Today's Morning Report

U.S. Overnight Market Commentary 

U.S. stocks declined overnight, sending the Standard & Poor’s 500 Index to the biggest two-day loss since March 2009, as Google Inc. and Apple Inc. led a drop in technology shares and Goldman Sachs Group Inc. was subpoenaed in the financial-crisis investigation. Apple lost 2% as the introduction of a new iPhone failed to boost the stock. Google sank 2.7% as Connecticut demanded information about data collection. Goldman Sachs slid 2.5% as the Financial Crisis Inquiry Commission said the bank had not complied with requests for documents. Autodesk Inc. fell 4.4% after Goldman Sachs removed the software company from its “conviction buy” list. The S&P 500 slipped 1.4% to 1,050.47, the lowest level since Nov. 4, as of 4 p.m. in New York. The Dow Jones Industrial Average decreased 115.48 points, or 1.2%, to 9,816.49. Benchmark indexes rose earlier following growth in German factory orders and toned-down comments from Hungarian officials about a potential default. “Despite some mildly positive news from Germany and Hungary, there’s been a lack of anything too positive to give the market a push and give investors more confidence to step in and do some bargain hunting,” said Richard Sichel, who oversees US$1.4 billion as chief investment officer at Philadelphia Trust Co. “The U.S. economy is an attractive place, but our economic recovery is going to be slow.” U.S. stocks fell last week as lower-than-estimated jobs growth and a worsening government debt crisis in Europe fuelled concern the global economic recovery will slow. Janet Yellen, President Barack Obama’s pick to be the Federal Reserve’s next vice chairman, said in a San Francisco speech today that while there appear to be improvements in the global economy, “significant headwinds to stability remain.” Benchmark U.S. indexes advanced in early trading after German factory orders unexpectedly jumped for a second month in April as the weaker euro boosted export demand and companies increased investment. Hungary’s government pledged to control the budget deficit and make structural changes to overhaul the economy as it further distanced itself from suggestions the country was facing a Greece-like crisis. “This is a small glimmer of hope that Europe might be doing better,” Malcolm Polley, who oversees US$1 billion as chief investment officer at Stewart Capital Advisors in Indiana, Pennsylvania, said of Germany factory orders. “A lot of the issues affecting markets have been coming from Europe, so this is an encouragement.”

 

Europe’s Overnight Market Commentary

European shares fell on Monday, as worries over debt problems in Hungary added to jitters about fiscal health in Europe, while BP was pressured by a broker downgrade and concern over the impact of its oil spill. The pan-European FTSEurofirst 300 index of top shares closed 0.8% lower at 990.49 points, slipping back after earlier rising to an intraday high at 1,000.50. The index has lost 11% since mid-April when fears of a sovereign debt crisis in the euro zone prompted investors to abandon riskier assets. "There is a lot of nervousness in the market. On the one hand we have the positive (German manufacturing) data, but there is also anxiety about Hungary keeping pressure on the market," said Heinz-Gerd Sonnenschein, equity markets strategist at Deutsche Postbank. Hungary's government vowed to cut spending on Monday as it strove to repair the damage from comments last week about a possible Greece-style debt crisis there, but a lack of policy detail kept markets on edge. Banks were among the worst off, with Barclays, HSBC, Societe Generale, BNP Paribas and Deutsche Bank off 0.1% to 2%. Euro zone finance ministers played down market concerns that Hungary, which is outside the bloc, could plunge into a debt crisis like Greece and said Budapest's troubles did not threaten the currency area. Helping to support some positive sentiment on the index, data showed German manufacturing orders jumped far more than expected in April, with suggestions of a rise in investment adding to signs Europe's largest economy is on the path to durable growth. BP fell 0.7% after the U.S. Coast Guard said the United States would be dealing with the spill in the Gulf of Mexico for another four to six weeks after its ruptured well was capped. The Coast Guard said BP was aiming to double the amount of oil it was capturing to 20,000 barrels per day. Adding to the pressure, Goldman Sachs downgraded the oil major to "neutral" from "buy", saying the spill would not only incur clean-up and legal costs but could also impact the firm's ability to do business in the U.S. and worldwide. Spain's Grifols shed 8.5% after saying it would buy U.S.-based Talecris Biotherapeutics, which makes plasma-based protein therapies, for US$3.4 billion in a bold move to expand its business in blood products. On the upside, Adidas gained 2% after Deutsche Bank upgraded the sporting goods maker to "buy" from "hold", saying it would benefit from the weaker euro

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

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