Oil's Rally, Stimulus Hopes And Deal News May Support Markets

(RTTNews) - The major U.S. index futures are pointing to a higher opening on Monday, as some M&A deals and oil's extended gains supporting sentiment. A domestic economic report released a short while ago showed that the manufacturing sector in the New York region unexpectedly contracted in August. Data released from Japan also showed stagnation in economic activity in the June quarter, all portending to slackening global growth. This should reignite stimulus hopes. That said, valuation concerns could limit any meaningful upside.

U.S. stocks extended their gains into the week ended August 12th, although the gains were much more modest. The Dow Industrials and the S&P 500 Index ended the week slightly off the all time highs at which they closed on Thursday, while the Nasdaq Composite closed at a fresh record high. Valuation concerns, oil's volatility, some soft domestic data and some positive retail earnings reports all played out in the minds of traders.

Last Monday, the major averages fell modestly, as the overbought levels and the Chinese trade data exerted downward pressure on the markets. However, helped by tame Chinese inflation data that triggered further stimulus infusion by China, the averages ended higher on Tuesday.

Hit by valuation concerns, accentuated by the slide in oil prices, the averages declined on Wednesday. Thanks to some upbeat retail earnings, the averages ended moderately higher on Thursday, with the averages all ending at record highs. The see-sawing mood continued, with the major averages reversing course on Friday amid the release of some soft domestic data.

For the week ended August 12th, the Dow Industrials rose 32.94 points or 0.18 percent to 18,577, the S&P 500 Index added 1.18 points or 0.05 percent to 2,184 and the Nasdaq Composite gained 11.77 points or 0.23 percent before closing at 5,233.

Among the sectors, oil, gold ans computer hardware stocks gained ground but biotechnology stocks fell steeply. Basic material and banking stocks also saw weakness.

Currency, Commodity Markets 

Crude oil futures are rising $0.39 to $44.88 a barrel after ending the week ended August 12th up $2.69 or 6.44 percent to $44.49 a barrel. Oil rallied strongly in the second half of the week amid fears of tightening of supplies.

Gold futures, which added $2.69 or 0.12 percent to $1,343.20 an ounce in the previous week, are currently slipping $1.40 to $1,342 an ounce.

Among currencies, the U.S. dollar weakened against the yen and the euro in the week ended August 12th, with the greenback slipping 0.51 percent against the yen to 101.30 yen. The dollar rose 0.69 percent against the euro before ending the week at $1.1162. The dollar's weakness reflected reaction to some weak U.S. data released last week, including retail sales and consumer sentiment.

The U.S. dollar is currently trading at 101.08 yen and is valued at $1.1173 versus the euro.   Asia    The Asian markets ended on a mixed note on Monday amid the release of weak Japanese GDP data. The lackluster closing by Wall Street stocks last Friday also impacted sentiment even as oil's gains and talks concerning the linkage of the Shenzhen exchange with that of the Hong Kong exchange generated some strength.

The Indian and the South Korean markets remain closed for public holidays.

The Japanese Cabinet Office released the nation's June quarter GDP data, which showed that the economy stagnated on a quarterly basis, belying expectations for a 0.2 percent expansion. The annualized GDP rose 0.2 percent, below expectations for 0.7 percent growth.

In a story of contrast, Thailand's GDP rose a more than expected 3.5 percent year-over-year in the second quarter, faster than the 3.2 percent increase seen in the first quarter and also exceeding the 3.3 percent growth forecast by economists.

A separate government report showed that industrial production in Japan rebounded by more than initially estimated in June. Revised estimates showed a 2.3 percent increase in output compared to the 1.9 percent increase estimated earlier. This follows a 2.6 percent drop in May.

The yen was firmer in the Asian session. After a weak start, Japan's Nikkei 225 average, trimmed its losses and popped into the positive territory by early afternoon trading. After volatile bout of back and forth movements in the mid-session, the index retreated yet again and moved roughly sideways. The index ended down 50.36 points or 0.30 percent at 16,870 after rising over 4 percent last week.

In Japan, construction, retail, paper, chemical, resource and most export, finance and utility stocks came under selling pressure. On the other hand, some telecom and food stocks gained ground.

Australia's All Ordinaries started on a weak note but recouped its losses by late morning trading. The average spent the rest of the session in positive territory, ending with a gain of 7.50 points or 0.13 percent at 5,634.

Financial, consumer and real estate stocks rose strongly in Australia, while the resource space saw weakness.

Hong Kong's Hang Seng ended up165.60 points or 073 percent at 22,933 and China, which is the best performing market of the region, saw its index climb 74.53 points or 2.44 percent to 3,125. The key gauge of the Chinese market rose to a 7-month high amid market speculation that announcement concerning the linking of the Shenzhen Exchange and Hong Kong will soon be announced.

Europe 

European stocks opened higher, ignoring the mixed lead from Asia and the insipid Japanese GDP numbers. The buoyancy in the commodity space offered support to the markets in the region. The averages are currently firmly in the green.

The Euro Stoxx 50, which is a compilation of blue chip stocks across the eurozone, is currently up 004 percent, the French CAC 40 is also up 0.29 percent, the German DAX Index is advancing 0.15 percent and the U.K. FTSE 100 Index is moving up 0.08 percent.

On the economic front, the results of a survey by property tracking website Rightmove showed that the average asking price of a house in the U.K. Fell 1.2 percent month-over-month in August following a 0.9 percent drop in July. Annually, the price growth slowed to 4.1 percent from 4.5 percent.

Among European stocks, auto and resource stocks are seeing strength but chemical and financial stocks are retreating.

In major corporate news, G4S announced the appointment of Petrofac executive Tim Weller as its CFO, effective October 1st. Bovis Homes reported higher first half profits and revenues and also said it sees strong trading through the rest of the year. Hennes & Mauritz reported a 10 percent year-over-year increase in its sales in July compared to a 8 percent increase in the previous month. The stock is up over 2 percent.   U.S. Economic Reports 

Manufacturing and housing readings, the FOMC minutes and some Fed speeches are among the market moving economic reports/events of the unfolding week. Traders are likely to closely focus on the results of the New York Federal Reserve's and the Philadelphia Federal Reserve's manufacturing surveys for August, due on Monday and Thursday, respectively, the Federal Reserve's industrial production report for July, due on Tuesday, the weekly jobless claims data, the FOMC minutes and several Fed speeches.

Also in the spotlight will be the National Association of Home Builders' housing market survey for August, the Commerce Department's housing starts report for July and the Labor Department's consumer prices report for July. The Conference Board's leading economic indicators index for July and announcements concerning the Treasury auctions of 2-year, 5-year and 7-year notes round up the economic events of the week.

 Manufacturing activity in the New York region unexpectedly contracted in the month of August, according to a report released by the Federal Reserve Bank of New York.

The New York Fed said its general business conditions index fell to a negative 4.21 in August from a positive 0.55 in July. A negative reading indicates a contraction in New York manufacturing activity. The decline by the index came as a surprise to economists, who had expected the index to climb to a positive 2.50. At 10 am ET, the National Association of Home Builders is due to release the results of its homebuilder confidence survey for August. The housing market index is expected to rise 1 point to 60.

The housing market index unexpectedly fell by a point to 59 in July. Economists expected the index to rise to 61 from 60 in June. The present sales conditions index fell a point to 64, the future sales expectations index declined 3 points to 66 and the index measuring prospective buyer traffic fell 1 point to 45. 

 Stocks in Focus 

Sysco (SYY) reported better than expected fourth adjusted earnings per share and its revenues were about in line.

Reports suggest that Honeywell (HON) is close to striking a deal to buy JDA Software (JDA) for around $3 billion.

Genesee & Wyoming (GWR) announced that it has agreed to acquire Providence and Worcester Railroad Company (PWX) for $25.00 per share, or approximately $126 million. 

Mid-America Apartment Communities (MAA) and Post Properties Inc. (PPS) announced that they have entered into a definitive merger agreement under which Post Properties, Inc. will merge with and into MAA.