While you were sleeping: Hopeful eyes on Fed

Tuesday 10th August 2010

Stocks gained, sending the MSCI World Index toward a 12-week high, amid speculation slower jobs growth would prompt the Federal Reserve to shore up the economy.

The MSCI World Index of equities in 24 developed nations advanced 0.4%, reflecting gains in both Europe and on Wall Street.

In late trading, the Dow Jones Industrial Average rose 0.53%, the Standard & Poor's 500 Index gained 0.59% and the Nasdaq Composite Index advanced 0.83%.

Among the most active on Wall Street were McDonald’s, eBay, Hewlett-Packard and Target.

HP slid the most in three months in New York trading following the August 6 resignation of chief executive Mark Hurd, who leaves behind a company with slowing growth and a senior staff that might be distracted by jockeying for the top job.

Cathie Lesjak, the interim CEO who addressed reporters and analysts twice in the past three days, is seeking to play down concerns about the shake-up. Hurd left after a probe found inaccurate expense reports and a personal relationship with a contractor named Jodie Fisher, a former actress and reality TV contestant.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’, rose 1.29% to 22.02.

The Stoxx Europe 600 Index rose 1.4% to 262.26.

Across Europe, the UK’s FTSE 100 jumped 1.47%, France’s CAC 40 climbed 1.65% and Germany’s DAX gained 1.47%.

Among the most active stocks in Europe were BP, International Power and GDF Suez SA.

US Treasuries slipped ahead of this week's auctions of US$74 billion of coupon-bearing securities. The Treasury, to meet its quarterly refunding needs, will sell US$34 billion in three-year notes on Tuesday, US$24 billion in 10-year notes on Wednesday, and US$16 billion in 30-year bonds on Thursday.

The 10-year note yield rose to 2.84%, up from 2.82% late Friday. The yield on 30-year bonds rose to 4.02%, up from 4.00% late Friday.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.39% to 80.72.

The greenback advanced as investors squared up positions before Federal Reserve monetary policy announcement, due Wednesday.

Gains were limited by Friday's disappointing US jobs data. Analysts say markets are pricing in at least some form of modest easing when the Fed meets on Tuesday.

"Investors are likely to consolidate positions ahead of tomorrow afternoon's policy meeting," Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, told Reuters.

The euro fell 0.4% to US$1.3226, off a three-month peak of US$1.3334 on Friday.

The yen was last up 0.4% at 85.84 against the greenback.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 0.04% to 274.59.

Oil rose for the first time in four sessions on expectations that the Fed might signal its readiness to print more money to support the faltering economic recovery.

US crude for September delivery rose 31 cents to US$81.01 a barrel at 1.25pm EDT.

Front-month ICE Brent crude rose 32 cents to US$80.48 a barrel.

"Weaker longs bailed out after the disappointing jobs data Friday. Now the expectation is the Fed will keep interest rates low and keep money flowing into the stock market and commodities," Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut, told Reuters.

Spot gold was bid at US$1,202.15 an ounce at 1532 GMT, against US$1,203.30 late in New York on Friday. US gold futures for December delivery edged down 90 cents to US$1,204.40.

Wheat markets rose, on track for the eighth gain in 10 sessions, after Russia’s prime minister said a ban on grain exports might extend beyond December 31 as a fall in this year's crop could be worse than expected.

"If someone is waiting for December 31, he is waiting in vain," Prime Minister Vladimir Putin told a government meeting, Reuters reported.

"A decision may be taken only after the harvesting campaign results are clear."

He said some key regions would not be able to start the winter-sowing campaign, aggravating the situation. Earlier, a SovEcon agricultural analyst's note said that if the ban extended beyond the December 31 expiry date, wheat exports in 2010/11 might be around three million tonnes instead of the expected 10 million to 11 million tonnes.

Chicago Board of Trade wheat for September delivery rose 1.3% to US$7.35-1/2 per bushel by 1635 GMT.

Copper for September delivery rose 1.10 cents to settle at US$3.3540 per pound on the COMEX metals division of the New York Mercantile Exchange.

Businesswire.co.nz

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