Published On: Mon, Oct 22nd, 2012

United States Releases Positive Housing Data, Stocks Rise

Stock markets in Asia gained during trading on Thursday following stronger than expected data from the United States. The recently released United States housing report showed that the world’s largest economy is gradually shaking off its deep recession. The Commerce Department stated that there were more new apartments and single-family houses made than at any point over the last four years. According to estimates, new housing rose to an annual rate of 872,000 during the month of September. Since the housing bust started the recession, growth in this key sector is assumed to be a sign that the economic recovery is beginning in the United States.

Data from China also raises expectations that the second largest economy is throwing off its temporary economic slowdown. Retail sales improved in the third quarter and growth was at 7.4 percent. Second quarter growth was at 7.6 percent, but the data still indicates that the temporary slowdown is declining gently. Industrial production increased by a rate of 9.2 percent for the month of September. Most analysts believe that the Chinese economy has fallen its farthest and the fourth quarter will show even better results.

After the data was released from the United States, Japan’s Nikkei 225 index gained by 2 percent to reach 8,982.31. The Hang Seng in Hong Kong also rose by 0.6 percent to reach 21,546.05. Australia’s S&P/ASX 200 gained 0.9 percent to reach 4,567.  Meanwhile, the South Korean Kospi rose a mere 0.1 percent to 1,956.70.

The largest gainers for the day by far were in the heavy industrial sector. Hitachi Construction Machinery rose 3 percent on the Japanese Nikkei 225 while the South Korean Hyundai Heavy Industries rose 3.3 percent. In Japan, Komatsu Limited also gained 3.6 percent. Benchmarks for the region mostly gained except for Taiwan. In mainland China, Singapore, Indonesia and Thailand, benchmarks rose across the board.

Release of the data from the United States and China impacted other shares around the world. Commodity prices generally rose as investors felt renewed expectations for export growth. The world’s largest mining company, the Australian BHP Billiton Limited, rose 3.3 percent while OZ Minerals gained 5.5 percent. Rio Tinto Limited also advanced 4.7 percent during the trading session.

Dow Jones Gains

In addition to US housing data, investors are hoping that Spain will finally resolve its debt crisis. On Thursday, leaders in the European Union will be meeting in Brussels. The meeting is expected to cover potential solutions to the debt crisis. Spain has been reluctant to initiate a formal bailout since any help would most likely be coupled with austerity measures.

With positive economic data and news of a meeting in Europe, the Dow Jones industrial average advanced by 0.1 percent. By the end of Wednesday’s session, it closed at 13,557. The Nasdaq composite index also gained by 0.1 percent to 3,104.12. After rising 0.4 percent, the Standard & Poor’s 500 index closed out Wednesday’s session at 1,460.91.

On the New York Mercantile Exchange, oil for November delivery rose by two cents to $92.14 per barrel. Commodities rose overall as investors see signs that a stable expansion may be starting. In London, copper gained by 0.2 percent to a price of $8,238.75 per metric ton. Brent Crude in the United Kingdom also gained by 0.3 percent to reach $113.57 per barrel. At the same time, Goldman Sachs group Incorporated lowered its forecasts for Brent Oil for 2013 from $130 to $110. While zinc rose by 0.7 percent, prices for wheat in Chicago gained by 0.5 percent to reach $8.61 a bushel.

During the trading session, the dollar gained to 79.13 yen from 78.97 yen. Europe’s currency dropped versus the United States dollar to $1.3097 from $1.3123.

Euro Stoxx Rises

By 7:15 AM in London, the Euro Stoxx 50 Index futures were on the rise. The MSCI Asia Pacific Index had gained 0.9 percent while the Japanese yen dropped for the sixth consecutive day. It dropped 0.3 percent versus the dollar to 79.15. Against the euro, the Japanese yen slid 0.1 percent to 103.71. Meanwhile, Standard & Poor’s GSCI Index rose 0.2 percent for a selection of 24 raw materials. In Tokyo, rubber gained by 1.6 percent.

United States Treasuries remained mostly unchanged. Reports for initial applications for unemployment benefits will most likely show that claims increased to 365,000 from the rate of 339,000 in the preceding week. With unemployment reports possibly growing and housing data reigniting, ten-year yields remained at 1.81 percent.

Among other events, tomorrow will be the 25th anniversary of Black Monday. Twenty-five years ago, the stock market suffered the largest equity decline for one day that has ever occurred in history.

ASX200 Stocks Manipulated?

Traders suspect that shares on the ASX200 may have been manipulated. Initial trades pushed shares in ANZ Bank up 6.5 percent to $1.67. Share prices rose to $27.63 at the start of the day before dropping back to $26.16. Within a few short minutes, one-third of the average daily number of trades took place.

When the Australian Securities Investment Commission was asked about the questionable trades, they replied that they were looking into the issue. Although there is not a formal investigation occurring, initial reports make it appear that the price rose due to buying orders. The monitoring commission believes that nothing is inherently wrong with the trading system.

Some of the affected stocks include ANZ Bank, AGL, Brambles, AMP and Aristocrat. The increase in trades was large enough that it managed to change the price of options. After the trades, the XJO Index gained to 4606 before dropping back to 4575. Some traders noted that the trades were especially suspicious since many of the options expired at the end of the trading session. Whether an algorithm went haywire or the trades were deliberately done, the Australian Securities Investment Commission is expected to look into the problem. Many brokers complained about the oversight of markets in Australia. Responsibilities have switched from the ASX to the ASIC. The new oversight board has been called unresponsive by investors since the initial rise in trades did not cause any reaction.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.