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While you were sleeping: FedEx delivers

Tuesday 27th July 2010

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Wall Street advanced as FedEx Corp’s improved earnings forecast and better-than-expected sales of new US single-family homes bolstered optimism about the economic recovery. 

Shares of economic bellwether FedEx climbed 4.4% after the package delivery and business services company raised its quarterly and full-year earnings forecast, a sign that demand might be picking up.

“Really, it's the earnings data and more so with FedEx that they are guiding upward - right now that's what people are looking at,” Doug Roberts, chief investment strategist at Channel Capital in Shrewsbury, New Jersey, told Reuters.

Adding fuel to the fire of optimism, US new home sales soared 23.6% to a 330,000 unit annual rate in June, the Commerce Department said. Still, the sales pace last month was the second lowest since records started in 1963.

In late trading, the Dow Jones Industrial Average rose 0.42%, the Standard & Poor's 500 Index advanced 0.55% and the Nasdaq Composite Index gained 0.56%.

Among the most active on Wall Street were FedEx, United Parcel Service Inc, Pulte Group Inc and Lennar Corp.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’, fell 0.55% to 23.34.

The Stoxx Europe 600 Index rose 0.5% to 257.12, gaining for a fifth consecutive session.

Across Europe, the UK’s FTSE 100 rose 0.72%, France’s CAC 40 gained 0.81% and Germany’s DAX advanced 0.45%.

Among the most active stocks in Europe were Allied Irish Bank Plc, Dexia SA, BP Plc and GlaxoSmithKline Plc.

BP gained 4.6% as the oil company was said to be planning on replacing Tony Hayward as chief executive officer. A decision was expected as early as Tuesday, when BP also was to release its latest quarterly results.

European equities benefited again from relief after regulators found that 7 of the 91 banks tested need to raise a combined 3.5 billion euros (US$4.5 billion) of capital, far below the amount analysts had estimated before the results were published.

Today, the group of governors and heads of supervision who oversee the Basel Committee on Banking Supervision said they reached a “broad agreement” on the “overall design” of new capital and liquidity rules for banks.

The central bankers and regulators agreed on a new 3% leverage ratio to apply to banks globally, according to a statement. The ratio will be tested from 2013 until 2017, and banks would be required to start publishing their individual leverage figures starting in 2015. The cap could become binding as early as 2018, after possible adjustment to the ratio and the method of calculating banks’ assets.

US Treasuries were little changed, having rebounded from earlier losses. after the better-than-expected sales of new homes in June lessened the appeal of fixed-income securities.

The two-year yield rose less than 1 basis point, or 0.01 percentage point, to 0.60% at 1.29pm in New York, according to BGCantor Market Data. The benchmark 10-year note yielded 2.99%.

The US is preparing to auction US$104 billion in notes this week. The Treasury is scheduled to sell US$38 billion in two-year notes tomorrow, US$37 billion of five-year debt the following day and US$29 billion in seven-year securities July 29. The total is the lowest monthly offering of the securities since June 2009.

The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.45% to 82.10.

The euro rose against the US dollar. Relief over the results of the European bank stress tests helped push the euro 0.2% higher against the greenback to US$1.2923.

The euro hit a seven-week high of 113.49 yen as dealers unwound long yen positions, but then ran into offers from Japanese exporters around 113.30/50 yen, according to Reuters. It was last down 0.2% at 112.64 yen, helping to pull the greenback down 0.4% to 87.10 yen.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 0.09% to 266.86.

Oil prices were little changed. U.S. crude for September delivery slipped 12 cents to US$78.86 a barrel by 12.49pm EDT.

US crude prices reached an 11-week high at US$79.60 a barrel on Friday before ending just below US$79.

In London on Monday, ICE Brent crude was down 6 cents at US$77.39.

Gold fell as the US home sales data bolstered the outlook for the world’s biggest economy, limiting the precious metal's safe-haven appeal.

Spot gold was at US$1,183.75 an ounce by 1.44pm EDT, down from US$1,189.05 late on Friday.

US gold futures for August delivery were down US$3.80 at US$1,184 an ounce.

US copper futures rose to the highest in 2-1/2 months, with copper for September delivery advancing 4.25 cents, or 1.35%, to US$3.2275 per pound on the COMEX metals division of the New York Mercantile Exchange.

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