Global Markets Overview - 12/01/2011

Three substantial economic developments announced in quick succession Wednesday morning, including efforts from several central banks to shore up the global financial system, prompted global stock markets to soar and sent the Dow Jones Industrial Average up by more than 400 points. Central banks around the globe announced a coordinated plan to make dollar funding cheaper for European banks.

The announcement came after China indicated it would loosen monetary policy by lowering the reserve requirement ratio for banks. In addition, a report on the U.S. labor market showed private-business hiring rose by 206,000 in November, the largest monthly gain this year.

U.S. Stock Markets

The blue-chip Dow was up 405 points, or 3.5%, to 11960 in afternoon trading. All but one of the 30 Dow components rose. Caterpillar rose 7.3% and Alcoa gained 5.4%, while Home Depot shed 0.2%. The surge propelled the index back into positive territory for the year.

The Standard & Poor's 500-stock index jumped 40 points, or 3.4%, to 1235. Material, industrial and energy stocks were the biggest gainers.

The technology-oriented Nasdaq Composite gained 83 points, or 3.3%, to 2599. The U.S. Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank agreed to lower the pricing on existing temporary U.S. dollar liquidity swap arrangements.

Financial stocks rallied following the release of the coordinated central-bank plan. Morgan Stanley rose 7.1% and J.P. Morgan Chase gained 6.3%. Bank of America rose 2.4%, while Citigroup increased 5.6%. Separately, Standard & Poor's Ratings Services late Tuesday downgraded more than a dozen large banks, including the six biggest U.S. financial institutions. The credit downgrades will make it more expensive for those banks, including J.P. Morgan Chase and Bank of America, to fund their day-to-day activities in the overnight debt markets.

European Stock Markets

European stock markets ended sharply higher Wednesday after global central bankers moved to ease pressures in money markets and China lowered bank reserve requirements for the first time in three years. The Stoxx Europe 600 index ended the day up 3.6% at 240.08.

In simultaneous announcements, major central banks including the U.S. Federal Reserve and the European Central Bank agreed to lower the cost of dollar liquidity.

European banks have been struggling to acquire dollars amid soaring rates as the euro-zone sovereign debt crisis has mounted.

The German DAX 30 index jumped 5% to close at 6,088.84, as Deutsche Bank AG surged 6.2%. The U.K.'s FTSE 100 index gained 3.2% to settle at 5,505.42.

Barclays PLC rallied 6.7%. Markets had gained ground in earlier action after the People's Bank of China cut the reserve requirement ratio for all banks by 0.5 percentage point, effective Monday.

Weighing on markets and banks earlier, a meeting of euro-zone finance ministers in Brussels disappointed some by not setting a size target for the European Financial Stability Facility. The next focus is the Dec. 9 summit of European Union leaders where markets are hoping for a once-and-for-all plan to contain the debt crisis.

Resource stocks surged as commodity prices shot higher on renewed hopes for global growth. Shares of energy groups BP PLC and Royal Dutch Shell PLC jumped 5% and 3.9%, respectively, and miner BHP Billiton PLC surged more than 6%.

Among stocks closely tied to the global economic outlook, Swedish-based Atlas Copco AB jumped 7% and retailer Hennes & Mauritz AB rose 3.7%. Car maker Volkswagen AG rose 6.5%, while shares of Daimler AG and BMW AG each rose more than 5%. In Paris, shares of PPR SA surged more than 6% and LVMH Moet Hennessy Louis Vuitton SA jumped 4.1%. Steelmaker ArcelorMittal SA soared over 11%, helping lift the French CAC 40 index 4.2% to 3,154.62.

Asia-Pacific Markets

Asian shares ended mostly lower Wednesday, capping off a month of losses for the region's major markets, with China's stocks dropping on growth concerns and financial shares falling after Standard & Poor's Ratings Services downgraded several global banks.

With a second day of meetings by euro-zone finance ministers due to take place later Wednesday, and a leaders' summit slated for next week, KGI Asia Chief Operating Officer Ben Kwong said Asian markets remained cautious. Japan's Nikkei Stock Average shed 0.5%, leading it to a 6.2% decline for the month. South Korea's Kospi ended the day down 0.5%, totting up a 3.2% loss for November.

China's Shanghai Composite dropped 3.3%, chalking up a 5.5% decline for the full month, with its declines helping to push Hong Kong's Hang Seng Index down 1.5%, to a total 9.4% fall for November.

The foreign currency-denominated B-shares led the declines on China's markets on concerns the launch of a board to enable foreign companies to raise funds from China's stock market might be imminent and would further reduce demand for the already-lackluster foreign currency-denominated stocks.

The U.S. dollar denominated Shanghai B-share index dropped 6.1%, while the Hong Kong dollar-denominated Shenzhen B-share index declined 2.5%.

Resources plays around the region were mostly lower, partly weighed by concerns over China's economic growth. Jiangxi Copper's Hong Kong and Shanghai-listed shares fell 4.4% and 4.2% respectively, with Daiwa Capital Markets lowering its copper price forecasts for 2012 and 2013 by 17.4% and 18.5% respectively.

Sumitomo Metal Mining lost 1.7% in Tokyo and S-Oil declined 2.3% in Seoul. Around the region, financial stocks were broadly lower after the S&P downgrade of 15 global banks' credit ratings. HSBC dropped 2.0% in Hong Kong after the downgrade. The agency set its outlook for Tokyo-listed Sumitomo Mitsui Financial Group and Mizuho Financial Group at negative and the pair closed down 1.0% and down 1.0%, respectively.


Copper closed 5.3% higher on the London Metal Exchange Wednesday after surging to a near-four week high on coordinated central bank action to boost dollar liquidity and a loosening of monetary policy in China, the world's top consumer of the metal.

LME three-month copper ended the session at $7,885 a metric ton, up $400 on Tuesday's PM kerb close. The red metal had earlier risen to $8,000/ton, its highest level since Nov. 4.

Crude oil futures prices trimmed gains, dropping below $101 a barrel Wednesday, after an unexpected rise in U.S. crude oil inventories.

The federal Energy Information Administration reported that crude oil stocks rose 3.932 million barrels in the week ended Nov. 25 as refiners slowed processing rates and boosted imports.

Analysts surveyed by Dow Jones Newswires expected crude stocks to drop 500,000 barrels, while refiners kept operations unchanged on the week.

The data also showed a jump of 5.526 million barrels in distillate stocks. The EIA data nibbled at earlier gains spurred by coordinated moves by central banks to shore up the global financial system.

Light, sweet crude oil for January delivery on the New York Mercantile Exchange settled 57 cents higher at $100.36 a barrel, after hitting a two-month high of $101.75 a barrel earlier.

Gold futures surged to settle at a three-week high after coordinated action from central banks made additional liquidity available to the global financial system. Gold prices rallied to a high of $1,754.70 on the news, with the February-delivery contract settling at $1,750.30 a troy ounce, its highest level since Nov. 16.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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