While you were sleeping: Shares slip on oil

Tuesday 18th May 2010

Shares in Europe and the US slid along with oil - as well as other commodities - on mounting concern the European debt crisis would curb global economic growth.

Also weighing on the US equity market was a report that New York manufacturing slowed and that home improvement retailer Lowe’s Cos was forecasting earnings would be lower than expected.

All but one of 39 companies in the Standard & Poor’s 500 Index slumped as oil dipped below US$70 a barrel for the first time in three months, according to Bloomberg News data.

Among the most active were Lowe’s, Alcoa Inc, Caterpillar Inc and JPMorgan Chase & Co.

In late trading, the Dow Jones Industrial Average fell 0.62%, the Standard & Poor’s 500 Index declined 0.61% and the Nasdaq Composite slid 0.45%.

Manufacturing in the New York region expanded at a slower pace in May than forecast as sales cooled. The Federal Reserve Bank of New York’s general economic index fell to 19.1 from 31.9 in April, which was the second-highest level in four years.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’, rose 5.73% to 33.03.

The Stoxx Europe 600 Index fell 0.2% to 248.09.

The UK’s FTSE 100 slipped 0.01%, and France’s CAC 40 declined 0.47%. In
Germany, the DAX rose 0.17%.

Among the most actives were Rio Tinto Group, Hochtief AG and Man Group Plc.

Rio Tinto, the world’s largest mining company, dropped 3% as copper prices plunged on mounting signs the global economic recovery was slowing. Xstrata Plc, the world’s fourth-largest copper producer, fell 2.1%.

Another round of airport closures because of ash from an Icelandic volcano hurt shares of airlines. Ryanair Holdings Plc fell 3.8% while British Airways Plc lost 1.2%.

Airlines grounded 1,000 flights across Europe today as the return of the Icelandic ash cloud closed terminals from Northern Ireland to the Netherlands.

London Heathrow, the region’s busiest airport, suffered more than 150 cancellations before reopening at 7am and Amsterdam Schiphol, the fifth-busiest, shut for seven hours until 1pm.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.24% to 86.30.

The euro slid to a four-year low against the US dollar on persistent concerns that efforts to rein in spending in Europe would dampen global growth.

A 750-billion euro bail-out package announced earlier this month from the European Union and the International Monetary Fund has failed to improve the appeal of the euro.

"Raising more debt to pay old debt is not necessarily the way for Greece to accomplish what needs to be accomplished," John McCarthy, director of foreign exchange trading at ING Capital Markets in New York, told Reuters.

"It's a package that raises more questions than answers and wouldn't necessarily alleviate the euro zone debt crisis. We expect the euro to slip further."

In early afternoon New York trading, the euro fell 0.2% against the US dollar to US$1.2340.

Earlier today the euro fell as low as US$1.2234, according to electronic trading platform EBS, the lowest in more than four years.

The euro has lost more than 7% against the US dollar this month, and is almost 14% lower for the year, making it the worst-performing major currency, according to Reuters data.

Against the yen, the euro fell 0.5% to 113.82 yen. The US dollar fell 0.2% to 92.23 yen.

Sterling fell 0.8% to US$1.4433.

US 10-year note yields were near the lowest level in more than a week.

The yield on the US 10-year note was at 3.46% at 2.19pm in New York, compared with 3.45% on May 14, according to BGCantor Market Data. It earlier touched 3.38% the lowest level since May 7.

The three-month London interbank offered rate in US dollars, or Libor, climbed to 0.46%, the highest since August 7, from 0.445% on May 14 and 0.252 at the end of February, according to the British Bankers’ Association.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, dropped 2.12% to 253.06.

Gold slipped from a record high.

Spot gold fell to US$1,226.05 at midday from US$1,230.05 late in New York on Friday. Earlier on Friday the metal hit a record high of US$1,248.95.

In the short term, the safe-haven investment may benefit from concerns about the euro-zone.

"We're seeing other markets suffering heavy losses and that could cap gold in the short term because there is a tendency to release profitable positions to pay for nonprofitable ones," Ole Hanson, analyst at Saxo Bank, told Reuters.

US June gold futures fell 50 cents to US$1,227.30 an ounce.

Gold priced in euros and sterling rose to a record overnight as did gold futures in Shanghai.

Platinum and palladium tumbled along with a broad drop in industrial metals. However, a closely-watched industry report said rising investment could take platinum to US$2,000 an ounce in the next six months.

Platinum dropped to US$1,655.50 from US$1,715.50 while palladium declined to US$502 from US$523.50. Silver slid to US$18.85 an ounce from US$19.25,

US oil prices fell to a five-month low on concerns about Europe's economy, the weak euro, swollen US oil inventories and that China's growth might slow.

Stockpiles of crude at Cushing, Oklahoma, the delivery hub for the US contract's West Texas Intermediate benchmark crude, have risen in the last eight weeks to a record high 37 million barrels, pushing front-month US crude down relative to later futures contracts and the other global crude benchmark, Brent.

US crude for June delivery dropped US$1.66, or 2.32%, to US$69.95 at 1.09pm EDT, having traded as low as US$69.27, the weakest since December 14.

July Brent crude fell US$3.08 to US$74.85 a barrel.

US copper futures fell on concerns about the European debt crisis and its potential impact on global economic recovery.

Shanghai copper slid 5% to its lowest since early February and London copper fell 3% to its weakest in nearly two weeks as a stronger US dollar pushed investors out of base metals.

Shanghai's benchmark three-month copper contract fell 2,820 yuan from its Friday settlement to touch its daily downside limit of 53,560 yuan a tonne by 0534 GMT.

Three-month copper on the London Metal Exchange dropped US$203 to US$6,722 a tonne.

Copper for July delivery plunged 7.30 cents, or 2.3%, at US$3.0610 per pound by 9.55am EDT on the New York Mercantile Exchange's COMEX division.

Businesswire.co.nz

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