Indonesia's Composite Index (IHSG), the main stock index of Indonesia, went back into negative territory on Wednesday (24/07) with all sectors closing in the red. Worst performing sectoral indices were construction, agriculture and the miscellaneous industry. This development was in line with the Asian region that showed mixed performances after HSBC's Chinese manufacturing PMI contracted. Stock indices in Europe and the United states, that both close hours after the IHSG ends its daily session, were more positive on Wednesday.
Wall Street started positive on Wednesday (24/07) due to increased earnings expectations of various companies, including Boeing and Ford. Boeing posted good results in the second quarter due to an increase in the number of delivered aircrafts in combination with lower production costs. The company surpassed analysts' expectations with earnings per share of USD $1.67. Ford posted good second quarter successes in China and the United States. In China, sales of the Focus-model rose 69 percent, while in the USA the Fusion-model rose to become the seventh best-selling car brand. Apple caused a significant upturn on Nasdaq. The technology group saw its profits decline in the second quarter, but the decline was less than analysts anticipated.
However, at the end of the day Wall Street's positive start was offset by weak results of Caterpillar and AT&T. The latter saw profits ease more than expected in Q2-2013, while sales growth was slow. Caterpillar, the world's leading manufacturer of construction and mining equipment, lowered its expectations for this year as sales of mining equipment has suffered from weaker demand. The Dow Jones Industrial Average fell 0.16 percent to 15,542.24, while Nasdaq gained 0.01 percent.
ING Private Banking believes that the dollar is the only safe haven for investors when other investment categories such as equities, commodities, bonds and currencies fall. Concerns about governments and central banks that may reduce their economic stimulus programs, have resulted in a 2.9 percent weakening of global shares in the past month. Furthermore, gold, copper and crude oil all fell about 2.9 percent and all types of bonds lost 1.1 percent. At the same time, many global currencies weakened against the US dollar. Under these circumstances the dollar may become very strong (if the interest rate remains at the current level and the United States will continue its economic recovery). The ING expects that capital flows to the USA will continue, regardless of the market scenario and risk sentiment. The only question is, according to ING, whether the capital will flow to the stock market or to sovereign debt. But in both scenarios, the dollar will rise further.
European stock indices were up on Wednesday (24/07) as investors responded enthusiastically to good quarterly results of companies and better than expected European and American industry data. Figures from research firm Markit showed that the Eurozone's industry unexpectedly showed small signs of growth in July. The firm also indicated stronger than expected growth of the US industry. A number of European companies released good corporate results. Volvo, the world's second-largest truck manufacturer, presented an operating profit that exceeded analysts' expectations. Airline EasyJet indicated that this year's operating profit will be substantially higher than in 2011/2012. Stoxx 500, an important blue-chip index in the Eurozone, rose 1.08 percent to 2,752.25 points.