Negativity on markets as eurozone and global growth worries dominate

The FTSE 100 closed the week up 32 points at 5,576, but down 1.4% on the week. The Dow Jones Industrial Average finished at 12,821 with Dow component J.P. Morgan falling 9.3% after revealing losses of at least $2 billion as a result of trades gone wrong by the so called “London Whale”, Bruno Michel Iksil.

The S&P 500 closed at 1,353, with a weekly drop of 1.2%. The Nasdaq Composite Index  closed on Friday at 2,934, a 0.8% decline from last Friday’s close.

Gold finished the week at $1,584 an ounce, its lowest level for 2012. Brent crude oil futures fell  to $112 a barrel on Friday. For the week, front-month Brent dropped 92 cents, or 1%, falling for a second straight week. In the last two weeks, Brent crude has fallen by 6% or $7.6, its biggest two week percentage loss since mid December 2011.

Plenty of economic news to digest on Friday, illustrating a mixed but not diabolical picture.

UK producer output prices in April were up 3.3% from the year before, having been up 3.7% in March, the lowest since December 2009 but below expectations of a figure below 3%. 

The Thomson Reuters/University of Michigan preliminary index of American consumer sentiment advanced to 77.8 from 76.4 in April, the highest level since January 2008.

Chinese industrial production increased by 9.3% in April compared with the same period last year, down from the 11.9% rise in March and below expectations of 12.2% gain expected and the lowest since May 2009. However, consumer price inflation dropped from 3.6% in March to 3.4% in April.

AIM stocks have been massacred this week, with the AIM share index down 18% at 742 versus 900 in May 2011.

Risk is off and concerns about the health of the banking sector do not help after JP Morgan’s proprietary trading nightmare. The bank was considered the “sensible one” after the shenanigans of RBS, Goldman Sachs and others.

We need Greece to elect a sensible government and the storm will blow over, continued uncertainty about an exit of Greece from the euro will only increase jitters. The US consumer sentiment data indicates that the American consumer is pretty confident and if China decides to add a stimulus package to boost growth then the global economy can overcome the eurozone problems. The European commission forecast a 0.3% decline in GDP for the European Union this year but predicts a bounce back into growth in 2013. An interesting pull between bulls and bears, but going all in now is probably premature even with the big drops.