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While you were sleeping: Banks ease, gold shines

Wednesday 10th November 2010

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Stocks on Wall Street fell as investors sold financial companies amid concern the Federal Reserve’s quantitative easing might hurt their earnings. Commodities gained, with gold climbing to a record for the fourth consecutive session.

In early afternoon trading, the Dow Jones industrial average fell 0.28%, the Standard & Poor's 500 Index declined 0.25% and the Nasdaq Composite Index slipped 0.13%.

Atlas Energy Inc soared more than 33% after Chevron Corp said it would buy the U.S. natural gas producer.

For the second day in a row, though, financial stocks led the S&P 500's decline. Bank of America, Wells Fargo and Morgan Stanley fell.

“Financials are the most at risk if the targeted quantitative easing two doesn’t help,” Frank Ingarra, a Stamford, Connecticut-based money manager at Hennessy Advisors, told Bloomberg.

Investors were also positioning themselves as the Federal Reserve was set to disclose tomorrow how much debt it planned to purchase in the next few weeks.

Meantime, investors piled into perceived safe-haven assets that also provide protection against inflation. An index of gold and silver miners' shares rose to a record, led by shares such as Barrick Gold.

"Gold is the vehicle investors are using to protect their currency and inflation exposure," Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont, told Reuters.

Gold rose to a record for the fourth straight session.

Spot gold was bid at US$1,419.50 an ounce at 1540 GMT from US$1,409.09 late in New York on Monday. It earlier rose to a record US$1,422.30.

"European investors are worried about the euro, real rates are very low and set to stay low for a long time, so the opportunity cost of investing in gold is tiny," Citi analyst David Thurtell told Reuters. "Lots of good reasons to buy it and not many to sell it.”

Treasuries declined before the sale of US$24 billion of 10-year notes. The yield on the 10-year note climbed four basis points to 2.59% at noon in New York, according to BGCantor Market Data.

“The market is backing up under the weight of the upcoming supply in the 10s and 30-year auctions,” said Dan Mulholland, a Treasury trader in New York at Royal Bank of Canada, told Bloomberg.

In Europe, the Stoxx 600 climbed 0.6% to 273.46, the highest level since September 2008.

European stocks will rally 16% by the end of next year as expansion in the global economy bolsters earnings, according to Deutsche Bank strategists.

Barclays, Britain’s third-largest bank, gained after saying its capital ratio remained strong.

The Dollar Index, which measures its value against a basket of currencies, rose 0.25% to 77.24.

The euro fell 0.4% to US$1.3873. The euro-zone currency stalled below US$1.40 on concern about that struggling member countries such as Ireland and Portugal would keep having trouble to finance their deficits.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, gained 1.25% to 319.18.

Silver rose to US$28.90 an ounce, the highest since March 1980. Palladium climbed to US$732.50 an ounce, its highest since April 2001.

US crude oil futures hit US$87.63 a barrel, the highest since October 2008. ICE Brent was 16 cents higher at US$88.62.

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