While you were sleeping: Wall St rises on jobs, housing data; Dubai default risk

Thursday 26th November 2009

Stocks rose on Wall Street after stronger-than-expected U.S. consumer spending and new home sales, and fewer claims for jobless benefits reassured investors the world’s biggest economy will pick up pace.

U.S. household purchases climbed 0.7% last month, according to Commerce Department figures. Disposable income rose 0.4%, the biggest gain in six months.

Sales of new homes climbed 5.1% in October from a year earlier, more than expected, as the looming end to the US$8,000 first-home buyer’s tax credit spurred buyers, according to a separate Commerce Department report. Much of the gain was in southern states. The median price slipped to US$212,200 from US$213,200 in October 2008.

The number of homes available for sale fell to a seasonally adjusted 239,000, the smallest number since 1971.

Labor Department figures showed the number of Americans applying for unemployment insurance fell by 35,000 to 466,000 last week.

The Dow Jones Industrial Average climbed 0.3% to 10459.86 and the Standard & Poor’s 500 advanced 0.4% to 1109.56. The Nasdaq Composite rose 0.3% to 2176.60.

The Chicago Board Options Exchange Volatility Index, or VIX, known as Wall Street’s `fear gauge,’ fell 1.7% to 20.52.

Heavy earth moving equipment manufacturer Caterpillar gained 1.5% to US$58.88, leading the Dow higher. Retailers were among the biggest gainers on the S&P 500, with women’s clothing chain Limited Brands Inc. rising 4.8% to US$17.43, JC Penney Co. gaining 4% to US$30.41 and jeweller Tiffany & Co. climbing 4.6% to US$43.75.

Moody’s Corp., the ratings company, fell 0.6% to US$23.43 after Connecticut Attorney General Richard Blumenthal said he would sue credit agencies for "negligent, or even reckless" ratings alleged to have contributed to losses in state pension funds.

Connecticut would join Ohio, which filed suit against Moody's, Standard & Poor's and Fitch Ratings last week.

The dollar sank to a 15-month low against a basket of six currencies as stronger-than-expected U.S. economic data stoked investors’ risk appetite, encouraging them to seek higher yielding assets in other currencies.

The Federal Reserve may lag behind other central banks in raising interest rates from near zero until it is convinced the economy is on a strong footing.

The Dollar Index fell 0.5% to 74.45.

The euro rose 0.8% to $1.5132 and slipped 0.2% to 132.04 yen. The greenback sank 0.9% to 87.32 yen, the least since January.

Helping underpin the euro, state-controlled Dubai World said it will seek agreement from creditors to delay payments on US$59 billion of debt, including Islamic bonds which are structured so as not to directly pay interest.

Dubai’s Department of Finance said the company, whose Nakheel building unit is responsible for the artificial islands being built along its coast, will ask creditors for a “standstill” agreement, buying time to negotiate extending maturities of its debt.

Contracts protecting against default rose 116 basis points to 434 basis points, Bloomberg reported, citing credit-default swap prices from CMA Datavision. The contracts are now higher than Iceland’s.

Crude oil rose as the U.S. data lifted demand for fuel and as the weakening dollar prompted some investors to seek commodities as an alternative investment.

Crude for January delivery rose 0.6% to US$76.48 a barrel in electronic trading on the New York Mercantile Exchange.

Gold climbed to a new record as the greenback weakened, spurring investors to buy the precious metal as an alternative investment. Speculation that India may add to its gold reserves also helped lift prices.

Gold reached a record US$1,184.70 an ounce. On the New York Mercantile Exchange, gold futures for February delivery rose 1.2% to US$1,181.70 an ounce.

Copper headed for a 14-month high. Copper for three-month delivery on the London Metal Exchange rose to US$6,985 a tonne from $6,870 a tonne.

Stocks in Europe also gained after the more upbeat U.S. data, helping soothe nerves after Dubai World’s announcement.

The Dow Jones Stoxx 600 Index rose 0.5% to 248.09.

Among national benchmarks, the U.K.’s FTSE 100 rose 0.8% to 5364.81 after the Office for National Statistics said gross domestic product fell 0.3% in the third quarter, less than the previous estimate of 0.4%.

Germany’s DAX 30 gained 0.6% to 5803.02 and France’s CAC 40 rose 0.7% to 3809.16. Greece’s ASE Index fell 2.3% as shares of Piraeus Bank and Alpha Bank tumbled.

Compass Group, the world’s biggest catering company, climbed 6.3% after posting earnings that beat estimates.

WS Atkins plc, the U.K. engineering design company, jumped 7.5% after saying it is confident about its performance for the second half of the year.

Businesswire.co.nz

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