While you were sleeping: US stocks slide as shoppers spend less

Tuesday 1st December 2009

Shares on Wall Street edged lower as U.S. consumers held back on purchases at the start of the holiday shopping season, dimming the recovery hopes for the world’s biggest economy.

Disappointing sales were compounded by concerns about the potential failure of Dubai World, after the Dubai government said it wouldn’t accept responsibility for the company’s tens of billions of dollars of debt.

In midday trading, the Dow Jones Industrial Average fell 0.17% to 10,292.47 and the Standard & Poor’s 500 declined 0.27% to 1088.55. The Nasdaq Composite climbed 0.54% to 2126.81.

The holiday shopping season kicked off last Friday, the day after US Thanksgiving. Sales on Black Friday and Cyber Monday, today in the US, were estimated to be below last year.

The National Retail Federation on Monday said the average shopper spent US$343.31, down from US$372.57 a year ago, this past weekend, a sign that consumers remain somewhat reluctant spenders.

Shares in online retail giant Amazon.com Inc surged 2.6% to a record US$135.14, while Abercrombie & Fitch Co gained 1.1% to $US40.41. Both were helped by a broker’s upgrade.

But many other US retailers declined. Wal-Mart Stores Inc was down 0.2%, Macy's falling 2.6% and Gap down nearly 1%. The S&P Retail Index fell 1.3%.

Traders had a tough time in Europe too where there was a higher degree of concern about the woes of Dubai World. The Dow Jones Stoxx600 Index slid 1.2% to 239.58 in London.

Banks in the U.K. led the declines. Royal Bank of Scotland had arranged more loans than any other bank for Dubai World in the last two years, according to JPMorgan Chase & Co.

Shares in RBS dropped 4.5%, Lloyds Banking Group Plc, the U.K.’s largest mortgage lender, slid 5.9%, and Standard Chartered Plc fell 2.4%.

Shares in Bank of Ireland dropped 5.3% after it said it would report a 3.4 billion euro loss on selling some of its “bad” loans to the country’s “bad” bank.

Among national benchmarks across Europe, Germany’s DAX dropped 1.03% to 5627.06 and France’s CAC 40 declined 1.11% 3680.15 and the U.K.’s FTSE 100 lost 0.93% to 5197.10.

On the monetary policy and economic front, investors are waiting for a meeting of the European Central Bank on Thursday and the latest US jobs report on Friday.

The ECB is expected to comment on how it plans to begin to reverse its loose monetary policy.

The meeting comes after inflation reappeared on radar screens in Europe overnight. Prices in the 16-nation euro region rose 0.6% from a year earlier after falling 0.1% in October, the European Union statistics office in Luxembourg said. Economists surveyed by Bloomberg News had projected a gain of 0.4%.

On the currency front, the ICE Futures U.S. dollar index, a gauge of the greenback's performance against six other major currencies, was down 0.2% at 74.888.

The euro rose 0.2% to US$1.4987, pulling back from last week's 15-month peak just above US$1.5140.

The Japanese yen stayed firm after hitting a 14-year high of 84.81 yen last week, according to Reuters data. The dollar last traded down 0.3% at 86.12 yen, while the euro fell 0.3% to 129.12 yen.

In commodities markets, gold dipped and oil edged slightly higher.

Spot gold stood at US$1172.20 an ounce by 1638 GMT, versus US$1176.70 an ounce late in New York on Friday

U.S. light crude oil futures for January were up 30 cents at US$76.35 a barrel by 1503 GMT. London Brent crude gained 30 cents to US$77.48.

Businesswire.co.nz

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