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While you were sleeping: Stuck on the sidelines

Tuesday 24th August 2010

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US equities were mixed as takeover activity did little to stem lingering concern about the global economic outlook.

In late trading, the Dow Jones Industrial Average rose 0.35%, and the Standard & Poor's 500 Index gained 0.31%. The Nasdaq Composite Index edged 0.16% lower.

Among the most active stocks on Wall Street were Hewlett-Packard, Cisco Systems, Intel and Potash of Saskatchewan.

HP, the world’s largest personal-computer maker, offered to buy 3Par for about US$1.6 billion, topping Dell’s bid for the maker of equipment and software for data centers.

The bid of US$24 a share in cash was 33% higher than Dell’s offer, HP said in a statement. Dell offered US$18 a share in cash, or about $1.15 billion, for 3Par on August 16.

BHP Billiton’s hostile takeover offer for Potash Corp of Saskatchewan last week has raised expectations that other companies will bid. China’s Sinochem Group and Brazil’s Vale SA have both contacted Potash as the company tries to fend off BHP’s bid, said a person with knowledge of the matter, according to Bloomberg. Potash shares rose 1.3% to $151.55.

"Overriding the M&A buzz - which didn't have a lot of longevity - is the fact that economic data still remains very poor and there's concern that the much-discussed soft patch has the potential to become something greater," Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama, told Reuters.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’, fell 3.3% to 24.65 in New York. The index measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index.

The Stoxx Europe 600 Index rose 0.6% to 253.76, climbing for the first time in four sessions.

The UK’s FTSE 100 climbed 0.76%, Germany’s DAX rose 0.10% and France’s CAC 40 gained  0.77%.

Among the most active stocks in Europe were Old Mutual, BHP Billiton and Rio Tinto.

Anglo-South African insurer Old Mutual  said on Monday it had received a bid from HSBC to buy up to a 70% stake in South Africa's Nedbank.

Old Mutual, which is the majority owner of South Africa's fourth-largest bank, is undergoing a strategic overhaul to slim down its complicated structure.

The Dollar Index, which measures the greenback against a basket of six major currencies, edged 0.08% higher to 83.12.

The euro fell, as euro zone data added to concerns over the economy and investors increasingly bet on prospects of loose monetary policy until year-end.

A survey of euro zone purchasing managers released today showed slower manufacturing growth in the region in August. On Friday, European Central Bank Governing Council member Axel Weber said the ECB should extend its loose monetary stance.

The euro "continues to be hobbled by concerns over the economic health of the periphery members, and today's mildly weaker-than-expected results from core Europe have not helped to assuage those worries," Boris Schlossberg, director for currency research at GFT in New York told Reuters.

In mid afternoon trading in New York, the euro was down 0.7% against the yen at 108.03 yen.

Against the US dollar, the euro was 0.3% weaker at US$1.2672.

US 30-year Treasuries fell, pushing their yields up from recent 16-month lows as traders took profits before this week's US$109 billion slate of bond auctions.

The government starts the offerings at 1700 GMT with a US$7 billion reopening of previously issued 30-year Treasury Inflation-Protected Securities, followed by sales of two-, five- and seven-year conventional notes in the coming days.

The 30-year bond yield rose to 3.69% from Friday's close of 3.66%.

The benchmark 10-year note was unchanged in price to yield 2.62%.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 0.39% to 265.98.

Oil futures prices fell to a six-week low amid lingering concern about the global economy, bulging US stockpiles and spare capacity from producers.

US crude for October delivery fell 82 cents, or 1.11% to US$73 a barrel by 1619 GMT.
October Brent crude fell 77 cents to US$73.49.

Gold also declined. Spot gold was bid at US$1,225.35 an ounce at 1518 GMT, against US$1,226.95 late in New York on Friday. US gold futures for December delivery fell US$1.80 to US$1,227.00.

Three-month copper on the London Metal Exchange gained US$13.75 to US$7,265.75 a tonne by 0232 GMT.

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