Global Markets Overview - 25 January 2013

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A broad rally in major indexes lost steam Thursday afternoon, as a disappointing earnings report from Apple weighed on technology shares.

The Dow Jones Industrial Average rose 19 points, or 0.1%, to 13798. The Standard & Poor's 500-stock index lost three points, or 0.2%, to 1491.

The technology sector led losses in the index. The Nasdaq Composite Index, which has Apple as its biggest component, declined 28 points, or 0.9%, to 3126.

Shares of Apple slumped 12% to their lowest levels in 11 months after the tech heavyweight reported fiscal first-quarter revenue that fell short of expectations and iPhone sales at the low end of views.

While its profit beat expectations, its second-quarter revenue outlook came in below analysts' marks. Stocks pulled back from session highs which had seen the S&P 500-stock index rise above 1500 for the first time since December 2007 and blue chips also hit a new multi-year high.

Still, the declines were most extreme in the tech-heavy Nasdaq Composite. Apple accounts for a relatively smaller share of the S&P 500 and isn't included in the Dow industrial average.

Elsewhere, 3M edged 0.2% lower after the blue-chip conglomerate reported fourth-quarter earnings that were in line with estimates and its revenue beat expectations.

Fellow Dow component Microsoft rose 1%. The software company is scheduled to report fiscal second-quarter results after the closing bell.

Blue chips were bolstered by a better-than-expected labor-market report. The number of U.S. workers filing new applications for jobless benefits fell to 330,000 in the latest week, the lowest level in five years.

Markit's preliminary reading on U.S. manufacturing rose to 56.1 in January from 54.0 the previous month, the strongest report since March 2011. Readings above 50 indicate growth. An index of forward-looking economic indicators rose 0.5% in December, in line with expectations. The Conference Board revised November's reading higher.

EUROPEAN STOCK MARKETS, BONDS   European stocks ended mostly higher as upbeat news about manufacturing offset disappointing earnings from Apple Inc. The benchmark Stoxx 600 index rose 0.2% to 288.89.

The U.K.'s FTSE 100 index gained 1.1% to 6264.91, Germany's DAX advanced 0.5% to 7748.13 and France's CAC-40 added 0.7% to 3752.17. Shares of Apple slumped 10% in U.S. trading Thursday morning, to their lowest levels in 11 months after the technology heavyweight reported fiscal first-quarter revenue that fell short of expectations.

Positive economic news helped stocks to rise. Preliminary January figures for China and the U.S. showed manufacturing activity in both countries is gaining steam. Mining stocks, which tend to rally when economic activity accelerates, gained ground.

Shares of Anglo American gained 1.4% in London, while Rio Tinto added 2.1%. Shares of LVMH Moet Hennessy Louis Vuitton gained 0.9%.

J.P. Morgan Cazenove raised its price target for the maker of luxury goods. Vodafone Group rose 3.2%. Widely followed hedge-fund manager David Einhorn said in a letter to investors late Wednesday that he had increased his Vodafone holdings, arguing that the market was undervaluing the company's stake in Verizon Wireless.

Nokia slumped 5.5% even though the Finnish handset maker earned more than expected in the fourth quarter. Sales fell 20%, a bigger decline than expected, and the company scrapped its dividends for 2012.

Logitech International sank 9.6%, after the computer-equipment firm said it swung to a net loss from a profit in the same period a year earlier.

In banking, Commerzbank gained 1.5% as the lender confirmed plans to cut between 4,000 and 6,000 jobs. Italy's Banca Monte dei Paschi di Siena retreated 8.2%, marking a third day of heavy declines, amid worry over losses from complex financial contracts it entered into in the late 2000s.


Japanese stocks made their first gains in the week on Thursday as China's manufacturing sector continued to recover and the yen started to weaken again, while South Korea dropped as Hyundai Motor's earnings disappointed.

The main Asian economic event on Thursday, HSBC's preliminary Chinese purchasing managers index for January, made little impact on Chinese stocks, despite rising to a 24-month high of 51.9 from a final reading of 51.5 in December.

A score above 50 indicates an expansion in manufacturing activity. The economic data had its biggest impact in Japan, where it proved an excuse for the market to return to its uptrend, after losing 3.9% over the previous three sessions.

Some Japanese companies that export to China outperformed the broader market: construction equipment manufacturer Komatsu was up 2.2% and Hitachi Construction Machinery gained 1.9%.

The Nikkei ended up 1.3% at 10620.87, as the yen started to return to a weakening trajectory. Exporters benefited from the weaker yen.

Honda Motor was up 2% and electronics company Kyocera Corp. added 2.9%.

In China, however, stocks shrugged off the PMI data, with Hong Kong's Hang Seng Index down 0.2% at 23598.90 and the Shanghai Composite in mainland China falling 0.8% to 2302.60.

The earnings season got into full swing in South Korea, where the Kospi was down 0.8% to 1964.48 after the country's largest automaker, Hyundai Motor, fell 4.6% following the release of disappointing earnings for the fourth quarter.

The company citied a stronger yen and a one-off hit from U.S. mileage overstatement. The next major earnings report to come out of South Korea will be Samsung Electronics which reports on Friday, while in Japan, reporting season starts in earnest next Wednesday, when Canon Corp. and Sumitomo Mitsui Financial Group announce their results.

Earnings could be the next major catalyst for regional markets that have rallied hard since September, and in recent sessions have struggled to push higher.


Base metals on the London Metal Exchange closed mixed after positive economic data from the U.S. helped to lift some members of the complex from earlier lows.

At the close of open-outcry trading, LME three-month copper, the flagship of the group, was 0.1% lower on the day at $8,095.50 a metric ton.

Lead prices maintained their recent resilience, closing 1.4% higher at $2,403/ton. Crude-oil futures rose Thursday, with upbeat economic data from the U.S., China and the euro zone that buoyed the outlook for oil demand offsetting bearish crude-supply data.

Crude oil for March delivery settled 72 cents higher at $95.95 a barrel on the New York Mercantile Exchange. Gold futures settled at their lowest level in more than a week as some investors were spooked by improvement in the U.S. labor market while others cut back gold holdings in frustration over the metal's lackluster performance.

The most actively traded contract, for February, fell $16.80, or 1%, to settle at $1,669.90 a troy ounce on the Comex division of the New York Mercantile Exchange. This was the lowest settlement price since Jan. 14, when gold ended at $1,669.40. COMPILED FROM MORRISON SECURITIES PTY. LTD.

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