While you were sleeping: US manufacturing, China's currency mutterings

Thursday 2nd July 2009

US manufacturing contracted at the slowest pace in 11 months, lifting optimism the world’s biggest economy is stabilising. Shares on Wall Street rose after the report.

The Institute for Supply Management’s factory index rose for the sixth month in a row in June, to 44.8, with a measure of production rising for the first time since August and a gauge of exports edging closer to breakeven. New orders fell to 49.2 from 51.1 in May.

The US National Association of Realtors said contracts to buy existing homes edged up 0.1% in May, following a 7.1% gain in the previous month. Still, US mortgage applications fell last week, suggesting the recovery in the property market will be slower than expected.

The Mortgage Bankers Association’s index of applications fell 19% to 444.8 last week from 548.2 the previous week. Construction spending fell 0.9% in May after rising for the first time in seven months in April, according to the Commerce Department.

ADP Employer Services said US companies cut 473,000 jobs last month after a 485,000 decline in May.

US stocks rose on optimism the manufacturing data and contracts to buy existing homes shows the worst is over for the recession in America.

The Standard & Poor’s 500 Index climbed 0.4% to 923.33 and the Dow Jones Composite Index gained 0.7% to 8504.06. The Nasdaq Composite rose 0.6% to 1845.72.

Kraft Foods Inc. gained 5% to US$26.61, leading the Dow higher, after announcing plans to expand factories in Russia. Chip-maker Intel Corp. rose 3% to US$17.04 and Coca-Cola Co. climbed 2.5% to US$49.18.

Investors are awaiting the second quarter earnings season, which starts with Alcoa Inc. next week. Earnings of companies on the S&P 500 may have declined 34% in the second quarter and are heading for a 22% slide in the third quarter, according to analyst estimates compiled by Bloomberg.

General Mills Inc. jumped 3.9% to US$58.18 after the food maker lifted its 2010 earnings forecast, citing a decline in costs of ingredients, after posting a 94% jump in fourth-quarter profit.

Freeport-McMoRan Copper & Gold Inc. rose 0.9% to US$50.57 as the price of copper climbed. Oshkosh Corp. jumped 27% to USD$18.43 after the company won a US$1.06 billion contract to build all-terrain trucks for use by the military in Afghanistan.

Ford Motor Co. slipped 2.6% to US$5.91 after reporting better than expected US sales. Japan’s Nissan Motor Co. also had US sales that beat estimates. Still, General Motors, Toyota Motor Corp. and Chrysler had worse than expected sales last month.

Chrysler’s rate of cash burn has slowed since the automaker emerged from bankruptcy, chief executive Sergio Machionne told Bloomberg in an interview. He said stopping the “bleeding” is “priority No. 1.”

The US dollar and yen fell after Reuters reported that China is seeking further debate on the adoption of a new global reserve currency and amid speculation the global recession is abating.

The dollar fell to $1.4152 against the euro from $1.4033 and edged up to 96.62 yen from 96.36. The yen weakened to136.74 per euro from 135.21.

China has asked to debate proposals for a new global reserve currency at the Group of Eight summit in Italy next week, Reuters reported, citing G-8 sources. China has suggested the International Monetary Funds unit of account, called Special Drawing Rights, could have a greater role.

Crude oil fell below US$69 a barrel after government figures showed a pick-up in US gasoline inventories before the Independence Day holiday. Gasoline stockpiles rose by 2.3 million barrels last week, according to the US Energy Information Administration.

US crude oil fell US$1.13 to US$68.76 a barrel in New York.

Copper had the biggest gain in four weeks after data from China, the world’s biggest consumer of the metal, showed an increase in manufacturing last month. China’s Purchasing Managers’ Index rose to 53.2, seasonally adjusted, in June from 53.1 in May.

Copper futures for September delivery rose 3.8% to US$2.3575 a pound on the New York Mercantile Exchange.

Gold futures for August delivery gained 1.2% to US$938.80 an ounce in New York.

Stocks in Europe gained after better manufacturing data across the globe stoked optimism the worldwide slump is abating. The Dow Jones Stoxx 600 Index rose 1.8% to 209.46.

Retailer Carrefour SA jumped 5.7% on optimism 4.5 billion euros of cost cutting and upgraded stores will revive earnings.

Commerzbank AG jumped 19% after analysts at Morgan Stanley said the lender’s shares may gain on Germany revised plans to tackle bad banks.

The UK’s FTSE 100 rose 2.2% to 4340.71 and Germany’s DAX 30 rose 2% to 4905.44. France’s CAC 40 gained 2.4% to 3217.

Marks & Spencer Plc rose 3.8% after the UK clothing retailer posted a smallest quarterly drop in sales for two years.

Dutch ING will combine its local insurance brands and separately manage its bank and insurance operations, aiming for an annual income boost of 100 million euros after cutting 800 jobs.

ING Groep NV rose 1.9% after the biggest financial group in the Netherlands announced plans to unify its Dutch insurance operation and separately manage its bank and insurance businesses.

Businesswire.co.nz

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