Gold Plunges 3%, Fed Worries Inflation

123jump.com Staff
10 Jun, 2008
New York City

U.S. dollar rebounded, metal prices fell with a sharp drop in gold and crude oil inched lower. The Fed Chairman Bernanke observed that the current rise in commodities should not be allowed to increase general inflation. While the Fed talk, inflation for most consumer is shrinking their purchasing power. The Fed talk of inflation lifted dollar and dragged most commodities prices and stocks lower.

10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney[R]– U.S. dollar rebounded on the hopes that interest rate may be on hold or may even rise after comments from Bernanke. Gold and other metal prices fell.[/R]

Global Markets Update

U.S. stocks edged lower as the Fed Chairman Bernanke talked of fighting inflation. Investors see a possible rise in interest rate if food and energy prices remain high. Stocks in resources, fertilizer and energy sectors fell. Banks and financial sector stocks declined led by a drop in Lehman and Morgan Stanley. Australian currency dropped sharply on the worries that the U.S. may intervene in the currency market to protect the dollar. Japan, India and Australian market indexes closed lower.

European stocks edged lower and rising crude oil prices and a rise in wholesale price index in Germany. Price of goods at wholesale level surged 8.1% in May a record gain since February 1982. EU 27 nations registered a trade surplus with US of 80 billion euros in goods and service surplus increased to 11 billion euros. The dollar rose against euro as the prospect of interest rate hike and currency market intervention intensified.

Stocks in Hong Kong and Shanghai plunged after the central bank increased cash deposit requirements for banks. The surprise decision caught investors on the wrong footing. Banks, energy and mobile telecom stocks fell. In Shanghai trading CSI 300 Index plunged 8.11% or 282.94 at 3,206.56. In Hong Kong trading Hang Seng declined 4.21% or 1,026.66 at 23,375.52. Yuan traded at a record high against dollar.

Stocks in Mumbai, India trading fell 1.2% after inflation worries dominated trading. Sensex dropped 1.2% and has lost 6% in the last five sessions. Rising crude oil prices and jittery investors in the U.S. and Europe have sold nearly $300 million of stocks in India in the last two weeks. The Sensex index now is at a three month low. Rising crude oil and food prices are stocking inflation. BHEL, the engineering company won an order to build a power plant in New Delhi.

North American Markets indexes

Dow Jones Industrial Average gained 9.44 or 0.08% to a close of 12,289.76, S&P 500 closed down 3.32 or 0.24% to 1,358.44, and Nasdaq Composite Index decreased 10.52 or 0.43% to close at 2,448.94. In Toronto TSX Composite closed down 224.56 or 1.50% to 14,736.20.

Of the 30 stocks in Dow Jones Industrial Average, 17 closed higher, 13 closed lower, and none was unchanged.

Coca-Cola Company led the decliners in the Dow Jones industrial Average with a rise of 3.85% followed by increases in Citigroup of 3.37%, in AIG of 2.36%, in JP Morgan Chase of 2.08% and in General Motors of 2%. Chevron led the decliners in the Dow Jones index with a loss of 2.4% followed by losses in Merck of 1.6%, in ExxonMobil of 1.32%, in Verizon Communications of 1.1% and in Du Pont of 1.06%.

Of the stocks in S&P 500 index, 227 stocks increased, 272 declined, and 1 were unchanged. Of the stocks in the index, 33 stocks fell more than 3% and 18 gained more than 3%.

Ambac Financial Group led the decliners in the S&P 500 index with a loss of 11.4% followed by losses in Lehman Brothers of 6.7%, in NVidia Corp of 5.9%, in Consol Energy of 5.6%, in Titanium Metals of 4.95% and in Dillards Inc of 4.9%.

WaMu Inc led the gainers in the S&P 500 index with a rise of 7% followed by gains in Pall Corp of 4.8%, in XL Capital of 4.7%, in Wachovia Corp of 4.6%, in The Gap Inc of 4.12% and in Moody’s Corp of 3.9%.

South American Markets Indexes

Colombia led the decliners in the Latin American markets with a fall of 1.3% followed by decreases in Brazil and Argentina of 0.8%, in Mexico of 0.70%, in Venezuela of 0.56% in Peru of 0.52% and in Mexico of 1.8% and in Argentina of 0.45%. Chile the lone gainer rose 0.04%.


European Markets indexes

The CAC 40 retreated 0.80% to 4,761.08. In Germany the DAX 30-index fell 44.53 points or 0.65% to 6,771.10. Shares in Switzerland dropped as the Swiss Market index fell 41.69 points or 0.57% to 7,284.21. The FTSE 100 dropped 50.30 points or 0.86% to 5,827.30.

Gainers and losers

Air France-KLM led the gainers in the CAC 40 index stocks with a rise of 1.55% to 16.34 euros followed by gains in BNP Paribas of 1.26% to 60.80 euros, in Lafarge of 1.18% to 111.62 euros, in Saint Gobain of 1.04% to 48.12 euros and in France Telecom of 0.75% to 18.04 euros.

Veolia Environ led the decliners in the CAC 40 index with a loss of 6.50% to 42.85 euros followed by losses in Vinci (EX.SGE) of 3.56% to 43.01 euros, in Vallourec of 3.56% to 199.17 euros, in Unibail - Rodamco of 3.49% to 157.14 euros and in Lagardere of 2.85% to 43.91 euros.

Among the DAX 30 index shares, SAP AG led the gainers with a rise of 1.35% to 34.41 euros followed by gains in TUI AG of 1.06% to 16.17 euros, in MAN AG of 1.05% to 87.69 euros, in Siemens of 1.01% to 71.72 euros and in Volkswagen of 0.51% to 176.52 euros.

ThyssenKrupp led the decliners in the DAX 30 index with a fall of 3.66% to 41.83 euros followed by losses in Continental AG of 2.50% to 66.79 euros, in BASF AG of 2.22% to 93.99 euros, in Henkel KGaA of 1.88% to 29.17 euros and in E.ON AG of 1.65% to 134.34 euros.

Asian markets

In Tokyo Nikkei 225 Index closed lower 160.21 or 1.13% to 14,021.17, in Hong Kong Hang Seng index decreased 1,026.66 or 4.21% closed to 23,375.52. In Australia ASX 200 index lower 154.60 or 2.76% to close 5,437.50. In Malaysia KL Composite index decreased 0.02 or 0.00% closed to 1,230.96.

In South Korea Kospi Index decreased 34.58 or 1.91% to close at 1,774.38, in Thailand SET index closed lower 13.64 or 1.69% to 791.94 and Indonesia JSE Index edged decreased 36.26 or 1.50% to 2,373.82. Sensex index in India decreased 176.85 or 1.17% to 14,889.25.

Commodities, Metals, and Currencies

Crude oil decreased $2.57 to close at $131.78 a barrel for a front month contract, natural gas decreased 18 cents to $12.43 per mBtu, and gasoline futures decreased 7.00 cents to close at 333.00 cents per gallon.

Gold decreased $26.90 in New York trading to close at $871.20 per ounce, silver closed down 57 cents to $16.63 per ounce, and copper for front month delivery decreased 4 cent to $3.56 per pound.

Wheat futures increased 21.00 cent in Chicago trading and closed at $8.09 per bushel. Sugar increased 8 cent to $11.05 per pound. Soybean future closed down 11 cents to $14.41 a bushel.

Dollar jumped but traded near record low against euro to $1.5459 and rose against yen to 106.30. The comments from the Secretary of Treasury and Fed chairman suggested that dollar may be undervalued.

Yields on U.S. bonds increased to 4.10% with 10 years of maturities and decreased to 4.70% with 30-year of maturities.