World Market Overview 6/30/2011
US markets
U.S. stocks advanced, as investors cheered a Greek austerity package and financial stocks jumped following a major settlement on mortgage backed securities. The Dow Jones Industrial Average rose 72.73 points, or 0.60%, to 12261.42, the blue-chip measure's third consecutive gain.
Bank of America climbed 3% and other big banks gained ground after BofA reached an $8.5 billion settlement on investor claims over securities purchased before the U.S. housing-market collapse. The pact was viewed as removing a persistent drag on the shares. The Standard & Poor's 500-stock index rose 10.74 points, or 0.83%, to 1307.41. The financial and materials sectors were strongest. The Nasdaq Composite gained 11.18 points, or 0.41%, to 2740.49. The moves put the Dow and Nasdaq on track for their biggest weekly gains since March and the S&P 500 for its biggest since November.
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Stocks have swung up and down for weeks on worries that Greece poses a contagion risk to European banks and other heavily indebted euro-zone countries. The passage of unpopular austerity measures Wednesday was seen paving the way for the heavily indebted country to get another round of aid. It was also viewed as moving the euro zone closer to containing its debt crisis.
In U.S. economic data, the number of people who signed contracts to buy previously occupied homes rose last month, though the figures were still low from an historical perspective. In corporate news, Monsanto gained 5% after it raised its fiscal 2011 profit guidance and reported a 77% rise in profit for its fiscal third quarter, beating analysts' expectations. Visa surged 15% and Mastercard rose 11% after the Federal Reserve unveiled a more lenient plan to curb debit-card interchange fees that banks can charge retailers.
European markets
European equity markets rallied Wednesday as Greece's parliament passed additional austerity measures, thereby bringing the country closer to securing more aid and avoiding a debt default. The pan-European Stoxx 600 index climbed 1.7% to end at 269.80. Peripheral euro-zone markets posted strong gains, with Italy's FTSE MIB index and Spain's IBEX 35 index both up 2.1%. In Greece, the parliament passed a revised austerity program in a closely watched vote. It will vote again Thursday, this time to approve the implementing measures for the program.
A second positive vote will pave the way for the disbursement of aid from international lenders, in turn helping Greece avert a near-term debt default. This would also mean European officials will continue work on a second package of financial assistance. The news from Greece buoyed banking shares, with Commerzbank AG up 2.1% in Germany, UniCredit SpA up 1.4% in Italy, BBVA SA up 2.3% in Spain, and Societe Generale up 2.6% in France. The DAX 30 rallied 1.7% to 7,294.14 in Frankfurt. Shares of Allianz climbed 3.1% after the German insurer was lifted to overweight from equalweight at Morgan Stanley. France's CAC 40 index gained 1.9% to 3,924.23, with shares of banking group BNP Paribas SA up 1.7%. The U.K.'s FTSE 100 index advanced 1.5% to 5,855.95, with miners such as Antofagasta PLC whose shares rallied 4.8% helping set the bullish pace.
Asian markets
Most Asian equity markets ended higher Wednesday as expectations that Greece would be able to avoid a messy default gathered strength, with the rally backed by strong gains in resource-sector stocks after commodity prices rose Tuesday. Japan's Nikkei Stock Average finished the day 1.5% higher at 9797.26, South Korea's Kospi climbed 1.5% to 2094.42, and Taiwan's Taiex advanced 1.1% to 8573.38. The performance marked a second day of broad stock gains in the region, which came ahead of a much anticipated vote by Greek lawmakers later Wednesday on a package of austerity and privatization measures.
Mainland Chinese stocks diverged from the broad regional trend to finish lower after six consecutive sessions of gains, as investors locked in recent profits. The Shanghai Composite Index dropped 1.1% to 2728.48. Hong Kong's Hang Seng Index also turned volatile in afternoon trading, before finishing little changed at 22061.18.
In Tokyo, utility shares climbed after the Nikkei newspaper reported that the opposition Liberal Democratic Party plans to urge the government not to ask utility companies other than Tokyo Electric Power to contribute to a compensation fund for people affected by the nuclear-reactor accident. Chubu Electric Power climbed 4%, and Tohoku Electric Power Co. jumped 6.3%. Shares of Tepco ended 2.8% higher after the company's shareholders Tuesday rejected a motion to abandon nuclear power.
Energy-sector stocks rose across the region after crude-oil prices rose Tuesday in New York. Cnooc added 1.5% in Hong Kong and Inpex gained 2.1% in Tokyo. Other resource-sector shares were also supported by firm commodity prices overnight, with Sumitomo Metal Mining climbing 3.6% in Tokyo, Korea Zinc advancing 2.9% in Seoul, and gold miner Zhaojin Mining Industry rising 1% in Hong Kong.
Base metals
Copper closed at its highest price in eight weeks on the London Metal Exchange Wednesday after the Greek parliament's approval of a five year austerity plan boosted risk appetite across the markets, although analysts remain sceptical of the lasting impact of the measure on base metal prices.
The Greek parliament Wednesday voted 155 to 138 to pass an additional EUR28.4 billion in spending cuts and new taxes, a mandatory step to secure an assistance package from the European Union and International Monetary Fund. In the build up to the announcement, LME three month copper spiked to a four week high of $9,245 a metric ton, though gains were later pared as some investors sought to book profits. But later in the trading session, copper rallied once more, closing the open outcry session up 2.7% at $9,320/ton, its highest price since May 4.
Crude futures rose 2% Wednesday, rebounding to levels last seen before the release of strategic oil stockpiles, on a surprise decline in U.S. oil inventories and calmed Greek debt fears. Light, sweet crude for August delivery settled $1.88 higher at $94.77 a barrel on the New York Mercantile Exchange, after rising as high as $95.84 a barrel earlier in the session.
Brent crude on the ICE futures exchange closed $3.66 higher at $112.44 a barrel. Oil prices gained following weekly data from the Department of Energy that showed a 4.4-million-barrel drop in U.S. oil inventories. The decline, much larger than analysts had expected, indicated that refiners are still churning out gasoline and other fuels in anticipation of rising demand. The data came after Greece's parliament voted for a new round of austerity measures, calming markets on edge due to the country's sovereign debt crisis. Gold futures rose as investors continued to seek a safe place to park cash after Greece's approval of austerity measures.
The most actively traded contract, for August delivery, settled $10.20, or 0.7%, higher, at $1,510.40 a troy ounce on the Comex division of the New York Mercantile Exchange.
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