World Markets Shift Focus to Central Bankers and Politicians

Bikram Pandey
28 Aug, 2012
New York City

World markets shifted attention from earnings season to international events and possible central bank actions from the U.S. and Europe. U.S. home price index showed a slight uptick and consumer confidence index declined. Commodities traded in a narrow range.

[R]4:00 PM New York – World markets shifted attention from earnings season to international events and possible central bank actions from the U.S. and Europe. U.S. home price index showed a slight uptick and consumer confidence index declined. Commodities traded in a narrow range.[/R]

The U.S. indexes were flat in a quiet trading as world markets worry about slowing economic environment.

Japan lowered its economic assessment for the fiscal second half, a day after Chinese industrial companies reported fourth monthly profit decline. The euro zone remains mired in recessionary conditions and the latest GDP data from Spain confirmed the shrinkage of 0.4% in the second quarter.

As the earnings season winds down around the world, investors are shifting focus from domestic issues to European leadership and are still expecting a strong action from the European Central Bank that may not pan out.

Among earnings, Bank of Montreal said third quarter net surged 37% and Cyberonics climbed as net advanced. Movado Group soared 17% after net surged 83% and lifted its fiscal earnings outlook.

Lexmark jumped 15% on restructuring and plans to eliminate 1,700 jobs of which 1,100 are located in Cebu, Philippines and plans to sell its inkjet technology and save $95 million a year.

European Markets Decline

The European indexes declined after Japan lowered growth assessment. Spanish and Italian borrowing costs fell in sovereign bond auctions today. German consumer confidence set to remain stable in September.

France based Credit Agricole second quarter net income plunged 67% on costs associated with Greece and impairment in its stake in Intesa Sanpaolo.

German consumer confidence is expected to remain stable in September. French unemployment and euro zone money supply growth rose in July. Spanish economy contracted 0.4% in the second quarter. Hungarian central bank cut key rate by 25 basis points.

The UK indexes declined and caught up with the gloomy world market outlook as Japan joined China and the euro zone in lowering economic outlook. Irish retail sales increased in July. G4S planned to cut 1,100 jobs as part of a restructuring.

Japan Lowers Outlook

Japan lowered its assessment of economic activities in the second half and blamed it on slowing growths in China and the U.S. and overhang of debt crisis in the euro zone. However, economic growth was left unrevised for now and the latest downgrade is the first since October 2011.

Australian Markets Turn Inwards

Defensive sector stocks in Sydney closed higher as investors focused on utilities, banks and pharmaceutical companies and global economic backdrop weakened after Japan lowered its assessment.

Treasurer Wayne Swan held his surplus target and outlook and said that the recent decline in commodities prices has been larger than expected but the government is still on target to deliver a budget surplus.

Commodities, Bonds and Currencies

The yield on 10-year bond declined to 1.63% and on 30-year bond fell to 2.74%.

The U.S. dollar inched lower to $1.2561 to a euro and decreased against the Japanese yen to 78.51 yen.

Futures in oil complex traded higher as the Hurricane Isaac approach Gulf of Mexico and appeared to head towards the Eastern coast of Louisiana.

Immediate delivery futures of Texas crude oil increased 75 cent to $96.22 a barrel and Brent crude increased 2 cents to $112.28, futures of natural gas fell 0.03 cents to $2.61 per mbtu and gasoline price edged down 4.18 cents to 311.31 cents a gallon.

In metals trading, copper decreased 1.65 cents to $3.46 per pound, gold fell $5.70 to $1,669.90 per ounce and silver decreased 21 cents to $30.94.