U.S Treasuries Rally on Record Foreign Interest; Asian Markets Decline 1%

Bikram Pandey
09 Feb, 2011
New York City

U.S. stocks edged lower after rallying for seven days in a row. Treasuries rallied as 10-year bond auction of $24 billion drew record foreign investor interest. Fed Chairman Bernanke said unemployment rate is likely to remain high. NYSE Euronext and Deutsche Boerse are in deal talk.

[R]4:00 PM New York – U.S. stocks edged lower after rallying for seven days in a row. Treasuries rallied as 10-year bond auction of $24 billion drew record foreign investor interest. Fed Chairman Bernanke said unemployment rate is likely to remain high. NYSE Euronext and Deutsche Boerse are in deal talk.[/R]

U.S. stocks traded lower after the 7-day rally in the Dow. Fed Chairman Bernanke facing lawmakers in the House for the first time after the November election said economy appears to have “strengthened” but unemployment rate remains “high.”

Bernanke said it will take some time before unemployment will decline He also added that at the current rate of 3.2% economic growth it may take as long as 10 years for the unemployment rate to decline between 5% and 6%.

Bernanke also urged lawmakers to develop a priority map to repay debt and curtail future debts because market imposed debt limits are generally “painful response to a looming or actual financial crisis.”

Treasuries rallied after comments from Bernanke and stronger than expected interest in $24 billion 10-year auction as investors deemed them cheaper than 3-year notes.

Through indirect sale, foreign investors and central banks bid 71% of the bonds on the offer, the record since the Treasury Department began tracking auction data in 2003.

Average for last eight auctions for foreign investor interest was 47.3% and bid to cover ratio was above 3.2.

Ingersoll-Rand fourth quarter revenue gained 13% and net earnings rose to $212.1 million. Coca-Cola net revenue rose 40% and net income surged 274% to $5.77 billion. Walt Disney first quarter revenue increased 10% to $10.7 billion and net income soared 54% to $1,302 million.

London Stock Exchange Group Plc agreed to acquire Toronto based TMX Group for $3.2 billion. Intense competition for stock trading and heavy technology cost brought two distant exchanges together.

European markets were on the defensive after mixed earnings in the region. PSA Peugeot Citroen said it will open a factory in India and sales rose 16% and earnings were ahead of previous estimate. LSE agreed to merge with Canada based TMX Group. Sanofi declined after it estimated lower net.

Stocks in London edged lower and government announced a deal with banks to hold bonuses and lend more to small businesses. The deal was criticized by the members of the ruling party and the opposition as ineffective and analysts surmised that banks have won the battle. Reckitt Benckiser dropped on a cautious outlook.

Stocks in Japan halted a three-day rally after China hiked rates and base metal prices declined. Toyota Motor Corp gained more than 5% after it lifted earnings outlook on Asia and emerging markets sales. Real estate developers fell after Tokyo office vacancy rose.

Stocks in China region declined on the first of trading after a week long holiday. Resource stocks in Hong Kong and Shanghai fell tracking lower copper and gold prices. Real estate developers fell more than 2% on the worries that future rate hikes may affect asset prices.

Stocks in Mumbai decline for the second day more than 1% and closed down 3% in two days. The inflation worries and slower economic growth has worried foreign and domestic investors. Auto sales in January soared 26% and Maruti Suzuki sales surged 14.7% in the month.

Australian stocks were lifted after Commonwealth Bank of Australia reported higher than expected earnings and declared dividend of $1.32 a share. Construction materials maker Boral soared as much as 7% after first half net rose 28%.

Commodities, Currencies and Yields

Dollar edged lower against euro to $1.364 and gained against the Japanese yen to 82.18. One UK pound fetched $1.61.

Crude oil decreased $0.19 to $86.75 a barrel for a front month contract, natural gas edged higher 0.005 cents to $4.04 per mBtu and gasoline increased 3.2 cents to 252.70 cents.

Gold decreased $1.60 in New York trading to at $1,362.50 per ounce, silver increased $0.18 to $30.95 per ounce and copper for the front month delivery decreased 6.4 cents to $4.51 per pound.

Yield on 10-year U.S. bond decreased to 3.66% and on 30-year U.S. bond yield fell to 4.72%.