Markets Rise Despite Gloomy Economic Outlook

Strategic Insights -

Despite the ongoing uncertainty and gloom surrounding the US and global economy, with the swine flu outbreak, Chrysler's bankruptcy, and a 6.1% decline in the US GDP in the first quarter, the US markets rose last week. The Dow Jones industrial average (DJIA) closed at 8212.41, gaining 1.7% and the Standard & Poor's 500 (S&P 500) closed up 1.3%. The resilience of the markets was tested by the news that several banks would need to raise additional capital within six months or face government support.

Key Takeaways:

  • The DJIA closed at 8212.41, gaining 1.7% last week, despite the gloomy economic outlook.
  • The S&P 500 closed up 1.3% last week, with Asian markets showing significant gains.
  • China's economic stimulus package helped lift its Purchasing Managers' Index from a negative 44.8 in March to a positive 50.1 in April.
  • The Asian market indices rose significantly, with the Hang Seng index in Hong Kong up 5.54%, the Nikkei 225 in Japan up 1.69%, and the S&/ASX index in Australia up 3.01%.
  • Bank of America and Citigroup Inc. are among the banks that will need to raise capital, but a senior government official noted that the financial situation is "manageable".
  • Asian markets turned upbeat due to China's economic stimulus package and the slowdown in economic decline.
  • European markets also turned mostly higher, with the FTSE 100 in London rising 0.01%, the DAX 30 in Germany up 1.61%, and the CAC 40 in Paris up 1.01%.

Statistics:

  • DJIA: 8212.41
  • NASDAQ: Not mentioned in the text
  • GDP decline in the 1st quarter: 6.1%
  • Swine flu outbreak's impact on international travel and trade: Not quantified
  • US Treasury's deadline for banks to raise capital: Six months
  • Asian market indices:

+ Hang Seng index in Hong Kong: Up 5.54%

+ Nikkei 225 in Japan: Up 1.69%

+ Singapore Straits Times index: Up 5.65%

+ Australia's S&/ASX index: Up 3.01%

  • China's Purchasing Managers' Index:

+ March: -44.8

+ April: 50.1

  • European market indices:

+ FTSE 100 in London: Off 0.01%

+ DAX 30 in Germany: Up 1.61%

+ CAC 40 in Paris: Up 1.01%

+ DJStoxx 600: Up 0.82%

Sources:

  • UPI, May 4
  • The New York Times, as cited in the UPI article
  • HSBC, Hong Kong, as cited in The New York Times