While you were sleeping: SEC may ban flash trades, home resales rise

Wednesday 5th August 2009

The US Securities and Exchange Commission may ban so-called flash trades offered by exchanges such as the Nasdaq Stock Market, BATS Exchange and CBOE Stock Exchange which critics charge give unfair advantages to some investors.

Flash trades give clients of the exchanges information about buy and sell orders for a fraction of a second before the trades are routed to rival exchanges. Investors need high-speed trading software to take advantage of the information.

Democratic US Senator Charles Schumer said he had been told by SEC Chairman Mary Schapiro of the planned ban. Schapiro separately said she had asked her officials to come up with a way to quickly “eliminate the inequity that results from flash orders."

The ban would have implications for as many as 40 stock trading venues, including so-called dark pools, which match orders anonymously.

US consumer spending rose in June though household incomes fell, stoking concern recovery from recession will be slow.

Consumer spending rose 0.4% in June after a 0.1% gain in May, according to the Commerce Department. Spending fell 0.1% after adjusting for inflation.

Personal incomes fell 1.3% in June, the biggest monthly decline since January 2005, according to the Commerce Department.

Private wages and salary disbursements slid US$28.6 billion after declining US$11.3 billion in May.

Real disposable income, after taxes and adjustment for price rises, fell 1.8% in June, the department said.

The amount of after-tax income Americans saved fell to an annual rate of US$505 billion in June from US$681 billion in May. The saving rate fell to 4.6%.

Pending home resales rose 3.6% in June, according to the National Association of Realtors, about five times more than expected.

The US dollar traded near its weakest level against the euro since December as the home resales data helped underpin investors’ risk appetite.

The dollar traded at $1.4404 per euro from $1.4412 yesterday while the yen was at 137.16 versus the euro from 137.31. The yen traded at 95.22 against the dollar from 95.26.

US stocks were mixed amid concerns the steep rally has made some companies expensive and as investors digested consumer spending and housing data.

The Dow Jones Industrial Average gained 0.4% to 9320.19 and the Standard & Poor’s 500 rose 0.3% to 1005.65. The Nasdaq Composite Index increased 0.1% to 2011.31

Caterpillar Inc., the heavy equipment manufacturer, jumped 6.1% to US$47.89, leading the Dow higher, after forecasting earnings to rise to US $10 a share by 2012.

The S&P’s valuation rose to about 17.4 times company earnings of the past 12 months, the highest since September, Bloomberg reported. Per-share earnings beat estimates at 75% of the 390 companies in the S&P 500 that have released second-quarter results, according to Bloomberg. On average, earnings have dropped 32%.

Pepsico Inc. rose 5.1% to US$59.06 after agreeing to buy the rest of Pepsi Bottling Group Inc. and PepsiAmericas Inc. for about US$7.8 billion, giving it control of about 80% of its North American market.

Copper rose for the fourth straight day after data showed an increase in US sales of previously owned homes.

Copper futures for September delivery edged up 0.7% to US$2.757 a pound on the Comex division of New York Mercantile Exchange. The metal has soared 94% this year.

Crude oil declined for the first time in four days on speculation US stockpiles are growing, a signal that fuel demand may be weakening.

US crude inventories probably rose by 600,000 barrels last week, according to a Bloomberg survey. The Energy Department is due to release the data on Wednesday in the US.

Crude oil for September delivery dipped 0.3% to US$71.40 a barrel on the New York Mercantile Exchange.

Gold rose to an eight-week high as the greenback’s weakness stoked demand for the precious metal as an alternative investment. Gold futures for December delivery rose 0.9% to US$967.20 an ounce in New York.

Stocks in Europe fell from a nine-month high amid concern prices have run ahead of companies’ earnings potential and the prospects of economic recovery. The Dow Jones Stoxx 600 fell 0.3% to 227.79.

Standard Chartered Bank sank 7.5% after the UK lender raised 1.02 billion pounds by selling new shares. The lender’s first-half profit rose to US$1.88 billion from US$1.79 billion a year earlier.

UBS AG, Switzerland’s biggest lender, fell 4.3% after posting its third straight quarterly loss. The bank’s net loss widened to 1.4 billion francs from 395 million francs a year earlier and chief executive Oswald Gruebel said there are no signs yet of a sustainable economic recovery.

BMW dropped 1.7% after the world’s largest maker of luxury cars posted a 76% decline in second-quarter profit.

The UK’s FTSE 100 fell 0.2% to 4671.37, France’s CAC 40 declined 0.04% to 3476.37 and Germany’s DAX 30 dropped 0.2% to 5417.02.

Businesswire.co.nz

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