While you were sleeping: US stimulus plan pared to US$789b

Thursday 12th February 2009

US lawmakers have trimmed back the size of President Barack Obama's stimulus package to some US$789 billion from the US$840 billion the Senate approved yesterday, a sign that Republicans are winning concessions on the controversial spending plan.

The Obama administration's spending proposals have been under the spotlight, with Treasury Secretary Timothy Geithner's bank rescue proposal criticized for lack of detail and workability by investors who sent shares lower around the globe.

Major US stock benchmarks were little changed overnight, swinging between gains and losses. Bank of America climbed 6.8% to US$5.94 and Citigroup rose 5.4% to US$3.53, nudging the Dow Jones Industrial Average higher. Financials led the Dow lower when Geithner unveiled a proposal worth some US$2 trillion to soak up toxic bank assets and stimulate lending to consumers and businesses.

The Dow climbed 0.1% to 7898.04. Exxon Mobil fell about 3% to US$73.93 after an Energy Department report showed oil stockpiles rose by a greater-than-expected 4.72 million barrels to 350.8 million barrels in the week ended Feb. 6. Rising inventories suggest a weak US economy is sapping demand for fuel.

Crude oil for March delivery fell 3.4% to US$36.29 a barrel on the New York Mercantile Exchange.

Nvidia Corp., which makes graphics chips and cards for computers, dropped 14% to US$8.07 after posting a bigger-than-expected fourth-quarter loss. Walt Disney fell 1.7% to US$18.45 and Hewlett-Packard dropped 1.6% to 34.65.

The Standard & Poor's 500 Index climbed 0.7% to 833.19 and the Nasdaq Composite climbed 0.5% to 1531.62.

Gold advanced to a seven-month high as some investors bought the precious metal as a haven amid concern the US federal government's aid packages won't be enough to revive the world's biggest economy.

Gold futures for April delivery rose 3% to US$941.80 an ounce on the New York Mercantile Exchange.

The dollar and yen strengthened against the euro for a second day amid concern about the lack of detail in Geithner's rescue package.

The dollar rose $1.2894 per euro from $1.2913. The yen gained to 116.65 per euro from 116.83. The greenback was little changed at 90.46 yen.

The US federal budget deficit widened more than expected in January to US$83.8 billion from a US$17.8 billion surplus in the same month of 2008. The US is heading for a record annual deficit exceeding US$1 trillion as spending rises.

In Europe, the Dow Jones Stoxx 600 Index fell 0.4% to 193.13 as financial fell. Credit Suisse Group rose 1% after Switzerland's second-biggest bank said it may a strong start to 2009 after posting a record loss of 6.02 billion Swiss francs in the fourth quarter of 2008.

Investors of Fortis rejected a state-mandated breakup that was to have included an offer from France's BNP Paribas to buy its banking unit in Belgium. BNP Paribas fell 2% on France's CAC 40. The benchmark index climbed 0.2% to 3027.72, led by an 8% gain for Sanofi Aventis.

Germany's DAX 30 rose 0.5% to 4530.09 as DFaimler climbed 4%. Hypo Real Estate fell more than 6% after announcing it will take a further 10 billion euros in government aid. In the UK, the FTSE 100 Index rose 0.5% to 4234.26.

Rio Tinto, the third-biggest mining company, rose 3.5% as the Financial Times reported it has agreed to a US$19.5 billion cash injection from China's state-owned Chinalco to help reduce its hefty debt levels. The deal is to be announced today, the FT said.

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