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While you were sleeping: Outlook a bit brighter

Friday 3rd September 2010

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Stocks in Europe and on Wall Street held their ground as an unexpected gain in pending home sales, a decline in claims for jobless benefits and better-than-expected retail sales eased concerns about US economic outlook.

In late trading, the Dow Jones Industrial Average rose 0.17%, the Standard & Poor's 500 Index gained 0.54% and The Nasdaq Composite Index advanced 0.67%.

Among the most active stocks on Wall Street were Burger King Holdings Inc, Nordstrom Inc and JC Penney.

In the US, pending sales of existing houses unexpectedly increased in July from a record low, a promising sign after the end of a government tax credit. The index of purchase contracts rose 5.2% after a revised 2.8% drop the prior month, according to figures from the National Association of Realtors.

A separate report from the US Labor Department showed initial claims for state unemployment benefits fell for a second straight week last week, declining 6,000 to 472,000. Further positive news came as US retailers reported better-than-expected August sales.

"This is an economy that has hit a soft patch. It's not an economy that appears to be heading toward a double-dip recession," Brian Levitt, an economist at OppenheimerFunds in New York, told Reuters.

Burger King, the second-largest US hamburger chain, agreed to be acquired by 3G Capital for US$3.3 billion. The US$24-a-share price is a 46% premium to Burger King’s close on August 31. Under the terms of the agreement, Burger King can solicit superior bids through October 12, according to a statement today.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’, fell 1.47% to 23.54. The index measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index.

The Stoxx Europe 600 Index barely budged, finishing the day at 258.18 compared with 258.19 yesterday. That’s 5.1% lower than this year’s high reached in April.

The UK’s FTSE 100 edged 0.09% higher and France’s CAC 40 rose 0.21%. Germany’s DAX was unchanged in percentage terms.

Among the most active stocks in Europe were Yell Group Plc, Pernod Ricard SA and Stora Enso Oyj.

Meanwhile, US Treasury 10-year notes declined for a second day for the first time since July as better-than-expected economic data lowered the attraction of government debt.

The US sold US$10 billion in Treasury Inflation Protected Securities of that maturity today.

The benchmark 10-year note yield rose 6 basis points to 2.63% at 1.09pm in New York, according to BGCantor Market Data. The yield on the two-year note slipped less than 1 basis point to 0.50%.

The Dollar Index, which measures the greenback against a basket of six major currencies, barely budged, edging 0.02% higher to 82.47.

The euro rose after the European Central Bank left interest rates unchanged, as expected, at 1% and investors awaited comments by its president, Jean-Claude Trichet.

At 1147 GMT, the euro was up 0.1% at US$1.2823 after Spain and France drew decent demand as they sold a combined 12.2 billion euros in bonds.

The US dollar was down 0.4% at 84.11 yen. The Japanese currency showed little response to Japan's political heavyweight Ichiro Ozawa saying action was needed to stem yen gains.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, gained 0.77% to 270.58.

US crude oil futures rose after a warning from the US Energy Information Administration that US East Coast oil refineries were threatened by Hurricane Earl.

The EIA said 1.1 million barrels per day or 7% of the nation's total refining capacity was in jeopardy because of Earl.

Also supporting oil prices was a fire at an oil and gas facility owned by Mariner Energy off the coast of Louisiana. The US Coast Guard said it was working to rescue 13 workers.

By 1.05pm EDT, US crude for October delivery was up 53 cents at US$74.44 a barrel.

ICE Brent gained 29 cents to US$76.64.

Spot gold was bid at US$1,251.80 an ounce at 1530 GMT, against US$1,243.50 late in New York on Wednesday. US gold futures for December delivery rose US$5.60 to US$1,253.60.

"Gold remains a macro play and when you're looking at the US that continued yesterday," Bank of America-Merrill Lynch analyst Michael Widmer told Reuters.

The most-active December copper futures contract on the COMEX metals division of the New York Mercantile Exchange rose 0.6% to US$3.50 a pound, the highest for a benchmark copper contract since April 27.

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