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While you were sleeping: Businesswire overnight wrap

Thursday 3rd July 2008

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Wall Street fell on Wednesday, with the Dow Jones industrial average ending in official bear territory, amid increasing concern that profit expectations will need to be lowered as the continuing surge in the price of oil puts more consumers on the sidelines.

Merrill Lynch also warned that General Motors might need as much as $15 billion in fresh capital or it could find itself filing for bankruptcy to cope with the extended slump in the US auto industry.

In turn, Merrill Lynch and Citigroup had their second-quarter earnings estimates cut by Oppenheimer & Co on expectations of both investment banks taking more writedowns related to the US housing market and bond-insurer downgrades.

After flirting with bear market status since last week, the Dow closed 20% below its October peak of 14,198.10 - the Street's measure of bear territory.

The Dow fell 166.75 points, or 1.46%, at 11,215.51. The Standard & Poor's 500 Index was down 23.39 points, or 1.82%, at 1,261.52. The Nasdaq Composite Index was down 53.51 points, or 2.32%, at 2,251.46.

The US economic outlook also remained in doubt.

First, a report by ADP Employer Services showed that private employers in the US eliminated 79,000 jobs last month, more than expected. The ADP report comes ahead of the monthly US non-farm payroll report, which is being released on Thursday because the US celebrates the Independence Day holiday on Friday.

In another hit at the US economy, Treasury Secretary Henry Paulson said in a speech in London that high oil prices, further home price declines and capital markets turmoil would prolong the slowdown.

Crude oil for August delivery rose $2.60, or 1.8%, to settle at $143.57 a barrel at 2:55pm. on the New York Mercantile Exchange. Futures touched a record $144.32 after the close of floor trading and have doubled in the past year.

Brent crude for August delivery rose $3.59, or 2.6%, to $144.26 a barrel on London's ICE Futures Europe exchange. Futures touched a record $144.95 a barrel.

In the U.K. overnight, the FTSE 100 closed down 53.6 points at 5,426.3 to touch a three-month low, led by miners after a sudden correction in the price of coal. On Tuesday, the UK benchmark index lost 2.6%.

Charlie Bean, Bank of England deputy governor, said the British economy was facing its most challenging time since at least the early 1990s.

In the currency market, the US dollar slid after the release of the ADP report and ahead of an expected increase in interest rates by the European Central Bank on Thursday.

The euro traded higher on expectations of the rate cut as well as speculation the ECB may surprise with a 50-basis-point increase. A quarter percentage point rise has been signaled by ECB officials in recent weeks.

US government bond prices advanced on perceptions that the economy was succumbing to yet more strain.

Two-year Treasury notes were up 4/32 in price for a yield of 2.60%, compared with 2.66% late Tuesday. The benchmark 10-year Treasury note's price, which moves inversely to its yield, rose 9/32 for a yield of 3.97%, down from 4.01% late Tuesday.

Gold traded at $942.60/943.60 an ounce by New York's last trade.

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