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While you were sleeping: Iceland's cool breeze

Wednesday 31st March 2010

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Equities were in a holding pattern, despite solid economic news in the UK and the US, after Iceland had its local currency credit rating cut, renewing concerns about the outlook for sovereign debt across Europe.

In afternoon trading, the Dow Jones Industrial Average rose 0.13% and the Standard & Poor’s 500 gained 0.06%. The Nasdaq Composite rose 0.2%.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ fell 0.68% to 17.47.

Among the advancers were Citigroup Inc, Goldman Sachs Group Inc and Bank of America Corp.  Home Depot Inc and Lowe’s Cos advanced. Tech shares were mixed with Apple Inc and Verizon Communications Inc rising, and with AT&T and Research in Motion Ltd falling.

Apple shares touched a record high on reports that it was developing a new iPhone for Verizon’s network.

In Europe overnight, the Dow Jones Stoxx 600 was littled changed at 263.87.

The Stoxx 600 is heading for a fourth straight quarterly advance amid easing concern that Greece will struggle to rein in Europe’s biggest budget deficit, Bloomberg News reported. The gauge has surged 67% since March 9 last year.

The UK’s FTSE 100 slid 0.67%, France’s CAC 40 shed 0.33% and Germany’s DAX fell 0.23%.

Some of the biggest movers included Michelin & Cie, Allied Irish Banks Plc and UBS AG.

S&P lowered Iceland’s long- and short- term local currency credit ratings to BBB/A-3 from BBB+/A-2, the ratings company said in a statement. The nation’s BBB-/A-3 foreign currency ratings were affirmed. The outlook is negative. 

The Dollar Index, which measures the greenback against a basket of six major currencies, added 0.26% to 81.48.

Positive economic reports bolstered both the UK pound and the greenback. The yen lagged.

The US dollar rose above 93 yen for the first time since early January.  It was last up 0.4% at 92.80 yen.

In afternoon trading, the pound rose 0.7% to US$1.5082 while the euro was changing hands at 89.02 pence, down 1%. The euro fell 0.6% to US$1.3416 and shed 0.5% to 124.48 yen.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 0.47% to 274.10.

The big news for commodities markets was the end of the annual pricing system for iron ore with both Vale SA and BHP Billiton striking short-term contracts with Asian steel mills.

Cash prices for iron ore have more than doubled in the past year, and BHP, Rio and Fortescue Metals Group Ltd. may be missing out on about US$20 billion of sales a year by selling at contract prices instead of spot prices, according to a Bloomberg story on a March 1 report by Goldman Sachs JBWere.

US crude for May delivery rose 20 cents to US$82.37 a barrel at 1426 GMT, while Brent crude rose 11 cents to US$81.28 in London.

Prices have traded in a range between US$69 and US$84 this quarter, touching US$82.78 on Monday, according to Reuters data. Prices hit US$83.95 a barrel in January, the highest since October 2008 at the peak of the financial crisis.

Spot gold stood at US$1102.70 per ounce by 1506 GMT, down from US$1108.20 quoted late in New York a day earlier.

US gold futures for April delivery were US$3.1 lower at US$1107.20 per ounce after also hitting their highest in almost two weeks on Monday.

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