From Morrison Securities Pty. Ltd.
U.S. stocks gained after investors took heart from stronger U.S. economic data, but fell off session highs after the head of the International Monetary Fund stoked fears that Europe's sovereign-debt crisis is worsening.
U.S. Stock Markets
The Dow Jones Industrial Average rose 59 points, or 0.5%, to 11883 in afternoon trading, after advancing by triple digits early in the session. The gains followed a 131-point drop Wednesday that stretched the measure's decline for the week to 361 points, or 3%.
The Standard & Poor's 500-stock index tacked on five points, or 0.4%, to 1217, while the Nasdaq Composite rose five points, or 0.2%, to 2545. Sectors viewed as more defensive were faring best, as utilities, health care and consumer staples shares led the S&P 500.
Stocks rose after the Labor Department said a seasonally adjusted 366,000 workers filed initial jobless claims in the week ended Dec. 10, well below forecasts and the lowest since May 2008. The figures were the latest indication the weak jobs market is slowly building strength.
The four-week moving average of new jobless claims fell to its lowest level since July 2008. Midmorning, the Federal Reserve Bank of Philadelphia's gauge of mid-Atlantic manufacturing activity rose to 10.3 in December, from 3.6 in November, which also was much stronger than forecast.
But stocks lost some steam after IMF Managing Director Christine Lagarde said at a U.S. State Department conference that the sovereign-debt crisis requires action by countries outside of the European Union. She called the global economic outlook quite gloomy.
Novellus Systems was the biggest advancer in the S&P 500, rallying 17% after the company agreed to be acquired by fellow chip-equipment maker Lam Research in an all-stock deal that values Novellus at about $3.3 billion. Lam shares slipped 5.4%. FedEx was the measure's second-strongest stock, climbing 7.5% after the package-delivery service reported fiscal second-quarter earnings that exceeded expectations and affirmed its full-year outlook.
European Stock Markets
European stocks rose Thursday, buoyed by encouraging economic data and a successful Spanish bond auction. The Stoxx Europe 600 index gained 1% to 234.73, extending gains after upbeat weekly U.S. jobless claims data and an improved Empire State Manufacturing index.
The Markit flash German manufacturing PMI index advanced to 48.1 in December from 47.9 in November. That was followed by the Markit flash euro-zone PMI, which rose to 46.9 in December from 46.4 in November.
Markets also embraced upbeat results from a Spanish bond auction, with borrowing costs lower than in prior auctions and with the amount raised almost double what was expected. Shares of Spanish telecom group Telefonica SA fell 1% after it said it would reduce dividends in 2012 and 2013.
Spain's IBEX 35 index rose 0.8% to 8,250.40, with banks Banco Santander and BBVA up 1.5% and 2.4%, respectively. In Frankfurt, shares of Commerzbank AG rose 6.7%.
The Wall Street Journal reported that the bank is in talks with the German government to transfer part or all of its struggling real-estate unit into a government-owned bad bank.
A spokesman for Commerzbank declined to comment. The German DAX 30 index rose 1% to 5,730.62, with Allianz SE up 2.7% and Munich Re AG up 1.9%. In Paris, the CAC 40 index rose 0.8% to 2,998.73, as hotels group Accor SA rose 4.6%. Shares of Credit Agricole SA fell 4.4%.
Late the prior day, Fitch Ratings downgraded the investment-grade ratings on five major European commercial banks by one notch each, including Credit Agricole. In London, shares of insurer Old Mutual PLC surged 11.4% on news it will sell its Nordic unit for GBP2.1 billion in cash to Skandia Liv. The gains helped boost the FTSE 100 index, which closed up 0.6% at 5,400.85.
Asia-Pacific Stock Markets
Asian markets slumped Thursday, with resource-sector shares suffering hefty losses a day after commodity prices plunged on mounting fears over euro-zone debt troubles.
Concern about Asia's economic health also contributed to the selloff after data showed that manufacturing activity in China contracted in December, while the Bank of Japan's quarterly tankan survey showed worse-than-forecast conditions for large manufacturers.
Japan's Nikkei Stock Average fell 1.7% to 8377.37, South Korea's Kospi shed 2.1% to 1819.11, India's Sensex fell 0.3% to 15836.47, and Taiwan's Taiex gave up 2.3% to 6764.59. Hong Kong's Hang Seng Index dropped 1.8% to 18,026.84, while China's Shanghai Composite Index skidded 2.1% to 2180.90, suffering its ninth decline in 10 trading days and finishing at levels it hasn't seen since March 2009.
A preliminary reading of HSBC's China Purchasing Managers Index showed the level of activity at mainland Chinese factories contracted again in December, though the rate of decline was slower than in November.
Commodity-linked stocks were among the worst performers across the region. In Hong Kong, energy majors Cnooc and PetroChina lost 4.6% and 3%, respectively, while Korea Zinc tumbled 8.8% in Seoul. Gold miners also suffered, as gold futures extended their fall in electronic trading during Asian hours.
Hong Kong-listed Zhaojin Mining Industry shed 8.2% and Shandong Gold-Mining slumped 7.4% in Shanghai. Exporters were hit again, with Pioneer sinking 5.1%, and Casio Computer dropping 3.5% in Tokyo; in Seoul, Hyundai Motor dropped 2.6%, and Kia Motors shed 2%. Shares in Olympus plunged 21% in Tokyo on worries about its low equity-capital ratio.
Base metals closed mostly higher after a corrective bounce on the London Metal Exchange Thursday, helped by a small recovery in the euro against the greenback and higher equity markets.
The mood in the broader markets was lifted after stronger U.S. economic data, including the lowest weekly jobless claims since May 2008 and a better than expected reading in the mid-Atlantic manufacturing activity gauge. The industry-linked metals are sensitive to economic news and data as they are widely used in manufacturing and construction.
LME three-month aluminum ended at $1,974 a metric ton, up $12 but off an earlier high of $2,000/ton. Three-month copper, however, closed up just $2 at $7,211/ton after retracing from a session high of $7,342/ton.
Oil futures turned lower Thursday, pushing deeper into negative territory a day after their 5% plunge, as equities pared earlier gains. Light, sweet crude for January delivery settled $1.08 lower at $93.87 a barrel on the New York Mercantile Exchange, its lowest in a month.
Nymex crude had earlier climbed as high as $95.99 a barrel, lifted by a slew of positive economic data out of the U.S. Gold futures settled at a fresh five-month low, unable to sustain a bounce in prices as traders eyed a still fragile euro and disappointment over the absence of a fiscal stimulus. The most actively traded contract, for February delivery, settled $9.70, or 0.6%, lower at $1,577.20 a troy ounce on the Comex division of the New York Mercantile Exchange.
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