While you were sleeping: Bank jitters hurt Wall St; China manufacturing speeds

Monday 2nd November 2009

Lenders led Wall Street lower on Friday, amid concerns about the strength of Citigroup’s balance sheet and increased scrutiny of banks.

The US Securities and Exchange Commission is close to settling with financial institutions including Bank of America and UBS as the result of a three-year probe into manipulation of the municipal bond market, according to the Wall Street Journal.

Bank of America dropped 7.3% to US$14.58 on Friday, leading the Dow lower. JPMorgan Chase fell 5.8% to US$41.77.

Citigroup declined 5.1% to US$4.09 after accounting consultant Robert Willens said the lender faces a US$10 billion deferred-tax charge.

The Dow fell 2.5% to 9712.73 on Friday and the Standard & Poor’s 500 declined 2.8% to 1036.19. The Nasdaq Composite fell 2.5% to 2045.11.

Shares also fell in Europe on Friday, with the Dow Jones Stoxx 600 index dropping 2% to 236.93. Among national benchmarks, the UK’s FTSE 100 fell 1.8% to 5044, Germany’s DAX 30 dropped 3.1% to 5414.96 and France’s CAC 40 fell 2.9% to 3607.69.

US consumer spending fell 0.5% in September, the first decline in five months, according to Commerce Department figures on Friday. The Reuters/University of Michigan final index of consumer sentiment weakened to 70.6 in October from 73.5 in September.

Still, the Institute for Supply Management-Chicago’s business barometer rose to a 13-month high of 54.2.

Figures yesterday showed Chinese manufacturing expanded at the fastest pace in 18 months in October, suggesting demand for that nation’s goods will pick-up as global economic growth revives.

The Purchasing Managers Index rose to 55.2, seasonally adjusted, last month from 54.3 in September, according to the Federation of Logistics and Purchasing. Export orders climbed to 54.5 from 53.3. China economy may grow at an annual pace of 9.5% this quarter, according to Zhang Liquin, an official of the State Council Development and Research Center.

Chinese Commerce Minister Chen Deming told a conference in Shanghai that global economic recovery could be at risk if governments withdrew their stimulus measures too early.

While there are increasing signs of global recovery, “there are still many uncertainties,” Chen said at the weekend forum. Global growth will “plunge.”

The dollar had the biggest gain against the euro in six months as data stoked concern the global recovery may run out of puff.

The dollar rose 0.8% to US$1.4715 per euro on Friday and the yen gained 2.2% to 132.62 against the euro. The greenback weakened to 90.08 yen.

Copper weakened on Friday, as the greenback gained and stocks fell, stoking fears demand for the metal will wane. Copper for December delivery fell 2.4% to US$2.955 a pound on the New York Mercantile Exchange.

Crude oil tumbled more than 3% as disappointing economic data in the US stoked doubts demand for fuel would accelerate. US crude for December delivery fell US$2.87 to US$77 a barrel in New York.

Gold fell as the greenback’s strength sapped demand for the precious metal as an alternative investment.

Gold futures for December delivery fell 0.6% to US$1,040.40 an ounce on the New York Mercantile Exchange.

Businesswire.co.nz

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