Today's Morning Report

U.S. Overnight Market Commentary 

U.S. stocks rose, erasing an early slide, and Treasuries pared gains as higher oil and copper prices fuelled a rally in commodity producers and banks climbed amid speculation the Federal Reserve will take steps to spur the economy. Apple Inc. rose 2.6% before reporting earnings. The Standard & Poor’s 500 Index climbed 1.1% to 1,083.48 at the 4 p.m. close in New York after tumbling as much as 1.3% earlier. Goldman Sachs Group Inc. recovered from a 2.8% slump to gain 2.2%. The 10-year Treasury yield slipped to 2.95% after falling to 2.89% earlier, while the two-year yield was little changed at 0.58% after setting a record low in the morning. Copper jumped the most in three weeks and oil topped US$77 a barrel. Nine of 10 industries in the S&P 500 advanced as traders speculated Federal Reserve Chairman Ben S. Bernanke may tomorrow announce plans to stimulate the economy. Commodity producers and homebuilders, which defied the earlier slump, led gains in stocks after better-than-estimated 2.1% growth in building permits spurred optimism in the outlook for demand. “The market is getting a boost here on a story from somewhere that the Fed is going to announce that they will stop paying interest on reserves where they are currently paying 0.25%,” said Peter Boockvar, equity strategist at Miller Tabak & Co. in New York. “This would be the Fed’s attempt to force banks to lend money instead of parking it at the Fed. In my opinion, this is the last bullet in the gun of the Fed and therefore is not going to be used so soon.” Financial companies in the S&P 500 erased a 1.8% tumble to gain 1.2%. Bernanke will give his semi annual report on monetary policy to the Senate Banking Committee tomorrow. “We don’t comment on rumours,” said Michelle Smith, a spokeswoman for the Fed. Equities slid earlier after International Business Machines Corp. and Texas Instruments Inc. joined Bank of America Corp. and General Electric Co. in posting revenue that missed analysts’ estimates as the slowing economic rebound makes it difficult to stimulate demand. While second-quarter net income at S&P 500 companies has topped estimates by 11%, revenue has been just 3.3% more than forecast, according to data compiled by Bloomberg. Of the 42 companies in the S&P 500 that reported since July 12, all but nine topped earnings forecasts, based on data compiled by Bloomberg. Twenty-seven have beaten revenue estimates.

 

Europe’s Overnight Market Commentary

European shares were down 0.9% on Tuesday as poor results from Wall Street firm Goldman Sachs rattled investors, already disappointed by results from IBM and Texas Instruments. Goldman reported lower quarterly earnings, dragged down by its settlement of U.S. Securities and Exchange Commission civil fraud charges and the UK tax on bank executive bonuses, as well as by weaknesses in its trading and investment banking divisions. "The business is down, demand is down, volumes are down," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey. "The appetite for risk continues to go lower and continues to recede and as a result, firms that specialise in financial engineering profit off a risk-centric business model are doing less well." Societe Generale was down 2.9%, Barclays down 2.3% and UBS down 1.5%. At 1320 GMT, the FTSEurofirst 300 index of top European shares was down 0.8% at 998.24 points, a level not seen in two weeks. The Euro STOXX 50, the euro zone's blue chip index, was down 1.2% at 2,604.41 points after falling to as low as 2,586.49, less than two points above its key 23.6% retracement level of the index's April high to its May low. "Recent corporate results have been below forecast, although they haven't been disastrous either, and the overall newsflow is pretty mixed," said Jacques Henry, analyst at Louis Capital Markets in Paris. "This is a chartist' market, with the indexes bouncing up and down between support levels and resistance levels," he said.

Sources: AFR, Bloomberg, CBS, CNN, Dow Jones News Wires, Financial Times, Reuters, Pulse and Wall Street Journal.

 

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

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