\n\tBy Greg Peel<\/p>\n
\n\tThe Dow rose 202 points or 1.6% while the S&P gained 1.6% to 1326 and the Nasdaq<\/span> added 2.2%.<\/p>\n \n\tWall Street was off to a flier last night on before-the-bell developments which included US earnings results and signs of positive moves in Europe.<\/p>\n \n\tEuropean officials are due to meet on Thursday night to discuss the best option for dealing with Greek debt and how the situation can be contained to ease the contagion fears that have spread all the way to Italy. Up to now, everyone had come around to the idea of a partial default on Greek debt – one which would imply the burden being shared by bondholders as well as eurozone<\/span> taxpayers – but the stumbling block had been the ECB<\/span>. The central bank's largely anachronistic president Jean-Claude Trichet<\/span> has maintained, as recently as last weekend, that if the ratings agencies call a partial default a default then the ECB<\/span> can't hold Greek debt as collateral.<\/p>\n \n\tBut blow me down if last night someone didn't see the sense in perhaps tweaking those rules. It must be a tough decision – should we head off the complete and total collapse of the European Union and the global financial markets which would potentially send the world into a severe and extended depression at the risk of upsetting a tired, old, increasingly irrelevant banker?<\/p>\n \n\tAustrian central bank chief and ECB<\/span> board member Ewald<\/span> Nowotny<\/span> last night suggested that perhaps a short-term partial default could be accommodated under the rules so to avoid outright default, which would otherwise be inevitable given Greece can no longer make its interest payments. At last, a light at the end of the tunnel.<\/p>\n \n\tWith that news the euro traded higher, and Europe was further appeased by strong demand for a Spanish sovereign bond auction held last night, albeit the interest rate was a lot more expensive than at the previous equivalent auction.<\/p>\n \n\tIBM (Dow) had already posted its solid result after the bell on Monday night, and in last night's trade it closed up 5.7%. Before the bell Coca-Cola (Dow) posted its result and provided a very strong “beat”, sending shares in the usually dour staple up 3%. IBM and Coke together represented a good deal of last night's move in the 30-stock average.<\/p>\n \n\tBank of America (Dow) didn't help. Both it and Goldman Sachs missed on their results, sending both down around 1%, but America's largest holder of non-agency mortgages – Wells Fargo – posted a very strong result which sent its shares rocketing 5.7%.<\/p>\n \n\tAmidst the excitement of earnings results, there was also good news on the housing front. Bad weather had delayed many housing projects before May but with the skies having cleared, May saw a 14.6% jump in housing starts to 629k<\/span> units when economists had forecast 570k<\/span> units.<\/p>\n \n\tBy lunch time the Dow was up 100 points, and then around 1.30pm<\/span> President Obama made an impromptu press statement. It appeared the “gang of six” which has been leading the debt ceiling\/budget cut negotiations had reached a level of resolution the president found workable. Concessions were made on both sides. For once it really did look like America could avoid a default of its own.<\/p>\n \n\tIt was always going to happen of course, particularly given mounting pressure from major US banks and corporates<\/span>, but even if the handshakes are made on this deal there remains one not insignificant stumbling block. The subsequent bill still has to be passed by the House.<\/p>\n \n\tWe are reminded of 2008, after the fall of Lehman, when a hastily prepared and brief bill proposing the TARP was put to the House. Knowing that they had the Administration by the you know whats<\/span>, every self-serving, parochial, popularity-seeking representative saw the chance to blackmail the government into providing home state rewards as a trade-off. After another week the brief TARP document had grown to hundreds of pages of conditions as global stock markets free fell in the meantime. Will we go through the same process again?<\/p>\n \n\tIf the risk trade was the winner across the markets last night, gold was the victim. Good news was always going to be a trigger for profit-taking and psychological levels like 1600 are good places to do so. Gold fell US$16.30 to US$1588.80\/oz. Silver dropped 4%.<\/p>\n \n\tBase metals have been waiting quietly for something to happen either way, and last night the dam broke to the upside. All metals were up 1.5-2.5%. Oil joined in, with Brent rising US$1.01 to US$117.06\/bbl<\/span> and West Texas US$1.57 to US$97.50\/bbl<\/span>. <\/p>\n \n\tThe US dollar was caught between all sorts of influences. The euro was stronger but the local debt resolution was positive and there was some movement out of the safe haven of the Swiss franc. The dollar index is down 0.3% to 75.13. But it's a lot more straightforward when it comes to the global risk proxy, and the Aussie has jumped 1.2% to US$1.0733.<\/p>\n \n\tThe SPI<\/span> Overnight rose 49 points or 1.1%.<\/p>\n \n\tAfter the bell it was the turn of tech heavyweights Apple and Yahoo to report, and on much better than expected sales of iThings<\/span> Apple shares are up over 5% in the after-market. Yahoo was unable to match the excitement, nor the stunning earlier result of competitor Google, and its shares are down 1.5%. Let's not forget though that despite not being a Dow stock, Apple is the second biggest company in the US by market cap after Exxon. So a big move for Apple means a big move for Wall Street.<\/p>\n \n\tA lot of confidence has been placed in the US earnings season, but it had seemed positive results may yet be overshadowed by pan-Atlantic debt issues. Have we turned a corner? It's all up to politicians in Europe and the US. <\/p>\n \n\t[Note: All paying members at FNArena<\/span> are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.]<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" Apparent resolution in Washington and a back-down from the ECB combined with strong US earnings to produce the best day for Wall Street in months. Dow up 202.<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[84],"tags":[90,23,21,29,24,41,91,22,46,26],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/58481"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=58481"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/58481\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=58481"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=58481"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=58481"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}