Global Market Overview

Last updated: February 12, 2013 9:15 pm

Stocks firm but bulls struggle for impetus

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Tuesday 21.10 GMT. Global stocks inched higher amid a batch of corporate earnings as investors awaited President Barack Obama’s State of the Union address for clues on the outlook for the world’s largest economy.

The FTSE All World gained 0.5 per cent, while on Wall Street, the S&P 500 Index rose 0.2 per cent to 1,519. The broad US benchmark reached its highest level since November 2007 last week.

But volumes were still lighter than usual, as markets in Hong Kong, Singapore and Taiwan remained closed for the Lunar New Year holiday.

A sharp fall for the Swiss franc versus the euro – after Swiss National Bank boss Thomas Jordan said he expected the Swissie to lose more ground versus the single currency – triggered strength in the eurozone’s currency unit, which rose 0.4 per cent to $1.3453.

This caused early dollar index strength to morph into a 0.3 per cent dip, which in turn triggered gains for dollar denominated commodities – copper rose to trade at $3.74 a pound after a weak start of the session.

It also helped gold to pare losses – the precious metal rose $3 to $1,651 an ounce – and reduced the attraction of perceived havens, with yields of 10-year US and German paper up 2 basis points to 1.98 per cent and 3bp to 1.64 per cent, respectively

The tentative tone came as some brokers warned that global stocks may have travelled too far, too fast and are in risk of giving up some of their gains.

Goldman Sachs said in a note to clients: “Some US fiscal uncertainty remains and the European sovereign situation could deteriorate again, but we see risks as smaller than last year.”

Still, it suggested being “overweight” equities with a 12-month view and “expect returns to be supported by a combination of a rebound in global growth, accelerating earnings growth and declining risk premia”.

But the bank added: “Over three months we downgrade to ‘neutral’ as we expect near-term consolidation after the strong gains.”

One of those issues mentioned by Goldman, the US budget wrangling, is likely to be addressed later on Tuesday by Mr Obama.

And another factor currently in the eye of investors – the so-called currency wars – could be at the forefront of talks during the G20 meeting of finance ministers and central bankers in Moscow on Friday and Saturday.

The market had a taste of the volatility the currency jawboning is delivering after a G7 official felt it was necessary to tell investors they had misinterpreted the economic grouping’s statement about exchange rates. The G7 is signalling that it is worried about excess yen weakness, Reuters reported.

Earlier in the global session, the Nikkei 225 Stock Average surged 1.9 per cent on Tuesday after Akira Amari, the country’s economics minister, said Japanese stock prices were too cheap for its fundamentals, according to media reports, and the yen hit multiyear lows overnight.

Exporters were buoyed by the yen’s recent weakness, with the Japanese currency plunging to Y94.42 in New York late on Monday, marking its weakest level since May 2010. The Japanese currency rebounded on Tuesday to trade at Y93.5.

One factor that may at one point have contributed to the paring of racier bets early in the session was heightened geopolitical tension after North Korea detonated a nuclear device. South Korean equities gave up initial gains on the news to close 0.3 per cent lower.

Additional reporting by James Chisholm in London

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