ADVFN III World Daily Markets Bulletin June 21, 2013.
Stocks Regaining Ground After Two-Day Sell-Off
Stocks have moved mostly higher in early trading on Friday, regaining some ground after falling sharply in the two previous sessions. The major averages have all moved to the upside, although buying interest has remained relatively subdued.
The major averages are currently all in positive territory, although the Nasdaq is underperforming its counterparts. While the Nasdaq is up 1.53 points or 0.1 percent at 3,366.17, the Dow is up 77.56 points or 0.5 percent at 14,835.88 and the S&P 500 is up 9.42 points or 0.6 percent at 1,597.61.
The early strength on Wall Street comes as some traders have gone bargain hunting following the steep losses posted over the past two days. The sharp pullback, which came on the heels of the Federal Reserve's monetary policy announcement, dragged the major averages down to their lowest closing levels in over a month.
On Wednesday, the Fed left its monetary policy unchanged but made some relatively upbeat comments about the economy that raised concerns that the central back could scale back its asset purchases in the near future. Even though the Fed has been signaling a slowdown in the program for several weeks, the news seemed to come as a surprise to economists, resulting in steep losses by the major averages.
Biotechnology stocks have shown a strong move back to the upside in early trading, driving the NYSE Arca Biotechnology Index up by 1.8 percent. With the gain, the index is bouncing off yesterday's two-month closing low. Commercial real estate, utilities, and health insurance stocks are also seeing early strength after turning in some of the market's worst performances on Thursday.
Meanwhile, shares of Oracle have moved sharply lower on the day, limiting the upside for the tech-heavy Nasdaq. Oracle is down by 8.8 percent after reporting weaker than expected fourth quarter revenues.
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Friday, although Japan's Nikkei 225 Index bucked the downtrend and advanced by 1.7 percent. Hong Kong's Hang Seng Index and Australia's All Ordinaries Index fell by 0.6 percent and 0.4 percent, respectively.
Meanwhile, the major European markets have turned mixed on the day. While the U.K.'s FTSE 100 Index is up by 0.2 percent, the French CAC 40 Index is down by 0.1 percent and the German DAX Index is down by 0.4 percent.
In the bond market, treasuries are seeing modest weakness, adding to the sharp losses posted in the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1 basis point at 2.429 percent.
The Canadian dollar lost ground against other major currencies on Friday, as data showed that country's inflation rose less-than-forecast in May.
Data from Statistic Canada showed that country's consumer price inflation rose 0.7% year-over-year in May led by higher shelter costs, notably natural gas. The index was lower than expectations for a 0.9% increase, after gaining 0.4% in April.
The Bank of Canada's core index rose 1.1% in the 12 months to May, same as last month. In a separate report, the agency said retail sales edged up 0.1 percent to $39.5 billion in April, following flat sales in March. Stronger sales at motor vehicle and parts dealers were offset by weaker sales at gasoline stations, it noted. Economists expected 0.3 percent growth in retail sales.
The loonie fell back against the yen, reaching a 2-day low of 93.22, off its early high of 94.56. The next support for the loonie-yen pair is seen around 92.00 level. The loonie reached 1.0473 against the greenback for the first time November 2011. If the loonie extends its bearish run, it may challenge support around 1.07 level.
The loonie hit more than a 1-1/2-year low of 1.3790 against the euro amid the inflation data, retreating from an early high of 1.3691. The loonie may seek next downside target around the 1.39 level. The loonie reversed from its prior high of 0.9536 against the aussie, touching a 2-day low of 0.9657 around 8:55 am ET. On the downside, the loonie is poised to find support at 0.975 level.
Toronto stocks moved up at open Friday amid buying across a variety of sectors, with the heavily beaten gold stocks turning in a particularly strong performance. The S&P/TSX Composite Index gained 83.90 points or 0.70 percent to 12,052.48.
The Global Gold Index gathered over 2 percent, with Royal Gold, Agnico-Eagle Mines, Kinross Gold and Goldcorp. gaining around 2 percent each. Detour Gold and Seabridge Gold rose around 4 percent each. In the oil patch, Niko Resources advanced over 4 percent, while Bonterra Energy and Suncor Energy were adding around 1 percent each.
Teck Resources said it has appointed Ian Kilgour as Executive Vice President and Chief Operating Officer, effective June 20. The stock was up about 1 percent.
European Stocks Rebound From Fed-led Selloff
European stocks rebounded on Friday following three days of losses on the back of stimulus worries. Metals stabilized after sharp losses the day before and fears over China's credit crunch eased, helping support investor sentiment.
The Euro Stoxx 50 index of eurozone bluechip stocks and the Stoxx Europe 50 index, which includes some major U.K. companies, are up about 0.9 percent each, while benchmark indexes in Germany, France, the U.K. and Switzerland are up between 0.6 percent and 1.2 percent.
Eurozone finance ministers have agreed to give the permanent bailout fund the authority to "directly capitalize" banks, but national governments will have the responsibility to ensure the minimum capital buffer.
Elsewhere, the International Monetary Fund settled concerns over Greece funding conditions with the assurance that the country will not face any financing problems if it completes the current review by the end of July.
In economic releases, the euro area current account surplus declined in April due to falling trade surplus and widening deficit on current transfers, the European Central Bank said. The current account surplus fell to a seasonally adjusted EUR 19.5 billion from EUR 25.9 billion a month ago.
U.K. public sector net borrowings excluding financial interventions decreased to GBP 8.8 billion in May from GBP 15.6 billion in the previous year, the Office for National Statistics said. Borrowings excluding the effects of transfers from the Bank of England Asset Purchase Facility totaled GBP 12.7 billion, down from GBP 15.6 billion last year.
In stock-specific action, Bayer AG is rising over 2 percent in Frankfurt after Goldman Sachs Inc. recommended investors to buy its shares. Volkswagen is moving up 0.4 percent on reports it has sacked Audi's R&D chief. Air Berlin is rallying 3.5 percent after the company reached an agreement with pilots union Cockpit in a dispute over pay.
BHP Billiton is gaining 0.9 percent in London after the Anglo-Australian mining giant said it has agreed to sell a 15 percent stake in its Australian Jimblebar iron ore mine to Japanese trading companies Mitsui & Co. and Itochu Corp for about $1.5 billion. French insurer AXA Group is edging down 0.1 percent in Paris after the French insurer announced it is adding 100 million euros to the AXA Research Fund budget for the period 2013 to 2018.
Asian Stocks Extend Declines On Fed Fears
The Asian markets extended losses for a second day on Friday, although stocks closed off their day's lows following the previous session's brutal selloff.
Investors continued to worry about U.S. stimulus measures and China's growth outlook as the nation's money market rates climbed to record highs yesterday. Media reports indicated that the People's Bank of China conducted the so-called "window guidance" with the nation's major state-run banks to release more cash into the system, easing fears of a liquidity shortage to some extent.
China's Shanghai Composite index slid half a percent to a fresh six-month low, while Hong Kong's Hang Seng index shed 0.6 percent.
Japanese shares rallied, bolstered by a weaker yen and optimism about U.S. economic prospects. The benchmark Nikkei rebounded from a sharp initial selloff to end 1.7 percent higher at 13,230, while the broader Topix index gained 0.7 percent. Shares of Mitsubishi UFJ Financial Group closed up 0.3 percent after falling sharply early in the session. The selloff came after the lender agreed to pay $250 million to the state of New York for laundering billions of dollars through New York from sanctioned countries. Honda Motor led exporters with a 2 percent gain, heavyweight Fast Retailing soared 4.8 percent and mobile network operator SoftBank advanced 1.8 percent, while Sumitomo Realty & Development, Sumitomo Metal Mining and Nippon Steel & Sumitomo Metal Corp fell between 0.3 percent and 0.8 percent.
Australian shares saw modest losses, with the benchmark S&P/ASX 200 ending down 0.4 percent at 4,739 after falling as much as 1.5 percent early in the session. Banks led the declines, with Westpac falling 1.6 percent, while Commonwealth, NAB and ANZ eased between 0.3 percent and 0.9 percent.
Global miner BHP Billiton rose 0.9 percent and Rio Tinto edged up marginally, while gold miners came under heavy selling pressure after gold prices fell sharply overnight to a 33-month low. Newcrest tumbled 3.7 percent, Medusa Mining slumped 8 percent and Silver Lake Resources plummeted 17 percent.
BHP said today that it has agreed to sell a 15 percent stake in its Australian Jimblebar iron ore mine to Japanese trading companies Mitsui & Co. and Itochu Corp for about $1.5 billion.
South Korea's Kospi average fell 1.5 percent to an 11-month low on foreign fund selling. South Korea is prepared to take action "immediately" against deepening market volatility caused by worries about the Federal Reserve's plans to scale back its bond purchases later this year, the Yonhap News Agency quoted Finance Minister Hyun Oh-seok as saying during a meeting with other policymakers. Samsung Electronics ended 0.3 percent lower after it unveiled a tablet that can switch between the Windows 8 and Android operating systems based on Google Inc.'s Android software.
New Zealand shares fell for a second day, dragging the benchmark NZX-50 index down 0.8 percent to a three-month low. Diligent Board Member Services plunged 7.2 percent, extending the previous session's 5 percent loss, after the company admitted mistakes in recognizing revenue from new customer agreements and upgrades.
Pay-TV operator Sky Network Television tumbled 3.2 percent, while retailers Hallenstein Glasson Holdings and Pumpkin Patch lost about 4 percent each. Heavyweight Telecom rose 0.4 percent and Chorus, the network company spun off from Telecom in 2011, advanced 1.3 percent.
Elsewhere, Indonesia's Jakarta Composite index was losing 1.6 percent and the Taiwan Weighted average fell 1.3 percent, while the markets in India, Malaysia and Singapore were little changed with a negative bias. Malaysia's unemployment rate decreased to 3.1 percent in April from 3.3 percent in March, data released by the Department of Statistics showed.
Crude Steady Above $95
The price of crude oil was steady above the $95-mark Friday morning amid a generally firm US dollar.
Light Sweet Crude Oil futures for August delivery, edged up $0.35 to $95.49 a barrel. Yesterday, oil lost over 3 percent as market sentiments dampened on the U.S. Federal Reserve's stand on its monetary stimulus support for the economy which could be tapered down as early as the year end. Investors also mulled over some disappointing weaker than expected manufacturing activity out of China and initial jobless claims data from the U.S.
This morning the U.S. dollar was hovering around its 2-week high versus the euro and sterling, while extending gains versus the yen and the Swiss franc.
In economic news, the euro area current account surplus declined in April due to falling trade surplus and widening deficit on current transfers, the European Central Bank said. The current account surplus fell to seasonally adjusted EUR 19.5 billion from EUR 25.9 billion a month ago. The surplus on trade in goods decreased to EUR 18.1 billion from EUR 22.5 billion in the previous month. Similarly, the surplus on services fell to EUR 8.2 billion from EUR 8.4 billion.
Germany's leading economic index increased for the fifth successive month in April, data from a survey by the Conference Board showed. The leading economic index moved up 0.1 percent sequentially to 105 in April after recording a 0.4 percent growth in March. The index increased for the fifth consecutive month.
Gold Edges Up After Sell-offs
The price of gold was ticking higher Friday morning after witnessing sharp sell-offs in the previous session, amid worries over the U.S. Federal Reserve's stand on the monetary stimulus.
Gold for August delivery, the most actively traded contract, edged up $7.10 to $1,293.30 an ounce. Yesterday, gold plunged near 3-year low as investors reacted sharply to the U.S. Federal Reserve's stand on the monetary stimulus support to the economy. The Fed sentiment also helped the dollar strengthen against a basket of some major currencies, which is a negative for gold. Markets reacted negatively to the US Federal Reserve Chairman Ben Bernanke's observation that the central bank could possibly taper down the pace of bond purchases later this year if the economy continues to improve. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, moved down to 995.35 tons from 999.56 tons.
Meanwhile, the U.S. dollar was hovering around its 2-week high versus the euro and sterling, while extending gains versus the yen and the Swiss franc.
Elsewhere, the prices of silver and platinum were ticking lower in morning deals.