Total Investor

Global Wrap

US Stocks fluctuated, with the bellwether indices swinging between gains and losses before eventually finishing out the session with modest gains as a German court cleared the way for Europe’s bailout fund ahead of the FOMC’s call on monetary policy tonight.  Hence, the Dow Jones Industrial Average managed to reach a fresh multi-year high for the second straight session, while the CBOE VIX fell as much as 5 percent. Separately, options to protect against losses in small-caps as judged by the Russell 2000 fell to the cheapest level in a year relative to large-caps, a sign that traders are becoming more confident in the recovery. On the economic front, mortgage applications rose for the first time in six weeks as borrowing costs neared a record low, while prices of imported goods rose for the first time in five months.

European Stocks mostly rallied, with only London’s FTSE 100 treading below water, after Germany’s top constitutional cleared the way for a ratification of the euro area’s permanent bailout fund. Hence, the Stoxx Europe 600 Index closed at its highest level since July last year and has now advanced 17 percent from its lows of the year. In Germany, the  Federal Constitutional Court in Karlsruhe dismissed motions filed by groups including an opposition political party that sought to halt German ratification of the €500 billion fund. The court stipulated that Germany set a cap of about €190 billion on its liabilities before ratifying the ESM, unless parliament decides to back extra funds. In acquisition news, BAE Systems (363.6p, +10.6%) rose as it said it’s in talks with EADS (€28.50, -3.9%) about a combination.

Commodities fluctuated, with industrial metals showing fresh signs of consolidation as Nickel shed more than a percent in London trade, while Iron ore in China ended a four day winning streak to settle more than 2 percent lower at $98.1/ton. Platinum, however, rallied to a five month high at $1657/oz on concern that supplies will be further disrupted by more labour unrest in South Africa, the world’s biggest producer. Gold and Silver, meanwhile, were little changed at $1730/oz and $33.28/oz respectively, notwithstanding that the USD Index slid to a new multi-month low on concerns that the Fed will restimulate the monetary base. Corn was offered below $7.70/bushel, or its lowest levels since mid-July on signs that the harvest will shrink less than earlier feared.  Meanwhile, WTI Oil prices gravitated around $97/barrel

Treasuries were sold throughout the session in the wake of the German Constitutional Court decision to uphold the legality of the ESM. The subsequent improvement in risk sentiment weighed on Treasuries as the curve steepened into the 10-Year Auction, which was not impressive. The sale attracted a bid-to-cover of 2.85 times and saw the lowest indirect participation since October, 2011 at 36.2 percent. Spanish 10-Year Yields were little changed at 5.6 percent.

US sector action was mostly positive, with only three of ten S&P 500 industries ending in negative territory. Telco’s – AT&T ($37.72, +0.3%), Verizon ($44.89, +1.5%) – were the winner, extending recent outperformance as a defensive play. Industrials – Caterpillar ($89.12, +0.6%), Deere ($78.79, +0.7%), General Electric ($21.89, +1.4%) – and Financials –Citigroup ($33.05, +1.2%), Goldman Sachs ($118.24 +1.3%), JPMorgan Chase ($39.92, +0.8%) – were close behind.

Facebook ($20.93, +7.7%) rallied as Apple ($669.79, +1.4%) debuted the iPhone 5 with tighter integration of the former.

Global Wrap

US Stocks advanced, sending the Dow Jones Industrial Average to its highest level since December, 2007 on the eleventh anniversary of the September, 2011 terror attacks that have shaped and defined the 21st century. Speculation that the Federal Reserve may unveil some form of additional stimulus was cited as a catalyst for the trading rally ahead of tonight’s ruling from the German Constitutional Court on whether the nation will participate in the $640 billion European Stability Mechanism. Volume for listed stocks across US exchanges was 5.9 billion shares, or roughly in line with the three-month average. On the economic front, the US trade deficit widened in July for the first the first time in four months as a global slowdown cut demand for exports. Meanwhile, a gauge of small business confidence rebounded.

European Stocks mostly climbed, with Germany’s XETRA DAX adding more than a percent, albeit the UK’s FTSE 100 finished marginally underwater. Deutsche Bank (€33.15, +4.1%) rallied as the region’s biggest bank by assets said it will cut jobs and review pay practices to boost profitability. The German lender will slash costs by €4.5 billion and target a return on equity of at least 12 percent by 2015. Regional Banking Peers – BNP Paribas (€39.01, +2.1%), Credit Suisse (CHF 20.27, +0.9%), Royal Bank of Scotland (264.7p, +4.6%), Société Générale (€24.66, +1.0%) – were also bid.

Commodities were little changed, albeit industrial metals continued to capture a modest bid tone, however Copper did begin to show signs of consolidation as it failed to hold onto $3.70/lb. Meanwhile, Iron ore in China, the world’s biggest steelmaker, rose for a fourth straight day, climbing 5.5 percent to $100.20/ton. Crude also climbed, breaking out to close at a three-week high at $97.17/bbl as the EIA upgraded its expectations on the pace of global oil consumption this year and next. The USD Index extended losses to hit its weakest levels since early May, albeit Gold was flat at $1731/oz.

Treasuries fell as a reversal in risk sentiment was buoyed by confirmation that the German court ruling on the ESM will still be on tonight, despite a new challenge. After little reaction to better than expected July trade data, the long end saw weight from Moody’s warning of the possibility of a US rating downgrade if budget negotiations do not result in a downtrend in the debt/GDP ratio. Nevertheless, Uncle Sam’s 3-year auction found solid demand, attracting a record bid-to-cover of 3.94. Spanish 10-Year Yields rose to highs at 5.8 percent on worries that the state won’t ask for a bailout

US sector action was generally positive, with 8 out of the S&P 500’s 10 sectors finishing higher, while advancers beat decliners by a factor of 1.86 times in the benchmark. Energy – Anadarko Petroleum ($71.62, +1.7%), Chevron ($114.18, +0.2%), Halliburton ($35.35, +3.2%) – and Financials – Bank of America ($9.03, +5.2%), Goldman Sachs ($116.69, +1.8%), JPMorgan Chase ($39.60, +2.2%) – outperformed. Meanwhile, Morgan Stanley ($17.25, +3.9%) and Citigroup ($32.66, +2.6%) valued Smith Barney at $13.5 billion as part of a deal for the former to own the whole unit by 2015

Resource Stocks regained traction. Cliffs Natural Resources ($41.68, +6.4%) was the standout, while Coal Miners – Alpha Natural Resources ($7.45, +7.7%), Peabody Energy ($24.34, +2.7%) – were also bid. In other news, Facebook ($19.43, +3.3%) rose as much as 4.8 percent after-hours as Mark Zuckerberg addressed the group’s stock slump.

Global Wrap

US Stocks slipped into the close, with the bellwether indices ending on session lows after earlier holding onto positive territory, though the NASDAQ composite was underwater and lagged throughout the entire day. Volume moderated from the end of last week’s elevated levels, with 5.6 billion shares changing hands across US exchanges, or 7.3 percent below the three-month average. Traders cited profit-taking and defensive positioning ahead of a German constitutional court ruling on whether the state may contribute to the Euro zone’s rescue fund and this Thursday’s FOMC rate decision as key reasons for the reversal in risk sentiment. The CBOE VIX, widely considered the best gauge of fear, rose more than 13 percent to 16.28. A lack of key catalysts, including macro data or corporate events, kept many at bay.

European Stocks declined, though losses were only mild with Brittan’s FTSE 100 and Germany’s XETRA DAX ditching less than 0.1 percent. Another round of disappointing Chinese trade and industrial output figures reignited fears of a slowdown that is gaining traction, while a state paper said that the likelihood of the PBoC cutting interest rates again this year has dropped. On the acquisition front, Xstrata (1026.5p, +1.2%) advanced after Glencore (370p, -2.1%) proposed that the former’s CEO, Mick Davis, should run the combined entity for six months before being replaced by its own CEO Ivan Glasenberg. BHP Billiton (1910p, +0.2%) and Rio Tinto (3069, +1.6%) saw some upside as spot Iron Ore jumped nearly seven percent yesterday to $95/tonne.  Anglo American (2001.5p, +1.5%) was also bid as metals rose.

Commodities fluctuated, with industrial metals jumping at the expense of precious metals and agriculture. In London trade, Tin and Zinc rallied at least two percent, while Copper, Nickel and Lead climbed more than a percent respectively. Separately, a report showed that hedge funds raised bullish commodity bets to the highest in 16 months amid speculation that the Americans, Chinese and Europeans will revive the global economy via fresh stimulus. Corn closed at its lowest level since July at $7.83/bushel as the US harvest accelerates following this summer’s droughts. At the same time, WTI Crude was little changed $95.64/bbl as traders waited to see if the Fed will announce more stimulus.

Treasuries slid into the US session, while paring gains from Asia as they digested news of the Jobs report from Friday and generally soft Chinese data. The long-end underperformed with the 10-30 spread steepening as the market braced for potential QE, though price action was mild given event risk later this week. 10-Year Yields settled out at 1.65 percent.

US sector action was broadly negative, with only Telco’s – AT&T ($37.42, +0.3%), Verizon ($44.06, +0.8%) – bucking the trend, while Consumer Staples – Pepsi ($71.84, -0.4%), Procter & Gamble ($68.51, unch), Wal-Mart ($73.51, -0.4%) – also outperformed on defensive allocation. Techs, meanwhile, lagged with Intel ($23.26, -3.8%) extending losses for a second day as the company lowered guidance on weaker-than-expected demand for its chips. Apple ($662.74, -2.6%) also declined after earlier hitting an all-time high at $683.29 ahead of the expected announcement of the iPhone 5.

Financials lagged. Major Banks – Bank of America ($8.58, -2.5%), Citigroup ($31.83, -0.8%), Goldman Sachs ($114.68 -1.4%), JPMorgan Chase ($38.76, -1.4%), Wells Fargo ($34.59, -1.2%) – were offered across the board, meanwhile AIG ($33.30, -2.0%) declined after Treasury said it will sell most of its stake in the insurer, leaving it with a minority holding.

Global Wrap

US Stocks extended gains, with the S&P 500 hitting a new post GFC high, or its highest level since May, 2008 as a weaker-than-forecast jobs report restored optimism that the Fed will likely unveil additional stimulus measures. Hence, the market was able to finish on session highs, albeit the range was narrow. Volume across US exchanges was 6.51 billion shares, or 7.8 percent above the three month average. Meanwhile, speculation that the Chinese are stepping up stimulus measures also supported risk sentiment after the Shanghai Composite added as much as 4.5 percent. The ratio of outstanding puts to sell US stocks versus calls to buy matched the lowest level since May, a sign that the market may rise further option traders cut bearish bets, while the CBOE VIX dumped nearly eight percent.

US Nonfarm payrolls rose less than projected in August and the unemployment rate was unexpectedly driven down to 8.1 percent by Americans leaving the labour force. The economy added 96,000 workers after a revised 141,000 increase in July that was smaller than initially estimated. That compared with the median estimate for a gain of 130,000 as calculated by Bloomberg. Factory employment fell by the most in two years, in line with the recent contraction in the ISM manufacturing PMI. Most disappointingly, the Participation Rate fell to a 32-Year low at 63.5 percent.

Commodities danced, with precious and industrial metals leading the way as revived Fed stimulus expectations spurred demand for inflation hedges. Gold rose to a 7-Month high at $1741/oz, while Silver added more than 3 percent to settle at $33.68/oz. In London trade, Copper and Zinc rose more than 3 percent, while Aluminium and Nickel both climbed at least two percent. Separately, a survey conducted by Bloomberg showed that Copper traders are the most bullish in almost 11 months. The US Dollar Index fell the most since October, helping fuel the bid in commodities.

Treasuries finished higher, with the complex roaring across the curve on the weak jobs report, though flatteners eventually ran out of steam as the long-end was weighed down by upcoming supply this week. 10-Year Yields ran to as high as 1.73 percent then slid to as low as 1.58 percent, before finishing at 1.66 percent on extremely heavy flow and clearly volatile conditions. Spanish 10-Year borrowing costs, meanwhile, slipped to a 5-Month low at 5.63 percent

US equity sector action was mixed, with 5 out of 10 industries posting upside in the range of 0.6 to 2.0 percent. Materials, however, rallied sharply. Volume in shares of Alcoa ($9.10, +3.9%), BHP Billiton ($67.70, +3.8%), Peabody Energy ($23.71, +10.8%), Rio Tinto ($48.64, +6.8%) and US Steel ($20.89, +8.8%) was nearly double its 30-Day average. Meanwhile, flow in Cliffs Natural Resources ($39.91, +14.5%) was 3 times its 30-Day average as Iron ore contracts for the first quarter of 2013 rose as much as 8 percent to $105/metric ton, or the most in 5 months.

Financials also finished higher, with the Major Banks – Bank of America ($8.80, +5.4%), Citigroup ($32.07, +3.1%), Goldman Sachs ($116.33, +2.5%), JPMorgan Chase ($39.30, +1.6%), Morgan Stanley ($17.08, +5.1%) – all supported.

Dow components Kraft ($39.99, -5.5%) and Intel ($24.19, -3.6%) fell as they warned of weaker-than-expected profits.

Glencore (378.05p, -3.6%) raised its bid for Xstrata (1014p, +3.6%) by 9 percent to overcome opposition from holders.