Last week couldn't end soon enough for the Indonesian stock market after it saw sharp losses every day, shedding more than 130 points or 7 percent while falling to a fresh 12-month low in that span. Now analysts say that the Jakarta Composite Index is overdue for a correction and is expected to follow the rest of the region to the upside on Monday - although the gains may be tempered by weakness among the commodity stocks.
The global forecast for the Asian markets is cautiously optimistic, in spite of worse than expected unemployment numbers out of the United States on Friday. There was also some mixed news out of the financial sector, which sent the U.S. markets to a mixed close.
But the biggest boost came on Sunday when the U.S. government took over control of mortgage giants Freddie Mac and Fannie Mae in a move to bolster the housing markets and protect and stabilize the financial system. The chief executives at the two firms will be replaced as part of the plan, while the Federal Housing Finance Agency will assume the power of management at the companies - and the financials are expected to rebound on Monday.
The JCI finished sharply lower again on Friday, dipping briefly below the critical support level of 2,000 points before getting a slight positive bounce to send the index back above that plateau. For the ay, the index lost 42.44 points or 2.5 percent to close at 2,022.56 after trading between 1,999.53 and 2,036.14.
Wall Street provides a mixed lead for the market as stocks ended Friday's session somewhat recovered after seeing significant selling pressure earlier in the day. While a disappointing monthly employment report sent jittery investors out of the stock markets early on, some investors looked for bargains in the afternoon following a dismal performance in the previous session.
Before the markets opened, the Labor Department released its highly anticipated monthly report on the employment situation, showing that employment continued to decrease in the month of August. The continued job losses helped to lift the unemployment rate to 6.1 percent, its highest level since September 2003.
Merrill Lynch (MER) added to the early selling pressure after a Goldman Sachs analyst downgraded the stock to a Sell rating with the expectation that the company will see further write-downs. Nonetheless, the stock ended the day higher by 2 percent. However, a Sandler O'Neill & Co. analyst said he expects Lehman Brothers (LEH) to survive the credit crisis, despite seeing considerable volatility in recent weeks on speculation that it will strike a deal to receive a capital injection.
The major averages moved higher in late day trading, although the Nasdaq could not hold onto its gain and ended the session below the unchanged line. While the Nasdaq closed down 3.16 points or 0.1 percent at 2,255.88, the Dow closed up 32.73 points or 0.3 percent at 11,220.96 and the S&P 500 closed up 5.48 points or 0.4 percent at 1,242.31.
Despite the mixed performance, the major averages all posted notable losses for the week due in large part to Thursday's sell-off. The Dow fell 2.8 percent for the holiday-shortened week, while the Nasdaq and the S&P 500 posted weekly losses of 4.7 percent and 3.2 percent, respectively.
In economic news, Indonesia saw a current account deficit of $1.5 billion in the second quarter, the central bank said on Friday. That was well below analyst expectations that called for a surplus of $2.6 billion.
For comments and feedback: editorial@rttnews.com