U.S. Stocks Erase Gains; World Markets Up

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
21 Jun, 2010
New York City

U.S. stocks closed lower after rallying on the back of global markets. China permitted wider trading band for the yuan after pegging the currency to the dollar for nearly two years. Stronger yuan raised expectations of higher exports to China but also raised fears that retailers will pay more.

[R]4:00 PM New York – U.S. stocks closed lower after rallying on the back of global markets. China permitted wider trading band for the yuan after pegging the currency to the dollar for nearly two years. Stronger yuan raised expectations of higher exports to China but also raised fears that retailers will pay more for Chinese goods.[/R]

U.S. stocks closed lower at close but earlier gained after China said it will permit wider trading band for the yuan and ruled out one time revaluation. The yuan traded higher to 6.79 against one dollar after being held at the peg of 6.83 for two years. U.S. retailers declined on the worries that imports from China will cost more.

U.S.-based Corn Products agrees to buy National Starch unit for $1.3 billion and Valeant agreed to merge with Biovail

Global Payments Inc. led the decliners in the S&P 500 index with a loss of 6.7%. Ralcorp Holdings to acquire American Italian Pasta Company. Adidas sees soccer sales of at least $1.9 billion. BP Gulf spill handoff plan on track.

European markets extend their gains for a ninth consecutive session after China decides to lift the peg of its currency against the dollar. Portugal producer prices rises 0.4% in May. Hungary Central Bank maintains key policy rate unchanged at 5.25% and the government seeks cost cuts in eight ministries.

The UK indexes soar after China’s decision to lift the peg of its currency against the U.S. UK home price inflation slows in June. Hagens Berman Sobol Shapiro reaches $103 million settlement with Astra Zeneca. Xchanging agrees to buy Data Integration.

Stocks in Japan end at one-month high after China permitted the float of the yuan. Honda Motor Co and Toyota Motor Corp hiked wages to end strikes in parts factories in China. Premier Naoto Kan is scheduled to unveil his plan to bring down the debt.

China allows a more flexible yuan policy after 23-months. The move may spur higher imports and stave off rising domestic inflation. Stocks in Shanghai and Hong Kong closed sharply higher. China Southern passenger count rises 15%. Toyota and Honda increase wages at their parts plants in China.

Stocks in Mumbai traded higher across all sectors after the government permitted life insurance companies to issue policies linked to stocks. Saudi construction firm agrees to buy stake in Maytas Infra. Bonus issue plans at Orbit Corporation and Tata Tea lifted stocks.

Stocks gained in Australia after China eased it yuan peg. Telstra surrenders copper fixed lines to government in A$11 billion deal. Government signs ten trade pacts with China. Sigma Pharmaceuticals Ltd and shareholders are likely to settle class action lawsuits.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 242.99 or 2.43% to 10,238.01, Hang Seng index in Hong Kong increased 625.47 or 3.08% to 20,912.18 and CSI 300 index in China higher 84.50 or 3.13% to 2,780.66. ASX 200 index in Australia increased 60.70 or 1.33% to 4,612.60. The FTSE Bursa KL Composite index in Malaysia closed higher 17.60 or 1.34% to 1,335.29.

The Kospi Index in South Korea increased 27.73 or 1.62% to close at 1,739.68. SET index in Thailand closed higher 14.22 or 1.80% to 806.07 and JSE Index in Indonesia increased 12.31 or 0.42% to 2,941.90. The Sensex index in India increased 305.73 or 1.74% to 17,876.55.

Europe Markets Review

In London FTSE 100 Index traded higher 35.33 or 0.67% to 5,286.17, in Paris CAC 40 Index traded increased 39.68 or 1.08% to close at 3,726.89, in Frankfurt DAX Index traded higher 61.04 or 0.98% to close at 6,278.02. In Zurich trading SMI Index traded increased 62.73 or 0.97% to close at 6,509.79.

Commodities, Currencies and Yields

Dollar edged higher against euro to $1.23 and gained against the Japanese yen to 91.01.

Crude oil increased $0.17 to $77.35 a barrel for a front month contract, natural gas edged lower $0.14 cent to $4.86 per mBtu and gasoline decreased 1 cent to 213.76 cents.

Gold decreased $22.20 in New York trading to close at $1,236.10 per ounce, silver closed lower $0.45 to $18.73 per ounce and copper for the front month delivery increased 4.2 cents to $2.94 per pound.

Yields on 10-year U.S. bonds increased to 3.24% and on 30-year U.S. bonds increased to 4.16%.