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While you were sleeping: BusinessWire overnight wrap

Friday 15th August 2008

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Another decline in the price of oil has helped ease concerns about inflation and another move to bolster the housing market helped boost interest in financial shares as Wall Street rallied in thin trading on Thursday.

The Dow Jones industrial average rose 82.97 points, or 0.72%, to 11,615.93, while the Standard & Poor's 500 Index climbed 7.10 points, or 0.55%, to 1,292.93. The Nasdaq Composite Index was up 25.05 points, or 1.03%, at 2,453.67.

The price of oil fell US99¢ to settle at $US115.01 a barrel as economic weakness in Europe underscored the threat to growth in global oil demand and on hopes that a shaky cease-fire between Russia and Georgia would hold.

The two largest US home mortgage lenders, Fannie Mae and Freddie Mac, surged after the Securities Industry and Financial Markets Association said larger loans financed by the two companies would be allowed in the main market for mortgage bonds.

That helped an index of S&P financial stocks rebound from its worst two-day slide in six years. The index rose 2.6%.

Shares of Bank of America Corp, the No. 2 US bank, were among the top contributors to the Dow's advance, with a gain of 4.6% to $US30.18. JPMorgan Chase & Co was another standout in the financial sector, up 2.4% at $US37.81.

The US Labor Department said consumer prices increased 0.8% in July, double the forecast of economists in a Bloomberg survey. So-called core prices, which exclude food and energy, advanced 0.3% last month, also more than projected.

What the report didn't fully capture was the recent drop in the price of oil. Oil prices have decreased more than 20% since reaching a high on July 3, helping restrain inflation as businesses pare back expansion and consumers spend less.

Goldman less bearish

Goldman Sachs said it had revised its position on the US dollar, ending its almost 10-year bearish position. The US dollar had "bottomed" against the euro, analysts at the firm said.
The euro fell 0.7% to $US1.4809 at 4:04pm in New York, from $US1.4919 on Wednesday. It touched $US1.4778, the weakest since February 21, compared with the all-time high of $US1.6038 set July 15. The euro dropped 0.7% to 162.36 yen, from 163.43 yesterday, when it reached a three-month low of 161.40. The dollar increased 0.1% to 109.63 yen, from 109.53.

The dollar will strengthen to $US1.45 per euro in three months, compared with an earlier estimate of $US1.56, according to Goldman.

Investors said the ongoing credit crunch and its implications for growth more broadly were supporting government bonds. Ten-year US Treasury notes added 9/32 in price for a yield of 3.91%, down three basis points. Two-year notes rose 2/32 to yield 2.45%.

As for gold, futures for December delivery fell $US17, or 2%, to $US814.50 an ounce on the Comex division of the New York Mercantile Exchange. Gold is down 5.8% for the week and 21% from its record of $US1,033.90 on March 17.

Goldman slashed its forecast on gold prices on Thursday, citing overvalued bullion and expected strength of the dollar against major currencies. It lowered its three-month gold outlook to $US745 an ounce from its previous view of $US890 an ounce.

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