While you were sleeping: BusinessWire overnight wrap

Tuesday 3rd February 2009

US manufacturing activity edged higher in January, the first month since June last year not marked by a deterioration, while consumers trimmed spending in December, figures showed.

The Institute for Supply Management's factory index unexpectedly rose to 35.6 last month, from 32.9 in the previous month. A reading below 50 indicates a contraction and the index has been sub-50 since February 2008.

Consumer spending dropped 1% in December while separate figures showed non-residential construction fell 0.6% and total building dropped 1.4%, rounding out a record annual slump, according to the Commerce Department.

Shares were mixed on Wall Street amid concern that recession is worsening in the world's biggest economy and bank shares declined on speculation President Barack Obama will tie further aid to increased lending to help kick-start credit markets.

Most US banks tightened lending criteria for businesses and consumers in the past three months, according to the Federal Reserve.

"Large fractions of domestic banks continued to report a tightening of policies on both credit-card and other consumer loans," according to the Fed's quarterly Senior Loan Officer survey.

The Dow Jones Industrial Average fell 0.5% to 7959.29 and the Standard & Poor's 500 Index rose 0.2% to 827.49. The Nasdaq Composite gained 1.7% to 1502.27 as Intel jumped 5% to US$15.36.

Bank of America fell 9% to US$5.98, leading the Dow lower. JPMorgan Chase slid 2.2% to US$24.93. Citigroup gained 0.9% to US$3.58.

Obama should nationalize banks that need a bail-out until private buyers can be found, Paul Krugman, a Nobel Prize recipient for economics, said in a column in the New York Times yesterday.

Macy's Inc. fell 5% to US$8.51 after the second-largest US department store chain announced plans to cut 7,000 jobs, buy back almost US$1 billion of bonds and more than halve its quarterly dividend to 5 cents a share.

Morgan Stanley rose 0.4% to US$20.31 after Bloomberg reported it plans to cut as many as 1,800 jobs, or 4% percent of its employees, after profit dwindled. The job cuts will be in administration and back-office areas, according to the report, which cited a person familiar with the situation.

Copper fell to the lowest in a week after weak US economic data heightened concern about a worldwide economic slump. Copper futures for March delivery fell 2.6% to US$1.431 a pound on the New York Mercantile Exchange.

Crude oil fell the prospects of waning demand for fuel. Crude for March delivery fell 3.9% to US$40.05 a barrel on the New York Mercantile Exchange.

Gold had the biggest decline in three weeks. Gold futures for April delivery fell 2.3% to US$907.20 an ounce in New York.

The yen rose against the US dollar and the euro after the US economic reports. The dollar weakened to 89.70 yen from 89.92 and fell to $1.2831 per euro from $1.2813. The yen strengthened to 115.02 per euro from 115.23.

Russia posted the weakest economic growth in six years for 2008, hurt by a decline in the ruble and waning global demand for the nation's exports of raw materials. Gross domestic product rose 5.6%, according to the Economy Ministry.

Shares fell in Europe, led by banks and energy companies, on jitters about the weakening US economy. The Dow Jones Stoxx 600 Index fell 2.6% to 186.32.

Barclays Plc declined 11% after Moody's Investors Service cut the UK lender's credit rating on the prospect of credit losses. France's BNP Paribas slipped 8.7% after saying it won't get a boost to its capital ratio from buying assets off Fortis. UBS AG fell 11%.

The European Central Bank is following the US in preparing to establish a so-called 'bad bank' that would hold lenders' toxic assets.

French Finance Minister Christine Lagarde said the government is likely to revise its economic forecasts to project a contraction in 2009 as the jobless rate rises. France's economy may have shrunk 0.8% in the fourth quarter, according to the national statistics office, Insee.

In London, the FTSE 100 fell 1.7% to 4077.78, Germany's DAX 30 dropped 1.6% to 4271.04 and in France, the CAC 40 fell 1.5% to 2930.05.

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