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Broadgate: Market News 25/6

25 June 2012

Stocks ended higher on Friday, led by gains in bank shares, as the S&P 500 index bounced back from its second-worst decline of the year.

The gains were not enough to push stocks into positive territory for the week, however.

Bank shares, among the worst hit on Thursday, rose after Moody’s Investors Service announced credit downgrades for 15 of the world’s largest banks. The downgrades had been expected, but some were less severe than feared, which helped boost those shares on Friday.

Dow component JPMorgan Chase & Co shares rose 1.4 percent to $35.99 following a 2.6 percent drop Thursday. The KBW Bank index gained 1.4 percent.

“It was such a hard selloff yesterday, a relentless selloff with a lot of downside volume at the close. Coming out of that, you usually get at least some kind of a rebound,” said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

“As for Moody’s downgrade, it was pretty much expected. The focus continues to be Europe at this point.”

Boosting market sentiment, leaders of Germany, France, Italy and Spain agreed on a 130 billion euros ($156 billion) package to revive growth in the region.

The Dow Jones industrial average was up 67.21 points, or 0.53 percent, at 12,640.78. The Standard & Poor’s 500 Index was up 9.51 points, or 0.72 percent, at 1,335.02. The Nasdaq Composite Index was up 33.33 points, or 1.17 percent, at 2,892.42.

The benchmark S&P index had slipped 2.2 percent on Thursday, its biggest drop since June 1, on signs of a global slowdown in manufacturing growth.

For the week, the Dow lost 0.9 percent and the S&P 500 fell 0.6 percent. But the Nasdaq was up 0.7 percent.

Facebook shares, which Russell named in its preliminary list of additions to the Russell 3000 index .RUI, have rallied more than 21 percent in the past two weeks. The shares were up 3.8 percent to $33.05 on Friday but were still off from the $38 initial public offering price.

Darden Restaurants Inc fell 0.7 percent to $50.04 after the operator of Olive Garden and Red Lobster restaurant chains reported sales that missed estimates and forecast weaker-than-expected profits.

Ryder Systems Inc slumped 13 percent to $35.44 after the transportation and logistics company cut its quarterly earnings forecast, citing lower demand at its commercial rental business.

Shares of Arena Pharmaceuticals Inc fell about 15.4 percent to $9.88 on Friday, ahead of a key meeting in which U.S. regulators are expected to rule on whether to approve its experimental weight-loss drug.

About 7.7 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, in line with last year’s daily average of 7.84 billion.

European stocks rose for a third week as Greece formed a coalition government of parties prepared to abide by the terms of the country’s two bailouts, increasing optimism that the nation will remain in the euro.

Air France-KLM Group rallied 17 percent after announcing a plan to cut jobs at its Air France unit. Aer Lingus Group Plc soared 14 percent after receiving a bid from Ryanair Holdings Plc, which added 5.5 percent. Danone plunged 8.4 percent after the world’s biggest yogurt maker cut its profitability forecast.

The Stoxx Europe 600 Index added 1 percent to 246.58 this past week, completing its longest stretch of weekly gains since January. The gauge retreated 0.7 percent on June 22 as a measure of German business confidence slid to its lowest level in more than two years. The equity benchmark has risen 5.4 percent from this year’s low on June 4, giving it a valuation of 10.3 times estimated earnings, according to data compiled by Bloomberg.

“The Greek election takes a bit of pressure off the debt crisis,” said Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd. In London, “The immediate implication is that it diminishes the risk of Greece leaving the euro zone and of contagion. The ground’s being laid out for some more progress.”

Antonis Samaras, leader of Greece’s New Democracy party, became prime minister on June 20 after agreeing to form a coalition with the Socialist Pasok party and the Democratic Left. New Democracy won the June 17 election — Greece’s second in six weeks — with almost 30 percent of the vote.

Commodities

Brent oil futures closed about 2 percent higher near $91 a barrel on Friday as it rebounded on bargain hunting after prices earlier fell to an 18-month low and U.S. crude futures rose in reaction to a potential storm in the Gulf of Mexico that could disrupt production.

In London, August Brent crude settled at $90.98 a barrel, gaining $2.75 to end a four-day losing streak. Earlier it slipped to a session low of $88.49, the lowest since December 2010, and then hit a session high of $91.70.

Gold edged up on Monday after falling more than 3 percent last week, but interest in the precious metal could be limited by a steady U.S. dollar and deflation worries stemming from a global economic slowdown.

Gold added $1.05 an ounce $1,572.49 an ounce by 0313 GMT after an early drop to around $1,567 spurred bargain buying from speculators.

Currencies

The euro fell toward the lowest in more than a week before Italy and Spain sell debt tomorrow amid concern Europe’s fiscal crisis is infecting bigger economies.

The euro lost 0.2 percent to $1.2542 as of 12:54 p.m. in Tokyo after falling to as low as $1.2519 on June 22, the least since June 13. The currency has weakened 3.2 percent this year. It declined 0.3 percent to 100.77 yen, paring a 1.1 percent advance since Dec. 31.

The Japanese currency touched 80.62 per dollar, the weakest since April 27, before trading at 80.34, up 0.1 percent from the June 22 close. The yen has depreciated against 15 of 16 major counterparts this year, dropping 4.3 percent versus the dollar.

The information set out herein has been obtained from various public sources and is by way of information only. Broadgate Financial can accept no liability of any sort in relation thereto and readers should obtain their own verification of any statement before making any decision which may have any financial or other impact.

Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.

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