U.S., World Markets Await ECB Action

Bikram Pandey
30 Jul, 2012
New York City

Global investors remained focused on the euro, Spain and Greece. European Central Bank and rescue fund are expected to announce decisive measures to purchase bonds of Italy and Spain as more leaders in the region lift hopes. Euro, oil and gold eased.

[R]4:00 PM New York – Global investors remained focused on the euro, Spain and Greece. European Central Bank and rescue fund are expected to announce decisive measures to purchase bonds of Italy and Spain as more leaders in the region lift hopes. Euro eased and oil and gold gained.[/R]

U.S. market indexes traded sideways as investors remained focused on the next steps from the European Central Bank and fear that the recent rally of three days may have gone too far.

The drumbeat of more political endorsement from European leader got louder after Jean-Claude Juncker, head of the euro zone finance ministers group, said in an interview with Paris based Le Figaro over the weekend that the central bank and the rescue fund will coordinate action to relieve some of the rising stress in the bond market.

U.S. Treasury Secretary Timothy Geithner is scheduled to meet German Finance Minister Wolfgang Schauble and ECB President Mario Draghi today.

The expectations of a possible large action from the European Central Bank ran high on both sides of the Atlantic and markets are likely to recoil if the measures fall short.

In economic news, a regional manufacturing survey covering most of the Southwest region in the U.S. turned sharply negative.

In addition, the statistical agency in Spain confirmed the second quarter contraction in economic activities by 0.4% from the first quarter when the economy contracted 0.3% following a similar decline in the fourth quarter of 2011. The activities shrank 1% from a quarter year ago as Spain extended economic weakness for the third quarter in a row and unemployment hovers near 24%.

Separately, European Commission survey showed a decline in confidence among businesses and consumers in the euro zone in July from June as investors worry about the growing uncertainties in the region. Also, mortgage lending in UK fell in June to the lowest level since December 2010.

On merger Monday, CB&I said it agreed to acquire Shaw Group for about $3 billion in cash and stock and Roper agreed to acquire Sunquest for $1.415 billion.

On the earnings front, CNA Financial second quarter net soared 34% and Franklin Resources third quarter net dropped 10% to $455.3 million. Loews second quarter net plunged 78%.

Air France said quarterly loss widened in the latest period and Air Liquide said net profit increased 5.3%. The UK based insurer Aviva is said to be in talks to sell its U.S. life insurance group that may fetch more than $1.5 billion. TNT Express said its merger talks with UPS may be delayed as two companies discuss details.

HSBC Holdings said it first-half earnings decreased 9% and the bank said it has set aside at $2 billion to cover regulatory fines and fees stemming from money laundering inquiry in the U.S. and charges stemming from payment protection plan linked to consumer and mortgage loans.

Net income in the first half declined to $8.4 billion from $9.2 billion in the period a year ago.

In European markets, European indexes rallied on the optimism that the ECB will take steps to resolve the debt crisis. Italy raised €5.5 billion in bond auction at lower yields.

Stocks in Japan traded higher as political momentum builds in the euro zone for another round of bond purchase. Nippon Steel fell after it estimated loss in the first half. Fujitsu traded near three decade low after it reported a net loss but Konica Minolta gained on earnings.

Australian markets closed higher for the third day in a row and resources linked stocks led the advance. Iron ore prices traded near 30-month low ahead of the Chinese manufacturing data later in the week.

Commodities, Bonds and Currencies

The yield on 10-year bond traded lower to 1.5% and on 30-year bond decreased to 2.58%.

The U.S. dollar inched higher to $1.225 to a euro and decreased against the Japanese yen to 78.14 yen.

Immediate delivery futures of Texas crude oil decreased 60 cents to $89.53 a barrel and Brent crude fell 48 cents to $105.99, futures of natural gas rose 0.19 cents to $3.20 per mbtu and gasoline price increased 4.31 cents to 293.15 cents a gallon.

In metals trading, copper decreased 0.90 cents to $3.417 per pound, gold gained $2.60 at $1,625.30 per ounce and silver increased 58 cents to $28.07.