Market Commentary
US Equities: U.S. equities dropped but trimmed back sharp losses late in the session on talk of progress by European leaders in easing the region's debt crisis. U.S. Supreme Court upheld Obama's healthcare overhaul law culminating in mixed outcome on stocks. Major insurers such as Aetna Inc, which face more regulation, were down while companies reliant on Medicaid, such as Wellcare Health Plans Inc advanced as their patient rolls are expected to increase. JPMorgan Chase & Co declined 2.5% after a New York Times report projecting that the losses from a recent botched trade could reach $9 billion, at least four times the original estimate.
European Equities: European stocks finished lower after volatile trading, led by weaker banks, with investors primed for disappointment from the latest European Union summit to contain the debt crisis. A Thomson Reuters survey of around 50 fund managers and analysts conducted over the past week showed the Euro STOXX 50 index was likely to gain about 9% by the end of 2012. Barclays plummeted 15.5% in its worst daily decline since 2009 following investigations that found it tried to manipulate key market interest rates. The LIBOR affair is costing Barclays a record $453 million in fines. Other banks sold off steeply, with RBS and HSBC also under investigation.
Asian Equities: Nikkei share average advanced 1.7% to its highest close in six weeks, buoyed by short-covering as the quarter-end neared, although it was still on track for the worst quarterly performance in two years. As concerns over Europe mounted, Japan fund managers' weightings in domestic equities surged to record highs in June. Hong Kong stocks tracked Shanghai stocks lower ahead of a Europe summit that is keeping many investors on the sidelines. Chinese cement companies were dented following a profit-warning from China Resources Cement Holdings, in the latest indication that lingering weakness in the world's secondlargest economy is adversely affecting corporate profits. Singapore stocks extended gains from the previous day to the highest in about one-and-a-half months, led by Sembcorp Marine.
Interest Rates: U.S. Treasuries advanced with demand for safe havens proving a mainstay as European Union leaders began a summit divided over how to solve the euro zone's debt woes. Italy's benchmark borrowing costs hit six-month highs at auction, increasing pressure on Prime Minister Mario Monti to ease debt burden by squeezing concessions out of Germany at a European summit later in the day.
Currencies: The euro dropped versus the US dollar for a fourth consecutive day and touched its lowest in at least three weeks as doubts persisted that a summit of European leaders will make progress in resolving the euro zone’s deepening debt crisis. Comments by a German official dashed any hopes of quick decisions at a European Union dragging the pound to a two-week low versus the safe-haven U.S. dollar.
Key events/data to look out for:
- China: Manufacturing PMI
