Today's Morning Report

U.S. Overnight Market Commentary 

U.S. stocks ground higher in another lightly traded session on Friday, ending a nervous week with gains despite signs of economic weakness at home and worries about public debt in Europe. Major indexes rose for the second straight week even though housing and labour market data raised concern about the fragility of the recovery. The S&P 500 closed above its 200-day moving average for the third straight session, which suggests resilience. "A lot of investors did get very bearish here, and that's a good sign that we had some selling. That has probably exhausted itself, so the pressures are ebbing," said Steve Goldman, market strategist, Weeden & Co. in Greenwich, Connecticut. Energy shares helped support the Dow and S&P 500 on Friday, with some investors betting stocks beaten down due to the Gulf of Mexico oil spill had run their course. Cameron International rose 1% to US$37.98 while Halliburton Co rose 2.2% to US$26.98. The Dow Jones industrial average gained 16.47 points, or 0.16%, to 10,450.64. The Standard & Poor's 500 Index rose 1.47 points, or 0.13%, to 1,117.51. The Nasdaq Composite Index added 2.64 points, or 0.11%, to 2,309.80. The market has struggled to make headway since Tuesday's strong run when stocks rose on positive feelings engendered from successful debt auctions in Europe. The broad-based S&P 500 is down about 8% since a recent high on April 23 after having fallen around 14%, largely on fears on sovereign debt defaults in Europe. For the week, the Dow and the S&P 500 gained 2.4% and the Nasdaq added 3%. Energy shares rose with crude oil ending higher at US$77.18 a barrel. Exxon Mobil Corp was up 0.8% at US$63.10, and was among top boosts to the Dow. BP Plc's New York-traded shares edged 0.2% higher a day after its chief executive underwent a bruising appearance before a U.S. congressional committee over the oil spill and the company said it would establish a US$20 billion compensation and clean-up fund. Caterpillar Inc reported an 11% rise in global dealer sales of its heavy machinery in the three months ended in May, driven by strong growth in the Asia-Pacific region. The company's shares rose 1.5% to US$65.85 and were the top boost to the Dow. Traders said the convergence of four key expirations, known as quadruple witching, had added to volatility. Stock options expire later Friday, while index futures expired earlier in the session. The June SPDR S&P 500 fund options, an exchange-traded fund that tracks the S&P 500 benchmark, showed a light turnover volume ahead of expiration at the close later in the day, according to Jon Najarian, founder of options information website optionMonster.com.

 

Europe’s Overnight Market Commentary

European shares rose on Friday for the eighth consecutive day, its longest winning streak in 11 months, boosted by banks as European leaders agreed to publish details of "stress tests" on the financial health of the sector. However, a "quadruple witching" expiration of June stock futures and options and index futures and options increased trading volatility as traders squared their positions before the close. Banks were in demand, with analysts suggesting the stress test to be published in July would boost investor trust in European banks. A senior euro zone source said the tests would simulate a slowdown in growth and stress on sovereign holdings. Societe Generale, Credit Agricole and UBS gained 1.7% to 6.1%. The pan-European FTSEurofirst 300 index of top shares closed up 0.3% at 1,044.52 points and was its highest close since May 13. The index rose around 2.5% for the week, its fourth consecutive week of gains. The index has added 6.6% in the past eight sessions but is still down 0.1% for 2010, having suffered in April and May when fears of a debt contagion in the euro zone gripped investors. "A positive day, but there is still a lot of resistance on the top side," said Phil Roberts, technical analyst at Barclays Capital. "It has come a long way without a correction so next week the market may struggle." "But in the bigger picture if it continues to consolidate above the 200-day moving average we could see further gains." Meanwhile, Spanish bank Banco Santander rose 3.5% after it confirmed it had made an offer for hundreds of British branches of Royal Bank of Scotland. RBS was up 0.6%. Carmakers were in demand, with Porsche up 1.3%. The company said falling debt and steady sport scar sales will lead to a narrower loss in fiscal 2010. German luxury carmakers BMW and Daimler rose 2.5% and 1.9% respectively, after Credit Suisse raised its price targets for both companies. On the downside, drug makers featured among the worst performers. Sanofi-Aventis fell 3% after analysts and traders cited talk of cancer risks relating to its Lantus diabetes drug. Meanwhile BP retreated from earlier gains and fell 0.6% after Moody's cut its credit rating by three notches on Friday, the oil major's third downgrade in a week.

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

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