Traders are bracing for a volume surge Wednesday when US stock markets reopen after being shuttered for two days to deal with the devastating effects of Hurricane Sandy that triggered an unexpected shutdown on Wall Street.
An average of 3.5 billion shares have been changing hands everyday throughout much of the month, but traders say that could double Wednesday, which also happens to be the last trading day of the month, a time when traders and fund managers often square up their positions.
Meanwhile the US dollar weakened Tuesday over expectations that the damage wrought by Super storm Sandy will prompt the Federal Reserve to maintain its expansionary policies, robbing the greenback of its safe-haven status. The Bank of Japan’s announcement that it would expand its own asset purchase program proved insufficient to offset investors’ apprehension as Wall Street tries to recover from one of the biggest natural disasters in recent memory.
European stocks jumped the most in two weeks (see chart above) after better than expected corporate earnings results, led by the financial and energy sectors, lifted investors’ sentiment.
A resurgent US housing sector also added to the overall optimism.
Extending October’s gain to 1.2 percent, the pan-European Stoxx Europe 600 index advanced 0.9 percent Tuesday. Switzerland’s biggest lender UBS jumped 5.9 percent to hit a 15-month high after raising profitability targets. It further announced winding up its fixed-income business and said it would restructure its investment banking business in response to tougher economic and regulatory climate while announcing a Swiss franc 2.2 billion ($2.35 billion) loss for the third quarter.
Deutsche Bank, Germany’s largest lender, rallied 4.5 percent after reporting a three percent rise in third quarter profits, topping street estimates.
British oil group surged 4.2 percent, its biggest daily jump, after third quarter profits rose 7.8 percent to $5.4 billion, beating analysts’ expectations. The company raised dividend by 12.5 percent to nine cents a share.
Macro economic data was in focus in Europe and investors looked at Spain where initial data showed the economy shrank less than expected in the third quarter, with gross domestic product shrinking by 0.3 percent vs. an estimated 0.4 percent. Spanish lender Banco Santander rallied 2.2 percent, lifting the IBEX 35 index 1.4 percent.
Separately, a European Commission report showed economic confidence in the eurozone dropped to 84.5 in October from 85.2 in September, the lowest in more than three years.
Germany’s DAX 30 index added 1.1 percent in Frankfurt after the latest unemployment rate came in at 6.9 percent, meeting expectations. Bayer AG rose 1.7 percent after third quarter revenues jumped nearly 12 percent over the same period last year. The Pharma major also announced the acquisition of US vitamin maker Schiff Nutrition International Inc for about $1.2 billion. Insurance major Allianz SE picked up 2.5 percent after it raised operating profit guidance for the whole year.
The French CAC 40 index gained 1.5 percent after oil major Total SA put on 1.6 percent in Paris while the FTSE 100 index rose 1 percent in London, led by energy and resource firms.
Europe has been rebounding strongly trying to close out October with a bang. It remains to be seen if that momentum can be maintained once US markets come back online tomorrow. Much uncertainty about the elections is sure to put a lid on any advances, but in today’s Fed stimulated and manipulated market environment, you can never be sure.
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