Today's Morning Report

U.S. Overnight Market Commentary 

U.S. stocks closed higher Tuesday, with Microsoft, Alcoa and Bank of America among the gainers, although continued concerns about global growth sapped some of the market's earlier gains. The Dow Jones Industrial Average rose 57.14 points, or 0.59%, to 9743.62, snapping a seven-session losing streak. However, the measure lost much of its morning gains; it had been up more than 170 points earlier in the session. Microsoft was the Dow's top performer Tuesday with a jump of 55 cents, or 2.4%, to US$23.82. Alcoa was also strong, up 21 cents, or 2.1%, to US$10.21, and Bank of America climbed 22 cents, or 1.6%, to US$14.06. Limiting the gains, Home Depot dropped 42 cents, or 1.5%, to US$27.34. Boeing was also weak, down 58 cents, or 0.9%, to US$61.36, and American Express lost 21 cents, or 0.5%, to US$39.21. The Nasdaq Composite edged up 2.09, or 0.10%, to 2093.88, snapping a five-day losing streak. The Standard & Poor's 500 index climbed 5.48, or 0.54%, to 1028.06, ending a five-session losing run. Traders characterised Tuesday's climb in stocks as a natural bounce off of last week's slump, although the gains were pared in the afternoon as investors continued to fret over the same concerns about the global economy that have weighed in recent weeks. "The fundamental outlook is questionable and most of the government policies haven't been helpful in terms of solving the unemployment problem," said Derwood Chase, chairman and chief executive of Chase Investment Counsel. "They may have been helpful temporarily to automobiles or selling condos, but we've got a lot of serious problems." He added, "solving a problem which basically reflects federal and state governments and many, many individual consumers being too heavily in debt, many of us are very sceptical of solving that problem by the government encouraging people to take on more debt." Agricultural Bank of China Ltd. raised US$19.21 billion in Hong Kong and Shanghai and is still in the running to pull off the biggest initial public offering ever. AgBank and its advisors set the Hong Kong portion of its IPO at HK$3.20 apiece, near the middle of the indicative range, people familiar with the matter said. Its shares in Shanghai were priced at 2.68 yuan, at the top end of the range, they said.

 

Europe’s Overnight Market Commentary

European shares were sharply higher at midday on Tuesday in a broad rally, which strategists said was due to stocks becoming cheap after a period of weakness. At 1056 GMT, the FTSEurofirst 300 index of top European shares was up 2.4% at 989.94 points, after hitting its lowest close since late May on Monday. The index is still down more than 11% from its mid-April peak on worries about the strength of the global economic recovery. The Euro STOXX 50, the euro zone's blue-chip index, rose 2.9% to 2,580.41 points, breaking through 2,555.84, a key 38.2% Fibonacci retracement of the index's rise from its March 2009 low to its peak in January 2010. Miners were among shares to bounce the most after recent weakness. They were also helped by higher metals prices, as the dollar weakened against the euro. Anglo American, Kazakhmys, Lonmin and Rio Tinto rose between 3.6% and 5.7%. ArcelorMittal , the world's largest steel maker, rose 6.3%. "The market had got down to quite an oversold level," said Colin McLean, managing director at fund manager SVM in Edinburgh. "Individual stocks are down at support levels in terms of moving averages, and could bounce a bit." "The fall has been a bit indiscriminate over the past few weeks." However, he said the increased profits companies were expected to report, as the second-quarter earnings season begins this month, were already factored in by markets. In the heavyweight banking sector, gainers included Banco Santander, Barclays and Credit Agricole, up between 4.2% and 5.6%. The banking sector's stress tests were still in focus on Tuesday, after sources told Reuters that European Central Bank President Jean-Claude Trichet will meet Europe's top banks to discuss the tests ahead of the publication of the results later this month. SVM's McLean said: "Until we understand more about the stress tests, that's casting a shadow over the markets." Among individual companies, BP rose 3.2%, adding to a 3.5% gain on Monday. The company has approached sovereign wealth funds with a view to securing an investor to fend off takeover bids while it deals with its massive U.S. oil spill, a senior United Arab Emirates source said on Tuesday. It was also helped by RBS upgrading its recommendation on the stock to "buy" from "hold", on valuation grounds. BP is still down more than 47% from its April peak. Stock index futures pointed to a higher open for Wall Street, where trading resumes after Monday's holiday. Futures for the Dow Jones, S&P 500 and Nasdaq were up between 1% and 1.6%. Investors are likely to closely monitor the U.S. ISM non-manufacturing report, due at 1400 GMT, for further clues on the state of the economy, following recent weaker-than-expected labour and other data.

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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