While you were sleeping: S&P 500 tops 1,000, greenback sinks; Markit probe

Tuesday 4th August 2009

The Standard & Poor’s 500 Index rose above 1,000 for the first time in nine months, commodities rallied and the US dollar dropped as better-than-expected data in the US and China stoked optimism the recession is abating.

The S&P 500 climbed 1.5% to 1002.62 and the Dow Jones Industrial Average rose 1.3% to 9286.56. The Nasdaq Composite gained 1.5% to 2008.61.

Aluminium producer Alcoa Inc. jumped 7.1% to US$12.60, leading the Dow higher, as metals prices advanced. Bank of America rose 3.6% to US$15.32, leading gains in financials after Europe’s HSBC Holdings posted a US$3.35 billion profit against expectations of a loss.

Ford Motor Co. rose 4.1% to US$8.33 after posting a 2.3% increase in US sales last month, stoking speculation the Obama administration’s so-called cash for clunkers scheme, to encourage trade-ins, may be fueling sales. Still, most automakers reported falling sales in July.

US manufacturing shrank less than expected in July while construction rose, helped by government spending on infrastructure projects. The Institute for Supply Management’s factory gauge reached 48.9, an 11-month high last month, nudging nearer the break-even level of 50, which it hasn’t exceeded since January last year.

Construction spending rose 0.3% in June, reflecting record-high spending on public works, according to the Commerce Department. Economists had expected a decline.

Figures yesterday showed manufacturing in China grew last month, helped by Beijing’s US$585 billion stimulus package and record lending.

The CLSA China Purchasing Managers’ Index rose to a 12-month high 52.8, seasonally adjusted, from 51.8 in June.

The US Treasury cut its estimate for borrowing this quarter, citing reduced spending on measures to aid the financial system and underpin the housing market.

It anticipates borrowing a net US$406 billion through September 30, 21% less than previously estimated, and plans to borrow US$486 billion in the final quarter of 2009, the Treasury said in a statement.

US Treasury bonds fell after the manufacturing and construction data and as stocks rallied, sapping the allure of debt’s fixed payments.

The yield on the 10-year notes jumped 15 basis points to 3.64% while the yield on 30-year Treasuries advanced 12 basis points to 4.42%.

The so-called TED spread, which measures the gap between what the Treasury and banks pay to borrow for three months, shrank to 0.294 percentage points, the first time since March 2007 that it has been below 0.3, according to Bloomberg. The TED spread is regarded as a gauge of financial-market stress.

The Dollar Index, which tracks the greenback against the currencies of six trading partners, fell 0.9% to 77.65, having earlier sunk to77.45, the lowest since last September.

The dollar slipped to $1.4413 against the euro, briefly trading at $1.4427, the weakest in 2009, from $1.4257. The yen fell to 137.37 versus the euro from 134.99. The yen fell to 95.28 against the dollar from 94.68.

Crude oil rose above US$72 a barrel on optimism the end of recession will bring a revival in fuel demand.

Crude for September delivery rose 3% to US$71.53 a barrel on the New York Mercantile Exchange and climbed as high as US$72.20.

Copper rose to a 10-month high on speculation China will suck in more raw materials for manufacturing.

Copper futures for September delivery surged 4.4% to US$2.7385 a pound on the New York Mercantile Exchange.

Gold futures for December delivery edged up 0.3% to US$958.80 an ounce in New York.

In Europe, the Dow Jones Stoxx 600 Index advanced 1.6% to a nine-month high of 228.46 as HSBC’s results spurred a rally in lenders, and commodity and metals producers gained with prices of their products.

HSBC climbed 5% after Europe’s largest bank posted a first-half profit of US$3.35 billion after putting aside US$13.9 billion to cover impaired consumer loans. Earnings from arranging bond sales and currency trading more than doubled.

Barclays jumped 6.7% after the UK’s second-biggest bank reported a 10% gain in first-half profit to 1.89 billion pounds.

Xstrata Plc jumped 7.1% as the price of copper surged, while Rio Tinto climbed 4.9%.

The UK’s FTSE 100 rose 1.6% to 4682.46 and Germany’s DAX 30 climbed 1.8% to 5426.85. France’s CAC 40 gained 1.5% to 3477.80.

UBS AG gained 2.5% amid reports it is nearing resolution of a US tax probe.

Markit Group, the data provider owned by Wall Street’s largest lenders, is under Justice Department scrutiny for potential anticompetitive practices, Bloomberg reported. The alleged practices include requiring customers to buy bundled services and controlling which trades can be cleared in the US$26 trillion credit-default swap market, according to the report.

Last month, the US Justice Department said it was investigating users of credit-default swaps.

Businesswire.co.nz

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