Global Market Overview

Last updated: February 1, 2012 9:32 pm

Production data boost stocks

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Wednesday 2200 GMT. Signs of a pick-up in global manufacturing activity boosted investor demand for growth assets, helping stocks on Wall Street snap a four-day decline.

The FTSE All-World equity index rose 1.2 per cent in afternoon, and the FTSE Eurofirst 300 gained almost 2 per cent. In the US, the S&P 500 index rose for the first time since last week, led by gains in industrial shares and financials, also supported by a report earlier in the session showing 170,000 US private sector jobs were added last month.

Shares in Morgan Stanley climbed more than 5 per cent on talks Facebook was said to pick the bank to lead on its long-awaited initial public offering. But confirmation only came after markets closed in New York, when the social media company filed papers with regulators applying for a $5bn initial share offering.

Also in extended trading action, shares in communications equipment maker Qualcomm rose 5 per cent after the company reported record first-quarter fiscal 2012 results.

The S&P closed 1 per cent higher and back into bull market territory – marked by a 20 per cent advance since hitting a cyclical low in October. A rally in Whirlpool shares, which surged 16 per cent on the back of earnings guidance that beat analysts’ forecasts, also supported the S&P.

The dollar index, which measures the value of the US dollar against a basket of currencies – and tends to move opposite to investors’ appetite for risk – fell 0.4 per cent. Gold rose to $1,743 a troy ounce, while US sovereign bonds fell, with 10-year yields up 3 basis points to 1.82 per cent.

After a mixed start, commodities are mostly firmer, with Brent crude up 1 per cent to $112.11 a barrel and silver adding to its recent good run, up 2 per cent to $33.82 an ounce.

Stronger appetite for growth assets also helped boost trading in emerging markets, with two high-profile corporate bond deals being priced on Wednesday: Mexico’s America Movil was about to become the first Latin American entity to issue Chinese yuan-denominated bonds, or dim-sum bonds. And Brazil’s largest company, Petrobras launched a whopping $7bn offer of dollar-denominated debt in three tranches. The deal is the largest corporate offering ever in Brazil.

The mood had not been quite so positive before the start of the European session. Bulls may have hoped for a more upbeat opening to February in Asia after China’s official manufacturing purchasing managers’ index for January rose to 50.5 from 50.3 in December.

The stronger than forecast performance calmed market concerns about a hard landing of the world’s second-largest economy. Still, the fragility of trader sentiment left some to fear the improving factory activity will leave Beijing feeling there is less need to aggressively ease monetary policy. That perception contributed to the Shanghai Composite index 1.1 per cent slide.

Still, European-based investors welcomed the Chinese data and another survey showing German factory activity rebounded in January. UK manufacturing was also a bit more chipper than forecast.

The single currency was flirting with the $1.30 level before the German PMI news but rose after the data and it is now up 0.8 per cent to $1.3194.

Additional reporting by Jamie Chisholm in London

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Trading Post

The first day of every month brings the release of national manufacturing sector surveys, or PMIs, writes Jamie Chisholm.

Copper price

The focus, naturally, is China. Investors wanted to see further evidence that the world’s second-biggest economy is avoiding a hard landing. They got it.

The “high beta” trade for this news tends to be industrial commodities, with copper at the forefront.

If better Chinese PMI is followed by decent news in Europe and the US later in the session (it was), then copper could look to challenge the $4-a-pound level it crashed through during the euro-funky market slump in September.

So far, the reaction to the China PMI news has been muted but the US and European data ebullient, and the red metal is up 0.4 per cent to $3.80 a pound.

Recent gains have tracked the broad risk asset rally in 2012, but fundamentals have played a part.

Data have shown Chinese copper imports pick up steam while supply growth has not kept pace. Net long speculative positions in copper futures are at their highest since August, but not so great that they excite contrarians.

In technical terms, bulls will welcome copper’s position comfortably above 50-, 100- and 200-day averages, though they will be wary with the relative strength index of 70 near overbought territory.

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