Sober US News

Mixed economic news from the US was overshadowed by war talk.

“This market is headline driven and economics don’t seem to matter any more, it’s all about sentiment”, said one trader.

US consumer prices rose 0.6% in February and were up 3% year on year – the biggest monthly increase in consumer inflation since January 2001 and slightly higher than expectations.

But the core inflation rate – which excludes volatile energy and food prices – was up just 0.1% and 1.7% year on year.

Economists said the data would determine the longer term direction of the stock markets.

“People will not make up their minds about the sustainability of this rally until they are able to take the temperature of the world economy, once this war is no longer the focus”, said Mr. Wilmot.

The Turkish stock market, however, has slumped significantly, falling more than 7% on Friday.

Traders there are worried about the lack of a deal with the US on using Turkish airspace.

Billions of dollars of aid may depend on a deal being reached.

Text 4.2 U.S. recession fears weigh on world stocks

By Herbert Lash

International Herald Tribune

Friday, February 29, 2008

NEW YORK: Stocks fell Thursday in Europe and the United States as the dollar dropped to a new low against the euro after more signs of a possible US recession.

Fears that the worst has yet to arrive in the battered U.S. housing sector and a fourth-quarter update on gross domestic product showing weakness lifted U.S. Treasury prices as investors scrambled for safety.

Financial markets were hit by reports that the U.S. economy barely expanded, with growth at just 0.6 percent, and that the number of workers filing claims for jobless aid jumped last week. Testimony by the Federal Reserve chairman, Ben Bernanke, did little to help sentiment.

Bernanke’s comments accelerated a fall in European and U.S. shares, with the major European stock indexes closing down almost 2 percent and major U.S. indexes were down more than 1 percent at midday. U.S. government debt surged.

Bond prices also jumped in the flight to safety and on the weak economic data.

“There’s ongoing flight to safety in Treasuries because of credit risk. Equities look softer, and we’ve got discouraging earnings reports from companies like Freddie Mac,” said Kim Rupert, managing director of global fixed income analysis with Action Economics in San Francisco.

In late trading, benchmark 10-year notes were up 14/32, yielding 3.708 percent, down from 3.85 percent late on Wednesday. The yield had peaked at 3.96 percent last week, a high for the year and sharply up from the 4-1/2-year low of 3.2850 percent struck last month. Bond yields move inversely to prices.

The Dow Jones industrial average was down 123.17 points, at 12,571.11. The Standard & Poor’s 500-stock index was down 12.24 points, at 1,367.75. The Nasdaq index was down 20.18 points, at 2,333.60.

European shares fell as financial stocks were weighed by renewed worries about a U.S. recession and Bernanke’s remarks about possible bank failures.

The FTSE Eurofirst 300 index of top European shares closed 1.8 percent lower at 1,333.42 points, leaving it 11.5 percent down in the year to date compared with a 6.3 percent loss for the MSCI’ s main world equity index.

Across Europe, the FTSE in Britain lost 1.8 percent, the DAX in Germany fell 1.9 percent and the CAC 40 in France dropped 2.1 percent.

Cash was also moving into commodities again, as gold, oil and some agricultural futures were trading near records.

Investors have pumped cash into commodities in recent weeks, betting the Fed will keep cutting interest rates to prop up the flagging U.S. economy.

Oil rose toward $102 a barrel, trading within sight of a record set earlier in the week, as the dollar sank to new lows and after militants cut supply from Nigeria, the top exporter in Africa.

“The energy complex is a dollar/inflation story as investors have moved into commodities as a hedge against inflation,” said Nauman Barakat, senior vice president at Macquarie Futures USA.

“The ever-weakening dollar, upward inflationary pressures and geopolitical tensions are having a greater impact on the energy market than the fundamentals,” Barakat added.

The euro rose above $1.52 for the first time in its nine-year history as investors bet that U.S. interest rates are set to fall further as the benchmark rate in Europe stays unchanged.

The euro hit a high at $1.5229, according to Reuters data, before retreating slightly.

In late trading, the euro was at $1.5218, up from $1.51.29, and the pound rose to $1.9939 from $1.9823. The dollar fell to ¥105.230 from ¥106.378 and to 1.0494 Swiss francs from 1.0623 francs.

Gold raced to a record above $965 an ounce as the dollar’s slump and strong oil prices bolstered investor buying, analysts said.

Gold futures for April delivery rose $7.90 to$968.90.

“Gold is pretty much tracking the euro/dollar moves and funds and investors will keep buying the metal until it gets to $1,000 an ounce,” said David Thurtell, an analyst at BNP Paribas.

Text 4.3 UK’s super-rich ‘getting richer’

BBC News, Sunday, 27 April 2008 01:17 UK

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