Today's Morning Report

U.S. Overnight Market Commentary 

Stocks surged, with the Standard & Poor’s 500 Index erasing its 2010 loss, and oil rose as growth in New York manufacturing added to signs the global economy is weathering Europe’s debt crisis. Greek bonds sank after Moody’s Investors Service cut the nation’s rating to junk. The S&P 500 climbed 2.4% to 1,115.23 at 4 p.m. in New York, the highest close since May 18, as the Federal Reserve Bank of New York’s general economic index showed an 11th month of growth. Oil rallied above US$77 a barrel and the Reuters/ Jefferies CRB Index of commodities climbed a seventh straight day, the longest streak since March 2007. Greek 10-year bond yields jumped 74 basis points to 9.08%. Stocks in Europe rebounded from early losses as News Corp.’s offer for British Sky Broadcasting Plc offset concern Greece’s downgrade will worsen the region’s debt crisis. U.S. equities also jumped as a government report showed prices of imported goods fell in May, led by the biggest drop in petroleum costs since December 2008, and chipmakers surged on signs of growing demand. “We’ve moved from recession to recovery and now we’re moving into expansion,” said Mike Ryan, New York-based head of wealth management research for the Americas at UBS Financial Services Inc., which oversees about US$663 billion. “Inflation remains subdued, suggesting the Fed will remain on the sidelines. The risk-off trade is starting to ebb a little bit.” The S&P 500’s rally today lifted it almost 7 points above 1,108.679, its average level over the past 200 days, a bullish sign to investors who make trading decisions based on charts. The S&P 500 closed below the 200-day average on May 20 for the first time since July 2009 and remained under the trend line for 16 straight sessions before today. “It doesn’t tell you that this correction is over but I think people would look at it as a plus,” said Michael Shaoul, chairman of Marketfield Asset Management, who oversees US$770 million and whose flagship fund beat 97% of peers over the last year. “I would call it a minor victory.” The S&P 500 tumbled as much as 14% from a 19-month high on April 23 through June 7 as concern grew that Europe’s debt crisis will derail the economic recovery and BP Plc’s leaking well in the Gulf of Mexico triggered the worst oil spill in U.S. history. The S&P 500 has rebounded 6.2% since June 7 as concern over European budget deficits eased and investors speculated growth in China and the U.S. will bolster the global recovery.

 

Europe’s Overnight Market Commentary

European shares rose for a fifth straight session on Tuesday, as strong demand for Irish, Belgian and Spanish government debt helped to soothe worries about the euro zone's fiscal health. The pan-European FTSEurofirst 300 index of top shares rose 0.7% to 1,037.68 points, the highest close since May 13. The index has gained for five straight sessions, rising 5.9% in the process, but is still down 6.9% from a peak in mid-April before fears intensified that Greece's debt crisis could spread to other euro zone countries and undermine the global economic recovery. "The market had got to a point where sentiment was weak and valuations were attractive," said Graham Secker, equity strategist at Morgan Stanley. "People were getting too pessimistic on the growth outlook. The market was oversold and is bouncing back and can continue to make some progress in the coming weeks. We only need stabilisation for the market to go higher." The debt sale helped to allay investors' worries over the region's fiscal health after Moody's downgraded Greece's debt rating to junk status. Spain’s Treasury raised €5.2 billion at its 12- and 18-month T-bill auction on Tuesday. Banks were among the biggest gainers. BNP Paribas, Banco Santander, Deutsche Bank and Standard Chartered rose between 2% and 3.7%. Societe Generale rose 3.9% after setting a net profit goal of €6 billion (US$8.05 billion) for 2012 and doubling its target for this year, as the bank seeks to restore investor confidence in a tough business environment. Shares in BSkyB surged 16.6% on expectations that News Corp , controlled by Rupert Murdoch, would raise its proposed offer of 700 pence per share, or US$11.6 billion, for the 61% of the British pay-TV company it does not already own. BSkyB rejected the approach, saying it would support an offer over 800 pence. BP fell a further 3.8% to a fresh 13-year closing low as it tries to contain the oil spill in the Gulf of Mexico, and came under further pressure from U.S. politicians. Ratings agency Fitch downgraded the company's debt rating to "BBB" from "AA". UK supermarket giant Tesco rose 0.7% after a trading update, while rival J Sainsbury rose 1.5% ahead of an trading update due on Wednesday. Back in macroeconomics, German analyst and investor sentiment fell more than expected in June, and by the most since the height of the financial crisis in 2008, the Mannheim-based ZEW economic think tank's monthly poll showed.  Investors have become less bullish about the global economy but have not given up on riskier assets, finding equities as cheap as they have been since March 2009, a Bank of America Merrill Lynch poll showed on Tuesday.

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

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