U.S. STOCK MARKETS

U.S. stocks finished the day roughly flat as investors juggled an unexpected contraction in domestic manufacturing activity and a mixed batch of corporate earnings.

The Dow Jones Industrial Average lost 7.36 points, or 0.1%, to 13164.78. The Standard & Poor's 500-stock index gained 1.60 points, or 0.1%, to 1405.53 and the Nasdaq Composite rose 13.95 points, or 0.5%, to 3030.93.

Consumer-discretionary and financial stocks led the gains. Bank of America and American Express each tacked on 1% or more, while Cisco Systems gained 1.1% ahead of its quarterly earnings report, which was released after the closing bell. The blue-chip tech company added another 2.5% in after-hours trading, after topping earnings and sales estimates.

Pulling on the downside were utilities and energy stocks. Investors took a cautious stance after the New York Federal Reserve's Empire State index of manufacturing activity fell unexpectedly into negative territory in August for the first time since last October, as orders contract further and cost pressures rise.

The Empire State survey is the first of several regional Fed manufacturing surveys each month, and the reading of minus-5.85, well below expectations of a slip to 5 from 7.39 in July, revives questions about the factory sector's health.

Also weighing on stocks was a gloomy outlook from industrial giant Deere, which missed analysts' estimates in its latest earnings report, citing weakness in certain international markets and manufacturing inefficiencies. Its shares fell 6.3% as the company also lowered its full-year outlook.

In other U.S. economic data, the consumer-price index for July came in unchanged from the previous month, below expectations for an 0.2% increase.

Stripping out volatile food and energy prices, consumer prices rose 0.1% in July, a touch below estimates. Industrial output picked up last month, rising 0.6%.

Capacity utilization also increased, climbing to 79.3% from the previous month. Both numbers matched Wall Street's expectations.

In corporate news, Staples tumbled 15% to lead the S&P 500 decliners, after the office-supplies retailer said it was lowering its full-year outlook following weaker-than-expected quarterly results.

Target gained 1.8% after the retailer reported better-than-expected fiscal second-quarter earnings and revenue and provided third-quarter and full-year earnings outlooks that were above analysts' projections.

Physicians Formula Holdings surged 14% after the company agreed to be acquired by Swander Pace Capital in a cash deal valued at $65 million.

Abercrombie & Fitch jumped 9% to lead the S&P 500 gainers after the teen-apparel retailer's better-than-expected fiscal second-quarter earnings and a 10 million share increase to its share buyback program helped offset disappointing sales results.

EUROPEAN STOCK MARKETS

European equities lost ground Wednesday after a mixed round of U.S. economic data left the outlook for additional stimulus measures unclear.

The Stoxx Europe 600 index seesawed around the prior day's closing price in afternoon action, closing 0.1% lower at 270.35. Miners led the pan-European index lower, as metals prices mostly fell.

Heavyweight Rio Tinto PLC lost 3.4% and BHP Billiton PLC fell 2.3%. Tobacco firms were also among notable decliners, after the industry failed to overturn a court ruling in Australia forcing companies to remove almost all branding from cigarettes packets.

British American Tobacco PLC fell 0.7% and Imperial Tobacco Group PLC dropped 1.7%. Drug makers helped curb losses, with Novartis AG up 1.4%, Sanofi SA 1% higher and Novo Nordisk AS rising 0.8%.

Stocks had pared losses midmorning after data showed the U.K. unemployment rate fell to 8% for second quarter from 8.2% in the first quarter, while the number of workers claiming jobless benefits dropped by 5,900 in July.

In addition, minutes showed the Bank of England's policy makers earlier this month voted unanimously to keep its interest rate at a record low.

The U.K. FTSE 100 index closed 0.5% lower at 5,833.04, as losses for tobacco firms and miners weighed.

Vodafone Group PLC also declined, falling 1% after Bank of America Merrill Lynch cut the stock to neutral from buy. Standard Chartered PLC bucked the trend, gaining 4.1% as it late Tuesday agreed to pay $340 million to New York's Department of Financial Services following allegations of money laundering in Iran.

In France, banks nudged higher, led by Credit Agricole SA, up 1.1%. Societe Generale SA rose 0.4%. The CAC 40 index slipped slightly to 3,449.20, as steelmaker ArcelorMittal SA dropped 2.8%. Among German stocks, car makers fell. Volkswagen AG lost 1.2% and Daimler AG fell 1%. The DAX 30 index was 0.4% lower at 6,946.80.

ASIA-PACIFIC STOCK MARKETS

Asian markets were lower Wednesday, with earnings in focus in Hong Kong, while Standard Chartered rebounded after the bank agreed to pay a New York regulator $340 million.

Hong Kong's Hang Seng Index came off the fresh three-month high it reached Tuesday, dropping 1.2% to 20052.29 as retail and communications stocks led the way. One of the index's largest constituents, China Mobile, slid 0.7% ahead of its earnings report. Japan's Nikkei Average dipped less than 0.1% to 8925.04.

The softer yen benefited some Japanese exporters, with Honda Motor and Hitachi Construction Machinery both up 0.4%. Not all exporters were lifted though.

A Nikkei report said a number of electronics companies had downgraded their sales projections for LCD televisions and digital cameras--Sony lost 2.9%, while Sharp dived 12% after a number of securities companies turned sour on the stock. Deutsche Securities downgraded Sharp to sell and Goldman Sachs cuts its target price.

In company news, Standard Chartered climbed 3.6% in Hong Kong, recovering some of last week's heavy losses, after news the bank had avoided a showdown with New York's banking regulator by agreeing to a settlement.

Another Hong Kong stock recovering from a recent pummeling was Li & Fung, which gained 1.4% after an exchange disclosure showed that the controlling shareholder, the Fung family, bought 15 million shares Aug. 10.

COMMODITIES

Base metals closed largely flat on the London Metal Exchange Wednesday, as a stronger dollar and mounting concerns over a Chinese 'hard landing' continued to pressure the complex.

At the close, LME three-month copper was 0.4% lower on the day at $7,385.5 a metric ton. Aluminum was down 1.1% at $1,835.5/ton. Tin, the most thinly traded metal, has seen less downside pressure, holding above $18,000/ton despite Tuesday's gains losing momentum.

Given recent warrant cancellations and concerns over physical supply, participants seem less willing to short tin however, and are instead focusing elsewhere, noted Standard Bank.

Oil futures prices rose to their highest level in three months Wednesday following a report of a steep drop in U.S. oil stockpiles and fresh tensions in the Middle East.

Light, sweet crude for September delivery settled 90 cents, or 1%, higher at $94.33 a barrel on the New York Mercantile Exchange, the highest finish since May 14. Brent crude on the ICE futures exchange rose $2.20, or 1.9%, to $116.23 a barrel.

Crude futures jumped from earlier losses after the Energy Information Administration said U.S. oil stockpiles fell 3.7 million barrels last week. The drop was well above the 1.9 million-barrel-draw forecast by analysts surveyed by Dow Jones Newswires, and came as U.S. demand for gasoline rose to a 13-month high.

Oil prices also got a boost Wednesday after The Associated Press reported that Saudi Arabia had ordered its citizens to leave Lebanon over kidnapping fears.

Saudi Arabia is the world's biggest oil exporter, and tensions there and across the Middle East have kept oil prices trading a premium for more than a year, amid fears of supply disruptions.

Gold futures edged higher as traders bet that U.S. economic data would continue to disappoint, underlining expectations that the Federal Reserve may ease monetary policy.

The most actively traded gold contract, for December delivery, rose $4.20, or 0.3%, to settle at $1,606.60 a troy ounce on the Comex division of the New York Mercantile Exchange. Compiled from MORRISON SECURITIES PTY. LTD.