While you were sleeping: Equities hesitate on outlook

Friday 19th March 2010

Equities eased in Europe and were mixed in the US amid concerns a bail-out plan for Greece was in trouble and speculation that the Federal Reserve was poised to increase its discount rate for a second time in as many months.

In afternoon trading, the Dow Jones Industrial Average was up 0.29%, the Standard & Poor’s 500 slid 0.18% and the Nasdaq Composite edged ever so slightly 0.01% higher.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ fell 2.19% to 16.54.

While US markets struggled overnight, a day earlier the DJIA rose through the midpoint of its last bull market in a positive sign for US stocks, according to Richard Russell, who has studied the average since 1958.

The advance by the 30-stock Dow also was a bullish signal for followers of Dow Theory, which holds that moves by the Dow Jones Transportation Average must be “confirmed” by the industrial average, and vice versa, in order to be sustained.

A close by the Dow above the midpoint is “a big positive for equities,” Russell, the 85-year-old editor of Dow Theory Letters, said in a telephone interview with Bloomberg. “I would probably turn somewhat bullish.”

Among the active stocks overnight were Nike, DuPont, GameStop and Burger King - all advancing on specific corporate news. Nike, for example, reported fiscal third-quarter earnings that exceeded expectations.

In Europe overnight, the Dow Jones Stoxx 600 edged down 0.1% to 261.2. Among national benchmarks, the U.K. ’s FTSE 100 declined 0.04%, Germany ’s DAX 30 dipped 0.2% and France ’s CAC 40 fell 0.5%.

Greek Prime Minister George Papandreou gave his European counterparts one week to agree on a financial assistance package as the country seeks help to rein in its fiscal deficit. The Prime Minister said he was prepared to ask the International Monetary Fund for help.

Among the active stocks in Europe, many banks fell after Papandreou spoke. National Bank of Greece, HSBC and UBS each fell. Among the advancers were Glaxo, Arriva and Adidas.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.68% to 80.18.

The euro fell to a session low of US$1.3587, according to Reuters data, pulling back from a five-week high hit on Wednesday. It was last at US$1.3622, down 0.8%.

Against the Swiss currency, the euro fell as low as 1.4356, the weakest level since October 2008, when it hit an all-time low just below 1.43 francs, according to Reuters data. It was last at US$1.4381, down 0.7% on the day.

The dollar trimmed gains versus the Swiss franc and was last at 1.0550 francs, up 0.1%.

The dollar was flat at 90.28 yen.

Against the Canadian dollar, the U.S. unit pulled back from a 20-month low of C$1.0071 hit on Wednesday to trade at C$1.0134. But analysts see the pair hitting parity in the near term.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 0.2% to 275.74.

US crude oil futures fell to US$81.90 a barrel by 1655 GMT. ICE Brent crude lost 79 cents to US$81.17.

Prices rose more than US$3 in the previous two days due to larger-than-expected decreases in fuel inventories in the United States and strong U.S. gasoline demand, which rose to a record high for the month of February, Reuters reported.

Spot gold was bid at US$1,125.60 an ounce at 1633 GMT, against US$1,124.05 late in New York on Wednesday. U.S. gold futures for April delivery on the COMEX division of the New York Mercantile Exchange rose US$2.30 to US$1,126.50.

Global gold demand was expected to rise in 2010 after a fall last year with economic recovery driving jewellery demand and fuelling investor appetite for bullion, a senior official at the World Gold Council said.

"I would expect to see a plus sign at the end of the year," Rozanna Wozniak, investment research manager at the industry-funded WGC, told Reuters on the sidelines of a presentation on Thursday.

Global gold demand fell 11% in 2009, hammered by a 20% drop in jewellery demand which accounted for 52% of the overall demand last year. Identifiable investment demand rose 7% in 2009.

Businesswire.co.nz

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