Global stock markets decline

LONDON — Stock markets brushed aside news that weekly US jobless claims fell to their lowest level in two and a half years on Thursday as the peculiarities of year-end trading dominated activity. German and Japanese stocks led the retreat on their last trading day of the year.

By (AP)

Published: Fri 31 Dec 2010, 11:36 PM

Last updated: Mon 6 Apr 2015, 10:12 AM

Year-end trading is often complicated by traders closing out position to present their portfolios in as best a light as possible — after all, bonuses are often dependent on how well those portfolios have actually performed.

In Europe, the FTSE 100 index of leading British shares was down 13.56 points, or 0.2 per cent, at 5,982.80 while France’s CAC-40 fell 35.50 points, or 0.9 per cent, to 3,855.15. Germany’s DAX was down 81.28 points, or 1.2 per cent, at 6,914.19 on its last trading day of the year. It if closes at its current level, it will still end up gaining just over 1,000 points, or around 16 per cent.

The reaction to better than anticipated weekly jobless claims figures was muted, if not nonexistent.

The US Labour Department reported that new unemployment claims last week fell by 34,000 to 388,000, their lowest level since July 2008.

Though the consensus expectation in the markets was that claims would fall by a far more modest 10,000, analysts said the figures were heavily impacted by seasonal factors related to the Christmas shopping season.

“While it is clear that initial claims are trending down as the labor market recovers, we would advise taking the result reported today with a very large grain of salt,” said Joshua Shapiro, chief US economist at MFR Inc. “The holiday season normally creates volatility in these figures that doesn’t shake out until late January/early February, and a week ending on Christmas Day only magnifies the situation.”

The US jobs situation will likely be the main issue next week when traders return from the holiday season. Friday’s non-farm payrolls figures for December often set the stock market tone for a week or two after their release and the hope is that the recent improvement in the weekly release will provide further evidence that the US economy is picking up steam.

Later, there will also be interest in figures about the sale of previously owned US homes in November — the expectations is that sales rose 0.8 per cent from the previous month following a record 10 per cent in October.

Anything weak, especially after soft new home sales figures earlier this week, may temper the recent optimism in the markets about the pace of the US economic recovery. A rebounding housing market is one of the key ingredients behind the recent uptick in forecasts for the US economic recovery.

Stocks have been buoyant in the last few months as expectations of another slide into recession around the world have dissipated. Most of the world’s major indexes are poised to post solid gains for 2010, and many are actually trading at their highest levels since Lehman Brothers collapsed in September 2008, which proved to be the catalyst to a banking crisis and the ensuing global recession.

In Asia earlier, Japanese stocks took a hammering, partly on year-end factors but also on concerns over the yen’s ongoing strength, which is making it more difficult for the country’s exporters to compete in international markets — by mid afternoon London time the dollar was 0.2 per cent down at ¥81.501, and approaching two-month lows.

Japan’s benchmark Nikkei 225 stock average fell 115.62 points, or 1.1 per cent, to close at 10,228.92, meaning it has ended the year down around three per cent, mainly on account of those yen-related concerns.

Chinese stocks continued to recover after sinking earlier this week in the wake of a surprise decision by the country’s monetary authorities to raise a key interest rate for the second time since October as they try to keep a lid on rising inflation.

The Shanghai Composite Index was up 8.05 points or 0.3 per cent to end at 2,759.58 while Hong Kong’s Hang Seng index rose 30.04 points or 0.1 per cent, to close at 22,999.34.

Oil prices are increasingly becoming a key worry in the markets as they have risen strongly of late in the wake of higher economic growth predictions — a number of analysts predict that a barrel of crude will soon spike above $100 a barrel.

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