While you were sleeping: US dollar gains; Blackrock eyes Barclays unit

Tuesday 9th June 2009

The US dollar rose to the highest in a week against the euro amid speculation the world’s biggest economy will revive enough by the end of the year to warrant the Federal Reserve raising its interest rate target from near zero.

The euro also weakened against the yen after Standard & Poor’s cut Ireland’s credit rating to AA, the second downgrade this year.

The dollar traded at $1.3901 per euro from $1.3968 and slipped to 98.41 yen from 98.64. The euro fell to 136.84 yen from 137.81.

The Dollar Index, which tracks the greenback against currencies of major trading partners, rose 0.2% to 80.87. The London Interbank Offered Rate, or Libor, for three-month loans in dollars, rose 2 basis points to 0.65%.

Traders see a 37% chance the Fed will raise its benchmark interest rate by its September meeting, based on futures on the Chicago Board of Trade, Bloomberg reported. A week ago, the odds were 15%.

The US economy may climb out of recession by September, economist Paul Krugman said in a lecture at the London School of Economics. “Things seem to be getting worse more slowly,” he said. “There’s some reason to think that we’re stabilizing.”

US Treasuries fell as the US government prepares to sell US$65 billion of new debt, on concern the market will struggle to absorb more government debt with signs the economy may revive.

The yield on two-year Treasuries rose 11 basis points to 1.39% while the 10-year yield rose 5 basis points to 3.88%.

The UK’s Barclays Plc slipped 0.4% to 282.58 pence amid reports that US fund manager BlackRock is the frontrunner to acquire its asset management arm, BGI, for about US$12 billion. Blackrock is vying with Bank of New York Mellon to buy the business, Reuters reported.

Under the proposed deal, Barclays could emerge with 20% of an enlarged asset management business, Reuters said, without identifying the source of the information.

BGI, based in San Francisco, has US$1.5 trillion in assets under management making it the world’s biggest fund manager. Buying the business would increase Blackrock’s assets to some US$2.8 trillion, almost twice the amount of second-ranked State Street.

Stocks on Wall Street pared their declines and end mixed. The Dow Jones Industrial Average rose 0.02% to 8764.49 and the Standard & Poor’s 500 fell 0.1% to 939.14. The Nasdaq Composite weakened 0.4% to 1842.40.

American Express led gainers on the Dow, climbing 2.8% to US$25.65, while JPMorgan Chase rose 2.4% to US$35.39 and Bank of America advanced 1.7% to US$12.06.

Home Depot rose 1.6% to US$24.56. Du Pont led decliners, sliding 2.9% to US$26.21.

Freeport-McMoRan Copper & Gold fell 1.2% to US$56.48 as prices of metals declined. The Reuters/Jefferies CRB Index of 19 raw materials fell 0.8%.

McDonald’s Corp. fell 1.9% to US$58.72 after reporting sales at US outlets open at least 12 months rose a lower-than-expected 2.8%.

Apple Inc. fell 0.6% to US$143.85 after the tech company launched new MacBook Pro laptops at a lower price, with faster chips and batteries that last up to seven hours. Apple will also roll out an updated Mac operating system, Snow Leopard, in a challenge to Microsoft’s new Windows 7. Microsoft stock fell 0.4% to US$22.05.

The company also said it sold more than 40 million iPhones and iPod Touch media players.

Crude oil fell as the US dollar strengthened, eroding demand for commodities denominated in the US currency.

Crude oil for July delivery slipped 0.2% to US$68.30 a barrel on the New York Mercantile Exchange.

Gold futures for August delivery fell 1.1% to US$952 an ounce in New York. Copper for June delivery fell 3.1 cents to US$2.2530 on the New York Mercantile Exchange.

Stocks in Europe fell, with the Dow Jones Stoxx 600 Index sliding 0.7% to 209.29.

Anglo American Plc fell 4.7% as prices of metals dipped. BHP Billiton, the world’s biggest mining company, dropped 3.9% and Rio Tinto Group fell 2.5%.

Lloyds Banking Group fell 7.7% after garnering bids for 87% of the shares in its rights offer.

Air France-KLM Group fell 3.4%, leading a decline in airline stocks after the International Air Transport Association said airline losses this year may reach US$9 billion, twice the previous forecast. British Airways fell 3.7% and discount carrier Ryanair Holdings fell 3.9%.

Swedbank AB rose 7.4% and SEB AB rose 12% after Latvia increased spending to defend its currency.

Deutsche Postbank AG rose 7.1% after the Handelsblatt newspaper reported that Deutsche Bank may acquire the company after lifting its stake close to 30%.

The UK’s FTSE 100 fell 0.8% to 4405.22 while Ireland’s ISEQ fell 2.2% to 2866.77 after S&P cut the nation’s credit rating to AA with a “negative” outlook. Germany’s DAX 30 fell 1.4% to 5004.72 and France’s CAC 40 slipped 1.5% to 3289.66.

Businesswire.co.nz

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