Euro Support Lifts S&P 500, Global Markets and Gold

Bikram Pandey
07 Sep, 2012
New York City

Financial markets around world closed the week with the largest gains in nine weeks. S&P 500 index added 1.9% and DAX index in Germany soared more than 17%. Gold, copper and silver gained more than 2% after the European Central Bank decided to buy more bonds stoking fears of inflation.

[R]4:00 PM New York – Financial markets around world closed the week with the largest gains in nine weeks. S&P 500 index added 1.9% and DAX index in Germany soared more than 17%. Gold, copper and silver gained more than 2% after the European Central Bank decided to buy more bonds stoking fears of inflation.[/R]

U.S. market indexes added to the yesterday’s surge and closed the week with the largest gain since June.

For the week, the S&P 500 index gained 1.9% and the Nasdaq Composite Index gained 2.2%.

Markets around the world advanced after the European Central Bank followed up on the promise of supporting the euro and effectively cut off the speculative attack building up in the sovereign bond market.

However, the road ahead for the euro zone nations is not without peril as governments in the region struggle with high debt loads and falling economic activities and elevated unemployment.

In the U.S., August month payrolls data confirmed the slow and steady economic recovery in the private sector as the government at all levels tighten belts to bridge budgetary shortfalls. The monthly net new jobs were below expectations and net new job creation was below 100,000 for the second month in three months.

Nonfarm payrolls rose 96,000 in August and fell far short of the target set by most economists and unemployment rate fell to 8.1% as worker participation declined.

The monthly jobs data took on added significance as the Presidential election enters into final phase. Republicans attacked the government for the slow job growth and highlighted unemployment rate above 8% for more than three years but failed to offer how their policies will bring down the rate and to what level.

In corporate news, Intel ((INTC)) lowered third quarter revenue outlook on weak business conditions as enterprise sales lagged expectations. The largest chipmaker also lowered its gross margin in the quarter to 62% with a range of one percent from its previous estimate of 63% and the similar range.

The chipmaker also said its annual capital spending is going to be below its previous estimate between $12.1 billion and $12.9 billion.

Specialty retailer, Lululemon Athletica advanced after it reported net profit increased 49% and estimated higher earnings. Also, cosmetics and fragrance retailer Ulta Salon reported 46% surge in quarterly earnings and lifted its annual outlook. However, grocery retailer Kroger struggled in the quarter. The contact lens maker The Cooper Companies, Inc said quarterly sales increased 8% and net income jumped 50%.

The European benchmark indexes added to the market advance of yesterday and for the week jumped 3.6% in France, added 1.5% in UK and surged 17.6% in Germany.

In corporate news, Glencore sweetened the bid for Xstrata Plc and KfW Bankengruppe sold 5% stake in Deutsche Post but still remained the largest shareholder in the courier company. The luxury automaker BMW registered record August month worldwide sales.

In economic news, German production rebounded 1.3% and French trade deficit narrowed in July. Swiss jobless rate remained unchanged in August. Greek contraction eased in the second quarter to annual rate of 6.3%.

The UK indexes traded higher after industrial production rebounded in July and output prices rose in August. New construction orders in the UK rose 0.2% in the second quarter.

In Asian markets, indexes in India soared 1.9%, in Hong Kong added 3.1% and in Japan jumped 2.2%, the best advance in five months; reacting for the first time after the policy announcement in Europe.

Japanese markets rallied and participated in the worldwide gains after the central bank in Europe followed through its promise to buy back bonds. Japan Tobacco dropped after France proposed to increase tax as early as next month. Toshiba Corp surged on the prospect of higher prices.

Australian markets opened sharply higher after the ECB policy announcement and China offered to finance more infrastructure projects. Australian trade deficit doubled in July to $556 million from the previous month after exports fell 3% and imports decreased 1%.

Commodities, Bonds and Currencies

The yield on 10-year bond decreased to 1.66% and on 30-year bond closed up at 2.82%.

The U.S. dollar inched lower to $1.279 to a euro and decreased against the Japanese yen to 78.28 yen.

Immediate delivery futures of Texas crude oil increased 98 cents to $96.51 a barrel and Brent crude added 85 cents to $114.30, futures of natural gas fell 0.08 cents to $2.69 per mbtu and gasoline price edged up 3.1 cents to 302.20 cents a gallon.

In metals trading, copper increased 12.60 cents to $3.61 per pound, gold added $34.40 to $1,740.10 per ounce and silver added $1.05 to $33.72.