While you were sleeping: Dollar gains, Obama meets bankers

Monday 30th March 2009

The US dollar rebounded against the euro on Friday amid speculation the European Central Bank will follow the Federal Reserve in buying its own bonds to lift the region's economy.

Weak data out of the euro-zone included figures showing industrial orders tumbled 34% in January from the same month a year ago, worse than economists had forecast and a record decline. Industrial production fell 17% in January, while the jobless rate climbed to a more-than two-year high.

German Finance Minister Peer Steinbrueck on Friday said rising debt within the euro-zone could undermine the euro

Agreed European limits on debt are "not taken so seriously by some," Steinbrueck said.

France suffered its worst economic contraction since 1974 in the fourth quarter, with the economy shrinking 1.1% from the third quarter, according to the statistics office, Insee.

The euro fell almost 2% to $1.3298 in late afternoon trading in New York, its biggest drop since early January, ahead of the Group of 20 meeting on London this week, where leaders hope to thrash out a unified position on tackling the global financial crisis.

The yen advanced against the euro and the US dollar as investors repatriated funds before the March 31 year-end. The dollar fell 0.8% to 97.85 yen and the euro fell 2.5% to 130.03 yen.

Economic indicators were more upbeat in the US Consumer spending gain for a second straight month in February, stoking optimism the world's biggest economy may be climbing out of its fourth-quarter trough.

Consumer spending, which makes up more than two-third of US economic activity, climbed 0.2% last month, after a revised 1% in January, according to the Commerce Department.

Stocks on Wall Street ended the week lower, as some investors took advantage of a rally that extended more than a week to sell some of their holdings. The Dow Jones Industrial Average fell 1.9% to 7776.18 while the Standard & Poor's 500 Index declined 2% to 815.94. The Nasdaq Composite fell 2.6% to 1545.20.

Banks were among the biggest decliners on the Dow. Citigroup slipped 6.8% to US$2.62 and JPMorgan Chase declined 5.8% to US$27.40. Bank of America dropped 3.2% to US$7.34.

Still, the S&P 500 is heading for its biggest monthly gain since 1991 on optimism about federal government plans to soak up banks' toxic assets and better-than-expected economic data.

IBM fell 4.7% to US$94.15 amid concern its talks to acquire Sun Microsystems are dragging on while the benefits of a takeover may be limited.

President Barack Obama met chief executives of banks including Wells Fargo and JPMorgan Chase on Friday, urging them to "show some restraint," he later said in an interview with CBS News.

"Show that you get that this is a crisis and everybody has to make sacrifices," Obama told the bank executives, according to the account of the meeting he gave CBS.

For their part, the bank executives agreed with Obama's plan to rid lenders of heir toxic assets.

The Reuters/Jefferies CRB Index of 19 commodities fell 2.4% to 222.26 as the dollar rebounded.

Copper futures fell on Friday as the US dollar rallied, trimming the metal's gain this year to about 30%.

Copper futures for May delivery fell 1% to US$1.836 a pound on the New York Mercantile Exchange.

Gold fell as the dollar's rebound sapped demand for the precious metal as a haven. US gold futures for April delivery fell 1.8% to US$923.20 an ounce on Friday in New York.

Crude oil for May delivery fell $1.96 to US$52.38 a barrel on the New York Mercantile Exchange.

In Europe, the Dow Jones Stoxx 600 fell 1.1% to 177.17 as Infineon declined 11% and Air France dropped 7.8%.

Barclays surged 24%, leading gainers after the Guardian newspaper reported that the UK's Financial Services Authority had concluded the lender has sufficient capital reserves to survive the economic downturn. That means Barclays won't need to be part of the government's toxic asset insurance scheme.

The FTSE 100 fell 0.7% to 3898.85. Lloyds Banking Group rose 10% while Prudential dropped 5.8%. Germany's DAX 30 fell 1.3% to 4203.55, led by a 5% decline for Metro AG and a 4.2% slide for Adidas.

Commerzbank rose 10%, leading German financials higher, after saying it had identified more than 50 billion euros of toxic debt that will be managed separately, a sign it may be able to ring-fence its bad loans.

France's CAC 40 fell 1.8% to 2840.62.

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