World Market Overview
U.S. stocks gained Monday, as a weaker dollar boosted materials and hopes for further central bank stimulus kept the market edging higher. Markets rose on hopes that the Federal Reserve will take further steps to stimulate the economy at its meeting next week. As the Dow pulled back from an earlier triple-point gain, some investors said the market may cool a bit after its relentless rise since early September.
Materials and industrials led the Dow on Monday as a weaker dollar boosted companies with more exports. DuPont gained 2.1%, Alcoa rose 1.5% and Caterpillar added 1.3%. However, financial companies lagged as questions continued regarding major banks' foreclosure practices. U.S. Federal Reserve Chairman Ben Bernanke said in a speech Monday that federal banking regulators expect preliminary results of their review of the nation's latest foreclosure troubles to be ready next month. Bank of America slid 2.5%, while J.P. Morgan Chase shed 1.7%.
European market
European stocks closed mostly higher Monday as the basic resources sector gained ground after the dollar fell against major currencies after the Group of 20 finance ministers meeting ended with a modest call for an end to competitive devaluations in the currency markets. Oil and gold prices both rose, largely due to the dollar weakness. Stocks traded higher through much of the morning as investors welcomed what news there was out of the G-20.
Also, the Federal Reserve's planned quantitative easing program is expected to be outlined next week, adding a bit more verve to sentiment. Some of the optimism was tempered by a Moody's report focused on problem loans in Spain. Problem loans in Spain's banking system reached a fresh high of EUR102.5 billion as of August, according to central bank data, potentially threatening the credit rating of the country's financial institutions, Moody's said in a research note. The pan-European Stoxx 600 Index closed up 0.3% at 267.42. The UK's FTSE 100 rose 0.2% to 5751.98, France's CAC-40 was little changed at 3870, and Germany's DAX gained 0.5% to 6639.21.
In the U.S., the Dow Jones Industrial Average was 0.6% higher at mid-session. In the U.S., September existing home sales rose 10% to 4.53 million, better than the 5.3% increase to 4.35 million forecast by analysts. Existing home sales are up two months in a row. On Tuesday, Germany is due to publish its GfK consumer confidence, the U.K. publishes third quarter GDP data, and in the U.S. consumer confidence figures for October are due.
In major market action: The weak dollar boosted basic resources shares. Copper miner Antofagasta PLC rose 4.1%, Kazakhmys PLC added 3.5%, and Xstrata PLC gained 2.7%. French luxury goods makers were also in the spotlight, with shares of Hermes jumping 15.1%. Over the weekend, LVMH Moet Hennessy Louis Vuitton SA said it now holds 14.2% of the share capital of Hermes. LVMH also indicated it plans to increase its stake but doesn't intend to seek control of Hermes. LVMH shares rose 2.4%.
In Germany, shares of automotive giant Volkswagen AG rose 6.8% after the group released earnings ahead of schedule Friday. Volkswagen tripled its year to date profit, citing strong demand for passenger cars, but urged caution over the fourth quarter. In Sweden, shares of truck maker Scania AB fell 4.6%. The group reported third quarter net profit of 2.31 billion Swedish kronor ($352 million), a large jump from profit of 278 million kronor in the same period a year ago. Sales totaled 18.56 billion kronor, falling short of expectations.
Shares of Lloyds Banking Group PLC fell 5.4% in London. Media group Pearson PLC fell 1.7% after it said demand in some of its markets remains subdued. The company also said it expects full year adjusted earnings per share to increase 10% compared with a year earlier.
Asian market
Most Asian markets climbed Monday on expectations that further monetary easing by the U.S. Federal Reserve would boost liquidity in the region, and with Chinese stocks rising amid hopes for strong corporate earnings. Singapore Exchange's multibillion dollar takeover bid for its Australian counterpart ASX spurred a wave of merger interest and lifted the region's stock exchange shares, though the Singapore bourse tumbled in the wake of its lofty bid.
Japanese stocks retreated, with exporters losing ground as the yen climbed to a 15 year high versus the U.S. dollar. China's Shanghai Composite rose 2.6% to 3,051.42, Hong Kong's Hang Seng Index advanced 0.5%, Australia's S&P/ASX 200 gained 1.3%, South Korea's Kospi rose 1%, and Taiwan's Taiex ended 1.7% higher.
Shares of ASX (ASXFY) soared 19% in Sydney after Singapore Exchange, or SGX, announced an 8.4 billion Australian dollar ($8.3 billion) cash and stock deal for the company. Among other regional stock exchanges, HKEx (HKXCY) jumped 4.9% in Hong Kong and Bursa Malaysia climbed 5.1% in Kuala Lumpur trading. But SGX itself lost 5.6% in Singapore afternoon trade on concern that the deal was expensive after it agreed to pay a 37% premium to ASX's traded price on Friday. Investors also worried that SGX would face regulatory hurdles due to a 15% ownership limit for the Australian exchange.
The SGX-ASX deal news also lifted other Australian shares, with Energy Resources of Australia rising 4.6%, Fox Resources climbing 3.9% and Insurance Australia Group gaining 3.2%. Among other merger plays, Zambia focused copper producer Equinox Minerals climbed 3.1% after offering to buy explorer Citadel Resource for A$1.25 billion, in a bid to leap into the top 20 of global copper producers. Citadel Resource soared 19%.
Sentiment in region also got a mild boost after a meeting of finance ministers from the G-20 nations in South Korea over the weekend vowed to avoid "competitive devaluation" of their currencies and resolved to curb their external imbalances. Chinese metals, coal and airline stocks fronted gains in Shanghai and Hong Kong, with Jiangxi Copper rising by the day's 10% limit, China Shenhua Energy rising 3.9% and China Eastern Airlines gaining 5.8% in Shanghai.
In Hong Kong, the stocks rose 5.7%, 3.6% and 2.2%, respectively.Shares of Chinese banks also advanced in Shanghai on hopes for strong earnings, with the five largest mainland lenders by assets announcing their results this week. Industrial & Commercial Bank of China (IDCBY) advanced 1.1% and Bank of China (BACHY) gained 1.7%.
In Tokyo, strong-yen concerns continued to weigh on exporters, with Canon (CAJ) shedding 1.1% and Hitachi (HIT) losing 0.8%. Toyota Motor (TM) was off 1.1% after the Yomiuri Shimbun reported in its Monday edition that the automaker will revise its forecast for the dollar-yen exchange rate for this fiscal year to 80 yen from 90 yen. Yahoo Japan rose 2.8% after announcing a 6.8% on year rise in July-September net profit.
Technology plays led the rally in Taiwan, which was led by notebook makers on expectations of strong Christmas season demand. Acer rose 4.9%, Asustek jumped 6.7% and Compal Electronics added 2.7%. Elsewhere in the region, Singapore's Straits Times Index rose 0.5%, Indonesian shares advanced 0.8%, and Malaysian shares rose 0.1% in afternoon trading. Markets in New Zealand, Thailand and the Philippines were closed for public holidays.
Base metals
Base metals on the London Metal Exchange traded up Monday with the likes of copper hitting multi-month highs due to a weak U.S. dollar that spurred investment across the commodity sector. A pledge by G20 finance ministers over the weekend to refrain from currency devaluations led to more dollar selling Monday sending copper and precious metals up. Talk about the launch of base metal exchange traded funds, which has led to speculation that investor demand will increase, further added to the bullish mood. Copper on the LME hit its highest since July 2008 at $8,549 a metric ton Monday. Lead and zinc also rose to fresh multi-month highs initially before pairing gains.
Crude futures settled higher Monday, helped by a weakening dollar as traders await more signals from the Federal Reserve on how it may act to stimulate the economy. Light, sweet crude for December delivery settled 83 cents, or 1%, higher at $82.52 a barrel on the New York Mercantile Exchange, after trading as high as $83.28 earlier in the session. Brent crude on the ICE futures exchange settled 58 cents higher at $83.54 a barrel.
Gold futures lost some steam as Monday's floor trading progressed, but held on to its early lead and closed 1% higher as weakness in the U.S. dollar lured investors back to the precious metals sector. Gold for December delivery climbed $13.80, or 1%, to trade at $1,338.90 an ounce on the Comex division of the New York Mercantile Exchange. The contract earlier hit an intraday high of $1,349.50 an ounce.
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