Thursday, August 26, 2010

US stocks rise on bargain hunting; yen eases

NEW YORK: U.S. stocks staged a comeback on bargain hunting after suffering steep early losses on disappointing economic data on Wednesday, Aug 25 while the yen pulled back from a 15-year high on mounting speculation Japanese authorities may intervene to stem the currency's rise.

Wall Street reeled in early trade after the government reported that sales of new U.S. single-family homes fell in July to their lowest level in 47 years and orders of long-lasting manufacturing goods posted their biggest decline in July in 1-1/2 years had driven.

The data, the latest evidence that the U.S. economic recovery is stalling, stoked fears of a double-dip recession and drove down world stocks for a fifth straight day.

Positive momentum grew on Wall Street, however, after the benchmark S&P 500 index, which had sagged as much as 1 percent earlier, bounced back from a breach of the 1,040 level, which is considered a key technical support. All three major indexes rose, breaking a four-day losing streak.

But without underlying support from economic fundamentals, there was little confidence that Wall Street could sustain gains.

"Overall, this is still a very careful market," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. "Until we see a package of decidedly positive data, this market is going to be vulnerable."

Gold rose to an eight-week high as investors sought to traditional safe havens. U.S. Treasuries, which had gained earlier on fears about the economy's path, came under selling pressure as U.S. equities' turned around.

The Dow Jones industrial average was up 19.61 points, or 0.20 percent, at 10,060.06. The Standard & Poor's 500 Index was up 3.46 points, or 0.33 percent, at 1,055.33. The Nasdaq Composite Index was up 17.78 points, or 0.84 percent, at 2,141.54.

World equities measured by the MSCI All-Country World Index dropped 0.57 percent, down for a fifth straight session, and the Thomson Reuters euro zone peripheral index lost 0.29 percent.

In Europe shares declined to a five-week closing low after the Commerce Department reported that sales of U.S. new single-family homes were at the lowest since records began in 1963. And prices fell to the lowest level in more than 6-1/2 years, implying further loss of momentum in the economic recovery.

The data on new-home sales comes a day after a report that showed sales of existing homes dropped by a record rate to a 15-year low.

In addition, Standard & Poor's downgraded Ireland's credit rating, sending a sharp reminder that euro zone economies still face problems managing their debt.

S&P's one-notch cut in Ireland's rating overshadowed a better-than-expected German business morale reading for August from the Ifo think-tank.

"The Ireland downgrade was not too much of a surprise but it is still weighing on sentiment," said Raymond at City Index.

The pan-European FTSEurofirst 300 index of top shares closed 0.8 percent lower at 1,011.35 points.

Miners were among the biggest fallers. BHP Billiton fell 2 percent after it said it was cautious on the short-term outlook and that the economy in China, its biggest customer, would slow from recent highs.

Shares of Allied Irish Banks fell 2.9 percent, following the S&P ratings downgrade on Ireland. S&P cited high costs faced by the government to support ailing financial institutions..


The yen pulled back from 15-year highs against the U.S. dollar on Wednesday on mounting speculation that Japanese authorities may intervene to stem the currency's rise for the first time since March 2004.

Japan has not been immune to the deep global recession, and a strong yen will dampen demand for Japanese exports, offsetting other measures to stimulate the economy.

Japan's Nikkei business daily reported that Japan's Ministry of Finance may intervene on its own to sell yen if speculators drive up the currency. The dollar has lost nearly 9 percent against the yen this year.

Finance Minister Yoshihiko Noda told reporters that recent yen moves were one-sided and Tokyo will respond appropriately when necessary.

In late afternoon trading in New York, the dollar was up 0.8 percent on the day to 84.63 yen, though still within reach of the 15-year low touched on Tuesday, according to Reuters data.

Overall, the dollar was up against a basket of major trading-partner currencies, with the U.S. Dollar Index up 0.10 percent at 83.226 from a previous session close of 83.146. The euro was up 0.25 percent at $1.2655 from a previous session close of $1.2624.

Tokyo's Nikkei average lost 1.7 percent to hit a 16-month closing low on disappointment over the lack of policy action by the authorities to rein in the strong yen.

In the U.S. Treasuries market, the benchmark 10-year U.S. Treasury note was down 12/32, with the yield at 2.54 percent.

The 2-year U.S. Treasury note was down 2/32, with the yield at 0.52 percent. At the longer end of the yield curve, the 30-year U.S. Treasury bond was down 4/32, with the yield at 3.57 percent.

Crude oil prices edged up from a seven-week low and settled higher than $72. U.S. light sweet crude oil rose $1.27, or 1.77 percent, to $72.90 per barrel, while spot gold prices rose $10.55, or 0.86 percent, to $1239.80.

But the Reuters/Jefferies CRB Index was down 0.66 points, or 0.25 percent, at 261.80. - Reuters

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