US equities rally: Morning market insights

US equities rallied overnight, sending the Dow Jones Industrial Average to its highest level since 2007 following improved US retail sales and a positive statement from the Federal Reserve.

In a good day for US banks, JP Morgan Chase (JPM:US) rose 7.03% to $US43.39 after announcing a 20% dividend increase and a $US15 billion share buyback. The Federal Reserve declared 15 of the 19 largest banks now have safe capital levels – even in a recession. The Bank of America (BAC:US) was up 6.26% to $US8.49.

Wall Street

On the New York Stock Exchange, the Dow Jones Industrial Average was up 1.68%, or 217.97 points, to 13177.70.  The S&P500 Index rose 1.81% or 24.86 points to 1395.95. The NASDAQ was up 1.88% to 3039.88 – its highest point since 2000.

West Texas Intermediate (WTI) oil was trading 0.35% up to US$106.71 a barrel.

Gold was down 0.33% to US $1694.20 an ounce on the good economic news.

The Australian dollar fell slightly as the greenback gained value against several world currencies during the bank rally.  One Australian dollar is buying $US1.0542 this morning.

Europe

UK and European indexes were all up over 1% overnight.

In London insurance and investment giant Prudential (PRU:LN) was the best performer (up 4.81% to 763 GB pence after its CEO threatened to move its head office to the United States to avoid new, heavier financial regulations imposed by the European Union. Prudential carries out 35% of its business in the US.

“The US is a reasonable place, with a reasonable solvency regime and we all want the EU to accept that,” CEO Tidjane Thiam told Bloomberg overnight. “If it doesn’t, then it will ask us to run our businesses in the US on a Solvency II basis, and I can tell you, fighting US competitors who don’t have to do that – we just won’t have a market. We won’t be able to sell any products at all.”

London’s FTSE 100 closed up 1.07% to 5955.91.

The German DAX rose 1.37% or 94.56 points to 6995.91.

The European blue-chip Stoxx50 index was up 1.66% or 41.85 points to 2556.82.

Federal Reserve statement

The Federal Open Market Committee made a positive statement on the US Labor market after the Federal Reserve meeting. “The unemployment rate has declined notably in recent months but remains elevated,” Bloomberg reports. “Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook.”

US banks pass test

The Federal Reserve says 15 of the 19 largest banks have safe capital levels –even in a recession. “It is night and day,” says Jason Goldberg, a senior analyst at Barclays Capital in New York. “In 2009, about half the banks failed the stress test. The industry’s capital position is higher today, and better quality. There is a lot less leverage.” The third-largest US bank, Citigroup, did not reach the Feds’ minimum requirements.