While you were sleeping: Wall St drops, bonds, dollar gain on revival doubts

Tuesday 16th June 2009

Shares on Wall Street tumbled, while Treasuries rose and the US dollar gained, as economic figures including regional manufacturing suggested the world’s biggest economy will only slowly revive from recession.

The Federal Reserve Bank of New York’s ‘Empire State’ index worsened to minus 9.4 this month from minus 4.6. Manufacturing in the New York region shrank as sales fell and inventory levels declined. Still, a gauge measuring manufacturing outlook rose to 47.8, the highest level since July 2007.

The International Monetary Fund forecast the US economy will contract 2.5% this year and return to growth in 2010 with a 0.75% expansion. In April, the IMF forecast the economy would shrink 2.8% this year.

The Chicago Board Options Exchange Volatility Index, or VIX, climbed 10.3% to 31.04. The index that tracks the cost of using options to insure against declines in the Standard & Poor’s 500, has fallen from as much as 80.86 in November.

The Standard & Poor’s 500 fell 2.4% to 923.72 and the Dow Jones Industrial Average declined 2.1% to 8612.13, trimming its advance this year to about 36%. The Nasdaq Composite fell 2.3% to 1816.38. Metals companies and manufacturers led the Dow lower.

Aluminium producer Alcoa Inc. fell 6.5% to US$11.21 and DuPont dropped 4.5% to US$25.79. Large earth moving equipment maker Caterpillar fell 4.2% to US$36.14 and Boeing Co. slipped 3.7% to US$49.52.

Wal-Mart Stores Inc. dropped 2.8% to US$48.46 after Goldman Sachs cut its rating on the company to “neutral” from “buy,” citing rising expenses and weaker sales.

Freeport-McMoRan Copper & Gold fell 5.8% to US$55.14 as the price of copper declined on speculation demand in China won’t keep pace with supply.

Exxon Mobil Corp. shed 1.3% to US$72.81 after the price of oil fell.

Stocks also sank in Europe, with the Dow Jones Stoxx 600 falling 2.5% to 209.02, its biggest decline in a month.

The European Union’s statistics office said payrolls in the region had a record slump in the first quarter while employment slipped 0.8% from the fourth quarter.

The VStoxx Index, which measures the cost of buying options on the Euro Stoxx 50, rose 14% to 31.97.

BHP Billiton fell 2.8% and Rio Tinto dropped 6.9% as prices of metals fell. Lonmin Plc declined 9.8% after platinum producer shuttered a furnace in South Africa for repairs.

Royal Dutch Shell fell 4.2% as the price of crude oil sank. TomTom NV, Europe’s biggest manufacturer of car navigation products, fell 5.1% after announcing plans to raise 430 million euros in a share sale.

STMicroelectronics, Europe’s biggest maker of computer chips, fell 6.3% after Finmeccanica SpA chief executive Pier Francesco Guarguaglini told Bloomberg his company would sell its stake by the end of the year.

Air France-KLM Group fell 5.2% after Citigroup cut its rating on the airline to “hold” from “buy.”

Swiss cement maker Holcim slipped 0.3% after announcing it will seek about US$1.9 billion from shareholders to help fund the A$2.02 billion acquisition of the Australian business of Mexico’s Cemex.

Germany’s DAX 30 fell 3.5% to 4889.94 amid fears global growth won’t return quickly. The DIHK Association of German Chambers of Industry and Commerce said companies face more difficulties gaining financing as banks tighten credit rules.

Daimler AG fell 6.5% and BMW dropped 4.5%. Steelmaker ThyssenKrupp AG declined 4.7%.

France’s CAC 40 slid 3.2% to 3219.58.

The UK’s FTSE 100 declined 2.6% to 4326.01 as commodity prices fell and the Confederation of British Industry warned the Bank of England may have to print more money to underpin an economy that’s unlikely to recover until next year.

Copper had the biggest decline in eight weeks as the US dollar strengthened and figures showed copper stockpiles in Shanghai rose to 60,647 metric tons last week. Copper has soared 69% this year on Chinese demand.

Copper futures for July delivery fell 3.7% to US$2.2845 a pound on the New York Mercantile Exchange.

The Reuters/Jefferies CRB Index of 19 commodities shed 1.6%.

Crude oil fell below US$70 a barrel as the dollar strengthened, reducing demand commodities as a hedge against inflation. The Dollar Index rose 0.4% to 81.13.

Crude oil for July delivery shed 2.1% to US$70.56 a barrel on the New York Mercantile Exchange.

Gold futures for August delivery fell 1.4% to a three-week low of US$927.50 an ounce in New York.

The US dollar had the biggest gain against the euro in about two months after Russian Finance Minister Alexei Kudrin said his country has full confidence in the greenback, which has had its status as the world’s reserve currency questioned in the face of ballooning US debt.

The dollar strengthened to $1.3791 per euro from $1.4016. The yen rose to 134.82 from 137.89 and rose to 97.77 per dollar from 98.43.

US Treasuries rallied as stocks declined and data showed weaker-than-expected US manufacturing.

The yield on 10-year notes fell 7 basis points to 3.73% and the yield on 20-year Treasuries slipped 7 basis points to 4.58%.

Businesswire.co.nz

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