|Globe Investor | October 31, 2014|
At midday: Stocks hang on to big gains but gold looks sickly
Dow Jones hits record high after Bank of Japan makes surprisingly aggressive stimulus move
U.S. and Canadian stock markets at midday were holding onto most of their gains from this morning, when they jolted higher in reaction to unexpected news that the Bank of Japan is aggressively boosting stimulus measures. The gold sector of the TSX, however, was taking a severe beating as precious metals saw a fresh onslaught of selling amid a stronger greenback and a healthy rise in the appetite for riskier assets.
At just past noon ET, the S&P 500 was up 19 points, or nearly 1 per cent, at 2,013 after earlier rising as high as 2,015 and surpassing its previous record closing high in early September. The Dow Jones industrial average was up 166 points, or nearly 1 per cent as well, at 17,361 after earlier hitting an all-time intraday high of 17,372. The Nasdaq was up 55 points, or 1.2 per cent, at 4,621.
In Canada, the S&P/TSX composite index was up 123 points, or nearly 0.9 per cent, at 14,582. The TSX is still far below its record high of 15,685.13 from early September, weighed down by the slide in commodity prices in the weeks that followed.
The December gold futures contract in New York around noon was down $33.20, or 2.7 per cent, at $1,165 (U.S.) an ounce. Bullion is in precarious shape from a technical standpoint and is being further undermined by the triggering of automated sell orders at key chart levels. And crude oil was also suffering at the hands of the rallying U.S. dollar, with the December WTI futures contract in New York down about 1 per cent, hovering near the $80 (U.S.) per barrel level.
Not surprisingly, the materials sector of the TSX - which includes gold stocks - was down significant, off by 2.4 per cent at midday. But other TSX sectors were all higher - even energy with a 0.3 per cent gain amid a bit of bargain hunting and a rally in natural gas prices in New York. Information technology and industrials were leading advancers.
The 40-company Standard & Poor’s/TSX Global Gold Sector Index this morning fell as much as 6.5 per cent to its lowest intraday level since December 2001. Barrick Gold dropped as much as 6.9 per cent to $12.80 on the TSX, the lowest intraday since 1991. Detour Gold declined as much as 17 per cent, while Lake Shore Gold Corp. plunged 15 per cent.
The Canadian dollar plunged 0.91 of a cent to 88.41 cents US as Statistics Canada reported that gross domestic product dipped 0.1 per cent during August against the flat showing that economists had expected.
Japan's central bank expanded its Japanese government bond purchases to the equivalent of about 80 trillion yen, or $727-billion, a year, a rise of 30 trillion yen from the previous pace. It also plans to triple its purchase of exchange-traded funds and real estate investment trusts.
Separately, Japan's public pension fund increased its target for holdings of foreign shares to 25 per cent from 12 per cent of its portfolio. The boost in its bond buying program was only predicted by three of 32 analysts that had been surveyed by Bloomberg News, so the action has taken most by surprise.
The bank is concerned about weak inflationary trends preventing further growth in its economy. In a statement, it said that "if the current downward pressure on prices remains ... there is a risk that conversion of deflationary mindset, which has so far been progressing steadily, might be delayed.”
Prior to the action, Japan released numbers showing that inflation fell to its lowest level in nearly a year, while the measure of job creation worsened for the first time in more than three years. While the U.S. economy has been showing promising growth trends of late, the same can't be said of other key global economies, including Japan.
There's now optimism that Japan's stimulus measures will help bolster global growth at a time when the U.S. Federal Reserve has just pulled the plug on its own quantitative easing measures.
There were also inflation numbers released out of the euro zone this morning. Consumer prices rose by 0.4 per cent from a year ago in October. That was line with market expectations, and was a slight rise from September's 0.3 per cent rise.
Among key stock movers in the U.S. was LinkedIn Corp, gaining 13 per cent after third-quarter sales exceeded estimates. GoPro Inc. jumped 17 per cent after its prediction for fourth-quarter profit surpassed analysts’ projections. Starbucks Corp. fell 1.8 per cent after posting disappointing quarterly revenue.
With files from wire services
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