Global Market Report 19 July 2012

US stocks rose on Wednesday, sending the Standard & Poor's 500-stock index toward an 11-week high, as investors responded to strong corporate earnings and continued hopes for central bank intervention.

The Dow Jones Industrial Average rose 103.16 points, or 0.81%, to 12908.70, while the Standard & Poor's 500-stock index tacked on 9.11 points, or 0.67%, to 1372.78--bringing that index to within a hair of a fresh two-month high. The Nasdaq Composite outpaced the other two measures as technology stocks soared, adding 32.56 points, or 1.1%, to 2942.60.

With Wednesday's gains, all three major indexes are now in positive territory for July.

Intel led the gains among Dow components, rising 3.6% after the blue-chip semiconductor maker topped earnings expectations, though it also lowered its full-year revenue-growth outlook, citing a more challenging macroeconomic environment. Strong earnings from VMWare and EMC also supported the sector. The top five gainers on the Dow were all tech names, led by Intel, Hewlett-Packard, Cisco Systems, International Business Machines and Microsoft.

Industrial stocks were also strong, after Honeywell International reported second-quarter earnings that were above estimates and raised the lower end of the range of its full-year earnings outlook. The industrial giant gained 6.1%, while rival United Technologies rose 1.9% and Boeing increased 1.2%.

Pulling on the downside were financial and consumer-staples stocks. Bank of America dragged on the Dow, falling 2.7% after the Charlotte, NC-based lender reported second-quarter earnings that exceeded analysts' forecasts but disappointed investors. Analysts said the earnings beat was "low-quality," citing the role of lower tax rates and credit costs in driving up profit.

The broad market gains were supported by US economic data, which showed home construction rising 6.9% last month from May to an annual rate of 760,000, better than expectations, for a 5.2% monthly gain and the highest in nearly four years. However, building permits for June fell 3.7% to an annualized level of 755,000, lower than Wall Street expectations.

Separately, Federal Reserve Chairman Ben Bernanke told the US House Financial Services Committee that he stood ready to act should the US recovery sour.

In corporate news, VMware climbed 12% after the virtualization-software company announced preliminary revenue and adjusted operating margins that were above the ranges it had forecasted earlier. Separately, the company said Pat Gelsinger, currently president and chief operating officer at EMC, was appointed chief executive, effective Sept. 1.

EMC rose 10% after backing its full-year earnings and revenue outlook while reporting preliminary second-quarter earnings that were slightly below estimates and revenue that was marginally above. The company also said VMware's current CEO, Paul Maritz, will join as chief strategist, effective Sept. 1.

Tiffany rose 4.2% after analysts upgraded the stock and its projection of the stock's multiple, arguing that its "long-term brand franchise remains rock-solid."

Facebook bounced 2.7% back after a six-day slide that shaved 13% off the social networking company's share price.

Yahoo edged up 0.3%. The Internet company reported second-quarter earnings that beat estimates, while revenue fell a touch shy.

IBM increased 2.4% ahead of its earnings report, due after the closing bell on Wednesday.

Vivus surged 11% after the company said the US Food and Drug Administration approved the company's weight-loss drug Qsymia.

Rovi tumbled 42% after the digital entertainment company provided a preliminary second-quarter earnings and revenue outlook that was well below analysts' projections. It also lowered its forecasts for the full year.

Madison Square Garden fell 0.7%, for its ninth decline in 10 days, after the New York Knicks decided not to retain star point guard Jeremy Lin, who confirmed that he will move to the Houston Rockets for the coming season.

Capital One Financial fell 2.4% after saying it will pay $210 million to settle a regulatory probe alleging that the company failed to properly monitor third-party sales of consumer credit-protection products such as identity-theft-monitoring services.

For Australian ADRs listed on the NYSE, BHP Billiton increased 8 cents (0.13%) to $63.40, ResMed dipped 7 cents (0.22%) to $32.30, Telstra Corporation firmed 6 cents (0.31%) to $19.97, Telecom Corporation of NZ remained rose 22 cents (2.25%) to $9.99 and Westpac added $1.53 (1.31%) to $118.01.

Treasury bonds carved out some price gains as the resilience of the key safe-harbour market--despite a rally in US stocks--signalled caution over the global economic outlook. Other safe-haven assets, such as German bunds and UK gilts, also strengthened. Germany sold a two-year zero-coupon bond on Wednesday with its first negative yield, meaning investors paid the nation the privilege to borrow money. At 7:45 AM (AEST), the 10-year Treasury note yield was 1.49% and the 5-year yield was 0.60%.

The Australian dollar hit an 11-week high against the US dollar and a euro-era record against the common currency, as investors hopeful that a serious global slowdown could be avoided sought out higher-yielding assets. The British pound was also under pressure after the most recent Bank of England minutes opened the door for a potential rate cut.

Strong earnings from Credit Suisse Group AG and Nordea Bank AB enabled European stock markets to move into positive territory

The Stoxx Europe 600 index jumped 1.1% to 258.93, closing at its highest level since April 27.

Credit Suisse rose 4.5% as the bank reported a 3.6% increase in net profit for the second quarter and said it aims to boost capital by 15.3 billion Swiss francs before the end of the year.

Sweden's Nordea Bank advanced 2.4% after reporting forecast-beating second-quarter results.

Stocks extended gains in afternoon action after the US market slowly climbed into positive territory.

Better-than-expected unemployment data from the UK also helped lift markets. In addition, minutes from the Bank of England's July policy meeting showed seven of nine votes in favour of an increase in asset purchases, along with a unanimous vote to leave the key lending rate unchanged at 0.5%.

Stocks climbed in London, with the FTSE 100 index rallying 1% to 5,685.77.

Rio Tinto improved 13.00 pence (0.45%) to 2,924.88 pence and BHP Billiton climbed 36.00 pence (2.02%) to 1,819.00 pence. BHP rose after reporting a 12th consecutive annual production record from its iron-ore operations in Western Australia.

HSBC Holdings PLC slipped 0.3%, as a key executive said on Tuesday he would step down in response to a continuing US government investigation into money laundering.

In Spain, some banks' shares fell after analysts cut its earnings estimates for the country's banking sector by 12% on average and said it expects earnings to drop by 47% quarter-on-quarter.

Banco Popular Espanol SA dropped 1.7% and Banco de Sabadell SA fell 2.3%. The IBEX 35 index gained 0.5% to 6,591.20.

Analysts further estimated Italian banks would see earnings slashed by 75% for the quarter. Shares of Banca Monte dei Paschi di Siena SpA lost 2.8%, weighing on the FTSE MIB index which underperformed most country-specific indexes, rising 0.4% to 13,594.39.

In France, oil group Total SA added 1.9%, helping lift the CAC 40 index by 1.8% to 3,235.40.

Among German stocks, pharmaceutical firm Merck KGaA rose 2.9%. The DAX 30 index jumped 1.6% to 6,684.42.

Asian stocks fell on Wednesday as a gloomy outlook by US Federal Reserve Chairman Ben Bernanke trumped hopes for further monetary stimulus.

In China, the state-run China Securities Journal published a front-page commentary saying that China should shift its monetary stance towards easing to stop the slowdown in economic growth.

Some observers are expecting an imminent reduction in China's reserve requirement ratio, the minimum amount of capital that banks have to keep in reserves.

Hong Kong's Hang Seng Index dropped 1.1% to 19,239.88, dragged down by its single-largest constituent, HSBC. The company fell 2.1% after the top executive in charge of the bank's anti-money laundering programs stepped down in the wake of a US Senate investigation into risky practices.

A poor performance by Chinese property developers also added pressure to the Hang Seng Index, as signs of recovery in the housing market were taken as an indication that Beijing will maintain its tough policy towards the sector. China Resources Land fell 5.9% and China Overseas Land & Investment dropped 4% after a survey showed that average housing prices in 70 cities were flat in June from May.

Japan's Nikkei Average ended 0.3% lower at 8,726.74, despite spending much of the session in positive territory. The market eventually turned lower as a result of a late rise in the yen that weakened gains in exporters and selling in power companies.

Japanese metals firms were also under pressure, with Nippon Light Metal Co. down 3.5% and Pacific Metals Co. off 2.4%. In Hong Kong, Aluminium Corp. of China Ltd. fell 1.6%.

JP Morgan cut its stance on iron ore prices, downgrading 2012 estimates by 7% and 2013 estimates by 10%.

South Korea's Kospi was down 1.5% at 1,794.91, while the Shanghai Composite gained 0.4% to 2,169.10.

Base metals closed mostly higher on the London Metal Exchange, boosted late in the session by better-than-expected US housing data.

Oil prices rose again, blowing past a mediocre oil inventory report to notch a higher closing price for the sixth straight day. Wednesday's jump came after the US Energy Information Administration released a weekly inventory report showing US crude stocks fell by 800,000 barrels, less than the 1.1 million barrels drop forecast by analysts.

Gold futures retreated amid a stronger US dollar and after Federal Reserve Chairman Ben Bernanke again didn't commit to fresh liquidity measures in his testimony to Congress.