While you were sleeping: BusinessWire overnight wrap

Friday 16th January 2009

Crude oil tumbled 11% after the OPEC cartel forecast a drop in demand this year amid the worldwide economic slump.

Crude oil for February delivery fell US$4.06 to US$33.22 a barrel on the New York Mercantile Exchange and sank as low as US$33.20 a barrel, a four-week low. Crude oil demand will fall by 1.4 million barrels, or 4.2%, to 29.5 million barrels, OPEC said in a report. The assessment is for sales from its members.

Demand for fuel in the US, the world's biggest economy, dropped 6% last year, the sharpest decline in 28 years, according to the American Petroleum Institute.

Amid fresh evidence on the prolonged US slump, Labor Department figures showed initial jobless claims rose to 524,000 last week, seasonally adjusted. The claims figures come after government data showed the US economy shed 2.6 million jobs in 2008. A separate report showed producer prices fell 1.9% in December, the fifth straight decline and the Federal Reserve said manufacturing contracted in New York state and the Mid-Atlantic region.

Shares on Wall Street were little changed, reversing a slide during the trading day that was led by Bank of America Corp. and Citigroup. The two banks clawed back an earlier slump after a report the former only needs US$15 billion of government aid and the latter denied it was in talks to be nationalized.

The Dow Jones Industrial Average fell 0.3%% to 8172.74 and the Standard & Poor's 500 fell 0.6% to 837.72. The Nasdaq Composite rose 0.8% to 1502.15.

Bank of America fell 14.3% to US$8.77 after CNBC reported it may get a government guarantee of between US$100 billion and US$200 billion. It earlier tumbled as much as 28% amid speculation it needed more government funds to cope with losses from the acquisition of Merrill Lynch. Citigroup fell 8.4% to US$4.15, paring a deeper decline.

Home Depot rose 5.2% to US$23.05, leading gainers on the Dow, after Democratic leaders in the House of Representatives announced their US$825 billion economic stimulus bill, part of President-elect Barack Obama's efforts to revive the US economy. The bill includes US$550 billion of emergency spending and US$275 billion in tax benefits over two years.

The European Central Bank cut its benchmark rate by 50 basis points to 2% and ECB President Jean-Claude Trichet said rates may fall again in March as the region's economy slides further into recession.

Economic indicators point to a "significant slowing down" compared to the ECB's forecasts last month, Trichet said. Still, the ECB would probably resist cutting rates to almost zero, as the Fed has done.

The euro fell sank to $1.3025, the lowest since December 11, and was recently at 1.314, from $1.3191 while European government bonds rallied. The euro rose to 118.04 yen after earlier slipping as low as 116.23 yen. The US dollar climbed to 89.81 yen from 89.05.

The ECB rate cut wasn't enough to revive shares in Europe. The Dow Jones Stoxx 600 fell 0.9% to 191.17, paced by banks, on concern they may need yet more capital. Deutsche Bank fell 6% and Deutsche Post, which the lender is acquiring, tumbled 16%. BNP Paribas fell 5.5% and HSBC declined 4.3%.

The FTSE 100 Index fell 1.4% to 4121.11, the DAX 30 slid 1.9% to 4336.73 and the CAC 40 dropped 1.8% to 2995.88.

Copper for delivery in three months on the London Metal Exchange fell 2.3% to US$3,210 a metric ton on the LME. Aluminum fell 1.7% to US$1,470 a ton.

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