Oil prices continue to unbalance equities

London:

In London on Friday the FTSE 100 gained 0.2 percent to 5,397.8, while the FTSE 250 was up by 0.2 percent as well, to 7,853.7.

The markets were up on advances in the telecommunications sector and on the downgrade of Hurricane Rita to Category 4. In the telecommunications sector, O2 gained 2.3 percent to 154¼p on a positive assessment by ratings agency Fitch, while Vodafone rose 1.4 percent to 147p.

The oil sector declined on the day as damage predictions ahead of Rita were decreased. BG Group fell 1.1 percent to 534½p, Royal Dutch Shell declined 1.2 percent to £19.09, BP lost 1.6 percent to 657½p, and Cairn Energy was down 2 percent to £19.77.

Elsewhere, ITV gained 1.4 percent to 112¼p as rumors continued that a group led by a former BBC director general was getting ready to bid on the broadcasting company.

Pub group Enterprise Inns added 1.8 percent to 838p on an announcement that it expects profits to meet expectations and that it will return surplus cash to shareholders through higher dividends and share buybacks.

In the pharmaceuticals sector, GlaxoSmithKline gained 2.7 percent to £14.16.

Europe:

In Europe on Friday the FTSE Eurofirst 300 closed at 1,207.44, a loss of 0.5 percent on the week.

Gains in the oil sector helped the equities market not lose any more than it did by balancing declines in the insurance sector due to fears of a new round of claims expected from victims of Hurricane Rita.

Despite a 2.7 percent decline on Friday due to a downgrade of Rita’s strength, Finnish oil refiner Neste Oil gained 11.5 percent for the week to end at €31.20. Neste reached a record high of €32.19 on Thursday.

In the automobile manufacturing sector, Volkswagen gained 13.1 percent on the week to close at €51.86 on Friday after going as high as €52.53 earlier in the day. Volkswagen’s strength was due partly to positive comment by brokers and partly to rumors that US billionaire Kirk Kerkorian is building a stake in the company much as he has done in General Motors.

In the insurance sector, Munich Re fell 2.5 percent over the week, mainly on rumors that it will soon issue a warning on profits. Elsewhere in the sector, Swiss Re dropped 2.5 percent to SFr81.25, Zurich Financial lost 2.4 percent to SFr217.70, and Axa fell 2.1 percent to €21.84.

New York:

In the New York equities markets on Friday, the Dow Jones Industrial Average was down, while the Nasdaq composite and the S&P 500 both gained slightly.

Friday’s declines were due to sell-offs ahead of the arrival of Hurricane Rita. Speculation about decreased refining capacity and economic slowdown was common even though some analysts downplayed concerns about the impact of high energy prices on the economy.

The Dow fell 0.02 percent on the day to 10,419.50, while the Nasdaq gained 0.29 percent to 2,116.84 and the S&P was up 0.06 percent to 1,215.12.

The oil and gasoline sector was up on the week, with Frontier Oil gaining 11.1 percent, Tesoro up 7.5 percent, Sunoco adding 5 percent, and Valero Energy ending the week 2.3 percent higher. Fears of rising energy costs sent several sectors down on the week. US Steel fell 6.3 percent.

In the trucking sector, Swift Transportation lost 6.9 percent. Both Swift and US Steel posted profits warnings.

Some retailers also issued warnings. Avon Products fell 15.9 percent on the week on a reduced earnings forecast for 2005, while fellow cosmetics company Estee Lauder cut its second-half sales estimate and fell 12.5 percent on the week.

Elsewhere, Palm, which makes handheld computers and smart phones, lost 16.5 percent to $29.20 in early trade and was off by 20.3 percent on the week as it warned of lower sales in the upcoming quarter.

Alcoa Aluminum lost 9.2 percent on the week, 6.4 percent of that on Friday morning on a warning that third quarter profits would not reach estimates due to higher costs and lower profits.

On the positive side, Goodyear Tire & Rubber gained 4.4 percent on Friday to $15.66 as it announced a program meant to cut costs by up to $1 billion by 2008.