Global Market Report 27 July 2012

Investors celebrated greater resolve from Europe's central bankers to shore up the euro zone, driving stocks and the euro sharply higher and Treasurys prices lower.

The Dow Jones Industrial Average ran up 211.88 points, or 1.67%, its biggest gain in nearly a month, to end at 12,887.93.

The Standard & Poor's 500-stock index surged 22.13 points, or 1.65%, to 1,360.02, and the Nasdaq Composite Index advanced 39.01 points, or 1.37%, to 2,893.25. All 10 of the S&P 500's sectors gained; telecommunications and energy companies paced the rally.

The fuel for the gains came from European Central Bank President Mario Draghi, who said the ECB is ready to do whatever it takes to preserve the common-currency union. The central-bank president indicated the ECB's willingness to restart bond purchases at a time when Spanish government bond yields have hit euro-era highs, and worries mount that Greece could again be forced to restructure its debt.

Comments from Europe's top central banker were later underscored by European Central Bank policy maker Christian Noyer, lending additional support to market gains.

In economic news, weekly jobless claims fell far more than expected last week, and orders for durable goods in June rose more than forecast.

Sprint Nextel Corp. surged 20% after the telecommunications company reported a narrower-than-expected second-quarter loss on higher-than-anticipated revenue and a gain in contract subscribers.

Exxon Mobil Corp. gained 1.5% after the oil major reported its second-quarter earnings rose 49%, although exploration-and-production profits fell on lower energy prices and production.

But all wasn't rosy on Wall Street. Zynga Inc. plunged 37% after the videogame maker missed second-quarter expectations and slashed its outlook for the year, citing delays in launching new games and a more-challenging environment on Facebook. Shares of Facebook Inc. sank 8.5% and inched 0.8% lower in after-hours trading after the company posted in-line earnings in its first quarterly earnings report as a publicly traded company.

The US government locked in a record-low borrowing cost at its sale of seven-year notes, even though yields overall ticked higher Thursday on the back of renewed optimism about the fate of the euro zone. At 7:45 AEST, the 10 Year Treasury note was 1.44%, and the 5 Year note was 0.59%.

European stocks surged after European Central Bank President Mario Draghi stepped in to try and reassure investors that the euro zone had a viable future.

Europe's top central banker said the central bank would take any measures within its mandate to preserve the euro. His comments revived hopes that the central bank may be ready to step in and buy highly stressed government bonds.

Mr. Draghi's comments raised hopes that the ECB would support Spain and Italy by buying their sovereign bonds--as the central bank did when the two countries came under attack from markets last summer. Spain's 10-year bond yield fell below the 7% mark to 6.96%, while Italy's 10-year yield was at 6.03%.

The benchmark Stoxx 600 index ended 2.5% higher at 256.58, close to the session's high, while Germany's DAX closed up 2.8% at 6,582.96 and France's CAC-40 finished up 4.1% at 3,207.12.

Banks received a significant boost, with the Stoxx Europe 600 index for the sector finishing up 4.2%. Italian bank UniCredit ended 9.2% higher, while Spanish banks also benefited, with BBVA closing 11% higher and Banco Santander also up 11%, despite the bank's second-quarter profits sharply undershooting expectations. The benchmark Spanish and Italian equity indexes, the IBEX-35 and FTSE Mib, outperformed peers, up 6.1% and 5.6%, respectively.

London's FTSE 100 index also finished higher, up 1.4% at 5,573.16, helped by a string of positive corporate earnings. Unilever rose 5.4% as emerging markets continued to drive revenue growth, and Rolls Royce climbed 6.7% after reporting increased profit for the first half of the year.

Asian markets were mostly higher on hopes central banks around the world will take more action to kick start the global economy, while Nomura Holdings jumped in Japan after top management stepped down over an insider-trading scandal.

Nomura's shares climbed 5.7% after a person familiar with the matter said the chief executive and chief operating officer will resign to take responsibility for the brokerage's involvement in a series of leaks of inside information.

There was a general improvement in other Japanese financial houses: Mitsubishi UFJ Financial Group gained 4.3% and Daiwa Securities climbed 4.7%.

After the Tokyo market closed, Nomura announced its net profit tumbled by 89% on the year in the April-to-June period--to just break even--because of chaotic markets caused by the European debt crisis.

Elsewhere, the rise in stocks across the region was thanks to rising hopes for policy action.

The major earnings reports out of Asia were mixed. In Japan, industrial robotics company Fanuc gained 5.3% after announcing first-quarter results that exceeded market expectations.

Nintendo climbed 3.2% after reporting a smaller quarterly net loss for the April-to-June quarter compared with the year-earlier period.

Canon slumped 7.8% after it lowered its financial year operating profit guidance, citing the impact of a strengthening yen and the European debt crisis.

In Hong Kong, Sands China fell 4.9% after the casino operator reported a 40% year-on-year decline in the second quarter. Other Macau names fell on the news: Galaxy Entertainment Group lost 2.8% and Wynn Macau retreated 3%.

There were large swings for some of the region's big airlines: Singapore Airlines was up 2.1% after its first-quarter earnings came out better than expected.

Japan's Nikkei Average was 0.9% higher at 8,443.10 and South Korea's Kospi was up 0.7% at 1,782.47. China's Hang Seng Index eked out a 0.1% gain to 18,892.79 as a rise in telecoms and transport stocks offset weakness in Sands China and Tencent Holdings. The Shanghai Composite was 0.5% lower at 2,126.00.

The NZX-50 ended up 0.8% at 3,485.74, supported by improving sentiment offshore.

Base metals closed mostly a tad higher on the London Metal Exchange, however gains spurred by euro-buoying comments from European Central Bank President Mario Draghi and better-than-expected US economic data began to scale back towards the end of the open-outcry session. Gold futures gained for a second session, hitting a three-week high as the euro gained after comments from the ECB calmed investors worried about the currency union's banking crisis.