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While you were sleeping: Unemployed losing hope

Friday 6th August 2010

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Equities declined as an unexpected rise in US jobless claims showed that American companies continue to opt to cut and contain payroll costs amid mixed signs about the nation’s economic outlook.

All eyes are now on the release of the US July non-farm payrolls data on Friday.

The US government said initial claims for state unemployment benefits rose 19,000 to a seasonally adjusted 479,000 in the week ended July 31. That was the highest since early April and above forecasts at 455,000 versus 460,000 in the prior week.

In late trading, the Dow Jones Industrial Average fell 0.20%, the Standard & Poor's 500 Index declined 0.24% and the Nasdaq Composite Index dropped 0.40%.

Among the most active on Wall Street were JC Penney, Ross Stores, Microsoft, Exxon Mobil and Bank of America.

“People are worried that the economy is going to slide back into negative growth, which would make it much more challenging to keep the earnings up,” Robert Lutts, president of Cabot Money Management, told Bloomberg News.

“What we are seeing is spending on capital, which is going to eventually result in hiring, but it’s going to take some time.”

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’, rose 0.68% to 22.36.

The Stoxx Europe 600 Index fell 0.3% to 261.48.

Across Europe, the UK’s FTSE 100 fell 0.38%. France’s CAC 40 rose 0.09% and Germany’s DAX edged 0.04% higher.

Among the most active stocks in Europe were Barclays, Nokian Renkaat Oyj, Unilever and Aviva.

US Treasuries gained after the unexpected rise in weekly jobless claims data fanned concern about the word’s largest economy, increasing the safe-haven appeal of government debt.

"Treasuries are certainly benefiting from fears that the jobs figure will be another nail in the coffin for the economy as the jobless claims number now implies downward risk to non-farms payrolls tomorrow," Thomas di Galoma, head of fixed income rates trading at Guggenheim Securities in New York, told Reuters.

A disappointing payrolls report would follow weak US economic growth data last week that raised concerns the recovery was faltering.

The yield on the benchmark 10-year Treasury notes fell to 2.91% from 2.96% late Wednesday, while the yield on 30-year bonds declined to 4.05% from 4.08%.

The London interbank offered rates (LIBOR) for three-month dollars fixed at 0.42406%, a three-month low.

The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.17% to 80.81.

The greenback was little changed against the euro before the US payrolls report.

In afternoon trading in New York, the euro was flat at US$1.3150.

Against the yen, the US dollar fell 0.5% to 85.88 yen, just over a yen off a 15-year low.

Sterling slipped 0.1% to US$1.5876.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 0.48% to 277.65.

Oil prices slipped on concern about outlook for energy demand after US government data showing rising stockpiles of refined products.

US crude for September delivery fell 46 cents to US$82.01 a barrel by 1617 GMT.

Front-month ICE Brent crude fell 63 cents to US$81.57 a barrel.

Chicago wheat markets jumped 8%, twice triggering trading curbs to restore order before easing back after Russia said it would temporarily halt grain exports.

Russia’s worst drought on record has devastated crops in parts of the country and sent international grain prices soaring as markets placed bets that without shipments from one of the world's leading exporters, global supplies would be restricted.

On pace for its biggest daily percentage gain in three weeks on the Chicago Board of Trade, September wheat repeatedly tested its 60-cent limit gain at US$7.85-3/4, the highest front month price since August 2008. The benchmark price has gained 82% since June 9, according to Reuters. It traded at US$7.83-3/4 as of 11.07am EDT.

Spot gold was bid at US$1,193.85 an ounce at 1427 GMT against US$1,194.60 late in New York on Wednesday. December COMEX futures were last at US$1,196.50 an ounce, showing a 60-cent gain on the day.

Silver rose to US$18.37 against US$18.25 in New York on Wednesday. Platinum was bid at US$1,567.50 an ounce versus US$1,577, while palladium was at US$490.50 versus US$494.00.

Workers at South Africa's Impala Platinum were voting on possible strike action at the world's second-largest platinum producer.

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