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While you were sleeping: FedEx vs Apple

Thursday 17th June 2010

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Stocks in the US were mixed as FedEx Corp's warning on higher costs offset Apple Inc's stronger-than-expected sales of the next generation of iPhones.

Shares of Apple rose 2.2% to US$265.28, and contributed the most to the Nasdaq's slim gain, after news that sales of its new iPhone 4 surpassed some analysts' expectations.

Shares of FedEx, a bellwether package delivery company, fell 3.3% after it said higher costs would constrain 2011 earnings.

In late trading, the Dow Jones Industrial Average gained 0.04%, the Standard & Poor’s 500 Index edged 0.01% higher and the Nasdaq Composite advanced 0.23%.

Also among the most active stocks on Wall Street were BP Plc’s US shares after the oil giant said it would cut four quarters of dividends, significantly reduce its investment program and sell US$10 billion of assets to finance a US$20 billion fund to pay for its Gulf of Mexico oil spill.

The commitments, outlined in a statement today, are harsher penalties than most investors had expected and follow BP chairman Carl-Henric Svanberg's meeting with US President Barack Obama.

Investors had anticipated the suspension of BP's dividend, or payment in shares for a couple of quarters and had not expected BP to be forced to sell assets and cut investment - moves that will curb BP's growth.

Bill Gross, the co-chief investment officer of PIMCO, told Reuters that he recently bought $US100 million of short-maturing BP notes and some Anadarko Petroleum paper.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’, fell 0.31% to 25.79.

The Stoxx Europe 600 Index gained less than 0.1% to 254.47.

The UK’s FTSE 100 gained 0.39%, France’s CAC 40 rose 0.39% and Germany’s DAX climbed 0.26%.

Among the most active stocks in Europe were Irish Life & Permanent Plc, Celesio AG, Daimler AG and Nokia Oyj.

Nokia shares plunged 9% after cutting its outlook for sales and margins, hurt by competition in high-end phones from Apple’s iPhone and devices based on Google Inc’s Android software. The company said second-quarter handset revenue and margins would be “at the lower end of or slightly below” the range previously forecast and also cut its outlook for the full year.

US Treasury 10-year notes rose for the first time in three days as reports showed housing starts fell in May the most in more than a year and producer prices dropped.

The yield on the 10-year note dropped two basis points, or 0.02 percentage point, to 3.29% at 2.38pm in New York, according to BGCantor Market Data.

Benchmark three-month euro Libor climbed to a six-month high of 0.65875%, while three-month Euribor reached its highest since late October.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.06% to 86.03.

The euro fell against the US dollar on renewed concerns about Spain's debt.

Spain, the International Monetary Fund, the European Union and the US Treasury dismissed a report in the newspaper El Economista that the Iberian nation was seeking a 250 billion euro (US$307 billion) credit line.

Spanish banks' reliance on European Central Bank funding increased to record levels in May, according to RBS research.

"The banks in Spain are facing a liquidity freeze with other banks reluctant to lend to Spanish banks," Fergal Smith, managing market strategist in Canada at Action Economics in Toronto, told Reuters.

In early New York trading, the euro fell 0.3% to US$1.2289, after rising as high as US$1.2354 on electronic trading platform EBS, the strongest level in two weeks.

Credit rating agency Fitch sees a break-up of the euro zone as a "remote risk" and not one of its most likely scenarios, a Fitch director said on Wednesday.

"It's not our central view, it's still a remote risk," Brian Coulton, managing director and head of EMEA sovereigns and global economics, told a conference in Paris, Reuters reported.

The euro was up around 0.4% versus the yen at 113.10 yen, as the Japanese currency weakened.

The US dollar was slightly stronger at 91.68 yen.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 0.27% to 264.21.

US crude oil futures advanced. At 12.55pm EDT (1655 GMT), US crude for July delivery was up 72 cents at US$77.66 a barrel.

In London, ICE Brent crude for August delivery was up 94 cents at US$78.04 a barrel.

A drop in US homebuilding to a five-month low, a stark warning from FedEx - often viewed as a gauge of the health of the wider economy - and heightened concern over the fiscal problems in euro zone member Spain reinforced the backdrop for gold.

Spot gold was bid at US$1,232.65 an ounce at 1415 GMT, against US$1,232.45 late in New York on Tuesday. US gold futures for August delivery were down 50 cents at US$1,233.90.

"We are going to push higher in the weeks ahead,” Standard Chartered analyst Daniel Smith told Reuters. “The pullback we saw from the previous highs is quite limited and investors are still waiting to come into this market."

Gold hit a record high of US$1,251.20 last week and is now just over 1% away from this level.

US copper futures slipped, ending a six-day winning streak, on unexpectedly weak housing data

Copper for July delivery fell 0.90 cent to settle at US$2.9955 per pound on the New York Mercantile Exchange's COMEX division.

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