While you were sleeping: BusinessWire overnight wrap

Friday 19th December 2008

Crude oil fell below US$38 a barrel for the first time in four years amid speculation the global economic slump will sap demand for fuel, hurting prices even as OPEC cuts production.

The Institute of International Finance, a body representing the world's biggest banks, said the global economy will contract for the first time in about 50 years in 2009, led by a collapse of growth in developed nations and a slowdown in emerging markets.

Crude oil for January delivery dropped 3.2% to US$38.77 a barrel on the New York Mercantile Exchange, extending its slide from the record US$147.27 reached in July. Among evidence of the extent of the slowdown, a gauge of the outlook for the US economy last month had its biggest annual drop since 1991.

The Conference Board's index of leading indicators fell 0.4% in November from the previous month, to be 3.7% lower than a year earlier. Labor Department figures showed the number of Americans making first-time applications for unemployment benefits fell to 554,000 in the week ended Dec. 13, from 575,000 in the previous week, which was a 26-year high.

The Philadelphia Federal Reserve Bank's manufacturing index remained negative this month, indicating a contraction, at minus 32.9 from 39.3 in November.

US Treasury Secretary Henry Paulson may ask Congress to release the second portion of the US$700 billion TARP program amid speculation the Bush administration's plan to rescue General Motors and Chrysler will chew into the funds.

Paulson is in talks with advisers on seeking the approval of the Congress to uplift the rest of the aid program, Bloomberg reported, citing people familiar with the situation.

Shares on Wall Street headed lower, with Exxon Mobile falling 3.6% to US$78.19 and Chevron declining 3.7% to US$73.96 after oil fell. General Motors sank 13% to US$3.81 after denying reports it was holding merger talks with Chrysler and the White House said it wants to avoid a disorderly collapse of the auto industry.

The Dow Jones Industrial Average fell 1.8% to 8667.99 and the Standard & Poor's 500 Index declined 1.4% to 891.99. The Nasdaq Composite fell 1.3% to 1559.32.

The US dollar climbed from a 12-week low against the euro and strengthened against the yen, on speculation the bank of Japan will follow the Federal Reserve in cutting rates and take other measures to weaken its currency.

The dollar strengthened to $1.4301 per euro from $1.4419. The yen weakened to 89.4 per dollar from 87.24. Earlier this week, the yen reached a three-year high 87.14 per dollar.

The European Central Bank cut the rate it charges banks for overnight deposits and boosted its emergency lending rate to try to free up credit availability. Starting on Jan. 21 the bank's deposit rate will be cut to 100 basis points below its benchmark interest rate from 50 basis points, while the marginal lending rate will rise to 100 basis points above the benchmark from 50 points.

European stocks fell for a second day, with the Dow Jones Stoxx 600 Index slipping 0.1% to 197.31.

Carrefour SA, the world's second-largest retailer, led decliners of France's CAC 40 after cut its forecast for profit growth this year, citing a slowdown in consumer spending and discounting by rivals. The retailer fell 7.4%, helping nudge the CAC 40 down 0.2% to 3234.15 and driving down retail stocks across Europe.

Germany's DAX 30 rose 1% to 4756.4, led by a 13% advance for Continental. Lufthansa rose 2.3%. In London, the FTSE 100 Index climbed 0.2% to 4330.66, led by an 8% gain for Schroders and a 6.3% advance by British American Tobacco.

Figures yesterday showed UK retail sales unexpectedly gained last month, snapping a two-month slide. Sales rose 0.3% in the month to be 1.5% higher on the year, according to the Office for National Statistics said today in London.

Copper fell to a four-year low as stockpiles of the metal rose and demand fell. Inventories of copper rose 0.7% to 324,175 metric tons, the highest in more than four years, according to the London Metal Exchange. Copper futures for March delivery fell 5.2% to $1.3015 a pound in New York.

Gold fell as the U.S, dollar clawed back some ground, reducing the appeal of the precious metal as an alternative investment. Gold futures for February delivery fell 0.9% to US$860.60 an ounce on the New York Mercantile Exchange.

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