S&P 500 Surges 3.4%, Gold Down 3%; China, Germany Slowdown

Bikram Pandey
23 Aug, 2011
New York City

U.S. stocks closed higher and indexes in Asia and Europe gained. U.S. Treasury completed the sale of $25 billion of 2-year bills at record low rates and its first auction after the rating downgrade. Two private surveys indicated slowing and sluggish manufacturing growth in China and Germany.

[R]4:00 PM New York – U.S. stocks closed higher and indexes in Asia and Europe gained. U.S. Treasury completed the sale of $25 billion of 2-year bills at record low rates and its first auction after the rating downgrade. Two private surveys indicated slowing and sluggish manufacturing growth in China and Germany.[/R]

U.S. indexes closed higher after the government list of banks with “problems” declined and investors anticipated more clarity on the U.S. economy this Friday from the Fed Chairman Bernanke.

In addition, two private surveys indicated sluggish manufacturing growths in China and Germany in August highlighting another slow year of economic growth in the euro zone and China’s vulnerability to export market.

China is expected to grow at 9% or more this year but as banks curb lending investors are beginning to factor in slower growth prospects. Germany is struggling to grow more than 2% in the year and the German central bank this week said that growth is slowing even after removing the temporary effects of tsunami and earthquake in Japan.

European markets gained and Asian markets regained advances.

In corporate news, Boeing secured £1 billion contract from the UK Ministry of Defence for 14 new Chinooks. Omnicare proposed to acquire PharMerica for $15 per share in cash.

On the earnings front, H. J. Heinz first quarter net income decreased 6% to $226.1 million. Medtronic first quarter net income fell 1% to $821 million. Universal Display licensed its technology and agreed to sell its proprietary materials to Samsung. Williams-Sonoma second quarter net earnings rose 27.8% to $39.31 million.

European indexes traded higher and Spain completed the sale of bonds at a lower yield. UBS planned to eliminate 3,500 jobs. The Committee on Foreign Investment in the United States approved Deutsche Boerse and NYSE Euronext merger.

Euro area private sector activity growth remained moderate in August. German economic sentiment worsened in August but leading economic index increased in June. Norway gross domestic product expanded and Swedish employment rose in the second quarter.

The UK indexes edged higher after manufacturing orders rose in August and mortgage approvals increased in July. Antofagasta first-half profit soared on higher commodity prices and strong growth in copper and gold output.

Stocks in Japan and Asia gained after three days of decline. The yen declined from its record high but hovered near the highs. Nintendo soared on the speculation of a new product release.

Commodities, Bonds and Currencies

Yields on 10-year bond increased to 2.11% and on 30-year bonds gained to 3.45%. The U.S. government sold $35 billion in 2-year notes that yielded record low rate of 0.22%.

Of the $99 billion bonds expected to be sold this week, $35 billion of 5-year bonds are scheduled for sale tomorrow and $29 billion of 7-year notes.

The U.S. dollar decreased to $1.4427 to a euro and fell against the Japanese yen to 76.675 yen.

Immediate futures prices of Texas crude oil increased $1.24 to $85.60 a barrel, for natural gas increased 0.12 cents to $4.012 per mbtu and gasoline prices increased 4.75 cents to 288.28 cents a gallon.

In metals trading, copper prices increased 4.40 cents to $4.01 per pound, gold dropped $57.20 to $1,834.70 per ounce and silver increased $1.76 to $41.60.