Emerging Markets Lead World Rally

Bikram Pandey
17 Feb, 2012
New York City

World markets continued their weekly advance after markets in Europe joined the rising markets in Americas and in Asia. For the year so far, emerging markets have attracted $19 billion in new capital. For the year the S&P index is up 8% and markets in Asia advance double digits.

[R]6:10 PM New York – World markets continued their weekly advance after markets in Europe joined the rising markets in Americas and Asia. For the year so far, emerging markets have attracted $19 billion in new capital. For the year so far the S&P 500 index gained 8% and markets in Asia advance double digits.[/R]

U.S. stocks struggled in the morning but picked up steam in the late afternoon and advanced to close at highs that confirmed the rally status.

The S&P 500 index reached near the high seen in 2011 and the Nasdaq traded near the new high of the decade. Much of the undertone of the market rally is driven by the latest string of economic data in the U.S. and in Asia.

World markets have been rallying for the last five months and ocean freight rates have rebounded and prices of oil and precious and base metals are flirting with highs not seen in the last two years.

For the year, the benchmark index in India has jumped 18.3% followed by 17% rise in Brazil, more than 16% increase in indexes in Germany and Hong Kong, 13% gain in the Nasdaq, 11% increase in gold and Japan, 9% in France, 8% gain in the S&P 500, 6% advance in UK and 4% gain in Toronto and in crude oil.

Broad rally has lifted sentiment and stretched expectations of higher earnings in the year as investors are recalibrating the earnings expectations in the U.S. and in Asia. India has sustained reversal of expectations and the Sensex increased for the seventh week in a row after foreign investors increased net exposure in the current year by $4.9 billion following withdrawal of $450 million in 2011.

Emerging markets have attracted $19 billion in the year so far compared to outflow of $34 billion in 2011 according the data compiled by EPFR Global.

Investor sentiment was also positive after the latest public offering of Internet video platform and technology provider Brightcove Inc soared 31% on its first day of trading in New York to close at $14.40.

In earnings news, H.J. Heinz gained as much as 5% after it reported better than expected earnings and revenues in the fiscal third quarter. Campbell Soup said fiscal second quarter earnings were ahead of expectations even though revenues barely matched estimates. Applied Materials reported better than anticipated earnings and revenue and Aruba Networks fiscal second quarter loss widened.

European markets advanced on the optimism that finance ministers will approve the entire bailout at the next meeting. Indexes in Germany, France and Italy led the region and gained for the third week in a row. Aegon earnings plunged on restructuring charges. Frankfurt airport strike disrupts flights across the region as more than 300 flights were cancelled.

Stocks in Tokyo closed higher and extended rally in the benchmark indexes to double digits in the year. The Nikkei index gained 1.6% today and closed up 11% in the year. Uny offered to acquire the rest of Circle K Sunkus Co shares for nearly $1 billion.

Australian stocks closed lower for the third week in a row. In trading today, banks gained after ANZ reported cash profit of $1.48 billion and net profit and the bank refused to lower mortgage rates. Pacific Brands reported higher loss.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond increased to 2.01% and 30-year bond advanced to 3.15%.

The U.S. dollar traded down 0.2% to $1.315 to one euro and edged up against the Japanese yen at 79.39.

Immediate delivery futures of Texas crude oil rose $1.21 to $103.52 a barrel and Brent crude declined 49 cents to $119.20. The spread between the two crude types soared above $16 a barrel as demand in Asia and heightened tensions in the Middle East lift Brent prices.

Futures of natural gas added 11 cents to $2.68 per mbtu and gasoline price decreased 2.1 cents to 302.66 cents a gallon in New York trading.

In metals trading, copper decreased 7.30 cents to $3.71 per pound, gold decreased $3.80 to $1,724.60 per ounce and silver decreased 16 cents to $33.21.