World Summary: RED INK SPLASHED OVER STOCKMARKETS 08:03, Thursday, 6 September 2007
Sydney - Thursday - September 6: (RWE Aust Business News) - US equities produced another erratic session with plenty of red ink on the floor of Wall Street.
At one stage the Dow Jones Industrial Average index was trailing 195 points before bargain hunters came to the rescue and pushed the key index back to a 143 deficit on the close.
The Standard & Poor's 500 index lost 17 points and the Nasdaq Composite fell 24.
Global markets have been stressed overnight over renewed concerns about weakness in the housing and credit markets.
US and European investors sent key markets sliding as fears grew over a possible American recession triggered by tighter credit and weaker housing.
Treasuries did much better business as the flight to safety accelerated leaving equities to languish after losing their buying support.
The US 10-year benchmark cash paper yield fell 8 points to 4.47 per cent.
There was even more bad news from the latest data showing pending sales of previously owned US homes plunging 12.2 per cent in July.
The National Association of Realtor's Pending Home Sales Index, based on contracts signed in July, fell to a reading of 89.9, the lowest since September 2001 when the index stood at 89.8.
The association attributed the some of the decline to mortgages falling through at the last moment.
The fall was much bigger than the 2pc decline in the index economists were expecting.
The decline in the pending sales index in the past three months has been the fastest at any time since the housing market began to slow.
Planned lay-offs by US companies surged 85pc in August due to turmoil in the sub-prime mortgage market.
The data raised expectations of a weak employment number from the government on Friday, adding to the possibility that the Federal Reserve could lower its Fed Funds target rate at its September 18 meeting.
Meanwhile, Home Depot Inc, America's biggest hardware group, expects no recovery in the housing market for the rest of 2007 and continued weakness into next year, chief executive Frank Blake said.
Mr Blake also told a Goldman Sachs retailing conference that while the retailer was committed to a plan to repurchase $22.5 billion in stock, completing the buy-back was likely to take longer than initially thought because of economic factors.
Policy makers around the world have offered little solace to markets since the tumult began.
Turmoil in credit and mortgage markets that has persisted for months is "far from over" a senior US Treasury Department official told Congress.
The crisis sparked by rising defaults in the market for US mortgages for risky borrowers has spread to the broader housing sector and to the money markets essential for corporate funding needs.
The crisis has continued to spill into the corporate world, as mortgage insurer MGIC Investment Corp and bond insurer Radian Group Inc terminated a $5.47bn merger because of deteriorating market conditions.
In the Fed's six weekly Beige Book summary of anecdotal economic conditions, the central bank said the tighter credit conditions also were affecting commercial real estate, but credit quality remained good for most consumer and business borrowers.
Outside of real estate, reports that the turmoil in financial markets had affected economic activity during the survey period were limited.
The Fed's beige book said that though the housing slump has "deepened" the overall economy has seen little impact so far, suggesting rate cuts may not be as aggressive as markets expect.
Moody's Investors Service said it could last well into 2008.
Global credit markets will likely not return to normal for up to six months as a consensus develops on pricing credit spreads, it said.
It said the immediate problem facing the financial system is a general blow to confidence which has brought the credit markets to a virtual standstill.
In contrast, the US manufacturing sector had healthy growth in the second quarter but the housing market slump will restrain growth for the rest of the year before rebounding in 2008, a survey showed.
Manufacturing production growth will slow to 2pc in 2007 from 4.7pc in 2006, before rebounding to 2.9pct in 2008, the Manufacturers Alliance/MAPI Quarterly Industrial Outlook report suggested.
China, India and other developing countries need to take steps to protect themselves against a possible recession in the United States by lifting domestic demand, a United Nations agency report disclosed.
In the market Apple unveiled a new iPod with a touchscreen and Wi-Fi Internet capability, incorporating some features from the iPhone.
The company also slashed the price of the iPhone by $200 in an effort to boost sales.
Boeing expects the first if its 787 jetliners will be delivered on time in May 2008, although the initial test flight of the aircraft has been pushed back another two months.
Mattel announced its third major toy recall this summer, this one including its Barbie brand. The recall covers about 775,000 Chinese-made toys believed to contain unsafe levels of lead in paint.
WALL STREET... the Dow Jones industrial average index settled 143.39 points lower at 13,305.47. The S&P 500 lost 17.13 to 1472.29. The Nasdaq Composite finished 24.29 points behind at 2605.95 while the 100 futures index dropped 26.13 to 1994.38 on the close. Treasuries climbed on the back of weaker equities. The 10-year note jumped 21/32 to 102 8/32, cutting the yield 8 points to 4.47pc. The 30-year bond yield fell 6 points to 4.77pc while the 2-year note yield dropped 1 points to 4.00pc.
US DOLLAR... is changing hands at 115.09 yen, compared with the 116.19 seen previously. The euro is at 1.3651 from 1.3613 previously while sterling is at 2.0202 from 2.0141. On the Swiss franc the US dollar is trading at 1.2044 against 1.2110.
AUSTRALIAN DOLLAR... is at US82.17c compared with US82.23c on yesterday's local close. Offshore the Aussie posted a high in New York of US82.66c and the low for the session was US81.83c. The Aussie crosses were 94.55 yen (prev 95.53), 0.6019 euros (pre 0.6041) and 40.68 pence on sterling (pre 40.83).
AUSTRALIAN SHAREMARKET... may continue to ease with the September futures showing a fall of 61 points to 6190. The ASX 200 index ended 30.6 points behind at 6262.7 while the All Ordinaries index declined 22.8 points to 6274.3 yesterday. Today the Australian Bureau of Statistics publishes the August jobs data.
Ex dividends are Adelaide Brighton, Amcor, APN News, Aequs, Premium Investors, Schaffer and Transmetro. Artemis is ex an entitlement and TNG a bonus issue.
EUROPEAN SHAREMARKETS... The UK FTSE-100 dropped 106.1 to 6270.70, the French CAC-40 slumped 121.17 to 5551.55, the German DAX Xetra retreated 133.74 to 7588.03 while Zurich tumbled 123.28 to 8843.07. In other regional markets Amsterdam shed 8, Brussels 55, Madrid General 37, Milan 677 but Oslo bucked the trend, adding 0.17 points.
METALS... COMEX spot gold (Oct) dipped 90c to $684.30 oz. The December contract slipped 80c to $690.70 oz. Sept silver lost 9.1c to $12.19 oz. October platinum shed 70c to $1273 oz, September copper fell 4.35c to 327.90c lb in New York.
The London Metal Exchange: Official cash ask prices compared with the previous session: copper gained $119.50 to $7420 tonne, tin eased $5 to $14,650 while lead rose $99 to $3090. Zinc lost $4.50 to $2930.50, aluminium fell $8 to $2397.50 and nickel ended $325 lower at $27,725 tonne.
The 3 month ask prices were copper $7210 (prev $7295), tin $14,800 ($14,650), lead $2950 ($2995), zinc $2850 ($2950), aluminium $2450 ($2468) and nickel $27,500 ($28,600).
OIL... October crude rose 65c to $75.73 barrel with a high of $75.86 and low of $74.75 barrel. The November contract gained 41c to $74.67 barrel with a high of $74.75 and low of $73.81 barrel. Brent ICE for October rose 43c to $74.35 barrel with the high $74.45 and low $73.74 barrel.
The Reuters CRB index fell 0.28 points to 310.92.
ENDS
ASX Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held