Earnings Drive World Markets Sentiment, Draghi Reiterates Euro Stance

Bikram Pandey
26 Jul, 2012
New York City

Latest batch of earnings from U.S., Europe and Asia lifted markets sentiment in nine largest markets around the world. Indexes in Europe and New York also advanced after ECB president reiterated his comments to preserve the euro. Commodities gained.

[R]4:00 PM New York – Latest batch of earnings from U.S., Europe and Asia lifted markets sentiment in nine largest markets around the world. Indexes in Europe and New York also advanced after ECB president reiterated his comments to preserve the euro. Commodities gained.[/R]

Markets in New York and in Europe traded higher after the latest string of positive earnings and comments from the ECB president Mario Draghi. Markets around the world were focused on corporate profits as investors in U.S., Europe, Japan, India and Australia digested new batch of earnings.

The largest bank in the euro zone, Banco Santander reported a sharp fall in earnings on higher than expected losses linked to Spanish home market. However, the stock rallied after the bank said most of the losses linked to housing market loans are behind.

Volkswagen reported higher sales in China but Nissan struggled to increase sales in Asia and battled rising yen. Nomura said profit fell sharply and Canon lowered its outlook for the year.

Visa Inc reported better than expected earnings and Sprint Nextel Corp, CBS Corp, Akamai Technologies, MetroPCS Communications Inc and PutleGroup Inc surged after the release of earnings. However, ITT Educational Services and Strayer Education declined more than 10% after student enrollment declined in the quarter.

ECB president Draghi reiterated his commitment to do whatever is necessary to preserve the currency union. His comments were interpreted by many economists as the willingness of the central bank to buy more sovereign bonds of Italy and Spain to lower the record bond yields.

In New York, stocks were higher after better than expected earnings from 3M, United Technologies, Exxon Mobil, Western Digital and Whole Foods Market.

U.S. indexes advanced after durable goods orders increased in June and weekly jobless claims fell more than anticipated.

Across the Atlantic, European indexes fell on the speculation that Greece may not meet its deficit target. Moody's changed outlook on 17 German banking groups to negative. Italy sold €2.5 billion of zero-coupon bonds at higher yields. Alcatel-Lucent planned to cut 5,000 jobs.

Banco Santander said it set aside €2.78 billion in the quarter to June to cover the rising losses from home loans in Spain. The bank also said loans that are in or near default increased one percentage point to 5.98%. Net income in the quarter declined to €100 million from €1.39 billion a year ago quarter.

Investors in New York were still on the sidelines after Greek political leaders struggled to agree on €11.5 billion of budgetary cuts before the release of €4.2 billion of bailout funds from international lenders.

Stocks in Japan rebounded after short sellers completed most of the selling earlier in the week. Nissan quarterly profit declined 15% and stronger yen took a bite from the earnings. Fanuc gained after it reaffirmed first half outlook. Nintendo reported narrower loss.

Australian stocks closed higher as investors focused on domestic earnings. Sirius Resources soared eight-fold and trading surged 100-fold after the company reported progress in mineral exploration. Caltex closed its refinery in Sydney and Wesfarmers rose after its retail division Coles Group reported rising sales in the quarter.

Commodities, Bonds and Currencies

The yield on 10-year bond traded higher to 1.43% and on 30-year bond increased to 2.49%.

The U.S. dollar inched lower to $1.228 to a euro and increased against the Japanese yen to 78.29 yen.

Immediate delivery futures of Texas crude oil increased 53 cents to $89.57 a barrel and Brent crude added 88 to $105.25, futures of natural gas rose 0.08 cents to $3.07 per mbtu and gasoline price increased 2.21 cents to 281.45 cents a gallon.

In metals trading, copper increased 1.85 cents to $3.39 per pound, gold gained $6.60 at $1,619.30 per ounce and silver decreased 2 cents to $27.44.