While you were sleeping: Wall St gains, US trade gap widens, GM sells Opel

Friday 11th September 2009

Stocks on Wall Street gained for a fifth day as investors grew more upbeat about the prospects for recovery and Procter & Gamble forecast a pick-up in quarterly sales.

The Dow Jones Industrial Average gained 0.8% to 9627.48 and the Standard & Poor’s 500 gained 1% to 1044.14. The Nasdaq Composite rose 1.2% to 2084.02.

Consumer products group Procter & Gamble rose 4.2% to US$56.04, pacing gains on the Dow, after confirming its earnings forecast for the current quarter and predicting faster sales in the following three months.

Chevron Corp. gained 1.6% to US$71.45 after the International Energy Agency said demand for oil will be boosted by consumption in the US and China, helping lift the price of crude.

AT&T Inc. gained 2.4% to US$26.56 after research firm ISuppli Corp. said the phone company may gain an extension to its exclusive US wireless agreement for the iPhone. Yahoo Inc. gained 4.5% to US$15.45 after Bank of America recommended buying the shares.

Monsanto Co., the world’s biggest seed company, dropped 5% to US$79.30, the biggest decline on the S&P 500, after forecasting annual per-share earnings of US$3.10 to US$3.30, below estimates.

The Chicago Board Options Exchange Volatility Index, or VIX, fell 3.7% to 23.43. The index shows investors paid less to use options to insure against falling stock prices, a sign that risk is seen abating.

Helping lift stocks, Labor Department figures showed the number of American workers filing new claims for jobless benefits fell more than expected last week to 550,000, while those still collecting benefits fell to 6.1 million in the week ended August 29, a four-month low.

Commerce Department figures showed the US traded deficit widened in July as imports surged, a sign that consumers may be regaining their appetite to spend. Imports of cars in the wake of the cash for clunkers trade-in scheme also stoked imports.

The trade gap widened by 16% to US$32 billion, the biggest jump since February 1999.

US Treasury Secretary Timothy Geithner told the Congressional Oversight Panel for the US$700 billion Troubled Asset Relief Program that the US economy has strengthened enough to allow the government to shift its strategy to preparing for growth, meaning the time was near to withdraw government support measures for financial markets.

"As we enter this new phase, we must begin winding down some of the extraordinary support we put in place for the financial system," Geithner said.

US Treasuries rallied after a US$12 billion sale of 30-year bonds attracted the most demand since November 2007. The sale drew a lower-than-expected yield of 4.238%, while the bid-to-cover ratio, which measures total bids against the amount on offer, was 2.92, the highest in 10 months.

Indirect investors, which include foreign central banks, bought 46.5% of the bonds on offer.

The yield on the 30-year Treasuries tumbled 13 basis points to 4.2% while the yield on the benchmark 10-year notes slipped 12 basis points to 3.36%.

General Motors agreed to sell 55% of Opel to a group led by Canada's Magna, ending months of negotiations and signaling a victory for Magna’s Russian partner, the state-owned Sberbank.

GM is ceding control of Opel as part of its restructuring. The protracted negotiations have extended to Germany and German Chancellor Angela Merkel, who has been anxious to secure the jobs of the 50% of Opel workers based in Europe’s largest economy.

GM will retain 35% of Opel, while Magna and Sberbank will get 27.5% each and workers will take up the remaining 10%.

The US dollar fell to its weakest level against the euro in 2009 as falling US borrowing costs spurred investors to sell the greenback for higher-yielding assets.

The dollar weakened to $1.4584 per euro from $1.4557, and earlier reached $1.4613, the puniest since Dec. 18. The dollar fell to 91.7 yen from 92.04. The euro strengthened to 133.76 from 133.99.

In Europe, the Dow Jones Stoxx 600 edged up 0.1% to 240.47. Among regional benchmarks, the UK’s FTSE 100 fell 0.3% to 4987.68, Germany’s DAX 30 gained 0.4% to 5594.77 and France’s CAC 40 fell 0.1% to 3705.87.

Crude oil rose after the International Energy Agency increased its 2010 estimate for global demand to an average 85.7 million barrels a day, up 450,000 barrels a day from its August prediction.

Crude oil for October delivery rose 0.9% to US$71.95 a barrel on the New York Mercantile Exchange.

Copper futures for December delivery fell 1.6% to US$2.8765 a pound on the New York Mercantile Exchange, amid signs of rising stockpiles.

Businesswire.co.nz

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