While you were sleeping: Crude oil, metals gain; US stocks slip

Tuesday 25th August 2009

Crude oil reached a 10-month high, briefly touching US$74.81 a barrel on speculation a reviving world economy will stoke demand for fuel.

Gains in stocks and upbeat comments from central bankers over the weekend helped fuel the rally in commodities, while data from China yesterday showed that nation’s implied oil demand rose for a fourth month in July.

Crude oil for October delivery rose 0.6% to US$74.34 a barrel on the New York Mercantile Exchange, having earlier reached its highest since late October.

Copper reached an 11-month high on optimism about world growth. Copper futures for December delivery advanced 1.3% to US$2.9305 a pound on the New York Mercantile Exchange.

US gold fell 1.2% to US$943.70 an ounce in New York as a stronger US dollar eroded demand for the precious metal as an alternative investment.

Stocks on Wall Street erased earlier gains. The Dow Jones Industrial Average was little changed at 9509.28 and the Standard & Poor’s 500 Index shed 0.1% to 1025.57. The Nasdaq Composite fell 0.1% to 2017.98.

Weighing on financial stocks, SunTrust Banks Inc. said lenders face more credit losses in 2010 while commercial real estate demand may remain weak.

Exxon Mobil climbed 2% to US$71.30 and Chevron gained 1.5% to 70.76 as the price of crude oil rise. Boeing Co. rose 2.8% to US$47.13, leading the Dow higher, after WestJet said it would buy 14 additional next-generation 737-700s.

Nouriel Roubini, the economics professor at New York University, said there is an increased risk of a double-dip recession as governments and central banks end their stimulus efforts. The global economy will probably emerge from recession in the second half of this year, he wrote in a Financial Times column.

US Treasuries rose after the Federal Reserve purchased some US$6.1 billion of government securities and as stocks pared their gains.

The yield on two-year notes fell nine basis points to 1.01% ahead of the Treasury’s sale of US$42 billion of the debt on Tuesday in the US.

The yield on the benchmark 10-year Treasuries fell eight basis points to 3.49%.

The US dollar edged up against the euro as shares on Wall Street reversed earlier gains, reviving the appeal of the greenback as a haven.

The dollar strengthened to $1.4298 per euro from $1.4326. The yen traded at 135.16 against the euro from 135.21. The dollar rose to 94.51 yen from 94.38.

The Obama administration said it won’t intervene in General Motors Co.'s choice of a buyer for its Opel unit as union leaders for the unit’s 25,000 workers in Germany stepped up pressure by rescinding an agreement to forego holiday pay, according to Reuters.

In Europe, shares rose after European Union statistics office Eurostat said industrial new orders rose a greater-than-expected 3.1% in June, to be 25% down in the year.

The Dow Jones Stoxx 600 Index gained 0.9% to 236.84, the third daily advance.

BHP Billiton, the world’s largest mining company, gained 3.6% and Rio Tinto, the third-largest resource company, jumped 4.9% as metals rallied. Xstrata Plc rose 4.3%.

While commodity companies are the most-expensive stocks in the Standard & Poor’s 500 Index, they are becoming relatively good value, according to a Bloomberg report. Investors are paying 17.7 times their estimated 2010 earnings, lower than their long-term average of 23.2 times.

National benchmark indexes in Europe rose. The UK’s FTSE 100 gained 0.9% to 4896.23 and Germany’s DAX 30 rose 1% to 5519.75. France’s CAC 40 gained 1% to 3652.17.

Warner Chilcott Plc, the Irish contraceptives maker, soared 30% after agreeing to buy Procter & Gamble’s pharmaceuticals unit for US$3.1 billion in a deal that will bolster profits immediately and produce tax gains.

Deutsche Bank AG said it plans to raise new Tier 1 debt with the sale of euro fixed-rate perpetual notes, a move that could rekindle Europe's market for hybrid subordinated financial issues. The sale would be for less than 1 billion euros as the bank tests investor appetite, Reuters reported.

Businesswire.co.nz

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