While you were sleeping: Dollar weakens, EU's growth outlook, China trade spat

Tuesday 15th September 2009

The US dollar reached its weakest level against the euro in 12 months as the cost of borrowing in the greenback fell to a record low, spurring investors to sell the currency for higher yields elsewhere.

The dollar fell to as little as $1.4653 per euro and was recently at $1.4609, from $1.4571. The yen weakened 0.6% to 90.97 versus the dollar and fell 0.7% to 132.96 against the euro.

The London interbank offered rate, or Libor, for three-month loans in dollars sank to a record low 0.295%. The greenback became more profitable and less risky to fund carry trades than the yen last month, according to Bloomberg, which cited the difference in Sharpe ratios.

The Dow Jones Industrial Average edged up 0.2% to 9626.80 and the Standard & Poor’s 500 rose 0.6% to 1049.34. The Nasdaq Composite gained 0.5% to 2091.78.

Sprint Nextel Corp. jumped 10% to US$4.15, leading the S&P 500 higher, after the UK’s Sunday Telegraph reported that Germany’s Deutsche Telekom has asked Deutsche Bank for advice on a possible takeover bid.

Tenet Healthcare Corp. rose 5.5% to US$5.75 after the hospital manager raised its 2009 earnings forecast.

Delta Air Lines climbed 6.7% to US$8.60 after the world's biggest airline lifted its forecast third-quarter operating margin as fuel costs abate. The margin is expected to be 3% to 4% in the third quarter, it said.

Delta’s load factor would be about 82% in September and October, in line with year-earlier levels.

US consumers are still cautious about spending, and are avoiding dining out, even as the US economy shows signs of recovery, according to a survey by America's Research Group. More than 52% of consumers said they eat out less frequently than three months ago, Reuters reported. Some 45.7% of Americans plan to spend less on holiday shopping this season.

A trade war may be brewing between the US and China after America imposed special duties on Chinese tyres. China said it will request World Trade Organisation consultations with the US over the move, which was announced by President Barack Obama. It also began an anti-dumping investigation into chicken products from the US and said it would look into auto imports from America.

Obama said in a speech that the tyre tariff wasn’t intended to be a protectionist move.

"We invoke provisions of existing agreements, we do so not to be provocative or to promote self-defeating protectionism," he said.

Goodyear Tire & Rubber Co. shares climbed 3% to US$17.78.

Stocks in Europe were mixed. The Dow Jones Stoxx 600 Index slipped 0.3% to 240.93.

BHP Billiton fell 1% as prices of metals declined.

Deutsche Telekom fell 1.2% after a newspaper report that it is considering a bid for Sprint Nextel and may need to tap shareholders for cash.

Among regional benchmarks, the UK’s FTSE 100 rose 0.2% to 5018.85, France’s CAC 40 fell 0.1% to 3730.61 and Germany’s DAX 30 slipped 0.1% to 5620.24.

Germany sold US$4 billion of bonds in its first sale denominated in the greenback since 2005, Bloomberg reported, citing a person familiar with the transaction.

The three-year notes were priced to yield 25 basis points below the benchmark mid-swap rate, according to the report.

The European Union said the region probably climbed out of recession this quarter as the EU economy began to respond to the massive fiscal stimulus from its governments.

Europe’s economy may expand 0.2% this quarter and grow 0.1% in the fourth quarter, according to the European Commission, which kept its full-year forecast at a contraction of 4%.

Copper fell for a fourth day as stockpiles monitored by the London Metal Exchange rose to a four-month high. Inventories gained 0.5% to 319,800 metric tons and have grown 7% this month, while in China, the biggest consumer of the metal, supplies gained 12% last week.

Copper for December delivery fell 1.5% to US$2.8045 a pound on the New York Mercantile Exchange.

Gold fell from an 18-month high as some investors took advantage of the rally, driven by the weak US dollar, to reduce holdings of the precious metal.

Gold futures for December delivery fell 0.5% to US$1,001.10 an ounce in New York.

Crude oil fell as US refineries took out capacity to undertake maintenance.

Crude oil for October delivery slipped 0.6% to US$68.87 a barrel on the New York Mercantile Exchange.

Businesswire.co.nz

Comments from our readers

No comments yet