Today's Morning Report

U.S. Overnight Market Commentary 

U.S. stocks fell, adding to losses from the Dow Jones Industrial Average’s worst May since 1940, as BP Plc’s failure to plug a leaking oil well dragged down energy producers and AFP reported Lebanon fired on Israeli warplanes. Transocean Ltd., Anadarko Petroleum Corp. and Halliburton Co. fell more than 11% after BP gave up trying to plug the worst oil spill in U.S. history any sooner than August. Benchmark indexes erased earlier gains triggered by growth in construction spending and manufacturing after a senior Israeli security official told AFP that the nation’s aircraft were targeted by Lebanese anti-aircraft guns. The Standard & Poor’s 500 Index decreased 1.7% to 1,070.71 at 4 p.m. in New York. The S&P 500 lost 8.2% in May, its worst month since February 2009, on concern Europe’s debt crisis will hamper the global economic recovery and China will take more steps to cool its economy. The Dow lost 112.61 points, or 1.1%, to 10,024.02 today. “The nervousness about the global economic recovery continues,” said Giri Cherukuri, portfolio manager and head trader at Oakbrook Investments in Lisle, Illinois, which manages US$2.2 billion. “Also, political tension across the world is making investors more cautious.” The S&P 500 has fallen 12% from a 19-month high on April 23 on concern that widening budget deficits in Europe could derail global growth. The five-week slide is consistent with a temporary pullback within a bull market, said Thomas J. Lee, the chief U.S. equity strategist at JPMorgan Chase & Co.  “It is a pretty normal correction in a bull market,” Lee said today in a Bloomberg Television interview. “It pays up to be a slow buyer here. If you start to get enough positive headlines to offset the negatives, that would be a way to build confidence. Investors are seeing good opportunities to buy.” Stocks fell to the lowest levels of the day after AFP said Lebanon’s military fired at Israeli planes as they flew over its airspace, according to a senior Israeli security official. The report came a day after nine people were killed in an Israeli commando raid on boats carrying pro-Palestinian activists to the Gaza Strip. Israeli forces killed two Palestinians who tried to infiltrate from the enclave today and another three who tried to fire a rocket, according to an army statement.

 

Europe’s Overnight Market Commentary

European shares recovered from steep losses to close slightly higher on Tuesday, as strong U.S. data helped to ease investors' worries about the global economic recovery, though BP fell heavily. The pan-European FTSEurofirst 300 index rose 0.2% to close at 1,002.80 points, having been down as much as 2% earlier. "People will continue to look to economic data to see how the recovery is panning out, as opposed to just rumours and fear, which have been driving the market in the last month or so," said Joshua Raymond, strategist at City Index. Key U.S. data boosted confidence. Construction spending rose unexpectedly in April, recording its largest monthly increase in nearly 10 years, according to a government report. Economists surveyed by Reuters forecast that construction spending would be unchanged in April. Moreover, the U.S. manufacturing sector expanded in May for a tenth straight month while employment rose slightly to its best level in six years, according to an industry report. Index heavyweight BP capped the benchmark's gains, slumping 13.1%, as it struggled to contain an oil spill in the U.S. Gulf of Mexico. BP is down more than 34% from a peak last month, wiping more than £40 billion (US$58.11 billion) off its value. However, most other energy shares ended higher, as oil prices bounced, and the euro recovered from a four-year low. Total, BG, Royal Dutch Shell and StatoilHydro rose between 0.6% and 2.6%. Banks fell, but were off their lows by the end of the day, with Spain's Banco Santander and BBVA down 1.5% and 1.4% respectively. The European Central Bank warned late on Monday that euro zone banks may face another €195 billion (US$236.9 billion) in potential write downs. Earlier in the session, investor confidence had been fragile after manufacturing growth in China slowed down in May, and euro zone manufacturing activity expanded that month at a considerably more sluggish pace than April's 46-month high. The index lost 5.8% in May, hit by intensifying fears that a sovereign debt crisis in the euro zone could derail the global economic recovery. Among other individual shares, Prudential gained 6.3% after American International Group said it would not consider revising the terms of a deal for its Asian life insurance unit with the British insurer. The deal is now close to collapse. Irish airline Ryanair rose 4.4% after it brought forward plans to pay its first dividend since being floated in 1997 and swung back to a full-year profit which was ahead of most rivals. 

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

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