Today's Morning Report

U.S. Overnight Market Commentary 

U.S. stocks rose, with the Standard & Poor’s 500 Index gaining the most in two weeks, after companies from United Parcel Service Inc. to AT&T Inc. and Qualcomm Inc. increased profit forecasts. UPS jumped 5.2% as growing overseas demand and cost- cutting improved the earnings outlook at the world’s largest package-delivery company. AT&T rose 2.4% as quarterly profit beat analysts’ estimates on demand for Apple Inc.’s iPhone. Qualcomm, the biggest maker of chips that run mobile phones, jumped the most since November 2008 as it predicted higher selling prices for devices based on its technology. The S&P 500 rose 2.3% to 1,093.67 as of 4 p.m. in New York. The Dow Jones Industrial Average climbed 201.77 points, or 2%, to 10,322.30. Both gauges gained the most since July 7. “Investors look to UPS as an indicator for the global economy, so their strong numbers are a positive,” said Greg Woodard, portfolio strategist at Manning & Napier in Fairport, New York, which manages about US$30 billion. “Some of the negative sentiment that had crept into the market is disappearing.” The S&P 500 has climbed 7% since July 2 on optimism about corporate earnings. About 85% of S&P 500 companies that have reported results since July 12 beat analysts’ per- share earnings forecasts, Bloomberg data show, while 69% have topped revenue forecasts. Sales have risen 9.2% for S&P 500 companies that have reported earnings so far.  “Corporate America is in very good shape,” said London- based Stephen Pope, chief global equity strategist at Cantor Fitzgerald. “We are seeing companies coming through with good top-line growth. I am happy with the tone and tenor of the U.S. equity market.” UPS jumped 5.2% to US$63.15 after raising its annual profit forecast and posting second-quarter earnings that beat analysts’ estimates. Net income was US$845 million, or 84 cents a share, which exceeded the 75-cent average of 10 analysts’ estimates compiled by Bloomberg. Revenue rose 13% to US$12.2 billion, UPS said. The Dow Jones Transportation Average, an index of 20 stocks including UPS, jumped 3.9%, as Union Pacific Corp., the largest U.S. railroad by 2009 revenue, also rallied on better- than-estimated earnings.

 

Europe’s Overnight Market Commentary

European shares surged to a one-week closing high on Thursday on strong earnings results and soothing macroeconomic numbers, although their medium-term outlook appeared bearish, analysts said. The FTSEurofirst 300 index of top European shares finished 2.1% firmer at 1,039.35 points, the highest close since July 14, after rising to a high of 1,040.72 earlier in the day. It closed higher for a third straight session. Technical charts showed the market faced tough resistance on the upside and its short- to medium-term outlook did not look good. Equities might face renewed selling pressure after the earnings season and summer holidays, the analysts said. Miners featured among the top gainers on Thursday, supported by strong metals prices on the back of a weaker dollar. BHP Billiton, Anglo American, Antofagasta, Rio Tinto and ENRC rose 2.1% to 3.5%. "We have got some positive earnings results in the U.S. and the PMI numbers came in significantly above the consensus. For today, that alleviates growth concerns," said Tammo Greetfeld, equity strategist at UniCredit. "But it's not the beginning of a new trend to the positive. It's just a positive day in a broad sideways movement/correction phase. We are convinced that in the course of the earnings season, deteriorating macroeconomic data will gain an upper hand and the equity markets will be dragged down." Sentiment was boosted after several U.S. companies posted impressive results. Profit jumped 43% at diversified manufacturer 3M Co on strong demand in emerging markets, while package deliverer United Parcel Service, considered an economic bellwether, said its profit rose sharply. The market witnessed a strong session on Thursday as figures showed the euro zone's private sector surged ahead this month, confounding expectations for a slowdown in growth and further quelling concerns about a double-dip recession. U.S. existing home sales also fell less sharply than expected in June. "Just when the macro picture was looking desperately gloomy, today's numbers have given investors a ray of hope," said Angus Campbell, head of sales at Capital Spreads. However, analysts remained sceptical about the market's ability to climb higher in the medium term. "Once the earnings season is over and traders are back to their desks in September, investors are going to take a more sanguine view of the prospects for the markets, given the fact that governments and households are still in the midst of a massive de-leveraging process, which is by no means complete," said Bill McNamara, an analyst at Charles Stanley. "The medium term outlook for most of the equity indices is not great. The volume on the FTSEurofirst 300 was 84% of its 90-day daily average. Financials raced higher, with the STOXX Europe 600 banking index rising 3.2% ahead of the results of stress tests for 91 European banks. Standard Chartered, Barclays, Societe Generale and Credit Agricole jumped 4.1% to 5.6%. European bank supervisors are in the final stages of an exercise designed to convince markets that most of the continent's banking sector can withstand another economic downturn and losses on government debt, and that authorities can deal with those banks that need support.

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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