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While you were sleeping: US data relief

Thursday 5th August 2010

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Stocks in the US advanced as better-than-expected expansion in private-sector jobs and the nation’s services sector eased some of the recent heightened concerns about the slowing pace of growth in the world’s largest economy.

Data from ADP Employer Services showed companies in the US added 42,000 workers to payrolls in July, topping the median forecast of 30,000 jobs in a Bloomberg News survey of economists.

The Institute for Supply Management’s index of non-manufacturing businesses, which covers about 90% of the economy, rose to 54.3 from 53.8 in June. Readings above 50 signal expansion.

In late trading, the Dow Jones Industrial Average rose 0.42%, the Standard & Poor's 500 Index gained 0.51% and the Nasdaq Composite Index climbed 0.67%.

Among the most active on Wall Street were Priceline, Barnes & Noble, Electronic Arts and Motorola. Barnes & Noble, the bookstore retailer, last night put itself up for sale.

Still, not all news on the outlook was positive. US consumer bankruptcies, after rising 9% last month from June, might exceed 1.6 million this year, according to the American Bankruptcy Institute.

The 137,698 bankruptcy filings in July also represent a 9% increase from a year earlier, the institute said yesterday in a statement posted on its website, citing data from the National Bankruptcy Research Centre.

Meanwhile, the Federal Reserve Bank of New York might require banks to buy back faulty mortgages and other assets acquired through the rescues of Bear Stearns and American International Group, a spokesman said.

“We are involved in multiple efforts related to exercising our rights as investors in non-agency RMBS or CDO securities,” New York Fed spokesman Jack Gutt wrote in an email, referring to residential mortgage-backed securities and collateralised debt obligations, Bloomberg News reported.

Steps include “those that require originators to repurchase ineligible loans,” Gutt wrote.

“These efforts support our primary goal of maximising the value of these portfolios on behalf of the American taxpayer.”

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’, fell 0.66% to 22.48.

The Stoxx Europe 600 Index edged higher to close at 262.17.

Across Europe, the UK’s FTSE 100 fell 0.19%. France’s CAC 40 rose 0.35% and Germany’s DAX gained 0.37%.

Among the most active stocks in Europe were Electricite de France, Lundin Petroleum and Allied Irish Banks.  

US Treasuries fell on the better-than-expected economic data, with the five-year note yield rising from the lowest level in more than a year as signs of recovery hurt the appeal of government debt.

The Treasury said it would sell US$74 billion in its quarterly sales of three and 10-year notes and 30-year bonds next week.

The yield on the two-year note advanced three basis points, or 0.03 percentage point, to 0.57% at 1.17pm in New York, according to BGCantor Market Data. The yield on the five-year note rose  five basis points to 1.60%.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.42% to 80.95.

The US dollar rose from an eight-month low against the yen and advanced against the euro on better-than-expected US employment and service sector data.

"The market is still short the dollar, so you could see some covering between now and the end of the week, but this would be for the short term," Hidetoshi Yanagihara, senior currency trader at Mizuho Corporate Bank, told Reuters.

"It's obvious the pace of US growth is slowing and people are waiting to sell the dollar at better levels."

The dollar rose 0.6% to 86.23 yen. The euro fell 0.6% to US$1.3142.

Sterling fell 0.5% to US$1.5865.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 0.87% to 279.04.

The benchmark US crude oil price edged higher after a larger-than-expected fall in crude stocks. A rise in gasoline and distillate inventories kept a lid on gains.

US crude for September was 24 cents higher at US$82.79 a barrel by 1547 GMT, after the 1430 GMT data release.

Crude oil stocks fell by 2.8 million barrels to 358.0 million in the week to July 30, according to the Energy Information Administration. Gasoline stocks were up 700,000 barrels at 223 million, with total distillate fuel 2.2 million barrels higher at 169.7 million.

The American Petroleum Institute also said late on Tuesday that gasoline stocks had increased and crude stocks had fallen.

Front-month ICE Brent slipped 8 cents to US$82.60.

Spot gold was bid at US$1,201.15 an ounce at 1523 GMT versus US$1,185.35 late in New York on Tuesday. US gold futures for December delivery rose US$16.30 to US$1,203.80.

Underpinning the precious metal were China’s comments, made on Tuesday, that it would allow more domestic banks to export and import gold as part of steps to encourage more liquid trade.

"The international gold market is now paying a lot more attention to China's gold demand, not just from an official reserve asset perspective, but also private demand," UBS analyst Edel Tully wrote in a note, according to Reuters.

"Behind India, China is the second-largest physical consumer," she added.

"Therefore any step to integrate, liberalise, and expand this market should, in time, foster a rising appetite for gold."

Platinum was at US$1,583.15 an ounce versus US$1,576.50 and palladium at US$498.98 against US$498.35. Silver was at US$18.58 an ounce against US$18.42.

Copper prices in London fell. Three-month copper on the London Metal Exchange fell US$38 to US$7,387 a tonne by 0242 GMT, extending losses from the previous session.

Shanghai's benchmark third-month copper futures contract was little changed at 57,460 yuan a tonne. The most-active contract for November delivery was up 10 yuan at 57,460 yuan.

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