While you were sleeping: Stocks drift, USD rises

Thursday 31st December 2009

The U.S. dollar edged higher after the Chicago Institute for Supply Management reported that its index of midwest business activity rose in December to its highest since January 2006.

While economic reports in the U.S. remain mixed, traders are betting that the world’s biggest economy will expand at a more steady pace in 2010 and the Federal Reserve will rethink its approach to monetary policy.

At midday, the Dow Jones Industrial Average edged 0.02% higher. The Standard & Poor’s 500 declined 0.99% and the Nasdaq Composite fell 1.11%

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ rose 0.65% to 20.14. The index has dropped 75% since reaching to a record 80.86 in November 2008.

Among the most active were Citigroup, Bank of America and Fannie Mae.

As markets have rallied this year, merger and acquisition activity has been renewed.

Takeovers by Exxon Mobil Corp. and Warren Buffett’s Berkshire Hathaway Inc. helped push up the value of M&A transactions 52% to US$530 billion in the quarter, the fastest pace in more than a year, according to data compiled by Bloomberg.

But the pace of the recovery is expected to keep takeovers in check through 2010, according to Morgan Stanley and other firms, Bloomberg reported.

In Europe overnight, the Dow Jones Stoxx 600 declined 0.4% to 253.16. Today is the last day this year that the index will be calculated as most European markets are shut on Thursday and Friday.

For the year, the Stoxx 600 advanced 28%, its biggest annual rise in a decade.

Among national benchmarks, the U.K.’s FTSE 100 fell 0.73%, Germany’s DAX 30 fell 0.9% and France’s CAC 40 slid 0.62%.

Some of the biggest movers included Anglo American, Rio Tinto and Randgold which all fell in line with a drop in the price of gold amid a rally in the U.S. dollar.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.02% to 77.86.

The dollar rose 0.6% to 92.52 yen, from 92 a day earlier. The greenback rose 0.4% to US$1.43 per euro, from US$1.4354. The euro increased 0.2% to 132.29 yen, from 132.05.

The dollar has appreciated 4.9% versus the euro this month, trimming its 2009 decline to 2.3%, according to Bloomberg. The greenback has fallen 30% against the euro in the past 10 years.

Seven-year U.S. Treasuries were flat ahead of today’s US$32 billion sale of the securities, the last of three auctions this week totaling a record-tying US$118 billion.

Tuesday’s US$42 billion five-year note sale drew a yield of 2.665%. The bid-to-cover ratio was 2.59, compared with an average ratio of 2.36 at the last 10 auctions.

The London Interbank Offered Rate, or Libor, for three month loans in dollars slid to 0.25%. It has dropped from 4.82% in October 2008.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 0.497% to 285.14.

Oil edged higher after a report showed U.S. inventories declined and amid a cold snap across the U.S. foreshadowed higher demand for heating fuels.

U.S. crude for February delivery rose 16 cents to US$79.03 a barrel. London Brent crude for February rose 42 cents to US$78.06 a barrel.

In London, spot gold hit a low of US$1085.90 an ounce and was bid at US$1088.15 an ounce, against US$1096.55 late in New York on Tuesday.

Copper reached a 16-month high on optimism for rising demand and the potential of a strike in Chile. Copper for three-month delivery on the London Metal Exchange traded at US$7310.25 a tonne from US$7275 at the close on Tuesday.

Businesswire.co.nz

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