Global Markets Overview - 31 January 2013

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The Dow Jones Industrial Average seesawed within a narrow range, though carrying a slight negative bias, after the FOMC was slightly less dovish in its policy statement.

The Fed concluded its latest two-day meeting by keeping rates unchanged and continuing its bond-buying efforts amid a mixed picture of economic growth.

The DJIA moved down 15 points, then was up slightly, and was last down 19 points, or 0.1%, at 13935, after hovering around the flat line before the Fed statement was released. Exxon Mobil Cisco Systems and 3M led the blue chips lower, while Boeing and Intel pulled on the upside.

The S&P 500 fell 3 points, or 0.2%, to 1504 and the Nasdaq Comp edged down 0.2% to 3148. Fed officials said economic activity had "paused in recent months," largely due to weather and transitory factors. That mindset was reflected in this morning's GDP report, when the government reported economic activity contracted by 0.1% in the final three months of 2012.

EUROPEAN STOCKS, BONDS   European stocks saw broad-based losses Wednesday following a report showing the U.S. economy unexpectedly contracted in the fourth quarter, and as investors remained cautious ahead of the conclusion of the Federal Reserve's first policy meeting of 2013.

Another drag came from Italian energy engineering firm Saipem, which slashed its full-year guidance, sending its shares spiraling down 34% in Milan.

The Stoxx Europe 600 index dropped 0.6% to close at 288.63 after closing at its highest level Tuesday since February 2011. U.S. fourth-quarter gross domestic product contracted by 0.1%, surprising economists who had expected 1% growth.

However, a reading on job growth was slightly better than expected. Among Europe's major national indexes, London's FTSE 100 fell 0.3% to 6323.11, Germany's DAX slipped 0.5% to 7811.31 and France's CAC 40 ended 0.5% lower at 3765.52.

Still, the Stoxx 600 continues to trade around February 2011 highs and the FTSE 100 is at levels not seen since May 2008. Italy's FTSE Mib index fell 3.4% to 17289.91, largely on Saipem's selloff, which also hit other shares.

Technip slumped 7.1% and Petrofac fell 7%. ENI, which has around a 43% stake in Saipem, fell 4.7%. Also in Milan, Fiat dropped 4.8% after suspending its dividend.

However, the auto maker said fourth-quarter net profit more than doubled as strong sales in Brazil offset weakness in Europe. In London, Antofagasta dropped 8.3% after it said in its quarterly production report that copper production will likely remain broadly flat this year.

Outside the major European indexes, Swedbank rallied 11%, after the Swedish bank proposed raising dividends to 9.90 Swedish kronor ($1.56) a share, up from 5.3 kronor a year earlier.

ASIA-PACIFIC STOCKS, BONDS   Asian stock markets rose Wednesday, with Japan closing at a 33-month high and Hong Kong reaching a 21-month high. The U.S. dollar pushed higher against the yen in early trading after Japan's finance minister Taro Aso said that excessive yen strength is currently in a correction phase.

The weaker yen paved the way for another day of gains for Japanese stocks, with the Nikkei ending up 2.3% at 11113.95. Brokerages and real estate companies were among the best performing sectors: Nomura Holdings gained 2.6% and Mitsubishi Estate added 3.5%.

Investors were digesting earnings news in Japan and South Korea. Yahoo Japan Corp. surged 17.1% in Tokyo after the company's third-quarter earnings came out well above expectations, buoyed by strong advertising revenues.

The company also announced a dividend hike and plans for a share buyback. Sentiment was so strong in Japan that construction equipment manufacturer Komatsu was up 2.2%, even after cutting its profit guidance for the year, which the company blamed in part on weak equipment sales to Indonesian coal mines.

In Seoul, chipmaker SK Hynix rose 0.6% after swinging to a fourth-quarter net profit, which it attributed to strong demand for chips used in new smartphones that run Microsoft Corp.'s Windows 8 operating system.

The Kospi added 0.4% to 1964.43, with declines in local car companies limiting the upside. Hyundai Motor lost 1.5% and Kia Motors was 1.9% lower, as concerns over how a stronger won will affect these exporters encouraged investors to sell.

In Hong Kong, the Hang Seng Index ended up 0.7% at a 21-month high of 23822.06, with Industrial and Commercial Bank of China up 0.5%, recovering in part from Tuesday's 2.2% drop prompted by a sale in the company's stock by Goldman Sachs.

The gains in Hong Kong were broad, with no particular sector standing out. Top performers included Citic Pacific and China Resources Power Holdings, which both closed 2.6% higher. The Shanghai Composite ended 1% higher, at 2382.47.


Base metals closed higher on the London Metal Exchange Wednesday, shrugging off disappointing U.S. growth data as investors took their cues from the currency markets and focused on other, more positive, economic indicators.

At the close, LME three-month copper was up 1.5% at $8,226 a metric ton. Nickel gained the most, rising 2.8% to close at $18,355/ton.

Crude-oil futures prices held modest gains Wednesday as the Federal Reserve's policy-making board voted to keep its bond-buying policy in place.

Light, sweet crude oil for March delivery on the New York Mercantile Exchange settled up 37 cents, at $97.94 a barrel, its highest since mid September.

Gold futures ended trade at their highest level in a week as weaker U.S. economic data soothed worries that the Federal Reserve would cut short its easy-money policies. It then extended those gains in after-market trade, after Fed officials held monetary policy steady after months of reconfiguring their bond-buying and communications policies.

Gold for April delivery, the most active futures contract, rose $18.90, or 1.1%, to settle at $1,681.60 a troy ounce on the Comex division of the New York Mercantile Exchange. The contract touched a high of $1,685 a troy ounce, the highest traded level since Jan. 24, on the Fed's policy statement, which was released shortly after Comex floor trading closed for the day. Compiled from MORRISON SECURITIES PTY. LTD.

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