While you were sleeping: BusinessWire overnight wrap

Tuesday 5th August 2008

Fears of rising supplies of oil, copper, platinum and other commodities led Wall Street lower on Monday with energy shares pulling back sharply ahead of this week�s Federal Reserve policy meeting.

The Dow Jones industrial average fell 42.17 points, or 0.37%, to 11,284.15. The Standard & Poor's 500 Index slid 11.30 points, or 0.90%, to 1,249.01, while the Nasdaq Composite Index dropped 25.40 points, or 1.10%, to 2,285.56.

Shares of Exxon Mobil paced the decline, shedding 3.9% to $76.60. Chevron fell 1.8% to $82.80. The S&P 500 Energy Index lost 4.9%, the steepest decline since March 19, and sank to its lowest level since February 8.

Nymex crude futures fell 5.9% since the energy index reached its record on May 20 and are down 16% from the July 3 high. The so-called crack spread, or hypothetical profit margin for processing three barrels of crude into two barrels of gasoline and one of heating oil, has tumbled 39% since May 20 to $9.90, according to data compiled by Bloomberg.

Part of the reason for oil�s slide on Monday was good news: Tropical Storm Edouard wasn�t expected to cause disruption to most offshore oil facilities in the Gulf of Mexico.

Commodities Slide

Concerns about rising inventories of other commodities contributed to a sharp reversal. Copper futures hit a six-month low. Gold dropped more than 1%.

Financials also took it on the chin on Monday after HSBC Holdings Plc, Europe's largest bank by market value, said its first-half pretax loss in North America was $2.9 billion, compared with profit of $2.4 billion in the year-earlier period.

Ahead of the start of the two-day Fed policy meeting on Tuesday, traders priced in 92% odds that the Fed will hold its benchmark interest rate unchanged at 2% tomorrow. The focus will clearly be on what the Fed has to say about the economic environment.

The benchmark 10-year Treasury note's price, which moves inversely to its yield, traded down 3/32 for a yield of 3.95%, versus 3.94% late Friday.

A US government report released on Monday showed the core PCE price index for June rose 0.3%, more than economists' forecast for a rise of 0.2%. The core year-over-year rate was 2.3%, above the Fed's presumed comfort zone.

The dollar traded at $1.5576 per euro at 6am in Tokyo. It touched $1.5515 on August 1, the strongest since June 24. The yen was at 108.25 per dollar, after falling 0.5% yesterday. Japan's currency traded at 168.64 per euro, following a 0.7% drop.

The New Zealand dollar climbed from near the weakest in 10 months as technical charts signaled the more than 2% loss in the currency of the past week was excessive. The kiwi strengthened 0.4% to 72.97 US cents.

The yen fell 0.2% versus the Australian dollar on Monday and 0.7% against the New Zealand dollar as investors resumed carry trades. In carry trades, investors borrow in low-interest-rate countries to buy assets in higher- yielding nations.

(Businesswire.co.nz)

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