While you were sleeping: Bank stocks fall, VIX rises; US manufacturing improves

Wednesday 2nd September 2009

Bank stocks fell in the US and Europe amid concern lenders may face more losses, while the VIX, known as Wall Street’s fear gauge, climbed and US Treasuries gained.

The Dow Jones Industrial Average fell 2% to 9310.60 and the Standard & Poor’s 500 declined 2.2% to 998.04. The Nasdaq Composite fell 2% to 1968.89.

Bank of America led the Dow lower, falling 6.4% to US$16.46. American Express declined 5.4% to US$31.98 and JPMorgan Chase slid 4% to US$41.67. Citigroup fell 9.2% to US$4.54.

Mortgage finance company Fannie Mae tumbled 18% to US$1.59 and Freddie Mac fell 17% to US$1.90.

American International Group led a slump in insurers, falling 20% to US$36, the biggest decline on the S&P 500, after being cut to `underperform’ from ‘market perform’ at Sanford C. Bernstein & Co.

EBay Inc. fell 2.1% to US$21.68 after agreeing to sell 65% of Skype, the Internet phone call business, to a group of private investors for about US$$2 billion. EBay had previously planned an IPO of Skype.

Ford Motor Co. fell 4.9% to US$7.22 even after reporting a 17% gain in August sales, helped by the federal government’s cash for clunkers scheme.

Sales at General Motors fell 20% and Chrysler Group’s declined 15%. Among Japanese automakers, Toyota’s US sales rose 6.4% and Honda Motor’s gained 9.9%.

The Chicago Board Options Exchange Volatility Index, or VIX, jumped 12% to 29.18, the highest in almost two months. The index measures the cost of using options to insure against declines in the S&P 500.

In Europe, the Dow Jones Stoxx 600 Index fell 1.8% to 231.66. Among regional benchmarks, the UK’s FTSE 100 declined 1.8% to 4819.70, with Lloyds Banking Group sinking 4.8% and HSDBC down 4.2%.

Germany’s DAX 30 dropped 2.5% to 5327.29 and France’s CAC 40 fell 1.9% to 3583.44. Commerzbank, Germany’s second-largest lender, gained 3.6% after a newspaper reported chief executive Martin Blessing predicting a return to profit next year.

BHP Billiton fell 2.6%, pacing a decline in resource stocks as commodity prices weakened. Royal Dutch Shell Group fell 1.4% as the price of crude oil declined.

Stocks fell even after the Institute for Supply Management said US manufacturing grew in August for the first time in 19 months while a measure of US home sales increased. The ISM gauge of factories rose to 52.9 last month, beating expectations and moving back into expansion.

Contracts to buy pending homes increased 3.2%, more than expected, in July and the sixth straight gain, according to the National Association of Realtors.

Manufacturing also picked up in Europe. Markit Economics said manufacturing in the euro-zone rose to 48.2 from 46.3 in July, remaining below the 50 level that separates a contraction from growth.

Manufacturing in the UK fell to 49.7 from 50.2, according to a separate report.

The yen and the US dollar gained against the euro as declining shares drove investors to the world’s biggest currencies as a haven. Through the global recession, the euro has tended to gain when signs of green shoots appear, while the yen and euro rise when the data prints bleak.

The yen strengthened to 132.03 against the euro from 133.48 and the greenback rose to $1.4214 against the European currency from $1.4334. The dollar slipped to 92.86 yen from 93.12.

Crude oil fell as the dollar strengthened and stocks markets declined. Crude for October delivery slipped 14 cents to US$69.82 a barrel on the New York Mercantile Exchange.

Gold futures gained as weaker stocks stoked demand for the precious metal as an alternative investment.

US December gold futures rose US$3 to US$956.50 an ounce in New York.

Businesswire.co.nz

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