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While you were sleeping: FedEx fails to deliver

Friday 17th September 2010

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FedEx earnings fell short of analysts’ expectations, leading Wall Street investors to wonder whether their recent optimism about the economic recovery was premature.

FedEx, considered an economic bellwether, also said it would eliminate 1,700 jobs.

On the economic front, there were more mixed signals. The number of Americans seeking unemployment benefits unexpectedly fell last week, while manufacturing in the Philadelphia area contracted in September.

In late trading, the Dow Jones Industrial Average was 0.08% higher. The S&P 500 fell 0.21% and the Nasdaq Composite Index was down 0.15%.

Losses were limited because of technical data. Dan Cook, senior market analyst at IG Markets in Chicago, told Reuters that anticipation of a breakout was keeping traders from going short.

"People are reluctant to get in there and sell because if we do get that break, all of a sudden anyone that is short gets rolled right out of the market, the stops get hit and it can be a big pop," Cook said.

"It's a legitimate concern for a lot of traders."

In addition, there are some longer bets being made that equities will rally into the end of the year.

A Reuters poll of institutional investors and strategists found US stocks were expected to make strong gains before year-end as worries about a second recession subside.

Still, economic indicators from Europe weren’t rosy. In the UK retail sales unexpectedly fell in August, dropping 0.5% from July and posting their first decline since January.

The benchmark Stoxx Europe 600 Index dropped 0.8% to 263.47.

Investors rushed to the perceived safety of gold, sending the precious metal to a record for the second time this week, amid the economic uncertainty.

Spot gold was at US$1,275 an ounce at 12.03pm EDT, after earlier rising to another record high  of US$1,277.70. It closed at $1,265.65 an ounce on Wednesday.

"It's an insurance policy at the end of the day," Robin Bhar, analyst at Credit Agricole, told Reuters.

"All the ingredients are still there - all the uncertainty and fear - to keep gold underpinned."

The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.33% to 81.22.

The yen was steady against the greenback, a day after  Japan sold an estimated 1.8 trillion yen (US$21.14 billion) for dollars on Wednesday, a record for a single day, to help its exporters and increase money supply to counter deflation.

The euro rose to its highest in more than a month against the US dollar and the yen on strong demand at a Spanish bond auction.

Japan's first currency intervention since 2004 weakened the yen from a 15-year high versus the dollar, but the yen's six month uptrend did not look broken, analysts told Reuters.

"There is talk of 82 being the line in the sand but surprise is the key element for the Bank of Japan," Samarjit Shankar, managing director of global FX strategy at BNY Mellon in Boston, told Reuters.

"A low 84 or high 83 may be sufficient for the Bank of Japan to come back in and show the market there is two-way risk."

US Treasury Secretary Timothy Geithner took the opportunity at Senate Banking Committee hearing to increase pressure on China to let the yuan rise.

“The pace of appreciation has been too slow and the extent of appreciation too limited,” Geithner said.

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