Today's Morning Report

U.S. Overnight Market Commentary 

U.S. stocks halted a global rally overnight, as Greece’s credit rating was cut and the Standard & Poor’s 500 Index failed to hold above levels watched by traders who base investment decisions on charts. Treasuries pared losses, while the euro rallied on signs the region’s economy is strengthening. The S&P 500 fell 0.2% to 1,089.63 at 4 p.m. in New York after gaining 1.3% earlier to 1,105.91, near its 200-day average of about 1,108. The MSCI World Index of stocks in 24 developed nations advanced 1% for a fifth consecutive gain, its longest streak since October. Ten-year Treasury yields rose 2 basis points to 3.26% after jumping 9 basis points earlier. The euro climbed 0.9% to top US$1.22. Benchmark indexes in the U.S. began paring gains as Moody’s Investors Service downgraded Greece’s government bond rating to junk, cutting the grade four levels to Ba1 from A3. Losses in the S&P 500 accelerated after it slipped below its June 3 closing level of 1,102.83, the day before slower-than-estimated growth in U.S. jobs sent the gauge down 3.4% for its biggest slump since February. “Greece is not a new story for the market and the Moody’s downgrade comes after S&P and Fitch, but the market may be sensitive to new bad news,” said Stephen Wood, who helps manage about US$179 billion as chief market strategist for Russell Investments in New York. “We continue to have this tug-of-war between negative and positive information in the market.” JPMorgan Chase & Co. and Wells Fargo & Co. lost more than 1.5% as financial shares in the S&P 500 reversed an earlier 1.1% rally. Newmont Mining Corp. helped lead raw- materials producers lower as gold fell for the third time in four sessions. Gauges of raw-materials producers, financial firms and energy companies lost at least 0.5% to lead declines among the 10 main industry groups in the S&P 500, which did not turn negative on the day until the final half hour of trading. “It was a technical move,” Ryan Detrick, senior technical analyst at Schaeffer’s in Cincinnati, said of the late-day retreat. “We have the 200-day moving average for the S&P 500 at 1,108. Buyers are very reluctant to step in. We got Greece downgraded and there’s a feeling that the uncertainties are still out there.” U.S. stocks followed European shares higher earlier after industrial production increased more than economists forecast in April, rising 0.8% for an 11th month of gains, the European Union said. The Federal Reserve may say on June 16 that output at U.S. factories, mines and utilities grew 0.9% last month after a 0.8% increase in April, according to economists surveyed by Bloomberg.

 

Europe’s Overnight Market Commentary

European shares rose for a fourth straight session on Monday as optimism on global economic recovery led some investors to cover short positions. At 1327 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.9% at 1,028.23 points having risen as far as 1,031.05, the highest since May 18. The index is still down more than 7% from a peak in mid-April, after fears that Greece's debt crisis could spread to other euro zone countries and undermine global economic recovery intensified. Analysts pointed to supportive economic data, notably from the United States on Friday. "Consumer sentiment is better, and we're just a few weeks away from the Q2 reporting season, for which the indications are very healthy for the market," said Christian Stocker, strategist at UniCredit Global Research, in Munich. "We have more positive than negative news, and there is a lot of short covering." Banks were among the biggest gainers, continuing a recovery of recent days. Barclays, Credit Agricole, Societe Generale and UniCredit rose between 2.8% and 4.1%. Greek banks rose 5.5%. Insurer AXA rose 2.5% after it confirmed it was in talks with Resolution Group over the sale of its British life insurance arm in a deal worth £2.75 billion pounds (US$4.03 billion). Within the sector, Aegon, ING, Old Mutual and Prudential rose 1.9% to 3.7%. Oil giant BP trimmed sharp gains made on Friday and fell 6.1%. The stock is down about 44% since the oil spill in the Gulf of Mexico started in mid-April. Investors are awaiting the outcome of a board meeting on Monday to discuss whether the company will cut or defer its second-quarter dividend payment. Other oils were higher, however, boosted by a rising crude price, with a weaker dollar, which also supported metals prices. Among miners, Anglo American, Antofagasta, Fresnillo, Kazakhmys, Rio Tinto, Vedanta and Xstrata rose between 2.1% and 4.8%. Comments from Greece's prime minister late on Friday helped soothe worries over Europe's debt crisis. George Papandreou told a meeting of top bankers his government made a conscious decision against default and against leaving the euro, a decision that made "good economic sense" and repeated a pledge that the country would pay its dues. Investors' sentiment got a further boost from data on Monday showing euro zone industrial output in April surged year-on-year more than in any month in almost two decades, bolstering the view that economic recovery could be gathering pace.

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Hanuman Investments Pty Limited trading as Hanuman Private Wealth - AFSL No. 313416

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