U.S. Stocks Rise; Exxon, Rosneft in Arctic Deal, Lehman to Pay $65 Billion

Bikram Pandey
30 Aug, 2011
New York City

The U.S. indexes rebounded in the afternoon after dropping as much as 1%. The consumer confidence index declined to the lows last seen in April 2009 and metropolitan home price index declined in June. Exxon Mobil Corp and OAO Rosneft reached an agreement to explore Arctic oil.

[R]4:30 PM New York – The U.S. indexes rebounded in the afternoon after dropping as much as 1%. The consumer confidence index declined to the lows last seen in April 2009 and metropolitan home price index declined in June. Exxon Mobil Corp and OAO Rosneft reached an agreement to explore Arctic oil.[/R]

U.S. indexes traded lower after the release of consumer confidence data and the minutes of the FOMC meeting held in August. The index of consumer confidence declined to the lowest since April 2009 and the monthly point decline was the largest since October 2008.

The consumer confidence index dropped to 44.50 in August from 59.20 in July and in the euro zone the index of confidence tracked by the European Central Bank declined to 98.3 in August from 103 in July.

The market indexes turned lower and dropped more than 1% but recovered in the late afternoon and closed higher. Treasury yields dropped after the release of the data and the sentiment turned negative on the growing worries of the economic slowdown a day after personal spending rose at the fastest pace in five months.

Market worries were compounded by the decline in metropolitan home price index. The index declined 4.6% in June from a year ago after falling 4.5% in May.

The Fed policy makers were also worried about the economy’s vulnerability and felt that the economic recovery is “still somewhat tentative.” Several members of the committee felt that the economy needs more aggressive stimulating measures.

In corporate news, Bank of America agreed to its lower its stake in China Construction Bank.

A federal court in New York approved a plan by Lehman Brothers’ bankruptcy estate to distribute $65 billion. The investment banker filed for Chapter 11 insolvency with $613 billion in debt which was later watered down to $320 billion. The payout will average about 20 cents on the dollar in recovery.

The settlement plan is expected to win an approval from 110,000 creditors before December 6 confirmation hearing.

In the earnings news, Dollar General second quarter net income increased 3.4% to $146.04 million. DSW second quarter net income soared 43.7% to $33.7 million. Peabody agreed for takeover of Macarthur Coal valuing A$4.8 billion. Bank of Nova Scotia third quarter net income increased 18% to $1.3 billion.

European indexes declined after euro-zone confidence slumped in August. Macarthur accepted sweetened A$16 a share offer from Peabody and ArcelorMittal. Italy sold €3.75 billion of 10-year bonds at lower yield. Alpha Bank swung to loss on impairment charge on Greek government bonds.

Euro-zone economic confidence slumped but Italy business sentiment strengthened in August. Portuguese retail sales increased and. Swiss consumption indicator fell in July. Polish economy expansion flat in the second quarter.

The UK indexes gained after mortgage approvals increased and M4 money supply fell in July. BP inked $7.2 billion deal with India-based Reliance Industries. Bunzl surged 4.3% after first-half revenues grew 4% to £2.44 billion.

Stocks in Tokyo traded higher for the third day in a row. Japan elected Yoshihiko Noda, sixth prime minister in five years. Sony Corp and Hitachi and Toshiba are expected to form venture to make liquid crystal displays. Banks closed higher and energy linked stocks rebounded.

The Australian benchmark index was nearly unchanged but retained a positive bias. Macarthur Coal agreed to $16 a share that valued the company at A$4.8 billion. Harvey Norman declined on the cautious outlook.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield decreased to 2.18% and 30-year U.S. bond fell to 3.52%.

The U.S. dollar decreased at $1.4446 to one euro and closed lower against the Japanese yen to 76.67 yen.

Immediate delivery futures of Texas crude oil increased $1.44 to $88.71 a barrel and futures of natural gas increased 0.08 cents to $3.91 per mbtu and gasoline price decreased 8.6 cents to 299.3 cents a gallon.

In metals trading, copper increased 4.6 cents to $4.15 per pound, gold decreased $46.70 to $1,838.30 per ounce and silver increased $0.91 to $41.52.