Howard Wheeldon Comments: International Markets - Business Day Online

Business Day Online, August 1, 2009

The S&P 500 ended its best five-month streak since 1938 with a slight gain on Friday as government data showed softness in consumer spending but reinforced expectations that the economic slump is abating.

But the mood was cautious as the report on second-quarter gross domestic product (GDP) showed the US consumer was more frugal, which hurt economic demand.

Even so, Dow industrials had their best July since 1989 while the S&P 500 and Nasdaq recorded their best gains for July since 1997. Trading was volatile as investors digested mixed news from the GDP report.

“The GDP number came in better than expected but was masked by a lot of government spending and the consumer pulled back,” Jack Ablin of Harris Private Bank said.

“When you're fuelling economic growth on government spending, clearly that is not a sustainable situation,” he said.

“But overall my take is that we still are going to enjoy a cyclical recovery and the third quarter will likely come in positive territory,” he said.

European stocks closed lower on Friday after downbeat US economic data, but rose for the third successive week, as investors continued to view most earnings in the current season positively, including L'Oreal.

The FTSEurofirst 300 index fell 0,2% to close at 928,78 points. Oils took most points off the index, though crude prices recovered to more than 67 a barrel, having fallen immediately after the gross domestic product (GDP) figures. Results from Total and ENI failed to impress, and the shares fell 2,7% and 7,7%, respectively. BP , Royal Dutch Shell and Repsol were down between 1,6% and 2%. “There are some worries that the market may have gone too far in the last three weeks. Markets have a habit of underplaying or overplaying,” Howard Wheeldon of BGC Partners said.

Rises for banks helped to limit the index's losses. HSBC closed 1,6% higher, ahead of results today.

UBS rose 3,9%. BNP Paribas , Banco Santander and BBVA rose between 1,5% and 1,8%. Beauty products firm L'Oreal added 4,4% after reporting sales in line with market expectations.

Asian stock markets closed out a robust July with more gains on Friday as better than expected earnings at companies from Japan to the US reinforced hopes of stronger global growth. Every major Asian market turned higher with Chinese and Indian markets leading the way. Investors worldwide cheered last-quarter results released in recent days that seemed to show many companies are faring better than expected despite the downturn and expect growth to pick up later this year. In Japan, electronics and entertainment giant Sony posted a smaller loss than forecast. Also lifting sentiment were results from leading western companies like US electronics giant Motorola. Dennis Poon of South China Securities said he expected markets, particularly those in Asia, to march higher as earnings potential and liquidity lure more money into stocks.

“We are in a bull market, the momentum is here and the direction is up,” Poon said.

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