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While you were sleeping: Stocks in a holding pattern

Tuesday 9th March 2010

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Stocks were little changed overnight in Europe and on Wall Street as investors awaited a new catalyst to extend the recent rally.

In early afternoon trading, the Dow Jones Industrial Average was 0.11% lower and the Standard & Poor’s 500 was unchanged%. The Nasdaq Composite was up 0.21%.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ rose 2.07% to 17.78.

Among the bright spots were AIG, MetLife and McDonald’s Corp.

American International Group Inc’s shares rose 4.2% after the company agreed to sell its Alico foreign life insurance unit to MetLife Inc for about US$15.5 billion. MetLife's stock shot up 4.5%.

Shares in McDonald’s advanced after it said same store sales accelerated 4.8% in February.

In Europe overnight, the Dow Jones Stoxx 600 declined less than 0.1% to 256.87. Among national benchmarks, the UK ’s FTSE 100 gained 0.12%, Germany’s DAX 30 dipped 0.02% and France’s CAC 40 edged 0.18% lower.

Among the most active stocks were Metro AG, Petrofac Plc and AstraZeneca Plc.

The rally in global equities since March 2009 appears set to slow.

Equity mutual funds are burning through cash at the fastest rate in 18 years, leaving them with the smallest reserves since 2007 in a sign that gains for the S&P 500 may slow, according to Bloomberg News. Cash dropped to 3.6% of assets from 5.7% in January 2009, leaving managers with US$172 billion in the quickest decrease since 1991, Investment Company Institute data show.

While there was no tangible developments on the deficit front, comments continued from the key players.

Greek Prime Minister George Papandreou told the Brookings Institution in Washington Athens was not asking Europe to rush to the "aid of a reckless country" by helping Greece deal with its budget problems, and warned the crisis could cause a domino effect, driving up borrowing costs for other countries with large deficits.

Before flying to the US, Papandreou met with his French counterpart.

French President Nicolas Sarkozy said the euro region was ready to rescue Greece should the government struggle to fund its budget deficit, arguing that the country was “under attack” from so-called speculators.

“I want to be very clear: if it were necessary, the states of the euro zone would fulfill their commitments,” he said in Paris yesterday. “There can be no doubt in this regard.”

International Monetary Fund managing director Dominique Strauss-Kahn told Reuters that Greece's financial problems were unlikely to spread to other euro zone countries with high levels of public debt.

Portugal, which is also seeking to convince investors it can reduce its deficit, announced plans to sell 6 billion euros of assets to cut debt.

The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.02% to 80.42.

Midway through the New York session, the euro was little changed at US$1.3621. Against the yen, the euro was also little changed at 123.00 yen, having hit a two-week high earlier on Monday.

The dollar trimmed gains after touching a two-week high against the yen to trade little changed at 90.30 yen.

China’s yuan rose to a five-week high against the dollar in benchmark offshore non-deliverable forwards (NDFs) on Monday after comments by the Chinese central bank chief on an end to the dollar/yuan peg.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 0.27% to 276.17.

Spot gold touched a low of US$1121.75 an ounce and was bid at US$1123.75 an ounce at 1545 GMT, against US$1133.80 late in New York on Friday.

US gold futures for April delivery on the COMEX division of the New York Mercantile Exchange fell US$11.50 to US$1123.70 an ounce.

Crude prices also pared gains after earlier rallying to eight-week highs above US$82 a barrel on the weaker dollar and signs of an economic recovery in top oil consumer the United States. US crude fell 18 cents to US$81.32 a barrel at midday in New York.

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