Today's Morning Report

U.S. Overnight Market Commentary 

U.S. stocks fell overnight, with the Standard & Poor’s 500 Index dropping for a third day, after the Federal Reserve signalled that European indebtedness may harm American growth and new-home sales sank to a record low. General Electric Co., Chevron Corp. and Microsoft Corp. retreated more than 1.7% after the Fed’s Open Market Committee said “financial conditions have become less supportive of economic growth on balance.” Adobe Systems Inc. dropped 7.3%, reaching the lowest price since July, after forecasting revenue that may miss the average analyst estimate. The S&P 500 declined 0.3% to 1,092.04 at 4 p.m. in New York, extending this week’s slump to 2.3%. The index had risen as much as 0.4% after the Fed released its statement at 2:15 p.m. The Dow Jones Industrial Average gained 4.92 points, or 0.1%, to 10,298.44. “The Fed’s comments are really just reflecting reality,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York. “The economy is growing, just not as much as one would like nor as much as the previous decline would suggest. The statement is very much as we expected, reflecting the weaker growth data and the troubling inflationary data.” Declines by stocks earlier in the day were driven by a U.S. Commerce Department report showing purchases of new homes fell in May to a record low as a tax credit expired, showing the market remains dependent on government support. Sales collapsed a record 33% to an annual pace of 300,000 last month from April, less than the median estimate of economists surveyed by Bloomberg News and the fewest in data going back to 1963. Demand in prior months was revised down. “Housing numbers are ugly with a capital ‘U’,” said Michael Mullaney, who manages US$9 billion at Fiduciary Trust Co. in Boston. “It looks like we’re going to double dip in housing. Investors are concerned.” Builders rallied despite the drop in home sales. An index of homebuilders across S&P indexes, which had fallen five straight days for a loss of 8.6%, climbed 2.4% today. “The perception is we will have a double bottom, but those valuations may already be reflected in the building sector,” said David Lutz, managing director of equity trading at Stifel Nicolaus & Co. in Baltimore. The benchmark for U.S. equities has gained 4% since June 7 and completed its biggest two-week rally since November on June 18 as concern about Europe’s debt crisis eased.

 

Europe’s Overnight Market Commentary

European shares briefly turned positive on Wednesday as miners reversed earlier falls after the Australian Prime Minister agreed to a challenge for leadership, raising investors hopes the resource tax could be eased. Miners initially gained ground after the news, but had slipped back from earlier risers. Eurasian Natural Resources Corporation was up 0.7%, but BHP Billiton, Anglo American and Xstrata fell 0.4% to 1%. By 1319 GMT, the pan-European FTSEurofirst 300 index of top shares was down 0.4% at 1,046.49 points, having been up as much as 1,052.19. Australian Prime Minister Kevin Rudd agreed to a request from his deputy Julia Gillard for her to challenge for the leadership and called a vote of ruling party lawmakers for Thursday morning at 2300 GMT. Rudd has been coming under strong domestic pressure as the opposition to the resource tax gains momentum. "There has been some dispute about the tax they want to levy on miners," said Stephen Pope, chief global equity strategist at Cantor Fitzgerald. "I think the miners went up initially as investors thought the leadership challenge could mean this tax gets eased." Investors were also cautious ahead of the U.S. Federal Reserve's interest rate decision and comments on the economy, due at 1815 GMT. Banks featured among the top fallers, with Banco Santander, Barclays and UBS down 1.4% to 1.6%.

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

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