Fundamental Analysis
EUR
“… the euro could face a breakup unless more urgency is placed on reducing the region's borrowing costs”
- Analysts at Wells Fargo Advisors
Investor confidence in the Eurozone dropped less than expected in August, said Germany’s Sentix research institute on Monday. An index measuring sentiment retreated to minus 30.3 from 29.6 the prior month.
European stocks closed higher on the same day.
“Investors are looking to add to Friday's gains, despite discouraging comments out of Europe. Italian Prime Minister Mario Monti warned that the euro could face a breakup unless more urgency is placed on reducing the region's borrowing costs,” said Wells Fargo Advisors analysts.
The Stoxx Europe 600 Index rose 0.46 per cent to 266.80. Germany’s DAX Index edged higher 0.77 per cent and France’s CAC 40 Index advanced 0.81 per cent.
USD
“The weekend didn’t bring any painful news out of Europe and there are expectations the ECB will buy bonds”
- Richard Sichel, chief investment officer at Philadelphia Trust Co.
U.S. stocks closed in green on Monday after German Chancellor Angela Merkel’s government agreed on the European Central Bank’s bond-purchase plan.
“There’s better general feeling,” Richard Sichel, chief investment officer at Philadelphia Trust Co., said.
“We’ve had a good earnings season and better-than-estimated data last week. The weekend didn’t bring any painful news out of Europe and there are expectations the ECB will buy bonds.”
The Standard & Poor's 500 advanced 0.23% to 1,394.23. The Dow Jones Industrial Average rose 0.16%, or 21.34 points, to 13,117.51. The Nasdaq Composite added 0.74% to 2,989.91.
GBP
“The Halifax data heighten our suspicion that house prices are headed lower over the rest of 2012”
- Howard Archer, economist at IHS Global Insight
U.K. house prices edged lower in July, said the Lloyds Banking Group Plc Halifax mortgage-lending unit on Monday. Prices fell 0.6 per cent to an average of 161,094 pounds, after rising a downwardly revised 0.8 per cent in June.
“The Halifax data heighten our suspicion that house prices are headed lower over the rest of 2012,” Howard Archer, economist at IHS Global Insight in London, said in a research note.
“There is a significant and mounting danger that house prices could fall further and longer due to the serious downside risks to the U.K. economic outlook, both from domestic factors and from the euro-zone crisis.”
The FTSE 100 Index edged higher 0.37 per cent, or 21.49 points to 5,808.77. The broader FTSE All-Share Index improved 0.47 per cent.
CHF
“We’re just seeing a consolidation after the strong market move last week”
- Konstantin Giantiroglou, head of investment advisory at Neue Aargauer Bank
Swiss stocks edged slightly higher on Monday.
The Swiss blue-chip index SMI, a measure of the largest and most actively traded companies, gained 0.02%, or 1.47 points, to 6,463.01. The broader Swiss Performance Index rose 0.17%, or 10.00 points, to 5,972.98.
“We’re just seeing a consolidation after the strong market move last week,” said Konstantin Giantiroglou, head of investment advisory at Neue Aargauer Bank in Brugg, Switzerland.
“Yields for Italian and Spanish bonds are coming down further, which is a very positive movement and should bolster equity markets going forward. Defensive names like Roche and Nestle are suffering a bit amid the thawing of the market, limiting gains for the SMI.”
JPY
“There are expectations that the ECB’s bond-purchasing plan will ease debt crisis tensions, bolstering markets”
- Kiyoshi Ishigane, a strategist at Mitsubishi UFJ Asset Management Co.
Japanese stocks extended gains on Tuesday amid optimism the European Central Bank will resume bond purchases.
The Nikkei 225 Stock Average increased by 0.88 per cent, or 77.02 points, to 8,803.31. The broader Topix Index rose 1.08 per cent, or 7.97, to 743.70.
“There are expectations that the ECB’s bond-purchasing plan will ease debt crisis tensions, bolstering markets,” said Kiyoshi Ishigane, a Tokyo-based strategist at Mitsubishi UFJ Asset Management Co.
“Earnings are just so-so on the whole. Some technology companies have been hurt by the stronger yen but I don’t have an impression that their earnings are very bad.”
