World Markets Rally on the ECB Action Hopes, S&P Up 1.9%

Bikram Pandey
27 Jul, 2012
New York City

U.S. indexes extended rally that began in Europe yesterday and swept around the world on the hopes of a fresh round of bond purchase by the European Central Bank. The strong market gains were seen in broad indexes and commodities closed higher. However earnings related stocks dominated trading.

[R]4:00 PM New York – U.S. indexes extended rally that began in Europe yesterday and swept around the world on the hopes of a fresh round of bond purchase by the European Central Bank. The strong market gains were seen in broad indexes and commodities closed higher. However earnings related stocks dominated trading.[/R]

U.S. indexes advanced on the hopes that the European Central Bank is preparing to launch a new round of bond purchases and political leaders of Germany and France echoed the recent comments in the support of the euro.

Economic growth rate was revised lower to 1.5% in the second quarter the Commerce Department also lowered the estimates of the economic activities decline in 2009 and the extent of the rebound in the 2010.

Though markets in Europe and Asia surged and in the U.S. broader indexes extended the gains, the debt problem in the euro zone is festering and in the U.S. there is no consensus in how fast to lower the debt.

Italy raised €8.5 billion from a bond auction today at lower yields and rates on Spanish and Italian bonds fell at least for today.

In the earnings news, Samsung net soared on smartphones sale. ABB second quarter net declined 27%. AstraZeneca second quarter net plunged 46% to $1.24 billion. Facebook second quarter net swung to $157 million loss. United Technologies net rose and completed the acquisition of Goodrich.

Facebook plunged 12% after the company reported a loss but earned 12 cents a share without the expenses related to stock based compensation related to its recent initial public offering. Facebook has declined steadily from its public offering price of $38 a share when the company was valued at $100 billion.

Aon second quarter net slipped 5% and Amazon.com second quarter net tumbled 96% to $7 million. Chevron second quarter net slid 1.6% to $7.21 billion. Merck net declined 11.4% to $1.79 billion and Newmont Mining plunged 27.9% to $279 million.

The European indexes pared gains on worries that Greece is struggling to meet its deficit target. Euro-zone leading index declined in June. Spanish jobless rate rose in the second quarter. Total and Lafarge quarterly earnings slumped.

Nikkei index in Tokyo advanced 1.5% and for the week decreased 1.2%. Automakers, steelmakers and shippers led the market advance after comments from the ECB president and short covering fuelled the rally.

Australian markets close higher as commodities advanced and the dollar gained a fraction. The spot price of iron ore declined for the second week in a row and dropped to a new low of $118 a ton and is likely to test the price level of $110.

Commodities, Bonds and Currencies

The yield on 10-year bond traded higher to 1.55% and on 30-year bond increased to 2.63%.

The U.S. dollar inched lower to $1.231 to a euro and increased against the Japanese yen to 78.54 yen.

Immediate delivery futures of Texas crude oil increased 80 cents to $90.19 a barrel and Brent crude added $1.19 to $106.45, futures of natural gas fell 0.09 cents to $3.01 per mbtu and gasoline price increased 7.41 cents to 288.85 cents a gallon.

In metals trading, copper increased 3.65 cents to $3.42 per pound, gold gained $7.30 at $1,627.10 per ounce and silver increased 22 cents to $27.67.