RTTNews - The Hong Kong stock market on Wednesday put an emphatic end to the two-day losing streak that had cost it more than 600 points or 3.3 percent in the process. The Hang Seng Index regained the 18,700-point plateau, although investors are anticipating a modest retreat at the opening of trade on Thursday.
The global forecast for the Asian markets is mildly negative as stocks could see a bit of a correction following major gains in the previous session. Mixed economic data and corporate news does little to reinforce sentiment - although the auto stocks could be in focus after Chrysler finalized its deal with Fiat. Commodities also may provide support. The European markets ended sharply higher, while the U.S. markets ended slightly in the red - and the Asian bourses are tipped to follow the latter lead.
The Hang Seng finished sharply higher on Wednesday, thanks to major gains among the financials and the resource stocks. For the day, the index soared 727.17 points or 4.03 percent to close at 18,785.66 after trading between 18,258.16 and 18,789.85 on turnover of 83.53 billion Hong Kong dollars.
Among the gainers, HSBC rose 4.3 percent, while Bank of China gained 8.3 percent, ICBC jumped 5.9 percent, China Construction Bank added 5.3 percent, CNOOC rose 3.2 percent, Chalco jumped 8.8 percent and Hong Kong Exchanges gained 8 percent.
The lead from Wall Street is modestly negative as stocks showed a notable downturn following a strong start on Wednesday amid waning buying interest and disappointing results from a 10-year note auction. Nonetheless, the major averages were able to finish only slightly lower, as some traders picked up stocks at reduced prices later in the session.
The Treasury Department's auction of $19.0 billion worth of ten-year notes drew a higher than expected yield of 3.99 percent, raising concerns about the outlook for interest rates. At the same time, the bid-to-cover ratio, an indicator of demand, rose to 2.62 from 2.47 during the previous ten-year note auction in May. The bond market has been in focus recently, as traders have expressed concerns that interest rates have continued to rise despite the Federal Reserve's efforts to keep rates low through quantitative easing.
On the economic front, the Federal Reserve's Beige Book report indicated that conditions remained weak or deteriorated further during the period from mid-April through May. However, five of the twelve Fed districts noted a moderation in the downward trend, mitigating some market pessimism. While the Beige Book also said that contacts from several Fed districts indicated an improvement in their expectations, they do not see a substantial increase in economic activity through the end of the year.
Separately, a report from the Commerce Department showed that the U.S. trade deficit for the month of April came in modestly wider than in March, as the value of exports fell by more than the value of imports. The report showed that the trade deficit widened to $29.2 billion in April from a revised $28.5 billion in March. Economists had expected the deficit to widen to $29.0 billion from the $27.6 billion originally reported for the previous month.
In corporate news, the Supreme Court allowed the sale of Chrysler's assets to Italian automaker Fiat to move forward. In lifting a stay on the sale, the high court rejected a move by a group of plaintiffs, including three Indiana public pension organizations, to block the sale. Chrysler and Fiat have since closed their deal on Tuesday morning.
Meanwhile, the House Oversight and Government Reform Committee said it has subpoenaed the Federal Reserve for documents, including e-mails to and from Fed Chairman Ben Bernanke, to explore the genesis of Bank of America's December purchase of Merrill Lynch. On Thursday, the committee will host Ken Lewis, former Chief Executive Officer of Bank of America, as part of a growing investigation into whether government officials pressured the bank to withhold details about the deal from investors despite ballooning losses at the brokerage firm.
The major indices pared some of their losses late in the session but remained stuck in the red. The Dow closed down 24.04 points or 0.3 percent at 8,739.02, the NASDAQ closed down 7.05 points or 0.4 percent at 1,853.08 and the S&P 500 closed down 3.28 points or 0.3 percent at 939.15.
In economic news, China will on Thursday provide May data for urban fixed asset investment, imports, exports, trade balance and M2 money supply. FAI is forecast higher by 31 percent on year after the 30.5 percent jump in April. Imports are predicted to shed 22 percent after the 23 percent fall in the previous month, while exports are called lower by 23 percent after the 22.6 percent contraction, the trade balance is seen at a surplus of $14.9 billion after coming in at $13.14 billion a month earlier and M2 is projected higher by 25.9 percent on year after the 26 percent annual jump in April.
Also, consumer prices in China were down 1.4 percent on year in May, the National Bureau of Statistics said on Wednesday, falling for the fourth straight month. The data was roughly in line with analyst expectations for a 1.3 percent annual decline following the 1.5 percent fall on year in April. Food prices were down 0.6 percent on year, the data showed, while non-food prices fell 1.7 percent. Excluding food and energy, inflation was down 1.3 percent. On a monthly basis, inflation eased 0.3 percent.
Finally, the NBS also said the producer prices plummeted 7.2 percent on year - worse than forecasts that had called for a decline of 6.9 percent on year after the 6.6 percent annual decline in the previous month. Producer prices are unlikely to bounce back in the near future, the NBS said in a statement on its Web site, since a glut of industrial products is expected to persist in the short term. It was the sixth consecutive month of decline.
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