From Morrison Securities Pty. Ltd

U. S. Stocks

U.S. stocks jumped in afternoon trading after reports that Italian Prime Minister Silvio Berlusconi plans to resign, seen as a breakthrough in the country's political impasse. Berlusconi was planning to resign after the country's 2012 budget vote is approved, according to several media reports. Few details were immediately available, but traders viewed the development as a positive one for stocks, which have been wracked by soaring Italian bond yields and fears that Europe's sovereign-debt crisis is spreading. Earlier in the session, stocks fell after Berlusconi won a budget vote but did so without a majority of Parliament, raising doubts on whether his government remains in power.

European Stock Markets

European stocks closed higher Tuesday, helped by earnings news, but they pared gains in late trade after Italian Prime Minister Silvio Berlusconi lost his parliamentary majority. The Stoxx Europe 600 index rose 0.9% to 240.50. The U.K.'s FTSE 100 index added 1% to 5567.34, France's CAC-40 index ended up 1.3% at 3143.30, and Germany's DAX gained 0.6% to 5961.44.

For the first half of the session, investors put their worries about Italy on the backburner, choosing instead to concentrate on a slew of earnings reports. It was a good day for banks. France's Societe Generale rose 7.3% despite posting a 31% drop in third-quarter net profit as it wrote down the value of Greek government-bond holdings.

The bank canceled its 2011 dividend, but said it doesn't need to raise fresh capital. Also in Paris, BNP Paribas rose 1.8% and Credit Agricole added 0.8%. In London, Lloyds Banking Group was the standout gainer on the FTSE 100, up 4.4% after reporting a reduction in bad debts for the third quarter and saying its exposure to weak euro-zone countries has fallen.

Barclays PLC gained 1.5%. Repsol YPF jumped 6.3% in Madrid after announcing a large shale-oil find in the south of Argentina, which could increase its energy reserves by 44%. In afternoon trading, however, investors shifted their attention back to Italy, and stocks pared gains, following news Berlusconi had won a budget vote but lost his majority in parliament.

After the vote, the opposition leader called for him to quit, and with only 308 out of 630 parliamentary votes, if Berlusconi doesn't resign, a confidence vote will be the next step. Italy's FTSE MIB index closed up 0.7% at 15664.06. Italian borrowing costs continued their recent climb, with the yield on the 10-year government bond hitting a euro-era high of 6.71%, according to Tradeweb.

Exane BNP Paribas and Bank of America Merrill Lynch downgraded their gross-domestic-product forecasts for the euro zone. Exane cited uncertainty over the debt crisis and said it now expects no growth in the euro zone in 2012, compared with a previous estimate of 0.8% growth.

Bank of America downgraded its 2012 European GDP projection to a 0.6% contraction, from a previous estimate of 0.8% growth, noting a combination of tighter fiscal policy, bank deleveraging effects and persistent uncertainty over the euro-zone sovereign-debt crisis.

The Greek ASE Composite Index rose 2.4% to 779.63, with National Bank of Greece up nearly 12%, as investors awaited the announcement of a new government of national unity. The new government is expected to receive EUR8 billion ($11 billion) in international aid and begin work on a new rescue deal if the country's leaders commit to the terms of the deal.

Vodafone Group rose 1.8% in London after reporting an 11% fall in first-half net profit on higher sales costs and taxes. The telecommunications provider also said it now sees adjusted full-year operating profit to be in the upper half of the range it indicated in May. BMW climbed 0.5% in Frankfurt as the auto maker reported an 8.3% increase in vehicles sold last month and said it was on course to reach a new sales record for the year.

Asia-Pacific Markets

Asian markets ended mixed Tuesday as caution over Europe's debt woes persisted, with attention shifting to Italy, while Tokyo shares were weighed by a 29% plunge in Olympus Corp.'s stock after the company admitted covering up huge investment losses. Speculation over the fate of Italian Prime Minister Silvio Berlusconi has intensified, even as he denied reports he would resign, as a loss of investor confidence in his government has sent Italy's borrowing costs surging to dangerous levels.

Japan's Nikkei Stock Average ended down 1.3%, South Korea's Kospi lost 0.8% and Australia's S&P/ASX 200 index gained 0.5%. Hong Kong's Hang Seng Index ended flat after a choppy session, while China's Shanghai Composite slipped 0.2%.

In Tokyo, Olympus plunged to end down 29%, after touching its lowest intraday level since 1995, after the company admitted Tuesday it had covered up investment losses for decades and used a series of acquisitions to clean up its books, reversing weeks of statements defending the transactions.

The company announced midday that Executive Vice President Hisashi Mori would be removed from his post. The stock has lost 70% since Oct. 13. The travails appear to have weighed Nomura Holdings, which lost 15% as investors fretted over the brokerage's possible involvement in Olympus' past M&A activities.

Nomura is Olympus' principle underwriter. Nomura's weakness might also have been related to concerns over devaluation of the company's European debt holdings. Toyota Motor fell 1.7% before the release of its second-quarter earnings, which came after the market close.

The company reported its net profit for the quarter fell 19% on-year to Y80.4 billion, and it decline to give a full-year earnings outlook as production continues to be disrupted by flooding in Thailand.

Semiconductor-linked names also suffered, led by Dainippon Screen Manufacturing, which fell 3.8% after announcing a larger-than-expected cut to its fiscal year operating profit forecast.

Tokyo Electron lost 2.2%, while Elpida Memory dropped 10%. Regional chip plays also fell, with Samsung Electronics shedding 2.3% in Seoul and TSMC slipping 0.7% in Taiwan. SMIC fell 6.8% in Hong Kong after swinging to a third-quarter net loss due to falling wafer shipments. In Hong Kong, gold producer Zijin Mining added 5.9% after it said Tuesday it plans to buy Hong Kong-incorporated mineral resources investment firm Long Province Resources from Australia's Warrior Advances for about CNY1.15 billion.

Commodities

Base metals closed mixed on the London Metal Exchange Tuesday, with flagship copper losing ground after Italian Prime Minister Silvio Berlusconi won a closely watched budget vote but failed to hold on to a governing majority. At the close, flagship three-month copper was down 0.3% at $7,800 a metric ton, having lost ground in afternoon trade.

Other metals fared better, with LME zinc closing 2.5% higher at $2,000/ton. Crude-oil futures rose Tuesday as a higher demand forecast from key oil producers, the euro zone's ongoing debt crisis and concern over Iran's nuclear program as well as growing tensions in the Middle East put prices on track to log a fifth-straight session of gains.

Crude for December delivery added 72 cents, or 0.8%, to $96.24 a barrel on the New York Mercantile Exchange. Prices had traded as high as $96.87 a barrel earlier. Gold futures climbed past $1,800 an ounce Tuesday, poised to score their highest close in nearly seven weeks as news from the euro zone continued to tug at trader sentiment. Gold for December delivery was up $10.30, or 0.6%, at $1,801.40 an ounce, after trading as high as $1,804.40 earlier.