US Stocks finished higher on hopes that the Fed’s meeting will result in new stimulus measures to expand Operation Twist from its planned end later in June. Stocks briefly turned down after “The Guardian” reported that Angela Merkel said the G20 meeting didn’t discuss specific plans for Europe’s rescue funds to buy government bonds. On the economic front data was mixed, housing starts down 4.8 per cent in May, but building permits surprising to the upside, rising 7.9 per cent. The US Dollar was broadly weaker on stimulus views.
European Stocks closed sharply higher, after stimulus expectations were bolstered by weak German data after the Zew Confidence Survey plunged the most in 14 years to -16.9 from 0.18 in May. Hopes were reinforced by an unexpected fall in UK inflation by 0.1 per cent to 2.8 per cent, a two and a half year low. Spanish borrowing costs surged at the nation’s first post-bailout auction for 1-Year Bills, yields at auction rising 2.1 per cent to 5.074 per cent. Nonetheless, Spanish 10-Year yields dropped 11 bp to 7.05 per cent, sending the euro to session highs of US$1.27. Hence, Spanish Banks – Banco Santander (€4.83, -2.8%), BBVA (€6.53, +3.5%), CaixaBank (€2.44, +3.44%) – were all bid.
Financials led, Bank of America ($8.11, +4.5%) posting gains after Julius Baer said it is talks to buy the firm’s international wealth management business. JPMorgan Chase ($35.38, +2.2%) held onto gains after CEO Jamie Dimon testified to the House Committee on Financial Services about the firm’s $2b trading loss. Peers – Wells Fargo ($32.96, +1.5%), Citigroup ($28.50, +3.5%) – also performed.
Microsoft ($20.70, +2.9%) outperformed after the company unveiled its play in the tablet market, Surface, in an attempt to combat rival Apple ($587.41, +0.3%). Facebook ($31.91, +1.6%) continued to rally. Orcale ($27.96, +3.1%) outperformed after it posted stronger than expected quarterly profits.
Energy rose, with Oil & Gas Producers – Chevron ($104.06, +0.6%), ConocoPhillips ($55.64, +1.0%), Exxon Mobil ($84.48, +1.65%) – tracking July Crude higher to $84.18/bbl. Meanwhile, Chesapeake Energy ($18.71, +5.89%) rose after it said it will cut 8 per cent of its North Texas workforce to fill a large funding gap. Walgreen ($30.09, -5.9%) slumped on missed revenue expectations but said it would by a 45 per cent stake in Alliance Boots for $6.7b in cash to bolster earnings. JCPenney ($22.25, -8.6%) plunged after President Michael Francis said he will be leaving the company. FedEx ($31.91, +1.6%) rebounded despite missing FY13 guidance.
Metals & Miners – Alcoa ($8.90, +2.4%), Cliffs Natural Resources ($50.76, +4.0%), Freeport ($35.45, +3.5%), US Steel ($20.15, +9.45%) – advanced as commodities staged their biggest rally since January, jumping over 1 per cent. Gold fell for the second day to $1,617.95/oz on potential easing and a dip in Spanish yields.
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