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Daily Analysis – Central Banks Unite To Boost Liquidity, Western Markets Soar

 December 01, 2011 11:42 AM


China's Shanghai Composite tumbled 3.3% due to growing concerns the country's growth with slow, and the Hang Seng fell 1.5% to 17989. China's central bank cut reserve requirements for the first time in nearly 3 years in an effort to keep the economy on track. In Japan, the Nikkei slipped .5% to 8435, while Olympus shares recovered from a sharp 10% loss at the open after the company affirmed it would release its December earnings report on time. Korea's Kospi declined .5%, but Australia's ASX managed to buck the trend, closing up .3%.

A coordinated move by global central banks to increase liquidity sent Western markets sharply higher. The DAX spiked 5%, the CAC40 soared 4.2% and the FTSE climbed 3.2%. Miners jumped 6% amid hopes the easing efforts will boost demand for raw materials.

[Related -Buffett's Market Indicator Flashes Red, Prepare To Sell]

In the US, a similar scene played out, as the Dow soared 485 points to 12041, the Nasdaq climbed 4.2%, and the S&P 500 rallied 4.3%. Caterpillar shares surged 8.1%.

Dow Soars Nearly 500 Points

Netflix shares slumped 4.5% after the company was downgraded to sell from neutral by Wedbush Securities.

Treasuries and Commodities
Bonds tumbled as investors poured into equities. 10-year notes dropped 25/32 to yield 2.08%, and 30-year notes sank 2 4/32 to yield 3.06%.

[Related -PBoC joins other major central banks with unconventional monetary policy action]

Copper soared 5.5% to 3.5755, leading metals higher. Gold rose 1.9% to 1751.70, and silver gained 3% to 32.915.

Energy ended mixed, as crude rose .62 to 100.41 despite a sharp jump in oil inventories, while natural gas fell 1.8% to 3.568.

Coffee jumped 4.1%, while cotton dropped 2%, as agricultural futures settled mixed.

The Australian Dollar surged 2.4% to 1.0284 as the recent rally accelerated. The Canadian Dollar jumped 1% to 1.0198, and the Euro gained .8% to 1.3436. The Pound rose .5% to 1.5695, while the Yen declined .5% to 77.55.

Economic Outlook
Wednesday's reports were exceedingly upbeat. Data from the ADP employment report blew past forecasts, with the economy adding 206K jobs last month, up from 130K in the previous report. Chicago PMI rose to 62.6 from 58.4, well above estimates, and the Challenger job-cut report showed planned layoffs declined by 12.8%.

Thursday's economic reports will include weekly jobless claims, the ISM manufacturing index, construction spending, auto sales, and chain store sales.

Earnings are due from Barnes & Noble, H &R Block, Kroger, Movado and Talbots.

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