While you were sleeping: Wall St retreats, Microsoft sells bonds

Tuesday 12th May 2009

Shares on Wall Street and in Europe fell, led by financials and resource companies, as some investors deemed banks expensive after the recent surge and price of crude oil and metals eased.

The Dow Jones Industrial Average fell 1.8% to 8418.77 and the Standard & Poor’s 500 declined 2.2% to 909.24. The Nasdaq Composite dropped 0.5% to 1731.24.

American Express declined 8.3% to US$26.04, JPMorgan Chase slipped 8% to US$35.83 and Bank of America dropped 8.7% to US$12.94. Oil company Chevron fell 3.4% to US$68.00.

General Motors dropped 11% to US$1.44. The automaker may move its headquarters from Detroit and is in restructuring talks with labor unions as bankruptcy becomes more likely.

Europe’s Dow Jones Stoxx 600 fell 1.4% from a four-month high to 206.59. BHP Billiton dropped 1.3%, platinum producer Lonmin fell 10% as prices of copper, platinum and gold fell. Royal Dutch Shell slid 2.2% and BP Plc dropped 1.3% as crude oil snapped a three-day rally.

The UK’s FTSE 100 fell 0.6% to 4435.50, France’s CAC 40 declined 1.9% to 3248.67 and Germany’s DAX Index shed about 1% to 4866.91.

HSBC Holdings edged up 0.1% after Europe’s biggest bank said bad loans will increase this year as the region’s economy deteriorates and 2009 will be a “tough” year as bad loans increase and the economy deteriorates.

Crude oil fell as stocks declined, stoking speculation demand for fuel will wane and stockpiles rise. Crude for June delivery fell 1.5% to US$57.78 a barrel on the New York Mercantile Exchange.

Copper declined on speculation demand may abate in China, the world’s biggest user of the metal, after stockpiles monitored by the Shanghai Futures Exchange climbed last week to the highest since February.

Copper futures for July delivery fell 2.7% to US$2.0885 a pound on the New York Mercantile Exchange. Gold futures for June edged down 0.2% to US$913.50 an ounce in New York.

The euro weakened against the yen and the US dollar as stocks fell, reducing risk appetite and stoking demand for the world’s biggest currencies.

The euro fell to 132.28 yen from 134.23 and traded at $1.359 against the dollar from $1.3634. The greenback weakened to 97.33 yen from 98.47.

US Treasuries advanced as stocks fell and the government took a two-week breather from selling more debt.

The yield on 30-year bonds fell 6 basis points to 4.22% while the 10-year note yield fell eight basis points to 3.22%.

European Central Bank President Jean-Claude Trichet said the global economy is near a turning point, who chaired a meeting of global central bankers today, said policy makers see first signs of an economic recovery.

“As far as growth is concerned, we’re around the inflection point in the cycle, that’s the sentiment,” Trichet said today at a press conference at the Bank for International Settlements in Basel, Switzerland. A number of recent reports are “encouraging, but it’s no time for complacency.”

Microsoft Corp. announced its first-ever bond sale, offering US$3.75 billion of debt as it benefits from an AAA credit rating to raise relatively low-cost funds to support its US$40 billion stock buyback and to make investments in data centres.

The sale will be split between 5-, 10- and 30-year notes, according to Reuters.

The five-year notes may pay a yield of 0.95 percentage point more than similar-maturity US Treasuries, and both the 10- and 30-year bonds may pay a spread of 1.05 percentage point, Bloomberg reported, citing a person familiar with the plan.

President Barack Obama unveiled proposals for eight new taxes, amounting to US$58 billion, on securities dealers, life insurance products and estates to help fund an overhaul of America’s health-care system. That’s in addition to some US$1 trillion in tax increases over the next decade starting in 2011.

The Obama administration lifted its forecast for this year's budget deficit by US$89 billion, citing the impact of recession, rising jobless claims and the cost of corporate bailouts. The deficit is estimated to reach US$1.84 trillion, or 12.9% of gross domestic product in the fiscal year ending September 30. That’s up from a February forecast of US$1.75 trillion.

The economies of Middle East countries, including the world’s three largest oil producers - Saudi Arabia, the United Arab Emirates and Kuwait – will contract as oil prices fall and oil companies pare back production, according to the International Monetary Fund’s Regional Economic Outlook.

The region has been hurt by the global economic slump which has driven down oil prices and sapped foreign investments, the IMF said.

Businesswire.co.nz

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