Global Market Report 16 July 2012

Financial stocks led a market surge after better-than-expected quarterly results from JP Morgan Chase boosted enthusiasm about earnings season and jolted the Dow from its longest slide in almost two months.

The Dow Jones Industrial Average gained 203.82 points, or 1.6%, to 12,777.09. The Standard & Poor's 500-stock index advanced 22.01 points, or 1.7%, to 1,356.77. Both benchmarks eked out weekly gains amid a late-session advance, and each rose for the first time in seven sessions.

JP Morgan rose 6% to sit atop the Dow's leaderboard after the bank reported second-quarter earnings fell from a year ago, but results exceeded expectations. Investors were watching to gauge the impact of soured outsize trading bets, which the company reported to be $4.4 billion in the second quarter.

Financial-sector stocks led all 10 of the S&P 500's sectors higher, with strong earnings by Wells Fargo lending support for the rally. Wells climbed 3.2% after the bank posted a 17% rise in second-quarter profit, as income in the bank's mortgage-banking business rose.

Fellow Dow component Bank of America rose sharply, while Citigroup, Goldman Sachs Group and Morgan Stanley also gained ground.

The Nasdaq Composite Index tacked on 42.28 points, or 1.5%, to 2,908.47. Still, the technology-oriented benchmark shed 1% over the past five sessions, snapping its streak of five straight weekly gains.

Lexmark International dropped 16% after the maker of printing and imaging products lowered its outlook for second-quarter earnings, citing weaker-than-anticipated demand, particularly in Europe. Rival Hewlett-Packard fell 1.9% and was the only Dow component to lose ground.

Investors shrugged off July's preliminary reading for the Thomson Reuters/University of Michigan consumer-sentiment index, which was lower than expected. In other US economic news, wholesale prices in June rose for the first time in four months, exceeding expectations, as rising prices for light trucks and food more than offset falling energy costs.

Earlier, investors had looked to China for a reading on second-quarter growth. While the gross domestic product of the world's second-largest economy decelerated to 7.6%, the slowest pace since 2009, the reading matched expectations, easing pressure across global markets.

Friday's reading on China's economy also supplied fodder to those looking for global central banks to contribute additional stimulus measures in order to shore up growth.

In US corporate news, Bridgepoint Education fell 25% after the company, which operates Ashford University and University of the Rockies, said Ashford is being monitored by a higher education commission to confirm that the university meets criteria for accreditation.

Cytec Industries rose 3.9% after the chemical and material technology firm predicted earnings well above analyst expectations for the second quarter.

Despite losing some ground on Friday, the US Treasurys market booked its third-straight weekly rally as investors fretted about the health of the global economy, pushing yields toward the brink of new lows. At 7:45 AM (AEST), the 10-year Treasury note yield was 1.49% and the 5-year yield was 0.62%.

The euro rose off of a two-year low against the US dollar, snapping a three-day losing streak, while the Australian dollar rallied as Chinese growth met expectations. The UK pound was also stronger against major currencies after the Bank of England announced the launch of a new lending scheme that would offer cheaper loans to households and businesses.

European stocks jumped and broke a two-day losing streak on Friday as resource shares climbed after China's economic-growth rate met market expectations and as telecoms rallied on a sector upgrade.

The Stoxx Europe 600 index jumped 1.3% to 256.26, following two sessions mired in the red as investors worried about global growth prospects. The benchmark extended gains after a positive open on Wall Street.

Among notable decliners, Peugeot SA tumbled 7.7%. Moody's Investors Service placed the French auto manufacturer's Ba1 credit rating under review for a downgrade. In addition, Citigroup downgraded the European auto sector to neutral from overweight.

Energy shares gained ground as oil prices rose following the Chinese growth data.

BP PLC added 0.7% and BG Group PLC gained 1.3% in London. The FTSE 100 index rose 1% to 5,666.13 and closed 0.1% higher for the week.

A successful Italian auction further helped steer stock markets into positive territory. The government managed to sell 3.5 billion euros of new 3-year bonds at lower borrowing costs compared with a sale in June.

In the secondary markets, yields were rising, however, in the wake of Moody's cutting the government's bond rating to Baa2 from A3 with a negative outlook.

On the equities side, Italy's FTSE MIB index gained 1% to 13,714.68, but shed 0.1% for the week.

Telecom Italia SpA rallied 4.6% after analysts lifted its rating on the telecom sector to neutral from underweight.

In Paris, France Telecom surged 5.6% and media and telecom firm Vivendi SA rose 3.5%, helping lift the CAC 40 index 1.5% to 3,180.81. The index closed the week with a 0.4% gain.

Germany's Deutsche Telekom AG jumped 5.7%, posting the biggest gain in the country's benchmark index, as analysts lifted its rating to neutral from underperform. The DAX 30 index added 2.2% to 6,557.10 in Frankfurt and was 2.3% higher for the week.

Asian stocks climbed on Friday as China reported second-quarter growth in line with expectations, dousing fears of a sharper-than-expected slowdown in the region's largest economy.

China's economy grew 7.6% in the April-June period, its slowest expansion since the first quarter of 2009, though the rise matched the median estimate of 15 economists polled earlier by Dow Jones Newswires.

Stocks in Hong Kong gained on the data, suggesting that much of the bad news was already priced in. The Hang Seng Index was 0.4% higher at 19,092.63, led by commodity stocks. China Coal Energy added 3.6% and Aluminum Corp of China rose 2%.

The Hang Seng China Enterprises Index, which tracks Chinese companies listed in Hong Kong, gained 0.8% to 9,237.04. The Shanghai Composite was little moved by the growth data, finishing flat at 2,185.90.

South Korea's Kospi climbed 1.5% to 1,812.89. Japan's Nikkei was up just 0.05% at 8,724.12, weighed down by a strengthened yen, but it was still enough for the benchmark to break a six-session losing streak.

The China growth figures brought a positive end to a week that was generally characterized by persistent selling, as other data from the country damaged sentiment. Lower inflation was taken as a sign that the economy was slowing, and weak import growth as a signal that domestic demand is weakening.

Japan's Nikkei finished down 3.3% for the week, while Hong Kong's Hang Seng Index was 3.6% lower.

In company news, Dentsu was the worst performer on the Nikkei, falling 7%, as investors reacted badly to an announcement made late on Thursday that the advertising agency has agreed to buy UK media firm Aegis Group for $4.91 billion to create Asia's largest media group.

In Hong Kong, the city's largest real-estate developer, Sun Hung Kai Properties, was suspended from trading as news came out that Co-Chairmen Thomas and Raymond Kwok had been charged in connection with a high profile bribery investigation alongside former senior government official Rafael Hui.

Belle International Holdings was the best performer on the Hang Seng Index, climbing 4% after it posted same-store-sales growth of 10.5% for its footwear business and 5% for its sportswear business for the second quarter.

Base metals closed higher on the London Metal Exchange on Friday, gaining in line with equities and the euro.

Crude-oil futures rose following news the Obama administration had expanded sanctions on Iran.

Gold stayed within a tight range after China's second-quarter growth report and a stronger euro prompted a morning rally.