While you were sleeping: Stocks fluctuate on economics

Tuesday 8th June 2010

Mixed views on where the global economy is headed hounded investors overnight with German industrial data helping to offset some concerns that the US labour market is going to need far more time to heal.

In afternoon trading, the Dow Jones Industrial Average rose 0.24% and the Standard & Poor’s 500 was up 0.24%. The Nasdaq Composite was 0.38% lower.

"Stocks have suffered on news that is now broadly known and, therefore, somewhat discounted," Robert W. Baird wrote in a note to clients as reported by Reuters. The firm forecast a support level for the S&P at 1,045 and resistance at 1,160. It was at 1,067.43 as of this report.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ was down 1.66% to 34.89.
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Among the actives were Goldman Sachs, Citigroup, Bank of America, Alcoa and Bristol-Myers .

Goldman’s shares fell, and dragged other financial firms lower, after it was issued a subpoena for failing to provide all documents requested by the US inquiry examining the financial crisis.

Contracts that pay off should the benchmark index for US stocks plunge more than 23% from its April high cost 75% more than those speculating on gains, the biggest premium ever, according to data compiled by Bloomberg and OptionMetrics.

In Europe, the Dow Jones Stoxx 600 slid 0.7% to 242.71, extending its slide from its year high on April 15 to 11%.

Among national benchmarks, the FTSE 100 fell 1.11%, France’s CAC 40 fell 1.21% and Germany’s DAX 30 shed 0.57%.

“We face a problem of low growth or no growth in 2011 due to fiscal problems in European countries,” Philipp Musil, who helps oversee US$10 billion at Semper Constantia Privatbank AG in Vienna, told Bloomberg News.

“A deflation scenario is really possible, which is very toxic for the equity market. We have reduced our exposure to European equities to ‘neutral.’”

Among the most actives were BHP Billion, Rio Tinto Group, Grifols and Adidas.

One overnight positive in Europe was Germany’s factory orders report.

Orders, adjusted for seasonal swings and inflation, rose 2.8% from March, when they surged 5.1%, the Economy Ministry in Berlin said today. Economists had forecast a 0.4% drop, according to the median of 34 estimates in a Bloomberg News survey.

The Dollar Index, which measures the greenback against a basket of six major currencies, edged 0.02% higher to 88.25.

The euro fell below US$1.19 for the first time in more than four years before the German data prompted some buying.

European corporate demand helped lift the euro after it touched US$1.1876, its weakest level since March 2006. But it remained well below US$1.20, a level pierced Friday after Hungary's warning about its deficit reminded investors of the severe debt problems plaguing some European countries, Reuters reported.

The euro last traded down 0.3% in early afternoon trading in New York at US$1.1938.

The euro was down 0.4% to 109.53 yen while the dollar shed 0.1% to 91.78 yen. The euro hit a record low at 1.3850 Swiss francs, down 0.4%.

Traders told Reuters that the next option trigger for the euro was US$1.1850 and the likely target at US$1.1825, the euro's March 2006 low.

US Treasuries fluctuated with stocks as the US government prepared to sell US$70 billion in 3- and 10- year notes and 30-year bonds over the next three days, Bloomberg said.

The yield on the 10-year note fell less than one basis point, or 0.01 percentage point, to 3.20% at 11.57am in New York, according to BGCantor Market Data. The yield dropped earlier to 3.15%, the lowest level since May 26.

Gold rally and oil slipped at the start of the trading week in Europe and North America.

Spot gold was bid at US$1,230.95 an ounce at 1512 GMT, against US$1,218.00 late in New York on Friday. U.S. gold futures for August delivery rose US$16.00 to US$1,233.70.

The precious metal continues to benefit from volatility in other markets as investors seek a safer place for their money.

The euro's overnight slide helped euro-priced gold hit a record 1,034.36 euros an ounce. Euro gold prices have risen 35% so far this year.

Spot silver rose to US$17.64 an ounce from late Friday's level of US$17.35.

Benchmark U.S. crude prices fell 60 cents to US$70.91 a barrel at 11.32am EDT, after earlier rising to US$72.17.

Prices have declined by almost one fifth since hitting a 19-month high above US$87 a barrel in early May.

ICE Brent crude for July fell 51 cents to US$71.58.

US copper futures fell to an eight-month low below US$2.75 per lb Monday morning in New York, as risk reduction gathered pace.

Businesswire.co.nz

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