Oil Surges 15%, Gold Up 5%; Dollar, Stocks Fall

123jump.com Staff
22 Sep, 2008
New York City

U.S. stocks drop after investors worried that bailout plan may be inadequate and the economy may still slide into a recession as the Republican administration carries out the largest bailout of banks. Gold and crude oil surges 5%, silver soars 8%. Dollar plunged against euro and yen.

4:30PM New York, 10:30AM Frankfurt, 6:30AM Sydney[R]– U.S. stocks fell after investors worried that bailout plan may be inadequate and the economy may still slide into a recession. Gold surges 5%, silver soars 8% and crude oil jumps 15%. Dollar plunges against the euro and yen.[/R]

Global Markets

Crude oil surges after the dollar declined in the international trading and short covering related futures expiration of the near-month crude oil futures contract and continued weakness in the oil and natural gas supplies from the Gulf of Mexico.

The U.S. Minerals Management Service reported that 76.6% of oil production and 65.5% of natural gas generation is still not functioning. Crude oil is increasingly seen as a safe haven by investors as the Fed is prepared to bailout investment bankers at the expense of dollar.

Goldman Sachs and Morgan Stanley sought and received approval to transform to depository institution under the supervision of Federal Reserve. Morgan Stanley agreed to sell up to 20% of stake to Mitsubishi UFJ of Japan. Crude oil and metals prices gain as dollar is expected to weaken.

European markets in the region fell between 1.6% and 2%. Regulators in the region followed the U.S. initiative to ban short selling in financial stocks till the end of the year. Crude oil and metals prices increased and German auto companies fell. Banks in Ireland declined on ratings downgrade.

Stocks in London fell after the U.S. lawmakers debate the merits and details of $700 billion bailout plan. Nomura of Japan is the top contender for Lehman Brothers assets in Europe and Asia. UK home prices fell 3.3% in September from a year ago as credit markets remain tight. Oil prices surge.

Stocks in Japan rose on the optimism that the U.S. bailout plan of $700 billion will improve liquidity in the credit markets. The Bank of Japan added liquidity to the system. Commodities prices gained as well. Taro Aso was elected as the leader of the LDP party. Konica Minolta surged 13%.

Stocks in Mumbai fell after crude oil futures rose and rupee fell against the dollar. Reliance Industries began its oil production from deep water wells near Gujarat State Investors fear that ongoing dispute on its sale price may drag beyond its peak production in February 2009.

Australian stocks rallied after stocks in Asia and commodities prices gained. The U.S. bailout plan of $700 billion and Morgan Stanley sale of a stake to Mitsubishi UFJ lifted financials. Commodities stocks gained after gold, copper and zinc surged. Australia extend ban on short sales.

North American Markets

Dow Jones Industrial Average decreased 372.75 or 3.27% to a close of 11,015.69, S&P 500 Index closed down 47.99 or 3.82% to 1,207.09, and Nasdaq Composite Index decreased 94.92 or 4.17% to close at 2,178.98. In Toronto TSX Composite closed down 274.92 or 2.13% to 12,638.07.

Of the 30 stocks in Dow Jones Industrial Average 2 closed higher and 28 closed lower.

Microsoft Corp led gainers in Dow Jones Industrial Average with a rise of 0.95% followed by increases in Alcoa of 0.04%. Microsoft will increase its dividend by 18% and plans to buy back $40 billion of its stock. The company plans to alter its capital structure and issue commercial paper for the first time.

JP Morgan Chase led decliners in the index with a loss of 13.3% followed by losses in General Motors of 11.5%, in Bank of America of 9% and in American Express of 7.7%.

Of the stocks in S&P 500 index, 34 increased, 465 declined and 1 was unchanged. Of the index stocks, 57 surged more than 10%, 240 rose more than 3% and 18 fell more than 3%.

AIG led the gainers in the S&P 500 index with a rise of 22.6% followed by gains in Newmont Mining of 6%, in Constellation Energy of 5.6%, in Zions Bancorp of 4.4%, in Hershey Company of 4.4% and in American Capital of 2.6%.

MGIC Investment Corp led decliners in the S&P 500 index with a plunge of 31.6% followed by losses in General Growth Properties of 24.9%, in Huntington Banc of 23.1%, in Sovereign Bancorp of 22.8%, in Marshall & Ilsley of 22.6%, in WaMu Inc of 21.6% and in Regions Financial of 21.2%.

South American Markets Indexes

Chile led gainers in the region with a rise of 2.03% followed by increases in Argentina of 1.68%, in Colombia of 0.07% and in Peru of 0.03%.

Brazil led decliners in the region with a loss of 2.86% followed by losses in Mexico of 2.21% and in Venezuela of 1.06%.

Europe Markets Review

European markets in the region fell between 1.6% and 2% after a week of tumultuous trading. The benchmark index CAC 40 in Paris led the decliners in the region with a loss of 2.4% followed by declines of 2% in Zurich and Madrid, of 1.8% in Stockholm and 1.6% in Milan.

Regulators in the region joined the U.S. led initiative to curb short selling in financial stocks, at least temporarily. Germany, France, Holland and Belgium banned short selling in local banks and financial institutions at least till the end of the year. Germany imposed a ban on short selling in Deutsche Bank and Commerzbank AG and Belgian regulators extended ban on Fortis, Societe Generale, Natixis and Credit Agricole SA.

In London FTSE 100 Index closed lower 75.00 or 1.41% to 5,236.30, in Paris CAC 40 Index decreased 101.36 or 2.34% to close at 4,223.51 and in Frankfurt DAX index lower 81.78 or 1.32% to close at 6,107.75. In Zurich trading SMI decreased 137.78 or 1.96% to close at 6,887.39.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 169.73 or 1.42% to 12,090.59, Hang Seng index in Hong Kong increased 304.47 or 1.58% closed to 19,632.20. CSI 300 index in China higher 134.50 or 6.49% closed to 2,207.61. ASX 200 index in Australia increased 216.40 or 4.50% to close 5,020.50. The KL Composite index in Malaysia higher 2.92 or 0.28% closed to 1,028.62.

The Kospi Index in South Korea increased 4.56 or 0.31% to close at 1,460.34, SET index in Thailand closed lower 10.34 or 1.65% to 614.49 and JSE Index in Indonesia increased 5.61 or 0.30% to 1,897.34. The Sensex index in India decreased 47.36 or 0.34% closed to 13,994.96.

Commodities, Metals, and Currencies

Crude oil increased $16.37 to close at $120.92 a barrel for a front month contract, natural gas increased 14 cent to $7.67 per mBtu and gasoline futures increased 8.73 cents to close at 268.70 cents per gallon.

Wheat futures closed up 19.75 cents in Chicago trading and closed at $7.37 a bushel. Sugar increased 0.62 cent to 14.26 cents a pound. Soybean future closed up 61.50 cents to $12.05 a bushel.

Gold increased $45.60 in New York trading to close at $910.30 per ounce, silver closed up $1.10 cents to $13.57 per ounce and copper for the front month delivery increased 10.75 cent to $3.28 per pound.

Dollar edged lower against euro to $1.4805 and dropped against yen to 105.37.

Yields on 10-year U.S. bonds increased to 3.82% and increased to 4.40% with 30-year of maturities.