Fidelity Global Market Update - Asia Pacific morning, 22 July 2009

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Wall Street climbs but gains limited
US stocks rose overnight as investors were buoyed by another round of strong profit reports and US Federal Reserve Chairman Ben Bernanke said there are signs the economy is stabilising, but the gains were limited as some investors held off after CIT Group said it may need to file for bankruptcy despite the $3 billion deal with its bondholders.

The Dow Jones Industrial Average Index gained 0.8% to extend its rally since 10 July to 9.4%. Both the Standard & Poor’s 500 Index and the Nasdaq Composite Index added 0.4%.

Stocks soared early in the session as Caterpillar jumped 7.7% after reporting a better-than-expected profit, offsetting warning from the company that the current quarter could be tough. Strong profits from drug maker, Merck & Co, saw its shares climb 6.1%.

Limiting the market’s advance was financial stocks after CIT Group warned it could still file for bankruptcy if debt-swap fails with Regions Financial. CIT lost -21.6% to close at 98 cents. Both Regions Financial and Comerica, two large US regional banking companies, posted second-quarter losses on increased bad loans. The banks shed -15.4% and -10.1% respectively.

In his speech before the US Congressional panel, US Fed Chairman Ben Bernanke said the economy is showing “tentative signs of stabilisation” and that the “limited inflation pressures” will allow policy makers to keep interest rates near zero for an “extended period” but warned that mounting unemployment, declining home values and tight credit were likely to curb consumer spending.
After the bell, Starbucks issued a stronger-than-expected yearly earnings forecast and its shares surged 10.1% to close at $16.17. Apple profits also topped analyst estimates, its shares rose 4.4% to $158.22. But Yahoo shares fell after hours despite posting an unexpected gain in second-quarter profit as net revenue fell.


European shares gained overnight, rising for the seventh straight session. The UK FTSE 100 Index rose 0.8%, the German DAX Index climbed 1.3% and the French CAC-40 Index gained 1%.

Asian markets closed mixed. The Nikkei 225 Stock Average climbed 2.7% in Japan and South Korea’s Kospi Index rose 0.7%. Australia’s S&P/ASX 200 Index closed flat while China, Singapore and India’s markets fell.

Fixed income
The 10-year note yield fell 12 basis points to 3.49%.

Currencies
The US$ advanced against the euro overnight but weakened against the yen. One US$ bought 0.7034 euro and 93.72 yen.

Commodities
Crude oil for August delivery rose 1.2% to $64.72 a barrel. Spot gold was slightly lower this morning, trading at $948.48 an ounce this morning.

Looking ahead
Australia’s ASX200 Index is currently up 0.4%.

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