World Markets Slide; Microsoft Debt Offering

Bikram Pandey
22 Sep, 2010
New York City

U.S. stocks traded sideways as investors speculated next Fed move to stimulate the economy. The U.S. dollar declined and gold and copper edged higher. European indexes closed lower and Asian markets traded mixed. Microsoft filed to sell $4.75 billion in debt securities.

[R]4:00 PM New York – U.S. stocks traded sideways as investors speculated next Fed move to stimulate the economy. The U.S. dollar declined and gold and copper edged higher. European indexes closed lower and Asian markets traded mixed. Microsoft filed to sell $4.75 billion in debt securities.[/R]

U.S. stocks edged lower after mortgage applications fell despite low rates and refinancing activity declined. Federal Reserve appears to be running out of options to stimulate the economy. Japan based Sharp Corp agreed to acquire Recurrent Energy for $305 million. The FDA approved Novartis’ Gilenya for multiple sclerosis.

SEC may look to place more curbs or restrict certain practices of high frequency trading conducted by several brokers and specialists firms according to Chairman Mary Schapiro.

Adobe Systems plunged 20% after it reported lower than expected third quarter. CarMax Inc, the used car dealer jumped more than 7% after it reported higher than expected second quarter earnings. EBay Inc declined. AMR Corp dropped 8%.

Microsoft plans to sell $4.75 billion in debt to pay for dividend and change its capital structure. The $1 billion of bonds each of three, ten and thirty years of maturities and $1.75 billion of five year maturities are expected to be sold. In a filing with the SEC, Microsoft did not disclose the timing of the sale. Debt maturities of three and five years are like to be priced at 30 to 55 basis points higher to the U.S. Treasuries and thirty year bonds are expected to be priced at 85 yields higher to the Treasuries.

The European indexes slid after euro-zone industrial orders fell more than expected in July. Norway retained key interest rate at 2%. German economic index rose in July and real wage growth accelerated in the second quarter. Hungary retail sales increased in July.

The UK indexes declined on the growing speculation that the Bank of England may be forced to widen bond purchase and increase the asset purchase program. The Confederation of British Industry lifted growth outlook for 2010. Mining companies rallied as the dollar weakened and copper and precious metals edged higher.

Stocks in Japan closed lower. Machine tool orders soars in August and orders for new ships rises in the first half of the year. Orders from China more than doubled. A Hitachi-led consortium loses its bid for a monorail project in Brazil.

Indian stocks pared some of Tuesday’s gains to drop below the 20,000 mark. ArcelorMittal signed an agreement with Bokaro villagers to set up 12 million ton steel plant. ONGC looks to acquire Russia’s Arctic oil fields. India is in talks to finalize a $5.8 billion defense deal with the U.S.

Australian stocks gained and the Australian dollar advanced to 25-month high. David Jones declined 2% after the company said earnings will be lower than the upper end of the earnings. Telstra led the most active list in trading.

Commodities, Currencies and Yields

Dollar edged lower against euro to $1.33 and gained against the Japanese yen to 85.55. One UK pound fetched $1.566.

Crude oil decreased $0.30 to $74.66 a barrel for a front month contract, natural gas edged higher 0.05 cent to $3.97 per mBtu and gasoline decreased 1.72 cents to 190.24 cents.

Gold increased $17.30 in New York trading to close at $1,291.60 per ounce, silver gained $0.37 to $21.01 per ounce and copper for the front month delivery increased 8.20 cents to $3.56 per pound.

Yields on 10-year U.S. bonds decreased to 2.55% and on 30-year U.S. bonds yields edged down 3.74%.