Risk Appetite Seen Returning As Geopolitical Fears Recede

(RTTNews) - The major U.S. index futures are pointing to a notably higher opening on Monday, with sentiment getting a solid lift from hopes of seeing mitigation of geopolitical crises. With political leaders in Europe showing resolve to settle the crisis in Ukraine, fears of a backlash is slowly receding Moreover, recent spate of lukewarm data points have cemented expectations that global central banks will not act in haste to normalize rates. The housing market data due to be released shortly after the markets open may also have an impact on the markets.

U.S. stocks moved mostly higher in the week ended August 15th, as geopolitical tensions remained largely under control.

Last Monday, with things turning quiet on the geopolitical front, the major averages ended higher, although off the highs of the session. The absence of any major catalysts amid the ongoing geopolitical worries led some traders to take profits on Tuesday, and consequently, the major averages closed modestly lower.

Soft data and an alleviation of geopolitical worries led to a strong rebound by Wall Street stocks on Wednesday. Stocks continued to benefit from twin expectations of subsiding geopolitical tensions and monetary policy remaining benign, with the major averages advancing moderately on Thursday. Amid the release of tame producer price inflation data and weak consumer sentiment data on Friday, the major averages went about in a lackluster manner before closing narrowly mixed.

For the week ended August 15th, the Dow Industrials added 0.66 percent, while the S&P 500 Index and the Nasdaq Composite gained 1.22 percent and 2.15 percent, respectively.

Among the sector indexes, the NYSE Arca Biotechnology Index rallied 4.51 percent for the week, and the Philadelphia Semiconductor Index and the NYSE Arca Airline Index added 3.03 percent and 3.58 percent, respectively. The Dow Jones Transportation Average ended up 2.12 percent, while the Philadelphia Oil Service Index slid 1.50 percent.

Commodity, Currency Markets

Crude oil futures are receding $0.11 to $97.24 a barrel after declining $0.30 or 0.31 percent to $97.35 a barrel in the week ended August 15th.

Last Monday, oil extended its gains amid an increase in risk appetite, but the commodity declined moderately on Tuesday as risk appetite mitigated. Notwithstanding soft U.S. retail sales data, oil rose modestly on Wednesday amid the release of the weekly petroleum status report.

The commodity tumbled to a 7-month low on Thursday by virtue of its over $2-a-barrel slump amid the release of weak data. However, oil clawed back most of its losses on Friday before ending the week modestly lower.

Gold futures, which declined $4.80 or 0.37 percent to $1,306.20 in the previous week, are currently slipping $0.70 to $1,305.50 an ounce.

On the currency front, the U.S. dollar rose in the week ended August 15th, with the greenback adding 0.31 percent against the yen before ending the week at 102.36 yen. The buck also gained 0.07 percent against the euro over the week to $1.3401, as weak eurozone GDP data pressured the common currency on stimulus hopes.

The U.S. dollar is currently trading at 102.53 yen and is valued at $1.3385 versus the euro.

Asia

The Asian markets moved about in a lackluster manner amid a lack of any major domestic catalysts. The Japanese markets rose marginally, and the Chinese, Australian, Indian and Indonesian markets also advanced, while the rest of the major markets moved mostly to the downside.

Japan's Nikkei 225 average went about in a tentative manner, moving back and forth across the unchanged line before closing up 4.26 points or 0.03 percent at 15,323.

Chugai Pharma rallied over 15 percent in reaction to reports that Roche is seeking to buy out the 40 percent stake it does not already own in the Japanese company. Construction, real estate, brewery, oil, mining and utility stocks gained ground, while export stocks moved mostly to the downside.

Australia's All Ordinaries opened higher and saw a sharp spike in early trading. After giving back some of its gains over the course of the morning, stocks embarked on a steady line for the remainder of the session before closing up 21 points or 0.38 percent at 5,581. The market witnessed broad based strength.

Hong Kong's Hang Seng Index, which spent better part of the session below the unchanged line, ended up merely 0.52 points at 24,956. China's Shanghai Composite Index closed 12.73 points or 0.57 percent higher at 2,240.

On the economic front, Thailand averted a recession, as the nation's GDP rose 0.4 percent year-over-year in the second quarter after contracting by 0.5 percent, as consumer spending rebounded and external demand was robust.

China's National Statistical Office reported that new home prices in most Chinese cities declined in July compared to the previous month. Annually, 3 out of the 70 cities surveyed reported house price declines.

A Chinese Ministry of Commerce report showed that foreign direct investment into China fell 16.95 percent year-over-year to $7.81 billion in June following a 0.2 percent increase in June.

A report released by the Australian Bureau of Statistics showed that new motor vehicle sales fell 1.3 percent month-over-month in July following a 1.7 percent increase in June.

Europe

European stocks opened notably higher and are seen solidly in positive territory amid easing geopolitical tensions and very little activity on the domestic economic and corporate fronts.

Property tracking website Rightmove reported that the average asking price for a house in the U.K. was down 2.9 percent month-over-month in August following a 0.8 percent drop in July. Annually, the price growth slowed to 5.3 percent from 6.5 percent.

A report released by Eurostat showed that the euro area's trade surplus was at 16.8 billion euros in June, wider than May's surplus of 15.4 billion euros and the year-ago's surplus of 15.7 billion euros.

U.S. Economic Reports

Housing data and the FOMC minutes are among the major economic events scheduled for the unfolding week. The focus of the week is likely to be on the Commerce Department's new home sales for July, the National Association of Realtors' existing home sales report for July, the results of the National Association of Home Builders' housing market index for August, the minutes of the July FOMC meeting, the jobless claims data, the results of the Philadelphia Federal Reserve's manufacturing survey for August and flash estimate of Markit's manufacturing survey for August.

The Labor Department's consumer price inflation report for July, the Conference Board's leading economic indicators index for July and announcements concerning treasury auctions of 2-year, 5-year and 7-year notes round up the economic events of the week.

The National Association of Home Builders is scheduled to release the results of its homebuilder confidence survey for August at 10 am ET. Economists expect the housing market index to remain unchanged at 53.

The housing market index rose to 53 in July from 49 in June, exceeding expectations. The index was back up above the '50' cut-off mark after five months. The futures sales expectations index rose by 6 points and the present sales conditions index was up 4 points. The index measuring prospective buyer traffic climbed 3 points, although it remains at a depressed level of 39.

Stocks in Focus

Biogen Idec (BIIB) said the FDA has approved its multiple sclerosis treatment PLEGRIDY. The company also noted that the European Commission has recently approved the treatment.

Valeant Pharma (VRX) said it has extended the expiration of its exchange offer to acquire all outstanding shares of Allergan (AGN) to 5 pm ET on December 31, 2014 from the previous deadline of August 15, 2014.

IBM (IBM) announced that it has received the U.S. government's regulatory approval for its impending $2.3 billion sale of its x86-based server business to Lenovo.

Logitech (LOGI) said it has been granted an exception by the Nasdaq, extending the deadline to October 15, 2015 for complying with listing rule with respect to filing its 10-Q and 10-K following a compliance plan submitted by the company.