While you were sleeping: Gold sets new high, greenback rises, stocks slip

Thursday 8th October 2009

Gold rose to its second daily record as investors were drawn to the precious metal as an alternative investment on speculation currencies are set to weaken.

Gold futures for December delivery reached a new high of US$1,049.70 an ounce and were recently up 0.2% to US$1,042 an ounce, adding to the previous session’s 2.2% advance.

The US Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.2% to 76.49. It has fallen 6% this year.

The greenback snapped a four-day slide against the euro on concern its decline has been too far, too fast. The greenback had extended its losses since the Reserve Bank of Australia raised its benchmark interest rate this week, while the Federal Reserve is expected to keep its target close to zero for longer.

The dollar strengthened to US$1.4662 against the euro from US$1.4722 and weakened to 88.62 yen from 88.82. The euro slipped to 129.94 yen, from 130.76.

Deutsche Bank cut its 2010 dollar-euro forecast, predicting the dollar will weaken to US$1.550 per euro in the first quarter before strengthening to US$1.40 by the end of 2010. It had previously predicted the greenback would strengthen to as much as US$1.15 per euro.

The stronger greenback helped stoke demand at the US$20 billion sale of 10-year notes, which drew a lower-than-expected yield of 3.21%. Indirect bidders, which include foreign central banks, bought 47.4% of the notes on offer, down from 55.3% in last month’s sale.

The yield on 10-year Treasuries fell 8 basis points to 3.175%. The yield on 30-year Treasuries fell 8 basis points to 3.994%.

Russia’s central bank intervened in the foreign exchange markets to weaken the ruble, bringing purchases of dollars in the past two days to US$2.5 billion, Bloomberg reported, citing Alexey Borichev, ING Groep’s head of foreign-currency trading in Moscow.

Stocks on Wall Street slipped on the eve of the start of the earnings season for the third quarter, which is kicked off after the bell by Alcoa Inc. The aluminium producer may post a loss before one-time items of 9 US cents a share. Earnings of Standard & Poor’s 500 companies probably fell for a ninth straight quarter.

The Dow Jones Industrial Average fell 0.4% to 9696.10 and the S&P 500 dipped 0.04% to 1054.34. The Nasdaq Composite eased 0.02% to 2103.14.

Pulte Homes fell 4.5% to US$9.99, leading the S&P 500 lower on concern the federal government won’t extend a US$8,000 tax credit for first home buyers, removing an incentive to reach for property. KB Home fell 2.5% to US$15.04.

Bank of America gained 1.9% to US$17.32, leading the Dow higher, after Wells Fargo said the shares are trading at the deepest discount to earnings among major US banks and raised its rating to “outperform” from “market perform.”

ConocoPhillips, the third-biggest US oil company, gained 2.3% to US$49.54 after announcing plans to sell US$10 billion of assets over the next two years to strengthen its balance sheet. It will lift its quarterly dividend by 6% to 50 cents.

Stocks dipped in Europe after revised figures showed the region’s economy contracted more than initially estimated in the second quarter.

The Dow Jones Stoxx 600 fell 0.4% to 240.30, led by a 5.9% drop in French banking group Societe Generale after Societe de Financement de l’Economie Francaise ended state-guaranteed fund raising for banks.

Among regional benchmarks, the UK’s FTSE 100 fell 0.6% to 5640.90, Germany’s DAX 30 declined 0.3% to 5640.75 and France’s CAC 40 fell 0.4% to 3756.41.

J Sainsbury Plc fell 3.3% after the third-largest UK supermarket chain reported a slowdown in sales growth.

Telefonica SA fell 1.6% after offering to buy Brazil’s GVT (Holding) for 2.55 billion euros, trumping an offer from Vivendi SA.

Europe’s economy shrank 0.2% in the second quarter, greater than the initial 0.1% estimate, according to the European Union’s statistics office. The region’s economy shrank 2.5% in the first quarter.

From a year earlier, the economy contracted 4.8%, more than the 4.7% initial estimate. The European Commission predicts growth resumed at a 0.2% pace in the third quarter.

Crude oil record its first decline in three days in New York after government figures showed inventories of gasoline are creeping up.

Gasoline supplies last week rose by 2.94 million barrels to 214.4 million, according to the Energy Department. Stockpiles of distillates, which include heating oil, rose by 679,000 barrels to 171.8 million, the highest since 1983.

Crude oil for November delivery dropped 2.4% to US$69.20 a barrel on the New York Mercantile Exchange.

Copper also declined for the first time in three days on signs of weaker demand. Copper futures for December delivery edged down 0.5% to US$2.77 a pound in New York.

Businesswire.co.nz

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