Global Markets Overview 19 May 2011
US Stocks
U.S. stocks snapped a three-day losing streak Wednesday as the Federal Reserve's minutes showed the central bank officials are in no hurry to tighten monetary policy. The Dow Jones Industrial Average closed up 80.60 points, or 0.65%, at 12560.18, as Caterpillar, Chevron and Exxon Mobil powered the blue-chip index higher. The Dow, which registered its biggest gain since April 27, is down 1.95% month to date. The Standard & Poor's 500-stock index rose 11.70, or 0.88%, to 1340.68, led by the materials and energy sectors.
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The technology oriented Nasdaq Composite rose 31.79, or 1.14%, to 2815.00, its biggest gain since April 20. Federal Reserve officials appeared to agree at their last meeting that letting the central bank's huge balance sheet slowly shrink was likely to be the first step toward tightening monetary policy. Nevertheless, they aren't ready to start executing the plan until they're sure the economy can bear it, according to minutes of the April meeting released Wednesday.
Fed officials had an extensive discussion about their exit strategy, which carries much uncertainty because it never has been done before. Fed officials have indicated the process is likely to be gradual and must be flexible because conditions may change. Material and energy stocks were the biggest gainers as oil futures closed above $100 a barrel for the first time in a week. The Dow's gains came after three consecutive days of declines as fears about euro-zone debt and a slowing economy manifested earlier this week. But those concerns subsided Wednesday as a strong corporate profit report from Dell and the Fed's latest views boosted investor sentiment.
On the corporate front, Dell late Tuesday reported fiscal first-quarter earnings that topped analysts' forecasts. It also reassured investors about its full-year outlook. The company's shares rose 85 cents, or 5.4%, to $16.75. Staples slumped 3.02, or 15%, to 16.63, after the office-supply company's fiscal first-quarter earnings missed analysts' estimates.
European Stocks
European stock markets ended with modest gains Wednesday, as rising commodity prices buoyed the resources sector and real-estate shares gained on strong results from Land Securities Group. The Stoxx Europe 600 index closed up 0.3% at 278.17, snapping a four session losing streak. Among major national indexes, the U.K.'s FTSE 100 climbed 1.1% to 5923.49, as heavily weighted mining stocks rallied. France's CAC-40 index ended 0.9% higher at 3978.00 and Germany's DAX rose 0.6% to 7303.53. In the U.S., stocks traded cautiously higher ahead of the Federal Reserve's minutes from its latest policy setting meeting.
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Meanwhile, the European Central Bank was trying to tone down prospects for a restructuring of Greek sovereign debt after Jean-Claude Juncker, who chairs the group of euro-zone finance ministers, Tuesday said a "soft restructuring" could be considered. Two ECB members Wednesday reportedly voiced opposition to any restructuring. Greece's ASE Composite index fell 1.4% to 1328.10. Real-estate stocks were among the star performers after Land Securities reported a 15% increase in full-year pretax profit and announced a rise in its net assets. Its shares climbed 6.4% in London, while peers British Land and Hammerson gained 4.6% and 3.2%, respectively.
Energy stocks gained as crude-oil futures rose. Shares of Royal Dutch Shell gained 2.4% and BP rose 1.4%. Total added 1.1% in Paris. Shares of Eurasian Natural Resources rallied 4.3% after Citigroup upgraded the miner to buy from hold, saying investor and consensus expectations are low. Lonmin and Anglo American each rose 2.1%, Fresnillo added 1.7% and Rio Tinto gained 1.5%.
Asian Stocks
Asian equity markets ended mostly higher Wednesday, with resources plays supporting Australian shares after a Moody's downgrade of the nation's four largest banks weighed on the sector, while banks and techs led Tokyo stocks higher. The day's gains came despite Tuesday's weakness on Wall Street, and were aided by higher U.S. index futures and the U.S. dollar's weakness, which analysts often view as a signal of improved investor sentiment.
Japan's Nikkei Stock Average rose 1% to 9662.08, South Korea's Kospi added 1.6% to 2135.78, China's Shanghai Composite advanced 0.7% to 2872.77, and Hong Kong's Hang Seng Index climbed 0.5% to 23,011.14. In Tokyo, major banks advanced, led by Sumitomo Mitsui Financial Group Inc., which rose 3.5%, and Mizuho Financial Group Inc., which tacked on 3.2%, recouping some recent steep losses that came amid concerns the government could ask them to accept waivers on loans to embattled Tokyo Electric Power Co. Semiconductor-related firms outperformed, with Elpida Memory and Tokyo Electron closing up 2.4% and 1.2%, respectively, after U.S. computer maker Dell issued stellar earnings and a bright forecast. Some resource sector stocks gained. Shares of Inpex Corp. rose 3.0% in Tokyo, PetroChina Co. rose 1% and Jiangxi Copper Co. rose 2.1% in Hong Kong.
Base Metals
Copper closed above $9,000 a metric ton for the first time in two weeks Wednesday, driven higher by technical buying and a weak U.S. dollar, although traders and analysts doubt the red metal's ability to sustain its current trajectory in the short term. After trading in a range below $9,000 a metric ton for a string of sessions, LME three-month copper finally broke above $9,000/ton in afternoon trade. LME three-month copper ended the afternoon session at $9,064/ton, up 3.0 % on the day. Oil futures closed above $100 a barrel for the first time in a week Wednesday after a closely watched report showed U.S. inventories held steady last week.
Light, sweet crude for June delivery settled up $3.19, or 3.3%, at $100.10 a barrel on the New York Mercantile Exchange, the first settlement above the $100 mark since May 10. Brent crude on the ICE futures exchange traded up $2.16, or 2%, at $112.15 a barrel. Futures advanced steadily throughout the day after a closely watched report from the Department of Energy said U.S. oil inventories remained flat last week, bucking expectations that supplies would climb. Other data also painted a rosier than expected picture of U.S. supply and demand.
Gasoline stockpiles rose less than expected, while gasoline demand rose 222,000 barrels, according to the DOE. Precious metals followed crude oil higher Wednesday. The most actively traded gold contract, for June delivery, was up $15.80, or 1.1%, at $1,495.80 a troy ounce on the Comex division of the New York Mercantile Exchange. The thinly traded May contract gained $15.80, or 1.1%, to $1,495.60 a troy ounce.
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