10/10/07

Stocks drifted higher through the morning, flattened out in the early afternoon and then began to rise as investors digested the minutes from the Sept 18 Fed meeting, released at around 2.00 pm. At the Sept 18 Fed policy meeting, central bankers cut interest rates for the first time in 4 years. The minutes showed that the decision to cut the fed funds rate by a half percentage point was unanimous, with the central bank worried the housing implosion and credit market crunch could hit consumers and the broader economy. Also important to investors, the minutes showed that the bankers were a bit more confident about a sustained inflation drop, provided that the dollar doesn’t keep falling.

After the close, Alcoa reported earnings of 64 cents per share, up from 62 cents a year earlier and 2 cents short of forecasts. Revenue fell from a year ago, but met forecasts.

Shares of mortgage lender Thornburg Mortgage which was hard hit by this summers subprime mortgage meltdown, tumbled nearly 9 percent after the company said its quarterly loss will be bigger than it initially thought.

Sallie Mae filed a lawsuit that seeks to force its private equity buyers to either follow through on the proposed $25bn deal or pay a $900m break-up fee. A group of buyers led by JC Flowers has balked at completing the deal at its original price.

Treasury prices fell after the minutes from the Fed meeting, raising the yield on the 10 year note to 4.65 percent from 4.64 percent.

COMEX gold for December delivery rose $4.40 to settle at $743.10 an ounce.

US light crude for November delivery rose $1.24 to settle at $80.26 a barrel on NYMEX.

The Nikkei average closed almost flat today after erasing earlier gains as investors sold Toyota Motor Corp and Olympus Corp, offsetting a rise in retail shares. Olympus Corp lost 2.8 percent, becoming one of the biggest drags on the market, after JP Morgan cut its rating on the stock to neutral from overweight. The Nikkei closed 18 points higher at 17177.89.

UK stocks closed 74.5 points higher at 6615.4 on Tuesday as Italian group Eni's bid for Burren Energy lifted oil stocks and Northern Rock led gainers on the back of new funding agreements. Oil stocks were the standout gainers, adding nearly 24 points to the index rise, after Eni said it had made a £1.48bn takeover proposal to Burren Energy which the firm rejected. Burren leapt 28 percent. Elsewhere, Tullow Oil climbed 2.6 percent, Royal Dutch added 2.2 percent, Cairn Energy rose 2 percent and BG Group rose 3 percent.

Miners were also strong. Vedanta Resources added 3.3 percent. BHP Billiton, Rio Tinto, Xtrata and Anglo American gained more than 1.5 percent. But Kazakhmys which said on Monday that its copper cathode output would be hit by flooding was down 2.6 percent, and Antofagasta fell 0.9 percent.

British Land rose 5 percent on talk of a Saudi fund building a stake in the company.

SAB Miller added 1.4 percent after it and Molson Coors Brewing agreed to combine their US operations to create a venture with annual sales of $6.6bn that will be a strong number two player to Anheueser Busch.

Northern Rock rose nearly 20 percent after the British government made a fresh attempt to shore up the bank, offering to guarantee new retail deposits and extend funding agreements. The FT also said US buyout firm Lone Star has joined the growing list of potential bidders for the company.

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