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While you were sleeping: Stocks get mixed messages

Wednesday 2nd June 2010

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Stocks in US were mixed as higher-than-estimated growth in construction spending and manufacturing offset a drop in energy shares.

In late trading, the Dow Jones Industrial Average rose 0.39% and the Nasdaq Composite gained 0.13%. The Standard & Poor’s 500 Index declined 0.12%.

Among the most active stocks on Wall Street were Wal-Mart Stores Inc, AT&T Inc, Transocean and Halliburton Co.

Combined price estimates from more than 2000 forecasters tracked by Bloomberg show the S&P 500 will rise 25% in the next year, the fastest projected rate since February 2009, data compiled by Bloomberg show.

Upbeat economic news supported the mood for equity investors. The US manufacturing sector expanded in May for a 10th straight month, while construction spending posted its largest gain in nearly 10 years in April, pointing to strength in the economic recovery.

The Institute for Supply Management said its index of national factory activity slipped to 59.7 from 60.4 in April, but above market expectations for 59.0. A reading above 50 indicates expansion in the sector.

Construction spending rose 2.7%, the biggest advance since August 2000, from 0.4% in March and well above market expectations for a flat reading.

Energy shares fell after BP Plc failed to halt the flow of oil from a leaking Gulf of Mexico well.

BP’s shares plunged in London trading on its failure to stop the spill and as the possibility of a criminal probe by the Obama administration gained strength.

The oil giant's shares fell by as much as 17% in London, ending down 13%. The shares have lost more than a third of their value, or about 46 billion pounds (US$67 billion), since the leak started. There is talk that BP may become a takeover target.

The cost of dealing with the crisis now totals US$990 million, and is rising.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’, rose 3.2% to 33.10.

The Stoxx Europe 600 Index increased 0.2%.

The U.K.’s FTSE 100 fell 0.48% and France’s CAC 40 slipped 0.13%. Germany’s DAX gained 0.28%.

Most European stocks also declined as the rate of manufacturing expansion in China and Europe slowed.

Among the most active stocks in Europe were BP, Boliden AB, Prudential Plc and Ryanair Holdings Plc.

The US Treasury two-year note’s yield was near its lowest level in a week on reduced demand for higher-yielding assets and low trading volume.

The yield on the two-year Treasury note was at 0.79% at 1.32pm in New York. The 10-year note’s yield was little changed at 3.30%.

About US$150 billion of US Treasuries changed hands today through ICAP Plc as of noon, compared with US$219 billion at the same time a week ago, according to data from the world’s largest inter-dealer broker.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.05% to 86.55.

The euro fell to a four-year low against the US dollar.

In mid afternoon New York trading, the euro was little changed against the dollar at US$1.2301 after dropping earlier to a four-year low of US$1.2112, according to Reuters data. It fell to US$1.2110 on electronic trading platform EBS.

Traders said euro/dollar stop-losses were triggered under the previous low at US$1.2143, while technical analysts highlighted a break below key support at US$1.2135. A daily close below US$1.2135 was key for further downside potential, they said.

Versus the yen, the euro rose 0.1% to 112.34 yen. The US dollar was up 0.1% to 91.29 yen.

Meanwhile, Canada became the first of the G7 major industrialised countries to raise interest rates after the global financial crisis, lifting its key rate on Tuesday by a quarter point to 0.50%.

Still, the Canadian dollar was lower against its US counterpart after the move as market watchers interpreted comments from the Bank of Canada as a sign that the rate increase wasn’t the start of a series of increases.

“Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments,” the Ottawa-based bank said.

The US dollar rose 0.1% to C$1.0461. The rate increase was expected in financial markets.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 0.95% to 252.39.

US crude for July delivery fell 79 cents to US$73.18 a barrel by 2.07pm EDT.

ICE Brent crude for July fell US$1.57 to US$73.08 a barrel. Brent touched US$68.15 a week ago, the lowest intraday price for a front-month contract since February 5.

Gold rose toward US$1,230 an ounce as investors bought the metal as a haven from debt problems in the euro zone, after the European Central Bank warned yesterday the region's banks might face a fresh wave of losses.

Spot gold was bid at US$1,228.25 an ounce at 1525 GMT, against US$1,214.20 late in New York on Monday.

US gold futures for June delivery on the COMEX division of the New York Mercantile Exchange rose US$15.40 to US$1,227.90 an ounce.

Prices of other commodities recovered, after earlier posting heavy losses on concern sluggish  manufacturing data from China and Europe suggested demand for raw materials might dampend.

Silver was bid at US$18.65 an ounce against US$18.49. Platinum was at US$1,553.50 an ounce against US$1,558.50, while palladium was at US$459 against US$465.10.

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