GTF MarketWatch
| Market Indices, Market Close as of February 5, 2010 | |||
| Index | Open | Close | % Chng |
| DOW INDU | 10185.53 | 10012.23 | -1.70 |
| S&P 500 | 1089.18 | 1066.18 | -2.11 |
| NASDAQ | 2171.20 | 2141.12 | -1.39 |
| S&P / TSX | 11317.55 | 11223.12 | -0.83 |
| BOLSA | 30876.6 | 30630.73 | -0.80 |
| FTSE 100 | 5247.41 | 5060.92 | -3.55 |
| DAX | 5654.48 | 5434.34 | -3.89 |
| NIKKEI 225 | 10205.02 | 10057.09 | -1.45 |
| HANG SENG | 20243.8 | 19665.1 | -2.86 |
| SHANGHAI COMP | 2941.36 | 2939.402 | -0.07 |
(click image to view at full
size) | Economic Calendar February 8 - February 12 |
|||
| Date | Release | Consensus | Prior |
| Mon | CA Housing Starts (K) N/A |
180.0 -- |
174.5 -- |
| Tues | US Wholesale Inventories (%) US ABC Consumer Confidence |
0.50 -- |
1.50 -49 |
| Wed | CA Int'l Merchandise Trade ($)(B) US Trade Balance ($)(B) |
-0.2 -35.5 |
-0.3 -36.4 |
| Thurs | US Advance Retail Sales (%) US Initial Jobless Claims (K) |
0.3 465 |
-0.3 480 |
| Fri | CA New Motor Vehicle Sales MoM (%) US U of Michigan Confidence |
2.00 75 |
-6.00 74.4 |
| Market Summary, February 1 - February 5 |
Global equity indices dropped for the third consecutive week, declining to levels not seen in months, as concerns over the sustainability and pace of economic recovery undermined earlier hopes of a "V" shaped recovery. In Canada, the S&P/TSX Composite Index, a broad measure of Canadian equity markets and overall economic health declined 0.83 percent, closing at 11,223.12. In the United States, the Dow Industrial Average meanwhile slipped 1.7 percent this week to 10,012.23, falling below the 10,000 level on both Thursday and Friday.
The weakness in markets was the result of a number of factors:
- Mixed economic releases highlighted both the fragile state of the American and world economy, as well as the rocky road ahead, depressing energy prices.
- Meanwhile concerns over high levels of public debt in developed economies were heightened as Greece struggled to plug a widening budget deficit of 12.7 percent of GDP.
- Anaemic recovery in the European and Japanese economies caused an appreciation of the US dollar, and consequently a similar depreciation in the price of gold.
| Market Outlook, February 8 - February 12 |
In Brussels, the European Commission continues to deliberate on the the possibility of a EU bailout of the Greek government in order to prevent a crisis with the Euro, or a potentially embarassing IMF intervention. Meanwhile, upcoming economic releases are expected to show that Spanish economy has failed to pull itself out of recession, while the German and Italian economies experienced meagre growth at best.
In North America meanwhile, economic releases of interest for the upcoming week include Canadian housing starts, which are expected thought to have increased, Canadian International Merchandise Trade, the US Trade Balance, and the University of Michigan Confidence Index.
| Story of Interest, February 8 - February 12 |
By: Gregory Darkeff and Andrew Vrana
On January 21st, Toyota Motors announced the recall of eight popular models, followed this week by the recall of its popular second generation Prius hybrid in Japan over malfunctioning braking systems. Made over safety concerns, the recalls have shaken consumers’ trust in a brand known until recently for its quality, erasing one fifth of the company’s market value between January 20th and February 5th 2010.
In 2007, Toyota Motors became the world’s premier automaker by volume, a title its competitor General Motors, had held for 77 years. This ambition, however, came at a price. The growth propelling Toyota forwards was to sow the seeds of future crisis. In a twist of fate, the company’s problems are eerily familiar; the sacrificing of product quality for sales volume was at the root of General Motors’ downfall.
In November 2009, Toyota became concerned by a problem with the driver-side floor mats of a number of models with the potential to jam the accelerator pedal. The additional discovery, little over a month ago, of electrical problems causing unwanted and uncontrollable acceleration prompted the company to immediately announce recalls for all affected models.
On the news, of the recalls, Toyota shares, declined significantly. Trading above $90 prior to January 21st, it had fallen to $81 by January 27th. By the fourth of February, shares sunk to $71, their lowest level since March 2009.
At the centre of the company’s response has been Akio Toyoda, the firm’s president and the grandson of its founder. Upon taking control of the company little over a year ago, Toyoda was the first executive to admit that radical change was needed. In a recent speech Toyoda admitted that quality would have to be rebuilt from the bottom-up if the company were to survive.
Mr. Toyoda has been coming under increasing fire as the public attention intensifies. Critics argue that as the president of the company, Toyoda should increase his visibility and model the company’s public relations strategy on its American rival, Ford Motors. Much like Toyota today, Ford Motors was on the edge of a public relations disaster as recently as 2002, when it was discovered that its Explorer model had a tendency to roll over. Jeffrey Sonnenfeld, Senior Associate Dean at the Yale University School of Management described Toyota’s response as ‘woefully inadequate’, and suggested the company model its public relations campaign on Ford’s. In 2002, Bill Ford, Chairman of Ford Motors and- like Akio Toyoda- heir of the company’s founder, made multiple public appearances to show that the company took full responsibility for its mistakes, and to dispel public anger.
In the meantime, Toyota’s problems have been a boon for other automakers. In particular, Ford has managed to capitalize, doubling its share price just as the markets have punished Toyota.
The fall in Toyota’s market share in the United States, the world’s largest automobile market, is an opportunity for the country’s “Big 3” automakers to regain some of their former clout. With government bailouts and restructuring, these fallen champions are moving forward, leaving their damaged reputations behind them.
The lesson from Toyota’s troubles is simple. It is all too easy to destroy a brand, lose shareholder’s confidence, and turn success into failure. Rebuilding that brand is un-quantifiably harder. Like all too many banks which dabbled in the subprime market not so many years ago, for it to survive Toyota needs to remember the values and the business which brought it to the top.
| GTF Announcements, February 8 - February 12 |
All Trader-in-Residence engagements during the Winter 2010 academic term will be held in the Allen H. Gould Trading Floor, Room DSB 122A. Refreshments will be served following a question and answer period, in the Commerce Lounge.
Disclaimer: The GTF MarketWatch is prepared primarily by students and is viewed as an educational tool. The GTF is not responsible for consequences of actions taken based on the GTF MarketWatch.