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While you were sleeping: Narrow range, China moves

Friday 8th January 2010

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Stocks traded in a narrow range in both Europe and on Wall Street overnight as investors appeared willing to wait on the sidelines for clearer signs of where the global recovery was headed.

The pause in the global equities rally this week has been linked to the release of tomorrow’s December jobs report in the U.S. The Federal Reserve has consistently said it would need to see signs of stability in the labour market ahead of a decision to change its position on interest rates.

In a speech in Shanghai, St Louis Fed President James Bullard said the U.S. labour market was improving and the economy was near a point where unemployment would start to decline.

On the economic front, the U.S. Labor Department reported that initial jobless applications rose to 434,000 last week, or fewer than forecast.

The latest report came after two separate reports yesterday which showed that job losses were lessening across the U.S. Payroll firm ADP said private employers cut fewer jobs last month than since March 2008. Challenger, Gray & Christmas said planned firings fell 73% in December from a year ago.

As investors try to make sense of the mix of economic news and the outlook for U.S. interest rates, China hit the reset button.

Chinese officials overnight increased rates on three-month bills for the first time since August in a bid to keep credit growth in check. Investors were interpreting the move as a precursor to higher benchmark interest rates.

The potential for tougher policy knocked Chinese shares and also commodities. The world’s third largest economy has been a huge consumer of steel, copper and other resources.

In Europe, the Dow Jones Stoxx 600 Index rose less than 0.1% to 258.08. The FTSE 100 closed down 0.06% and Germany’s DAX was 0.25% lower. France’s CAC 40 Index edged 0.18% higher.

Among the big movers in Europe, Metro AG fell while Autonomy Corp, SAP AG and Continental AG rose.

At midday, the Dow Jones Industrial Average rose 0.01% and the Standard & Poor’s 500 Index was up 0.04%. The Nasdaq Composite Index slid 0.48%.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ fell 1.15% to 18.94.

Both gold and oil eased from recent highs. Spot gold was at US$1133.40 from US$1137.90 late the previous day. U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange fell 0.2% to US$1133.70 an ounce.

Oil slid below US$83 a barrel, down from a 15-month high hit a day earlier, while copper prices fell from a 16-month peak.

Among other precious metals, silver was bid at US$18.30 an ounce against US$18.18, while platinum was at US$1551.50 an ounce versus US$1555 and palladium at US$425 versus US$426.

In midday New York trading, the dollar rose 0.9% to 93.13 yen, after earlier climbing to 93.40, its strongest since September, according to Reuters data.

The euro fell 0.6% to $1.4323, on track for its worst day since December 17, according to Reuters data. Its low for the day was $1.4299. The single currency was hurt by weak German manufacturing orders and euro-zone retail sales data.

Businesswire.co.nz

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