Global Markets Overview 08/31/2011
US Markets
U.S. stocks rose Tuesday as talk of the Federal Reserve implementing yet another round of quantitative easing helped push the market higher for a third straight session. The Dow Jones Industrial Average rose 20.70, or 0.18%, to 11559.95, in another choppy session. The blue-chip Dow dropped as much as 110 points early in the day following a dismal reading on consumer confidence, but turned positive after the minutes of the latest Fed meeting were released. The Dow gained as much as 91 points before paring gains minutes before the close.
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Stocks got a boost after news that the Fed's most potent tool, a third round of asset purchases, was raised as a possibility by some officials at the Aug. 9 meeting. In addition to quantitative easing, Fed officials also suggested extending the average duration of the central bank's existing portfolio by selling bonds with short maturities and buying those with longer maturities. The thinking is this course of action could have a similar effect as buying new securities outright. Boeing was the Dow's biggest performer, rising $1.43, or 2.2%, to 66.03, after the company officially launched the revamped version of its 737 jet family. Caterpillar rallied 1.68, or 1.9%, to 89.83, and DuPont gained 72 cents, or 1.5%, to 48.22.
The Standard & Poor's 500-stock index gained 2.84 points, or 0.23%, to 1212.92, led higher by telecommunication and material stocks. Financial stocks kept the rally in check. Bank of America fell 27 cents, or 3.2%, to 8.12, and J.P. Morgan Chase fell 58 cents, or 1.5%, to 37.06. The technology-oriented Nasdaq Composite rose 14 points, or 0.55%, to 2576.11. The market's swing came on thin volume, which tends to prompt more volatile moves. Trading volume is expected to be light for the rest of the week as many market participants are on vacation ahead of the Labor Day weekend.
European Markets
European stock markets ended mostly higher Tuesday, with gains by the financial and basic resources sectors outweighing the impact of a weak U.S. consumer-confidence number and an earlier drop in economic sentiment in the euro zone. The Stoxx Europe 600 index rose 1% to close at 230.64. While European markets wobbled, London stocks caught up with gains made by Continental markets the prior session, when its market was closed for a holiday.
Royal Bank of Scotland Group PLC jumped 8% after an upgrade to buy from hold at Deutsche Bank. Shares of Barclays PLC rose 6.7% and Lloyds Banking Group PLC added 7.8%. Mining stocks also rose, with BHP Billiton PLC and Rio Tinto PLC each gaining 4.3%. The FTSE 100 index rose 2.6% to close at 5,260.63. Among the bigger declining stocks in Europe, shares of heavily weighted Swiss food group Nestle SA fell 2.1%. Sanford C. Bernstein cut the stock to market-perform from outperform, the first time it has changed its rating since it began coverage in 2002.
Among economic news, the European Commission said its economic-sentiment indicator fell to 98.3 in August from 103.0 in July, whereas economists had been expecting a more modest drop to 100.5. ING economist Peter Vanden Houte noted that the index saw its biggest month on month fall since December 2008. The consumer-sentiment index fell to minus 16.5 from minus 11.2 in July. The German DAX 30 index fell 0.5% to close at 5,643.92, pulling back sharply after U.S. confidence data.
Shares that had made sharp gains the prior day fell, including utility stocks such as RWE AG, which declined 2.8%, and E.ON AG, down 2.5%. France's CAC 40 index rose 0.2% to 3,159.74. Banks were mostly lower in Paris, with Societe Generale SA down 0.2% and Credit Agricole SA down 1%. Insurer Axa SA gained 1.3%.
Asian Markets
Asian stock markets ended higher Tuesday, with resources and banking shares among the best performers, as investors showed more appetite for riskier assets in the wake of strong U.S. equity gains. Hong Kong's Hang Seng Index led the region with a 1.7% gain to 20204.17. Japan's Nikkei Stock Average closed up 1.2% at 8953.90, South Korea's Kospi ended with a 0.8% rise to 1843.82, and India's Sensex rose 1.6% to 16676.75.
China's Shanghai Composite went its own way, losing 0.4% to finish at 2566.59. Financial stocks rose, tracking sharp gains for the sector in U.S. and European trading hours after news of a merger between Greece's EFG Eurobank Ergasias and Alpha Bank. In Japan, Nomura Holdings added 2.5% and Mitsubishi UFJ Financial Group rose 1.8%. Aozora Bank surged 8.2% amid reports that Australia & New Zealand Banking Group was considering a takeover of the Japanese bank.
Hong Kong-listed shares of China Construction Bank Corp. gained 1.8%, shrugging off news that Bank of America Corp. will sell half its stake in the Chinese lender. Technology shares also showed strength, with Sony up 3.5%, Toshiba up 2.1% and Elpida Memory up 1.8% in Tokyo, while LG Electronics surged 4.1% in Seoul. Auto makers posted solid gains in Japan, with Hino Motors adding 4%, Isuzu Motors rising 3.4% and Mazda Motor gaining 3.1%.
Commodities
Base metals closed higher on the London Metal Exchange Tuesday, bolstered by an improvement in risk appetite as investors turned their focus to a key labor report later in the week. LME three-month copper climbed as high as $9,225 a metric ton its highest level since Aug. 5 as the markets found support from better-than-expected U.S. economic data, including positive consumer spending figures. The market closed up 0.9% on Friday's close, at $9,160/ton.
Oil futures rose to their highest level in almost a month Tuesday on the prospect that the Federal Reserve will continue its easy-money policy, while reports of Israeli warships near Egypt kept traders on guard. Light, sweet crude for October delivery settled up $1.63, or 1.9%, at $88.90 a barrel on the New York Mercantile Exchange, the highest settlement since Aug. 3. Brent crude on the ICE Futures Europe exchange was up $2.34, or 2.1%, at $114.22 a barrel.
Crude pushed higher as minutes from the most recent meeting of the Federal Reserve's policy-making body showed some officials raised the possibility of another round of monetary easing. Trading volumes were thin, however, as many market participants were still without electricity or stuck at home following Hurricane Irene. Gold futures climbed to a one-week high Tuesday on the view that central banks in the U.S. and Europe may ease monetary policy in an effort to jumpstart growth, enhancing gold's appeal as an alternate store of wealth.
Gold for December delivery, the most actively traded contract, rose $38.20, or 2.1%, to settle at $1,829.80 a troy ounce on the Comex division of the New York Mercantile Exchange. The nearby September contract rose $38.20, to $1,826.70 an ounce, also a one-week high.