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The equity markets globally faced down negative economics and profit outlooks, as well as an big increase in jobless activity in the U.S. to eventually close in the red. Asian markets started and closed in the negative, but Europe and the U.S. held ground after a very shaky pre-session period of trade. The end result is a defining of where the markets are now, compared to where they were in the same circumstances over the last 18 months.
The trade action is stable, and price momentum is holding where it starts, and that may draw the attention of the short-sellers. The S&P regained 1.0% of the 1.7% lost on Wednesday, and pushed back to hold most of this year’s percentage gains.
The NYSE posted gains that averaged 1.0%. The DOW finished at 8331 after a gain of 46 points (0.5%), while the S&P traded at 893, higher by 1.0%, and the technology-heavy NASDAQ traded at the 1689 area, after moving up by 25 points (1.5%).
Since investors are speculating the worst is over for the financials, the banking sector has posted strong gains over the last few trading sessions. However, not all European banks rallied this morning. The U.K. bank, Lloyds, dropped almost 10% this morning, after saying it will record a pre-tax loss this year. On the other hand, Barclays rose 4%, after announcing a profitable first quarter. On the German Dax, the auto industry posted significant gains after the merger of VW and Porsche was announced.
The European markets were mixed in trade on Thursday, and unable to spark any positive momentum. The German Dax closed at 4804 (-1.5%), the London FTSE closed at 4398 (+0.1%), and the French Cac 40 stood at 3251 with a loss of 1.4%.
A number of reports suggested that the global recovery might not come soon, or as strong as the equity markets expected. First, two different reports from China and Japan suggest that global trade is still in a decline, even though the pace has slowed. Both countries still reported declines in month over month exports, which suggest that demand is still lagging.
Overnight, the Japanese Nikkei fell 246.76 points (2.64%) to 9,093.70. The Australian S&P/Asx slipped 132.40 points (3.44%) to 3,723.40. The U.K. Ftse declined 22.50 points (0.52%) to 4,308.87, while the German Dax shed 47.46 points (1.00%) to 4,680.15
In trade on Thursday the XLF, the financial sector ETF, gained 0.38 points (3.3%) to trade at 11.77, and added a positive period of yearly trade, in spite of the dark cloud still hanging over the market regarding the Stress Test results . The sector moved higher on low volume; 174m ETF's changed hands, above the ten day average of 212m. Without a solid period of trade from the banking sector the main equity markets are going to struggle to hold the higher ground, and although lower in trade on Thursday recent moves have increased the Financial Sector value dramatically from the test of $6 in March.
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