Global Markets Overview 09/15/2011
US Markets
Stocks surged as investors found reasons for optimism in a barrage of headlines from Europe. The Dow Jones Industrial Average rose 140.88 points, or 1.27%, to 11,246.73, after a day of whippy trading. The Standard & Poor's 500-stock index gained 15.81 points, or 1.35%, to 1188.68, while the technology-oriented Nasdaq Composite advanced 40.40 points, or 1.60%, to 2572.55. The Dow has now posted three straight days of gains, and is up 2.3% for the week. The Nasdaq briefly recovered all its losses for the month, and is now down just 0.3% for September.
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During the morning, the Dow plunged more than 100 points in minutes after headlines suggested Austria's parliament had voted down an upgraded bailout fund for Europe. But the market quickly retraced those declines after officials said parliament had only rejected changing the agenda and would hold a special meeting on the bailout fund. A scheduled conference call between German Chancellor Angela Merkel, Greek Prime Minister George Papandreou and French President Nicolas Sarkozy further bolstered sentiment, as investors took hope that the three leaders would stand behind commitments to keep Greece in the euro zone. With half an hour left in trading, the Dow had gained more than 280 points before cutting those gains in half by the closing bell. Amid the skittishness over any news involving the 17-nation euro zone's debt crisis, Merkel earlier rejected speculation that Greece is nearing default or would be forced to leave the 17-nation euro zone. That offset the effects of a widely expected downgrade by Moody's Investors Service of two French banks. Technology stocks were among the sectors leading the market higher, and the sector has been the best performer for the week and month. Intel gained 1.7%, International Business Machines added 2.3% and Microsoft rose 1.8%. Industrial and materials stocks were also strong, with DuPont adding 1.9 % and 3M gaining 2.1%. Home Depot also was strong with a 2.7% advance.
European Markets
European stocks ended higher Wednesday, boosted by hopes European leaders will take steps to avert a deepening of the region's debt crisis, while French banks saw a mixed performance after a pair of downgrades by Moody's Investors Service. The Stoxx Europe 600 index rose 1.5% to close at 224.17. Stocks in the region cemented gains after European Commission President Jose Manuel Barroso said options for the introduction of euro-zone bonds are due to be presented soon. He cautioned, though, that the moves won't be an immediate cure for the region's sovereign-debt crisis.
Meanwhile, markets were looking to a meeting between Germany's Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou who were expected to hold a conference call Wednesday afternoon to discuss Greece's deficit-cutting measures and a bid to push through a second aid package agreed on over the summer. Shares gained in Greece. The Athens General Index rose 1.7%, lifted by a 6.4% gain for National Bank of Greece SA and a 6.7% rally in Public Power Corp. shares. Trading in shares of French banks was volatile Wednesday. Moody's cut the long-term debt ratings of Societe Generale SA and Credit Agricole SA. SocGen pared an earlier loss to finish down 2.9%, while Credit Agricole moved into the green, rising 1.2%. The move had been flagged by media reports since the weekend. Shares of BNP Paribas SA dropped 3.9% after the company announced a plan to sell EUR70 billion in risk-weighed assets to raise its common-equity Tier 1 ratio to 9% by 2013. Overall, the French CAC 40 index rose 1.9% to close at 2,949.14.
Notable gainers included insurer AXA SA, up 6.9%, and chip group STMicroelectronics NV, up 11.9%. Auto-related stocks surged in Germany, with BMW AG up 6% and Volkswagen up 5.1% amid general optimism from auto makers at the Frankfurt show. The German DAX 30 index jumped 3.4% to close at 5,340.19, with a 7% gain for Deutsche Boerse AG making the company's shares another standout. London's FTSE 100 index rose 1% to end at 5,227.02, supported by a 6.3% jump for retailer Next PLC after it reported a gain in first-half net profit and provided an upbeat outlook.
Asian Markets
Asian markets ended off their lows Wednesday after German Chancellor Angela Merkel reportedly sought to ease fears of an imminent default by Greece. Fears of contagion and of another hit to European growth had pressured Asian markets after ratings firm Moody's downgraded two French banks. Hong Kong's Hang Seng index recovered enough ground to push it into positive territory for the day, up 0.1% at 19045.44. Japan's Nikkei Stock Average lost 1.1% to 8518.57, while South Korea's Kospi dropped 3.5% to 1749.16 in investors' first chance to react to recent events following a long holiday weekend. China's Shanghai Composite rose 0.6% to 2484.83, while India's Sensex gained 1.5% to 16709.60. With the threat of Greek default looming, Europe's debt woes are dominating markets. Japan's economic recovery is likely to be frustrated by Europe's debt woes and a slowing U.S. economy, a board member of the nation's central bank cautioned Wednesday.
Also Wednesday, Chinese Premier Wen Jiabao said China was willing to expand its investment in Europe, according to reports, though he didn't offer specifics. Losses for financial stocks, viewed as particularly exposed to events in Europe, accelerated in afternoon trading. In Tokyo, Nomura Holdings fell 2.1% while Sumitomo Mitsui Financial Group lost 1.7% and Shinsei Bank fell 3.7%. Japanese exporters were pressured, with shares in Canon down 4.1%, TDK off 3.1% and Pioneer losing 3.5%. Property companies posted steep falls in Hong Kong: Agile Property Holdings plunged 8%, China Overseas Land & Investment shed 3.6% and China Resources Land fell 6%. In South Korea, auto makers were among the hardest hit. Kia Motors lost 3.8% and Hyundai Motor dropped 3.3%.
Commodities
Base metals closed mostly lower on the London Metal Exchange Wednesday after another session dominated by nervous Europe focused trade in which bellwether copper slid to as low as $8,590 a metric ton. A slight recovery in the euro did little to lift the dollar-denominated metals, with many potential buyers keeping to the sidelines amid conflicting reports on a new upgraded bailout fund for the euro zone. While LME three-month copper came up off its intraday low the market's lowest level since Aug. 11 it still closed down more than 1.6% at $8,630/ton.
Crude oil futures fell Wednesday as traders looked past a sharp decline in U.S. weekly crude oil inventories to focus on rising stockpiles of fuel products and sliding demand. Light, sweet crude oil for October delivery on the New York Mercantile Exchange settled $1.30 a barrel lower at $88.91 a barrel. A firm U.S. dollar and cautious optimism about Europe's debt crisis eased investor demand for gold as a safe haven. The most actively traded gold contract, for December delivery, fell $3.60, or 0.2%, to settle at $1,826.50 a troy ounce on the Comex division of the New York Mercantile Exchange.