World Summary: WALL ST BOUNDS AHEAD ON GM AGREEMENT
08:05, Thursday, September 27, 2007
Sydney - Thursday - September 27: (RWE Aust Business News) - Wall
Street investors produced a late bout of confidence, lifting the Dow to
fresh highs and pushing lingering worries about credit markets into the
background.
Financial markets breathed a sigh of relief after motor industry
workers decided to return to work following the two-day walkout.
General Motors and the UAW said they reached a tentative
agreement on a new national contract for about 74,000 US vehicle workers
that includes an historical restructuring of GM's obligations for UAW
retiree health care.
The fragile pact, which must be ratified by UAW-GM members, marks
a turning point in Detroit.
General Motors shares soared more than 9 per cent or $3.22 to
$37.64 on the news, leading Dow stocks.
Both Ford and Chrysler say they are ready to work with the UAW
now that the GM labour talks are out of the way.
The agreements at Ford and Chrysler are likely to be broadly
based on the GM deal, including the establishment of a new UAW-aligned
health care trust, an industry source said.
At the bell on Wall Street, the Dow climbed 100 points to
13,878.15, still a way from the key barometer's all time peak of 14,140
set in mid July.
The S&P 500 index gained 8 points while the Nasdaq Composite
gained 16 and the Nasdaq 100 index 12.
In Treasuries, markets were flat as dealers absorbed an $18
billion 2-year note auction on moderate demand.
The notes produced a high yield of 4.00pc with 86.89pc at the
high end.
Bid-to-cover ratio was 3.29, and indirect sales were $6.15
billion with primaries taking $11.07bn.
It showed that foreign buyers were not losing their appetite for
US debt.
Bonds pared losses despite investors switching to stocks in
reaction to the GM resolution.
Meanwhile there was more bad news on the sub-prime crisis.
A Goldman Sachs analyst said Merrill Lynch, the world's largest
brokerage, faces a $1.5bn third-quarter loss on its fixed-income
business, driven by $4bn in asset write-downs connected to leveraged
loans and mortgages.
But this was offset by a top US Treasury Department official
saying that, while recent credit market strains would exact a penalty on
US economic growth, he was optimistic the penalty would be small.
"There is also no question that it will take a bit of time to
work out," Treasury under secretary for domestic finance Robert Steel
said in a TV interview.
"But we're in a period of very strong growth all over the world.
"The US economy is strong and we're optimistic the penalty will
be modest and we'll resume a period of growth in the second half of the
year."
In other reassuring news, US inflation pressures are easing and
the economy should manage a soft landing, the Federal Reserve Bank of
Dallas said.
"The latest data reinforce the impression of an economy in which
growth remains moderate and inflationary pressures are likely to continue
to subside," it said in a national economic review.
"A soft landing with a slow convergence to trend growth is
probable, unless uncertainties among households and investors suddenly
trigger a sharp consumption slowdown or the credit crunch spreads beyond
housing the sector."
On the economic scene, durable-goods orders fell 4.9pc last
month, and a barometer of business spending fell, sharpening concerns
that the recent financial turmoil may be damping the mood of corporate
America.
Northern Rock is in preliminary talks with potential
buyers, and the UK mortgage lender suspended its dividend.
Fremont General's shares slumped after the real-estate lender
said an investor group isn't ready to close its planned $80m purchase of
preferred stock in the company's industrial bank.
Consumer price data from Germany's most populous state suggested
inflationary pressures rose quicker than expected in September, raising
the prospect of a sharp pick-up in Euro zone inflation this month.
Consumer prices in the state of North Rhine-Westphalia increased
0.3 percent on the month in September, with annual inflation accelerating
to 2.6pc from 2pc in August, the state's statistics office reported.
"This could knock-on adversely euro zone inflation ... probably
pushing the headline rate above the 2.0pc target, possibly as high as 2.3
percent, above the 2.1pc rate expected," said Bearn Stearns economist
David Brown.
Data from German states offer the first insight into inflation
trends for the euro zone.
Germany accounts for nearly one third of the index for the
13-nation currency bloc.
WALL STREET... The Dow Jones Industrial Average settled 99.5
points higher at 13,878.15. Standard and Poor's 500 index rose 8.21 to
1525.42. The Nasdaq Composite index rose 15.58 to 2699.03 while the
Nasdaq 100 improved 11.55 to 2088.38 on the close. The 10-year note
dipped 1/32 to 100 30/32 with yield up 1 point to 4.63pc. The 30-year
bond yield was steady at 4.90pc while the 2-year note yield eased 1 point
to 3.98pc.
US DOLLAR... is changing hands at 115.48 yen, compared with the
114.64 seen previously. The euro is at 1.4131 from 1.4148 previously
while sterling is at 2.0157 from 2.0186. On the Swiss franc the US dollar
is trading at 1.1698 against 1.1659.
AUSTRALIAN DOLLAR... is at US87.68c compared with US87.22c on
yesterday's local close. Offshore the Aussie posted a high in New York of
US87.68c and the low for the session was US87.10c. The Aussie crosses
were 101.22 yen (pre 100.15), 0.6204 euros (pre 0.6174) and 43.49 pence
on sterling (pre 43.28).
AUSTRALIAN MARKET... should rally with the December futures
contract showing a rise of 42 points to 6589. The ASX 200 index ended 1.6
points easier at 6481.4 after being up 18 and down 29, while the All
Ordinaries index put on 0.5 of a point to 6491.4 yesterday. Today the ABS
publishes quarterly job vacancy data. AMCIL holds its AGM. Cadence
Capital, Devine and Hunter Hall Global are ex dividend. Farm Pride is ex
an entitlement.
EUROPEAN MARKETS...The UK FTSE-100 rose 36.1 to 6433.00, the
French Paris CAC-40 gained 49.18 to 5690.77, the German DAX Xetra firmed
34.71 to 7804.15 while Zurich put on 30.56 to 8859.08. Other regionals
followed the trend. Amsterdam rose 4, Brussels 45, Madrid General 21,
Milan 265 and Oslo ended 2 in front.
METALS... COMEX spot gold (Oct) fell $3.40 to $728.60 oz. The
December contract lost $3.30 to $735.50 oz. Sept silver dipped 6.6c to
$13.416 oz. October platinum rose $2.10 to $1351.50 oz. September copper
added 15 points to 361.30c lb in New York.
The London Metal Exchange: Official cash ask prices compared with
the previous session: copper rose $92 to $8082 tonne, tin slipped $25 to
$15,300 while lead rose $105 to $3565. Zinc gained $101.50 to $3002,
aluminium rose $57 to $2432.50 and nickel ended $255 higher at $32,760
tonne.
The 3-month ask prices were copper $7970 (prev $8010), tin
$15,300 ($15,400), lead $3450 ($3410), zinc $3000 ($2935), aluminium
$2475 ($2460) and nickel $31,100 ($32,600).
OIL... November crude rose 77c to $80.30 barrel with a high of
$80.82 and low of $78.44 barrel. The December contract added 25c to
$78.86 barrel with a high of $79.50 and low of $77.33 barrel. Brent ICE
for November lost 19c to $77.43 barrel with the high $78.29 and low
$76.36 barrel.
The Reuters CRB index rose 0.23 points to 331.92.
ENDS
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