Global Market Report 9 August 2012

Investors nudged stocks a touch higher, sending the Dow Jones Industrial Average to a new three-month high.

The Dow Jones Industrial Average inched up 7.04 points, or 0.05%, to 13,175.64 to notch up its fourth consecutive gain, and the Standard & Poor's 500-stock index gained 0.87 point, or 0.06%, to 1,402.22. The Nasdaq Composite slipped 4.61 points, or 0.15%, to 3,011.25.

The day's gains helped bring the four-day run for the Dow to about 300 points, and sent the blue-chip measure to its highest level since May. The Dow is now about 100 points from a December 2007 high and 7% off its all-time high.

Helping drive the gains were consumer-staples and health-care stocks. Hewlett-Packard Co. (HPQ) led the blue-chip components, gaining 2.4% after the tech giant raised its earnings forecast for the third quarter and named new leaders for its enterprise services division.

Alcoa was also strong, rising 2.3%. Wal-Mart Stores continued its recent strength, advancing 1% to within reach of its all-time high.

In addition, central banks remain accommodative and US companies have shown their ability to maintain their fat profit margins.

Limiting the gains were consumer discretionary and industrial stocks. McDonald's had the biggest fall among Dow components, losing 1.7% after the fast-food giant reported declining sales across all three of its global regions, disappointing expectations.

In US economic data, the productivity of US workers increased at a 1.6% annual rate during the quarter, better than expectations for a 1.3% rise. However, labour costs rose 1.7%, much higher than estimates of a 0.6% increase.

Shares of Walt Disney rose 1.4% after the Dow component reported fiscal third-quarter earnings that exceeded analysts' estimates but revenue that fell short of expectations.

Priceline.com dropped 17% after the online travel agent reported second-quarter earnings that beat estimates but provided a third-quarter outlook that was well below current projections.

Treasury prices slipped as investors' appetite for US government debt, including a set of newly auctioned 10-year notes, subsided given the lack of dire euro-zone and economic news. At 7:45 AEST, the 10 Year Treasury note was 1.65%, and the 5 Year note was 0.73%.

European stocks ended a choppy session with a small rise, tracking modest gains on Wall Street as investors shrugged off euro-zone debt worries.

Earlier, investors seemed ready to cash in on recent gains, particularly in drug and food stocks. Shares of French drug group Sanofi SA fell 1.7%.

The news that did flow through during the session included a cut by the Bank of England of its growth and inflation forecasts in a quarterly inflation report.

Shares of ING Groep N.V. fell 1.3% in Amsterdam after the bank reported a profit decline. The company said it was taking aggressive steps to cut its exposure to Spain.

The FTSE 100 index ended 0.1% higher at 269.20. Shares of banking group Standard Chartered PLC rallied 8.6%, a day after a 16% rout. New York's financial regulator Tuesday accused the bank of hiding transactions with Iran worth US$250 billion.

Also providing support in London, shares of Rio Tinto PLC rose 2.9%. The mining group reported a 22% fall in first-half profit as metals prices fell and spoke of near-term uncertainty but said it was confident about demand in the long run.

Spain's IBEX 35 index fell 0.8% to 7,150.20, giving back some of the 4%-plus gains seen earlier in the week.

Banco Santander SA trimmed an earlier loss to decline 0.1% and BBVA SA slipped 0.3%.

The Greece ASE Composite index fell 1.4% to 611.50.

S&P said that it was cutting Greece's ratings outlook to negative from stable on the view the country may not be able to secure further bailout funds from the European Union and International Monetary Fund.

The French CAC 40 index fell 0.4% to 3,438.26, led by losses for Sanofi. Shares of supermarket operator Carrefour SA fell 1.7%.

The German DAX 30 index fell 1.8 points, or less than 0.1%, to end at 6,966.15, with shares of airline Deutsche Lufthansa AG down 3%. Members of the air-cabin-crew union UFO voted for a strike, with talks between the body and Lufthansa set to resume 16 Aug.

Asian markets advanced on signs central banks may take more action to boost the global economy.

A US Federal Reserve official kept alive hopes for central bank intervention by saying the Fed should launch an aggressive bond buying program to aid the economy until unemployment begins to fall.

Some market participants said a market rally based on policy expectations might not last, however.

Investors were also looking ahead to regional data points--such as Chinese economic data for July, which starts to come out. The Bank of Korea will also meet and some analysts suggest that the central bank could surprise with another interest rate cut, driven by weak data both domestically and abroad, as well as a stronger won.

Japan's Nikkei was up 0.9% at 8,881.16, at one point breaking above 8,900 for the first time since 10 July, with Nikon outperforming, up 2.6%, after a Nikkei report said the company will team up with Intel to develop a next-generation semiconductor technology that could halve the cost of chip making.

Sharp finished up 2.7%, as the beleaguered electronics company climbed on reports that it is in talks with banks to review a plan to strengthen its financial standing, as well as earlier reports that it will continue its partnership with Taiwan's Hon Hai.

South Korea's Kospi rose 0.9% to 1,903.23, finishing above 1,900 for the first time since 20 June, led by gains in brokerages, techs and construction names.

In China, stocks were lower ahead of the Chinese economic data. Hong Kong's Hang Seng Index was flat at 20,065.52 as consumption stocks performed poorly, and the index took a breather after climbing 6% over the last nine sessions. The Shanghai Composite was up 0.2% at 2,160.99.

A bright spot in Hong Kong was MGM China, up 5.3% after reporting its first half-net profit rose 38% from a year earlier.

The Japanese yen jumped higher against both the US dollar and the euro on expectations the Bank of Japan will refrain from implementing new measures to weaken the country's currency at its meeting.

The NZX-50 closed 0.1% lower at 3,581.794 as large cap Telecom Corp. of New Zealand fell 2.6%, likely due to profit-taking after finishing at a four-year high.

Base metals closed mostly lower on the London Metal Exchange, treading water ahead of key Chinese industrial production and retail sales data the following session. Nymex crude-oil fell despite a bullish inventory report, as traders took profits after the recent big price jump.