While you were sleeping: US consumer confidence falls, dollar gains

Wednesday 28th October 2009

US consumer confidence unexpectedly fell this month, a sign that a weak jobs market is curbing Americans’ enthusiasm for spending. The US dollar rose and Treasury bonds advanced.

The Conference Board’s confidence index fell to 47.7 from a revised 53.4 in September, the researcher said in a statement. The proportion of respondents who said it was hard to find a job rose to 49.6 from 47.

The confidence survey outweighed data showing house prices may be starting to stabilise. The S&P/Case-Shiller home-price index of 20 metropolitan areas rose 1%, seasonally adjusted.

The US dollar strengthened after the confidence report, which trimmed investors’ appetite for higher yielding, or riskier investments.

The dollar gained to US$1.4805 per euro from US$1.4876 and weakened to 91.74 yen from 92.19. The euro slipped to 135.78 yen from 137.10.

The Dollar Index, which measures the greenback against a basket of six major currencies, edged up 0.1% to 76.12.

New York University professor Nouriel Roubini said investors risk creating “huge” bubbles by borrowing dollars to buy higher-yielding assets which could cause another financial crisis.

“This game is becoming dangerous,” Roubini told a conference in South Africa. “We have the mother of all carry trades.”

Treasuries rose, helped by stronger-than-expected demand at the auction of US$44 billion of two-year notes, which drew a yield of 1.02%, lower than the 1.051% forecast in a Bloomberg survey.

The bid-to-cover ratio, which compares total bids to the amount of bonds on offer, was 3.63, the highest in more than two years.

Indirect bidders, which include foreign central banks, bought 44.5% of the notes on offer.

Shares on Wall Street were mixed. The Dow Jones Industrial Average rose 0.3% to 9895.47 and the Standard & Poor’s 500 declined 0.1% to 1065.64. The Nasdaq Composite dropped 1% to 2120.80.

American Express gained 3.2% to US$36.00 after Goldman Sachs Group lifted its earnings estimates for the credit card company.

Alcoa Inc. dropped 3% to US$12.89 as prices of metals declined.

Oil companies Exxon Mobil climbed 2.3% to US$74.94 and Chevron gained 1.9% to US$76.87 as the price of crude oil strengthened and BP Plc posted earnings that beat estimates.

Copper fell after the drop in US consumer confidences stoked speculation demand will falter for the metal used to make pipes and wires.

Copper futures for December delivery fell 0.5% to US$2.996 a pound on the New York Mercantile Exchange.

Gold fell as the US dollar strengthened, trimming demand for the precious metal as an alternative investment.

Gold futures for December delivery fell 0.5% to US$1,037.90 an ounce in New York.

In Europe, shares were mixed. The Dow Jones Stoxx 600 Index rose 0.2% to 242.27. Among national benchmarks, the UK’s FTSE 100 rose 0.2% to 5200.97, Germany’s DAX 30 fell 0.1% to 5635.02 and France’s CAC 40 was little changed at 3743.95.

BP, Europe’s second-largest oil company, gained 4.8% after reporting third-quarter earnings before some items fell a smaller-than-expected 47% to US$4.67 billion. BP also increased its cost-cutting target for the next 12 months.

Wind turbine manufacturer Vestas surged 7.6% after Royal Bank of Scotland raised its rating on the stock to ‘buy.’

Royal Bank of Scotland Group tumbled 8%, Lloyds Banking Group fell 6.2% and Barclays declined 3.6% amid speculation the European Union will compel lenders to sell assets to win government bailout approval.

Akzo Nobel fell 6.3% after the coatings manufacturer said the global economy’s recovery is “fragile.”

Businesswire.co.nz

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