The Star Online: Business
The Star Online: Business |
- US, Europe, Asia stocks rise(update)
- Gold rally draws more investors back into the fold
- Oil rises 3% on broad market rally
| US, Europe, Asia stocks rise(update) Posted: 15 Aug 2011 06:05 PM PDT NEW YORK: The Dow Jones industrial average notched a three-day win streak Monday for the first time in six weeks. A US$19 billion corporate buying spree and encouraging economic news from Japan sent the Dow up 213 points and erased its losses from last week. The return of what's called "Merger Monday" on Wall Street made investors more optimistic about the future. So did a report that Japan's economy shrank less than feared after the earthquake and tsunami there on March 11. That helped ease worries that the U.S. economy may slide into another recession. The Dow rose 213.88 points, or 1.9 percent to 11,482.90. It has gained 763 points since Thursday. That's the best three-day point gain since it rose 927 in November 2008, during the depths of the financial crisis. The Dow is also up 7.1 percent over the three days, the biggest percentage gain since it rose 9.5 percent the first three days of the bull market in March 2009. The Standard & Poor's 500 index rose 25.68, or 2.2 percent, to 1,204.49. The Nasdaq composite index rose 47.22, or 1.9 percent, to 2,555.20. Markets may have stabilized the last three days, but financial analysts warned investors not to assume that stocks have fully settled down after last week's swings. The Dow rose or fell by at least 400 points in four straight days for the first time. The first downgrade of the U.S. credit rating triggered the volatility. It was worsened by concerns that Europe's debt problems are worsening and that the U.S. economy is weakening. "You might have these moments of quiet, but the debt crisis in Europe did not go away," said John Hailer, chief executive for the U.S. and Asia of Natixis Global Asset Management. "Our issues with the debt, with what our tax policy is going to be going forward, our unemployment did not go away." "We are probably going to have to look at some very different levels of volatility than what a lot of investors grew up with over the last 25 to 30 years," he said. A period of relative stability has been common in past volatile markets. In 2008, stocks plunged between mid-September and mid-November. From mid-November until the beginning of January 2009, the Dow was in a lull of sorts. It ratcheted up and down, mostly in the high 8,000 range. But in early January 2009, it began to plunge again and finally hit bottom at 6,547 on March 9. Despite its three-day gain, the Dow remains down 9.8 percent since its most recent high on July 21 and down 10.4 percent since its 2011 high set on April 29. More swings could come this week. Leaders of France and Germany meet Tuesday to discuss Europe's debt problems. Spain and other countries have borrowed so much that they may need help to repay their bills. Investors on Tuesday will get an update on how Spain's economy did during the second quarter. Corporate deals dominated the news, as companies followed a years-long practice of announcing acquisitions on a Monday. The biggest was Google Inc.'s $12.5 billion cash purchase of wireless phone maker Motorola Mobility Holdings Inc. It is also the biggest acquisition in Google's history. No. 2 was its $3.2 billion purchase of DoubleClick in 2008. Motorola Mobility's stock jumped percent 55.8 percent. Google fell 1.2 percent. Among other deals: Time Warner Cable Inc. said it will pay $3 billion in cash for Insight Communications Co., which has more than 750,000 cable customers in the Midwest. Agribusiness conglomerate Cargill said it will buy animal nutrition company Provimi of the Netherlands for $2.16 billion. And in the energy industry, offshore driller Transocean Ltd. said it will buy Aker Drilling of Norway for $1.43 billion in cash. Companies across the United States have accumulated a record amount of cash since the recession ended. They have increased their cash reserves every quarter for more than two years. Those in the S&P 500 index had a total of $963.3 billion at the end of March, according to the most recent data from Standard & Poor's. Investors have been waiting for companies to use some of that cash on acquisitions, dividend increases and stock buybacks. Many market strategists believe that companies are more confident about the future if they're willing to buy other businesses. So a series of acquisition announcements tends to send stocks higher. The growing cash hoard has been the result of strong profits. Companies have kept costs low by being slow to hire. Revenue, meanwhile, is growing, particularly from overseas customers. For the 460 companies in the S&P 500 that have reported second-quarter results, earnings were up 12 percent from a year ago. It was the busiest day for acquisitions since July 11, when Express Scripts said it would buy Medco Health Solutions for $29.1 billion in a combination of the country's largest pharmacy benefits managers. The total value of deals targeting U.S. companies has climbed to $771 billion this year, according to Dealogic. That's up 55 percent from $498 billion at the same point last year. Some companies are looking to pare back. Bank of America Corp. said it will sell its Canadian credit-card business to TD Bank Group. The bank will also get out of the credit card business in Britain and Ireland. The deals follow others that Bank of America made to move out of foreign credit cards, and they should help the company improve its balance sheet Bank of America rose 7.9 percent, part of a rally for the financial industry. Financial stocks in the S&P 500 rose 3.2 percent as a group. Energy stocks in the index rose 3.4 percent after crude oil climbed $2.50 per barrel to settle at $87.88. Asian and European markets rose earlier after Japan said its economy shrank at just a 1.3 percent annual rate from April through June. That was less than half the drop that economists expected following the earthquake, tsunami and nuclear crisis that struck the country in March. Still, investors have more reason to worry about the weak U.S. economy. Manufacturers in New York told the Federal Reserve they're increasingly pessimistic about growth. Manufacturing has been one of the strongest parts of the economy since the recession ended in 2009, but growth began to slow in March. Manufacturing nationwide barely grew in July. Cosmetics company Estee Lauder Cos. fell 6.5 percent after it forecast earnings for the upcoming year that were below Wall Street's expectations. It also said its net income rose 72 percent last quarter on strong sales growth to China, Russia and the Middle East. Lowe's Cos., the second-largest home improvement retailer, rose 0.9 percent after it said its net income was roughly flat last quarter on a 1 percent rise in revenue. More than 10 stocks rose for every one that fell on the New York Stock Exchange. Trading volume at 4.5 billion shares was below the 9 billion it reached last Monday and Tuesday. Volume was close to its average over the last year of 4.3 billion shares. Global stocks continued their rebound Monday on hopes that the recent sharp volatility in the markets has run its course following a run of stronger than anticipated economic data and after Google announced a $12.5 billion deal. Though concerns remain over the state of the global economy and Europe's debt crisis, many investors think the recent sell-off has been overdone and are snapping up potential bargains. "Some stability appears to be returning to markets .... but businesses remain wary that the U.S. government isn't doing enough to arrest its massive budget deficit and that European governments aren't doing enough to avert financial contagion from infecting the banking system," said Sal Guatieri, an analyst at BMO Capital Markets. The calmer mood has been helped by last Friday's better than expected U.S. retail sales figures for July and news earlier that Japan contracted by an annualized rate of 1.3 percent in the second quarter of the year after the impact of a devastating earthquake and tsunami. The consensus in the markets was that Japan's economy would have shrunk by at least double that rate. In Europe, London's FTSE 100 closed up 0.6 percent at 5,350.58. Germany's DAX rose 0.4 percent to 6,022.24. The CAC-40 in France ended 0.8 percent higher at 3,239.06. Europe's debt crisis will likely return to the forefront of investors' thoughts Tuesday, when French leader Nicolas Sarkozy and German Chancellor Angela Merkel meet, and second-quarter eurozone growth figures are published. The meeting is a day after the European Central Bank revealed that it spent 22 billion ($32 billion) last week buying government bonds. Analysts think a large chunk of the money splashed out was spent driving down the bond interest yields of Spain and Italy, who had seen their borrowing costs ratchet up sharply in the preceding weeks. The ECB's purchases were the biggest weekly amount the bank has made under the emergency measure, exceeding the 16.5 billion it laid out when it started buying Greek government debt in May, 2010. In Asia, stock markets rose Monday as data showed the economy of earthquake-battered Japan shrank less than expected. Japan's Nikkei 225 index closed up 1.4 percent at 9,086.41 while Hong Kong's Hang Seng index shot up 3.3 percent to 20,260.10. Mainland Chinese shares gained for a fifth trading day on expectations the government announce new measures to support growth. The Shanghai Composite Index added 1.3 percent to 2,626.77 and the Shenzhen Composite Index rose 1.4 percent to 1,175.41. Asian markets opened higher Tuesday as calm continued following last week's volatility. Japan's Nikkei 225 index opened up about 50 points, or 0.5 percent, and was trading at 9,140. Australia's S&P/ASX 200 index was up 13 points, or 0.3 percent, to 4,296.3 at the opening. New Zealand's benchmark NZX 50 was up by more than 1 percent when the market opened. At midmorning, it was up by 0.9 percent, or 28 points, trading at 3,281. - AP
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| Gold rally draws more investors back into the fold Posted: 15 Aug 2011 05:56 PM PDT NEW YORK: Investors returned to gold on Monday. Gold joined most commodities in a stronger finish, largely driven by a weaker dollar. Since commodities are priced in dollars, a weaker dollar makes them more of a bargain for traders who use other currencies. The precious metal also attracted investors who want to broaden their portfolios because of uncertainty about the global economy. Gold for December delivery rebounded Monday, finishing up $15.40 at $1,758 an ounce, after it eased off a high just above $1,800 an ounce during last week's volatile trading. Gold is up 24 percent for the year. Gold often is considered a relatively stable asset to hold during uncertain economic times. It also draws investors who use it as a hedge against currency movements. "Everybody is looking at gold for some particular reason or another, from central banks looking for a currency hedge to the average investor looking to diversify their portfolio and move money out of dollars," said Dave Meger, vice president of metals trading at Vision Financial Markets. Meger believes the fundamentals underlying the market will remain strong because of persistent concerns about U.S. and European debt issues and what that may mean for the global economy. In Europe leaders are grappling with debt problems that threaten to spread from Greece, Ireland and Portugal to the much bigger economies of France and Spain. Commodities traders are concerned that if the debt problems spread, it would dampen demand for an array of commodities. Meanwhile a dozen U.S. congressional leaders are working to produce a plan to cut the nation's deficit. Silver and metals used for manufacturing all rose slightly on Monday. In contracts for September delivery silver, which is used as a precious metal asset and in industrial production, added 19.3 cents to finish at $39.307 an ounce. Copper rose 2 cents to $4.032 a pound and palladium fell $1.85 to $746.35 an ounce. October platinum rose 50 cents to $1,797.20 an ounce. In other trading, oil rose nearly 3 percent as stock markets rallied and new data showed Japan's economy contracted less than feared in the months after the March earthquake and tsunami. Benchmark West Texas Intermediate crude gained $2.50 to finish at $87.88 per barrel on the New York Mercantile Exchange. In other Nymex trading for September contracts, heating oil rose 4.04 cents to finish at $2.9441 per gallon, gasoline futures gained 5.23 cents to $2.8745 per gallon and natural gas lost 3.6 cents to $4.024 per 1,000 cubic feet. Corn, wheat and soybeans also rose. September wheat added 10 cents to finish at $7.125 a bushel, December corn gained 5.5 cents to end at $7.20 a bushel and November soybeans rose 16.5 cents to $13.5125 a bushel. - AP Latest business news from AP-Wire Full Feed Generated by Get Full RSS, sponsored by Used Car Search. |
| Oil rises 3% on broad market rally Posted: 15 Aug 2011 05:54 PM PDT NEW YORK: Oil jumped to the highest level in more than a week on some positive news about the global economy. Oil was also pushed higher by a fall in the dollar. As the greenback weakens, investors who hold stronger foreign currencies are able to buy more crude. Monday's 3 percent rise to more than $87 per barrel all but erased losses in oil markets last week. Crude rose Monday after Japan's economy shrank less than expected from April to June. "Last week, we saw a market that was really driven by fear," PFGBest Phil Flynn said. "The data out of Japan shows that the world isn't falling off the map." On Monday the dollar sank and oil rose after the government reported that foreign investors cut their holdings of U.S. Treasuries in June. The 0.4 percent decline happened when lawmakers were still fighting over a deal to increase the nation's borrowing limit. The stock market also rose after a wave of acquisition announcements bolstered investor optimism. China, the world's second-largest oil consumer behind the U.S., said that it expects its consumption to increase this year by 6.5 percent, according to Platts, the energy information arm of McGraw-Hill Cos. Benchmark West Texas Intermediate crude for September delivery surged $2.50 to $87.88 per barrel on the New York Mercantile Exchange. That's the highest finish since Aug. 3. Brent crude, which is used to price many international oil varieties, rose $1.88 to finish at $109.91 on the ICE Futures exchange in London. In other Nymex trading for September contracts, heating oil rose 4.04 cents to end at $2.9441 per gallon and gasoline futures gained 5.23 cents to end the day at $2.8745 per gallon. Natural gas fell 3.6 cents to finish at $4.024 per 1,000 cubic feet. - AP Latest business news from AP-Wire Full Feed Generated by Get Full RSS, sponsored by Used Car Search. |
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