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Overnight MarketWatch
By SHAW Stockbroking
US stocks finished higher on Wednesday despite mixed second quarter earnings announcements. Many attributed the rally to ongoing weakness in crude prices and hopes that congress would pass a law mandating a housing market relief.
NYMEX light crude for September delivery fell US$3.98 to settle at US$124.44 a barrel, the lowest close for NYMEX oil futures since 4 June.
Since about 11 July, when crude peaked at over US$145 per barrel, the Dow has advanced 4.8 per cent, while the S&P 500 and NASDAQ have picked up 3.9 per cent and 3.4 per cent respectively.
On Wednesday, the Dow gained 29.88, or 0.26 per cent to 11632.38, while the broader S&P 500 added 5.19, or 0.41 per cent to 1282.19. Meanwhile, the NASDAQ was up 21.92, or 0.95 per cent to 2325.88.
Looking to the financial sector, mortgage lenders Fannie Mae and Freddie Mac rallied 11.9 per cent and 11.3 per cent respectively.
The US House of Representatives voted in favour of a law authorising the Federal Housing Administration to insure up to US$300 billion in new loans.
The bill, which will now go to the Senate for a final vote, also allows the Treasure department to offer Fannie Mae and Freddie Mac an unlimited line of credit and buy stock in the companies.
Elsewhere in the financial sector, American Express gained 3.6 per cent, while Bank of America, Citigroup and JPMorgan added 3.7 per cent, 1.1 per cent and 2.7 per cent respectively.
On the downside, Seattle based Washington Mutual ended the session 21.1 per cent lower. Late Tuesday, the company reported a larger than expected US$3.3 billion quarterly loss.
In other earnings news, Northwest Airlines reported a net loss of US$377 million. However, the result beat expectations, sending the carrier’s shares 15.2 per cent higher.
Meanwhile, Pfizer gained 3.9 per cent after the group reported a second quarter profit of US$2.78 billion, more than doubling the result from last year’s corresponding period. The result topped consensus estimates.
Fellow Dow component AT&T said it earned US$3.77 billion in the second quarter, up 30 per cent from US$2.90 billion in the same period a year ago.
The bottom line was inline with expectations, but the revenue line was slightly below consensus estimates. The telecommunications company’s shares closed 3.9 per cent higher.
Meanwhile, industrial giant Caterpillar dropped 3.4 per cent after JPMorgan downgraded the stock, citing a slowdown in demand in North America and Europe.
Elsewhere, discount retailer Costco fell 11.9 per cent after warning that its fourth quarter profits would come in well below consensus estimates of US$1 per share.
Among technology stocks, Amazon added 3.8 per cent in anticipation of its second quarter earnings announcements. After the close, the web retailer posted better than expected profits of $158 million. Its shares were up as much as 7.9 per cent in after hours trade.
Late Tuesday, Yahoo! reported second-quarter results that fell short of Wall Street's expectations. On Wednesday, the company’s stock lost almost 4.7 per cent.
Elsewhere in the sector, Microsoft was up 2.4 per cent, Apple gained 2.6 per cent and Google tacked on 0.8 per cent.
In economic news, the Federal Reserve’s 'beige book' on the economy warned of slowing growth and rising inflation, raising the ominous prospect of economic stagflation.
Elsewhere, COMEX gold for August delivery fell US$25.70 to US$922.80.
UK
markets
British stocks gained 1.6 per cent on Wednesday with the banking sector leading the way. Lower crude prices pulled oil firms down but eased inflation concerns.
The FTSE 100 ended 85.80, or 1.60 per cent higher at 5449.90.
Lender HBOS climbed 16.9 per cent on speculation of bid interest from Spanish rival BBVA and a broad recovery across the financial sector, which has followed a 30 per cent rise in the US in the last week.
Barclays climbed 11.8 per cent, while Royal Bank of Scotland added 11.2 per cent and Lloyds TSB put on 8.3 per cent.
Among other financials, Friends Provident and Standard Life gained 13.1 per cent and 7.1 per cent respectively after Goldman Sachs listed Friends as a conviction buy from not rated and initiated coverage on Standard Life.
A fall in crude prices saw BP, Royal Dutch Shell, gas producer BG Group and Tullow Oil shed between 0.8 per cent and 2 per cent.
The slip in oil also helped struggling airlines. Shares in British Airways gained 6.9 per cent, easyJet rose 9.4 per cent and Ryanair Holdings added 5.4 per cent.
Meanwhile, the rise in financials signalled switching out of the mining sector. Resources were also hurt by falling commodity prices in response to a stronger US dollar. Anglo American slipped 2.8 per cent, while Eurasian Natural Resources Corporation lost 3.2 per cent.
Aquarius Platinum dipped 6.1 per cent on fears Thursday’s fourth-quarter production figures could disappoint and trigger earnings downgrades.
In the pharmaceuticals sector, shares of GlaxoSmithKline lost 0.3 per cent after the drug maker said it would delay the completion of its 12 billion pound stock buyback plan, which was initially scheduled for completion next July.
In other news, Vodafone, which dropped 14 per cent on Tuesday after warning on sales, added 1.9 per cent after the mobile phone company decided to launch a 1 billion pound share buy-back with immediate effect.
European markets
European shares closed higher on Wednesday as banks enjoyed their best day in four months. A fall in oil prices also lifted the automakers and airlines, which have struggled with higher crude prices.
Germany’s DAX added 93.30 or 1.45 per cent to 6536.09, while France’s CAC 40 added just 81.48 or 1.88 per cent to 4408.74.
The banking sector rose on takeover speculation. Spain’s BBVA added 4 per cent on talk that it was interested in Britain's HBOS. Credit Agricole was up 7.4 per cent and Credit Suisse gained 7.1 per cent.
In earning related news, Fiat advanced 3.7 per cent after it reported a 19.6 per cent rise in second-quarter profit, led by a forecast-beating performance at its core car business. The company also confirmed its targets for the current year and 2009.
Also in the sector, Peugeot rose 9.2 per cent after sticking to its full-year operating profit margin target following better than expected first-half earnings.
Germany’s Volkswagen also beat expectations with a 22 per cent rise in second-quarter operating profit on lower costs and sales growth. Its shares climbed 6.9 per cent.
For the airlines, Air France-KLM rose 6 per cent and Lufthansa added 4 per cent after oil prices fell.
Japanese markets
Japanese markets continued upward for a second day in a row led by property firms. Investors were not quite ready to jump back in completely, awaiting second quarter results later this week.
The Nikkei 225 climbed 127.97 points, or 0.97 per cent to 13312.93.
Property developer Mitsui Fudosan rose 3.9 per cent on positive broker comments.
Mitsubishi Estate added 6.9 per cent, while Sumitomo Realty & Development jumped 7.3 per cent.
Banking stocks also gained with Mizuho rising 4.3 per cent and Mitsubishi UFJ Financial gaining 2.4 per cent. Mizuho is up 24 per cent, while Mitsubishi has gained 12 per cent since 2 July.
Oil and gas field developer Inpex Holdings was 4.2 per cent cheaper, the biggest drag on the bourse.
Hong Kong
markets
The Hong Kong bourse soared to a five week high on Wednesday, as lower oil prices eased investor worries. Airlines took off on the prospects of cheaper fuel and consolidation speculation.
The Hang Seng closed 607.07 points or 2.7 per cent higher at 23134.55.
China Eastern Airlines gained 11.8 per cent and Shanghai Airlines added 4.1 per cent after reports local and state governments wanted to merge the two.
Air China jumped 5.6 per cent, while Cathay Pacific Airways climbed 6.3 per cent.
China's biggest airline by fleet size, China Southern, surged 9.9 per cent.
Market operator Hong Kong Exchanges & Clearing was 3.8 per cent dearer, with higher turnover recorded on the back of renewed investor confidence.
Lower oil prices also boosted shares in Sinopec Corp, which jumped 5.3 per cent after crude dropped to a six-week low.
The Overnight MarketWatch report is provided by SHAW Stockbroking's egoli - simple but informative market news for the everyday investor.
egoli news: A view of the Australian market, from your perspective, as it happens. For more information go to http://www.egoli.com.au/egoli/egolihome.asp
24 July 2008
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| Related articles for Market Watch | | • Overnight MarketWatch (8-Sep-2008) | | • Overnight MarketWatch (5-Sep-2008) | | • Overnight MarketWatch (4-Sep-2008) | | • Overnight MarketWatch (3-Sep-2008) | | • Overnight MarketWatch (2-Sep-2008) |
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