While you were sleeping: Fed's Beige Book, UBS loss

Thursday 16th April 2009

The Federal Reserve's regional economic assessment showed that the rate of deterioration in some parts of the US has slowed, stoking optimism the recession may be reaching its bottom.

The Fed's Beige Book showed an easing in the pace of contraction reported by five of the 12 Fed district banks: New York, Chicago, Kansas City, Dallas and San Francisco. The report supports President Barack Obama's assertions this week that measures to underpin the economy, restore access to credit and shore up banks are starting to have an impact.

Some districts reported a mild pickup in retail sales and home buying, while manufacturing and employment weakened.

Separate figures from the Fed showed industrial output fell a greater-than-expected 1.5% in March, while the level of industrial capacity in use fell to 69.3%, the lowest since records began in 1967.

The US dollar advanced against most major currencies after the drop in industrial production, which drove investors to the world's reserve currency.

The dollar rose to $1.3225 from $1.3259. The greenback advanced to 99.34 yen from 98.98. The euro strengthened to 131.40 yen from 131.25.

The consumer price index fell 0.1% in March from February, and to be 0.4% lower in the 12 months ended last month, the first annual drop since 1955.

Mike Duke, chief executive of Wal-Mart Stores, said he doesn't expect a speedy recovery from recession as unemployment soars. Duke told NBC's 'Today Show' that there is "still a lot of stress."

Shares of Wal-Mart fell 0.3% to US$50.99 in a session where most stocks on Wall Street gained.

The Dow Jones Industrial Average climbed 1.4% to 8029.62, led by America Express, which climbed 12% to US$20.62. JPMorgan Chase rose 6.1% to US$32.56 and General Motors advanced 6.2% to US$1.89.

The Standard & Poor's 500 Index rose 1.3% to 852.06 and the Nasdaq Composite gained 0.1% to 1626.80. Intel fell 2.4% to US$15.62 after chief executive Paul Otellini said it is too soon to predict a recovery this quarter. Sales of its processors used to run personal computers probably troughed in the first quarter. Microsoft fell 2.7% to US$18.83.

UBS AG, the biggest Swiss bank, posted a first-quarter loss of nearly 2 billion Swiss francs and unveiled plans to eliminate 7,500 jobs, bringing jobs cuts to about a fifth of its workforce after a flood of withdrawals from its wealth management unit. Withdrawals amounted to 23 billion Swiss francs, the lender said today.

Its shares fell 6.9%, pacing a decline in the Dow Jones Stoxx 600 Index, which slipped 0.3% to 190.52.

In London, the FTSE 100 fell 0.5% to 3,968.4. Rio Tinto, the world's No. 3 mining company, dropped 5.2% after reporting a decline in production of iron ore. Xstrata Plc fell 6.5% and BHP Billiton fell 4%.

GlaxoSmithKline Plc gained 1.6%, leading gains in shares less tied to the economic cycle. British American Tobacco rose 4.8%.

More signs emerged that the UK's housing slump may be abating. The number of real-estate agents and surveyors saying house prices declined exceeded those reporting gains by 73.1 percentage points last month, according to the Royal Institution of Chartered Surveyors. That's an improvement of the 78.1 reading in February.

In Germany, wholesale prices had their biggest drop in 22 years in March, led by declines in energy and agriculture. Prices fell 8% from a year earlier, according to the Federal Statistics Office.

Germany's DAX 30 fell 0.2% to 4549.79 and France's CAC 40 fell 0.5% to 2985.74.

Copper rose as stockpiles monitored by the London Metal Exchange dropped 2.4% to 480,400 metric tons, stoking optimism demand is increasing for the metal used to make pipes and wire. The price of copper has soared almost 60% this year.

Copper futures for July delivery rose 3.8% to US$2.209 a pound on the New York Mercantile Exchange.

By contrast, crude oil weakened after the US Energy Department reported inventories have grown to the largest in almost two decades. Stockpiles jumped by 5.67 million barrels to 366.7 barrels million last week, the most since 1990, according to the department.

Crude oil for May delivery slipped 0.3% to US$49.25 a barrel on the New York Mercantile Exchange.

Gold futures for June delivery rose 0.2% to US$893.50 an ounce in New York.

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