Global Markets Overview 08/12/2011
US Markets
U.S. stocks notched a massive advance Thursday, as investors seized on favorable corporate and economic reports to recover most of the ground they lost in the previous session. The blue-chip Dow Jones Industrial Average soared 423.37 points, or 3.95%, to 11143.31, the second biggest point and percentage gain this year. It was the fourth straight move of 400 points or greater, a first in the Dow's history.
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The action followed a 519.83-point slump Wednesday that was the blue-chip index's ninth-largest point drop ever, reflecting mounting worries about the health of Europe's banks and the chances of a global economic recession. Thursday's two big catalysts were a rare favorable weekly employment report and signs of a turnaround at networking-equipment maker Cisco Systems.
The absence of troublesome new developments in European sovereign debt and banking also helped. Markets have swung violently this week and last as investors weighed the chances of a global economic recession, and as they fretted over further debt turmoil on two continents. The huge swing to the upside relieved some investors, but to others it was more a symptom of the extreme volatility that has gripped the markets. The Standard & Poor's 500-stock index jumped 51.88 points, or 4.63%, to 1172.64, led by battered financial stocks.
The Nasdaq Composite surged 111.63 points, or 4.69%, to 2492.68. Like the Dow, both indexes' gains were the second largest all year in point and percentage terms. Cisco Systems was the strongest blue-chip stock, surging $2.19, or 16%, to 15.92, after a late Wednesday earnings report highlighted by stronger-than-expected revenues. The number of people claiming new jobless benefits fell last week to the lowest level in four months, dropping to a seasonally adjusted 395,000 in the week ended Aug. 6. Bank of America, which slumped 11% Wednesday, was the second strongest Dow component behind Cisco. The bank's stock rose 48 cents, or 7.1%, to 7.25. In corporate news, AOL gained 1.25, or 12%, to 11.47, after announcing a $250 million stock-repurchase program. Advance Auto Parts climbed 4.19, or 8.4%, to 54.29, after besting earnings estimates and upping its share repurchase authorization.
European Markets
European stock markets ended a very choppy session with strong gains Thursday, as banking shares recouped some of the previous session's heavy losses. The Stoxx Europe 600 index closed up 3.2% at 230.57, but the trading session was marked by sharp ups and downs, with the index at one point sinking as low as 218.91. Salzgitter AG was the biggest gainer in the Stoxx 600. Its shares surged 21% after the German steel producer raised its guidance for pretax profit and reported an 18% rise in sales in the first half of the year.
The German DAX 30 index rose 3.3% to 5,797.66, buoyed by gains for ThyssenKrupp AG, another German steel producer, which rose 8.1% after Salzgitter's results and ahead of its own fiscal third-quarter numbers Friday. In France, the CAC 40 index advanced 2.9% to 3,089.66, as STMicroelectronics NV rallied 11%. Another big gainer was water utility Veolia Environnement SA, whose shares surged around 10%. European bank stocks swung sharply throughout the session, particularly the French and Italian lenders. In Paris, BNP Paribas ended up 0.3% and Societe Generale rose 3.7%. Italy's UniCredit SpA ended up 3.4% after high volatility resulted in trading on several Italian banks being temporarily suspended.
The FTSE MIB index rose 4.1% to 15,277.19 in Milan. In Amsterdam, shares of Dutch insurer Aegon NV fell 3.5% after the group reported a 17% drop in underlying pretax profit. Switzerland's Zurich Financial Services AG, on the other hand, rallied 10.5% after the insurer reported an 88% jump in profit and said it has reduced its exposure to Italian bonds. The U.K. FTSE 100 index gained 3.1% to 5,162.83, as shares of banking giant Barclays PLC rallied 8.6%, recouping losses from the previous session. Shares of Essar Energy PLC were also among the top performers on the benchmark index. The stock rose almost 8% as it partially recovered from a fall of nearly 13% in the previous session, when Goldman Sachs removed the stock from its conviction buy list.
Asian Markets
Mainland Chinese and South Korean shares advanced Thursday, while most other Asian equity markets came off earlier lows as bargain buyers circled equities amid attractive valuations. China's Shanghai Composite Index finished the day 1.3% higher at 2,581.51 and South Korea's Kospi added 0.6% to 1,817.44, with both erasing initial losses. Hong Kong's Hang Seng Index fell 1% to 19,595.14 and Japan's Nikkei Stock Average dropped 0.6% to 8,981.94. Taiwan's Taiex declined 0.2% to 7,719.09, unable to hang on to early gains. Some reports also cited speculation about state-owned funds as a reason for the support to the Chinese market.
Dow Jones Newswires cited a Chinese media account as saying that the National Council for Social Security Fund had bought at least CNY10 billion worth of stocks since Tuesday. Separately, Takeda pointed to speculation of government institutions in South Korea and Taiwan also being among buyers. Gains in Shanghai were led by airline stocks on hopes that steep recent fall in crude-oil prices and a rising yuan would cut their fuel costs, with bargain buyers also snapping up some banks and property developers. Air China jumped 4.9%, and China Eastern Airlines soared 10.1%; in Hong Kong, they gained 2.9% and 6.5%, respectively.
Attractive valuations also pushed several financials higher in the region, with China Construction Bank up 1.7% in Hong Kong, Cathay Financial Holding 5.9% higher in Taipei, and Korea Exchange Bank up 3% in Seoul. HSBC Holdings PLC dropped 2.9% in Hong Kong, however, as trade resumed after being halted Wednesday afternoon, because of a disruption to the exchange's corporate-announcements website.
Commodities
The price of copper bounced back toward $9,000 a metric ton on the London Metal Exchange Thursday, as base metals benefited from a better-than-expected U.S. labor market report. Weekly jobless-claims data showed that the number of people claiming jobless benefits in the U.S. fell slightly last week a small bright spot in a persistently weak U.S. Oil futures shot to their highest level all week Thursday, powered by a stock-market rally and an upbeat report on the U.S. labor market. Oil futures have moved nearly in lockstep in recent weeks with major equity indexes, which traders have come to view as indicators of broader economic sentiment. U.S. stocks powered higher on data showing fewer people claiming jobless benefits last week and better than expected earnings reports.
Light, sweet crude for September delivery settled up $2.83, or 3.4%, at $85.72 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange recently traded up $1.37, or 1.3%, to $108.05 a barrel. Gold prices buckled under pressure from anxious investors who cashed in recent gains in a bid to keep their wealth safe, but losses were limited as traders kept a weary eye on Europe's sovereign debt problems.
The most actively traded contract, for December delivery, fell $32.80, or 1.8%, to settle at $1,751.50 a troy ounce on the Comex division of the New York Mercantile Exchange. The contract touched an intraday record $1,817.60. Thinly traded August-delivery gold settled $32.50, or 1.8%, lower at $1,748.80 a troy ounce after setting an intraday record at $1,813.50.