While you were sleeping: ECB reassures, Stocks flat

Friday 15th January 2010

Global stocks edged higher overnight, bolstered by positive comments from the European Central Bank, and continued optimism that the outlook for corporate earnings was improving.

An unexpected decline in U.S. retail sales in December boosted U.S. government bonds as investors further pared bets about the timing of a decision by the Federal Reserve to increase interest rates.

At midday, the Dow Jones Industrial Average rose 0.11% and the Standard & Poor’s 500 gained 0.03%. The Nasdaq Composite rose 0.21%.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ fell 1% to 17.67.

Tech shares were higher ahead of Intel's latest results, set to be released after the closing bell. Among the advancers were Intel, Microsoft and Oracle. The gains reflected a positive outlook from Germany's SAP.

President Barack Obama said he would seek to impose a fee on Wall Street banks to recoup every cent taxpayers provided to financial firms through the credit crisis.

The fee would apply on financial companies with assets greater than US$50 billion. It will be based on bank liabilities and take effect on June 30.

The administration estimates it will raise US$90 billion over 10 years and US$117 billion over 12 years.

In Europe overnight, the Dow Jones Stoxx 600 rose 0.7% to 258.80. Among national benchmarks, the U.K.'s FTSE 100 rose 0.45%, Germany’s DAX rose 0.43% and France’s CAC 40 gained 0.37%

Some of the biggest movers included Rio Tinto, SAP, Home Retail Group and DSG International.

Rio advanced after it reported higher iron ore production.

Business management software maker SAP said its latest sales and margins exceeded targets. SAP shares rose as much as much as 4.1% in Frankfurt, after fourth-quarter software licensing sales, a measure of future fees from maintenance and upgrades, fell less than analysts expected, suggesting global software demand is picking up, according to Bloomberg News.

As expected the ECB kept its key interest rate unchanged. President Jean-Claude Trichet spoke to reporters in Frankfurt:

"Based on its regular economic and monetary analyses, the governing council decided to leave the key ECB interest rates unchanged. The current rates remain appropriate."

Trichet said the euro-zone economy was expanding. "The latest information has also confirmed that towards the end of 2009 euro area economic activity continued to expand. However, some of the factors supporting the growth in real GDP are of a temporary nature.

"Overall, the governing council expects the euro area economy to grow at a moderate pace in 2010, recognising that the recovery process is likely to be uneven and that the outlook remains subject to uncertainty."

The ECB kept its main interest rate on hold at a record low of 1% for the eighth month running. It also left its overnight deposit rate, which acts as a floor for money markets, at 0.25% and its marginal lending rate at 1.75%.

The euro slipped 0.2% to US$1.4483 after trading as high as US$1.4555 earlier.

The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.07% to 76.81.

In morning trading in New York, the U.S. dollar fell 0.15% to 91.25 yen, according to Reuters data.

The Aussie advanced 0.6% to US$0.9297 after hitting US$0.9331, close to the 2009 high of US$0.9407, according to Reuters data.

Yields on two-year U.S. government notes, most sensitive to monetary policy. New York Fed President William Dudley said short-term rates might remain “low” for at least six months and possibly for as long as two years.”

The yield on the 30-year bond fell four basis points, or 0.04 percentage point, to 4.67% at 11:55am in New York. Two-year note yields decreased four basis points to 0.92%.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 0.13% to 284.77.

U.S. crude for February delivery fell 28 cents to US$79.37 a barrel by 11:26am EST (1626 GMT). In London, Brent crude for February fell 41 cents to US$77.90 a barrel ahead of its expiry later in the day.

Spot gold was bid at US$1133.90 an ounce at 1627 GMT, against US$1137.60 late in New York on Wednesday. U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange fell US$2.10 to US$1134.70.

Businesswire.co.nz

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