World Market Overview
U.S. stocks finished lower Thursday for a second consecutive day, as disappointing revenue from utilities and consumer companies pushed aside a handful of strong earnings reports Thursday, though the market remained on track to close out the best month since July 2009.
The Dow Jones Industrial Average climbed back from a triple digit decline intraday in afternoon trading, but sank again before the close, to settle down 30.72 points, or 0.20%, at 10467.16. Despite Thursday's choppy trading, the blue chip index has gained more than 7% so far this month, on pace to post its biggest monthly gains since July 2009.
A flurry of disappointing second quarter revenue and guidance reports Thursday stung the utilities, consumer staples and technology sectors Thursday, but financial companies strengthened in the wake of encouraging earnings.
With only one session of trading left in July, the major benchmark indexes are poised to notch gains of about 7%. Investors also appeared to react to Federal Reserve Bank of St. Louis President James Bullard's suggestion that the U.S. was in danger of falling into a Japan style deflation trap.
The Nasdaq Composite edged down 0.57% to 2251.69. The Standard & Poor's 500 stock index shed 0.42% to 1101.53, bobbing above the key 1100 level. The measure's declines were led by the utilities and consumer staples sectors, while financials climbed.
European market
European stocks failed to hold on to gains Thursday despite a raft of impressive earnings, particularly in the telecommunications sector, as trepidation ahead of the U.S. gross domestic product data release on Friday weighed in sentiment and mixed U.S. results pressured stocks lower.
The pan-European Stoxx 600 index closed down 0.4% at 256.26, falling within the last hour of the trading session. The U.K.'s FTSE 100 ended down 0.1% at 5313.95, Germany's DAX finished down 0.7% at 6134.70 and France's CAC-40 closed 0.5% lower at 3651.91.
Disappointing earnings from Colgate-Palmolive and Kellogg's hurt the European personal & household goods and food & beverages sectors.
This served to drag Europe lower overall, despite very strong gains from the telecommunications sector following a spate of earnings from some of the industry's leading blue chips.
The Stoxx Europe 600 telecoms index added 1.5%. Shares in France Telecom rose 5.5%, after it reported a drop in second-quarter earnings and revenue but said trends are improving across markets and that it will keep its EUR1.4 a share dividend over the next three years.
Also, Shares in Spanish telecoms company Telefonica gained 3.2%, after its second-quarter net profit rose 16% as revenue growth in its Latin American business compensated for a weaker Spanish market.
Elsewhere, an upgrade of European equities by UBS was well received by market participants but this was not enough to keep the major indexes in the black.
The Swiss banking giant upgraded its weighting on European equities to neutral from underweight, citing strong earnings and greater financial sector transparency following the release of stress test results last week. In economic news, and contrary to expectations, the euro zone economic sentiment indicator rose to 101.3 from 99, its highest level since March '08. But jobless claims data out of the U.S. were mixed.
New claims for unemployment fell unexpectedly while the previous week's level of claims were revised upward and claims lasting more than one week increase. On Friday, the focus will likely be on U.S. GDP data for the second quarter.
With several U.S. fundamentals disappointing of late, investors are concerned that the GDP numbers will come in weaker than expected. Prior to this, the euro zone unemployment rate and consumer price index for July.
Asian market
Asian stocks ended mixed Thursday though optimism over the Chinese economy helped push Shanghai listed shares higher.
The Nikkei Stock Average dropped 0.6% in Tokyo, while Australia's S&P/ASX 200 slipped 0.1% on a decline in bank stocks. South Korea's Kospi dropped 0.2%, Taiwan's Taiex rose 0.2% and India's Sensex gained 0.2% in afternoon trade.
China's Shanghai Composite was up 0.6%, gaining further on top of its 2.3% rise Wednesday, which came after nation's central bank, the People's Bank of China, said there was little scope for a double dip in the economy. Hong Kong's Hang Seng Index ended flat after rising the previous seven days.
Brokerage shares rose in Shanghai on hopes that the recent market rally will attract more investor interest in local stocks, helping increase brokerages' fee income. Citic Securities was up 1.5% and Haitong Securities climbed 3.0% in Shanghai.
Industrial & Commercial Bank of China ended flat in Shanghai after saying that it will raise up to CNY45 billion from a rights issue.
The stock rose 1.0% in Hong Kong as the fund raising plan was well flagged, and as the news removed the overhang of equity dilution.
ICBC also said it's board had approved a plan to take its Hong Kong listed unit ICBC (Asia) private.
This raised speculation that other Chinese banks may look to privatize their smaller Hong Kong listed units as well. Dah Sing Banking was up 5.9%, Chong Hing Bank gained 4.1% and Wing Hang Bank surged 8.3% in Hong Kong.
Hong Kong-listed shares of Agricultural Bank of China fell 0.3% to HK$3.57, succumbing to profit taking despite news the bank had raised an additional HK$12.20 billion from exercising the over allotment option of its Hong Kong initial public offering.
The stock had already rallied 11.5% in the past six sessions, leading to Thursday's inclusion into the MSCI China index after the market close.
AgBank said the over allotment option of its A-share offering hasn't yet been exercised, which could make the IPO the world's largest ever.
Japanese stocks were dragged lower after Wednesday's strong gains, with Panasonic slumping 7.7% on news the company would offer Y818.4 billion to buy out shares it doesn't already own in Sanyo Electric Co. and Panasonic Electric Works Co. The company plans to issue new shares to raise up to Y500 billion for the acquisitions.
Sanyo surged 26.0% and Panasonic Electric jumped 15.0%. SK Telecom gained 0.6% in a weak Seoul market despite missing market expectations with its second quarter numbers as the company gave a bullish outlook for the third quarter.
Commodities and metals
Copper rallied to fresh 12 week highs on the London Metal Exchange Thursday, with demand boosted by firmer equities, a stronger euro and a general rebound in market confidence.
The metal, which led a rally across the entire base metals complex, peaked at $7,283 a metric ton, before pulling back marginally.
LME three month copper still closed 0.8% higher than Wednesday's PM kerb, at $7,230/ton, with short covering activity exacerbating its rally.
The metals showed little immediate reaction to both the weaker U.S. durable goods data released Wednesday and the better than expected jobless claims on Thursday.
While a fresh bout of confidence regarding the economic recovery and the subsequent rise in demand for riskier assets is putting upward pressure on the metals, there is still some nervousness that weaker PMI data out of China Sunday could drag the markets lower again.
Crude oil and natural gas futures jumped Thursday on a weaker dollar and a general optimism about the outlook for commodities that held even as stocks turned lower. Crude for September delivery added $1.37, or 1.8%, to $78.36 a barrel on the New York Mercantile Exchange.
Prices started out in the red, but rebounded as stocks opened higher and held even as equities reversed lower.
It was oil's first positive finish in a week. Gold futures Thursday bounced from near three month lows, but only slightly as investors continued to lighten their holdings of the metal, which has been losing its appeal as a refuge amid calming markets.
The most actively traded gold contract, for December delivery, rose $8.80, or 0.8%, to settle at $1,171.20 an ounce on the Comex division of the New York Mercantile Exchange.