Stocks rallied in Europe and the US while they were mixed in the Asia Pacific.

 

 

 

 

United States

 

Stocks rallied Tuesday as buyers returned to a market that had been mostly beaten down in recent days. The strength partly reflected a positive reaction to a rally in Europe. The price of oil rose for a second day in a row in a modest recovery from long time lows. However, natural gas prices slumped again as the warm weather continued in the US. Both the Dow Jones industrials and Nasdaq were up 0.9 percent and the S&P gained 1.1 percent. The Federal Reserve began its final meeting of 2015 and on Wednesday it is expected announce that it is raising interest rates for the first time in almost 10 years.

November core consumer price index was up 0.2 percent from a year ago. A report from the New York Federal Reserve showed that regional manufacturing activity contracted for the fifth straight month in December, although the pace of decline slowed more than expected.

Disney advanced after the premiere of “Star Wars: The Force Awakens.” Shares of the satellite radio operator Sirius XM Holdings after it announced it had signed Howard Stern to another five year deal. 3M declined after it trimmed its profit forecast for 2015 and gave a disappointing estimate for 2016. Exxon Mobil, Chevron, Ensco and Transocean advanced. Banking stocks climbed as investors anticipated that higher interest rates would help banks become more profitable by charging more for loans. JPMorgan Chase and Wells Fargo gained. Boeing advanced after the company increased its stock buyback authorization to $14 billion and raised its quarterly dividend to $1.09.

These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$6.75 to US$1,061.50. Copper futures were down 2.8 percent to US$2.05. WTI spot crude was up 83 US cents to US$37.14.  Dated Brent spot crude was up 79 US cents to US$38.19. The US dollar was up against the euro, yen, pound, Swiss franc and the Australian dollar. It was virtually unchanged against the Canadian dollar. The Dollar Index was up 0.8 percent. The yield on US Treasury 30 year bond was up 3 basis points to 2.99 percent while the yield on the 10 year note was up 4 basis points to 2.27 percent.

 

 

 

 

 

Europe

 

 

European stocks rebounded sharply, snapping their recent losing streak. Energy stocks provided a boost after crude oil prices rebounded from multi-year lows. The rally was broad based, with strong performances by resources, luxury goods, financial and automotive stocks. The FTSE was up 2.4 percent, the SMI added 2.5 percent and the CAC and DAX advanced 3.2 percent and 3.1 percent respectively. Investors are eagerly anticipating tomorrow's announcement from the Federal Reserve, which will come after markets here have closed for the day. The Fed is widely expected to announce an interest rate increase upon the conclusion of its two day policy meeting.

Dialog Semiconductor retreated after it slashed its fourth-quarter revenue outlook. Both E.ON and fellow utility RWE gained. Commerzbank and Deutsche Bank were up on the day. Automakers including BMW, Daimler, Volkswagen, Peugeot and Renault gained. In Paris, Sanofi climbed. The drug maker and Boehringer Ingelheim have entered into exclusive negotiations to swap businesses. Car parts maker Faurecia surged after agreeing to sell a division to Plastic Omnium. BNP Paribas, Société Générale and Crédit Agricole closed higher. In London, Glencore advanced after a broker upgrade. J Sainsbury and Wm Supermarkets advanced. Tesco also finished higher. Tullow Oil was up after the successful exploration of a well increased the potential size of oil resources in Kenya. Total and Royal Dutch Shell gained as oil prices jumped.

German economic confidence improved to a five-month high in December as investors expect the asset purchase program of the European Central Bank to boost recovery. The ZEW economic sentiment indicator climbed a more than expected 5.7 points to 16.1 in December. UK inflation turned positive for the first time in four months in November largely driven by transport costs, while factory gate prices continued their downward trend on lower crude oil cost. Consumer prices were 0.1 percent higher on the year reversing a 0.1 percent decline in October.

 

 

 

 

 

 

Asia Pacific

 

 

Shares were mixed Tuesday although Monday’s gains in the US and an increase in oil prices in the US session helped spur some bargain hunting. Australian shares hit two year lows and Japanese shares fell to 7-1/2-week lows as oil prices dipped again in Asian trading on oversupply worries and China's yuan weakened further to hit a new 4-1/2-year low.

The Nikkei dropped 1.7 percent to a 7-1/2-week low as investors cleared out long positions ahead of the Federal Reserve announcement on Wednesday. Banks closed broadly lower, with Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial all retreating. Toshiba was flat on a Nikkei report that the company is looking to cut up to 7,000 jobs in its consumer electronics division as part of its restructuring efforts.

Australian shares erased early gains to end lower, dragged down by banking and resource stocks after the government said its budget deficit would likely worsen by A$2.3 billion due to the plunging price of iron ore. Both the All Ordinaries and the S&P/ASX were down 0.4 percent. Rio Tinto, BHP Billiton, Santos and Woodside Petroleum were lower. The big four banks also were down. Qantas Airways was down even though the airline forecast a profit jump for the first six months of 2016.

The Shanghai Composite index dropped 0.3 percent. Property stocks were in focus after the Chinese government encouraged rural residents to buy more homes and reduce the housing glut. The Hang Seng slid 0.2 percent. The Kospi added 0.3 percent even though foreign investors extended their selling streak for a 10th straight session. The Sensex was 0.7 percent higher.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Looking forward

 

 

Flash December manufacturing PMIs will be reported for Japan, the Eurozone, Germany, France and the US. The Eurozone also posts final November harmonized index of consumer prices and October merchandise trade balance. The UK releases November labour market report. In the US, November housing starts and industrial production will be posted. The FOMC announces its monetary policy decision followed by Chair Janet Yellen’s press conference to explain the decision.

 

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only