeconomic data released on Thursday sent investors scurrying to the perceived safety of the Dollar.
Caution once again took hold among investors following yesterday’s bearish US jobs data and a disappointing regional manufacturing report.
Natural resource stocks suffered, as a rush to the safety of the US Dollar lifted the currency, rendering commodities, priced in Dollars, relatively more expensive. Crude Oil futures fell 1.4% to $73 per barrel and copper slumped 1.22% to $327.80 per tonne. Copper miner Freeport McMoRan dropped 1.4% to $71.04, while Exxon Mobil dipped 0.7 percent to $58.87.
Technology bellwether Dell edged ahead during the afternoon, rising 0.71% to $12.13, as net income for the second quarter rose by 16% to $545 million thanks to an impressive 52% surge in revenue from BRIC countries, Brazil, Russia, India and China.
For the full year, the company expects sales growth to range between 14% and 19%, saying it expects a return to normal technology cycles for both commercial and public clients. In other words they expect customers who are hoarding cash to start spending on new technology.
Hewlett Packard by contrast slid 1.91% to $39.98, despite a 5% increase in income to $1.8 billion. The firm’s interim CEO said that HP’s strategy was unlikely to change in the wake of the departure of the chairman and CEO, Mark Hurd. ‘When you have a winning strategy I don't see the motivation to change it, and that's what we have here’, the company said in a conference call. [1]
Hormel Foods Corp., which makes iconic wartime food Spam, reported higher-than-expected third-quarter income, despite higher raw material costs. Net income rose 10.6% to $85.4 million, or 63 cents per share, beating a Thomson Reuters forecast of earnings of 60 cents per share. Hormel shares gained 0.65% to $43.65.
Cloud computing firm Salesforce.com was the star riser, announcing better-than-expected quarterly income and also raising its full-year outlook. The company, which added 5100 new customers in the period, enjoyed income of 29 cents per share, beating analyst forecasts of 27 cents per share.
Salesforce said that its earnings were now expected to be $1.15-$1.17 per share, as opposed to earlier estimates of $1.13-$1.15. The shares raced ahead 12.75% to $12.29.
By 3.30pm (London time), the Dow had slumped 73.3 points (-0.71%) to 10197.91 and the S&P 500 lost 7.42 points (-0.69%) to 1068.21. The Nasdaq was slightly lower, down 4.48 (-0.25%) to 1818.52.
Following a meeting between the president and finance ministers, France cut its official growth forecast for 2011. The rate was cut from 2.5% to 2%, bringing France into line with that of international forecasts; the cut was made in order to reassure European partners that Paris is serious about its deficit-reduction efforts.
Natixis bank said that the move was a realistic one, adding that the 2.5% forecast was always ‘a bit of a fantasy’. The French government also said that the 2010 forecast of 1.4% growth would be maintained. [2]
On the currency markets, both Sterling and the Euro took heavy losses against the US Dollar as investors moved towards the safe-haven currency. Sterling hit a low of $1.5464 while the Euro nose-dived 1.08% to $1.2681.
After a quiet day on the macro-economic front, next Monday will see the release of a swathe of economic data, including German GDP figures for the second quarter, US home sales and the Richmond Federal Reserve manufacturing index.
The last of these will be particularly important as it will provide more hints as to the likely direction of the US economic recovery.
Source: [1] Reuters (20 August 2010),
Source: [2] Bloomberg (20 August 2010)
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'Spread Betting News 20 Aug 2010', Article by IG Index, last update: 20-Aug-10
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