28/09/07

US stocks closed higher on Thursday, as investors bet that a big drop in new home sales and a weak reading on GDP growth will make the Federal Reserve more likely to cut interest rates further. However, gains were limited by surging oil prices and some anticipation about today's economic reports. The DJIA closed 34.8 points higher at 13912.9, the Nasdaq closed 10.56 points higher at 2709.59 and the S&P500 added 6 points to close at 1531.4.

In corporate news, Microsoft said its Halo 3 video game racked up about $170m in first day sales.

Sallie Mae jumped on reports that a group led by private equity firm JC Flowers is willing to renegotiate the $25bn merger deal with the student loan company. Officially known as SLM, Sallie Mae was dealt a blow late Wednesday when the buyers said they wanted out of the deal because of the economic environment and legislation signed by President Bush on Thursday that will trim education lending subsidiaries.

In economic news, New home sales fell to a 795,000 annual unit rate in August, the lowest level in seven years, from an 867,000 unit rate in July. A steeper than expected decline. GDP growth was revised down to 3.8 percent in the second quarter from a previous reading of 4 percent.

Today brings reading on personal income and spending, and the PCE deflator, the reports inflation component. After the start of trading, the consumer sentiment index from University of Michigan is due, along with the read on construction spending and the Chicago PMI, a regional manufacturing report.

US light crude for November delivery rose to $2.58 to settle at $82.88 a barrel on NYMEX, a jump of more than $3.

Treasury prices rose, lowering the yield on the 10 year note to 4.56 percent from 4.62 percent.

In currency trading, the dollar fell versus the euro and also dipped versus other major currencies COMEX gold for December delivery rose $4.40 to settle at $739.90 an ounce.

The Nikkei average closed virtually flat today as Canon Inc extended gains on news about a possible additional share buyback, but Mitsubishi Estate Co and others slipped after recent sharp gains. The market meandered as Friday is the last day for many listed Japanese companies to close their books for the fiscal first half. The Nikkei closed 46.5 points lower at 16785.7.

UK stocks rose on Thursday as more bid talk surrounded Northern Rock boosting markets, while US economic data was mixed but helped boost expectations for another Federal Reserve rate cut soon. The FTSE100 closed 53.4 points higher at 6486.4, again boosted by the financial sector, with continental Europe stocks also gaining.

Northern Rock added 6.3 percent as hedge fund RAB Capital increased its stake in the company and its shares were buoyed for a second day by takeover speculation. There was renewed speculation that former Goldman Sachs bankers Chris Flowers is considering a takeover. The Daily Telegraph said Flowers private equity firm had been given access to the banks books. Northern Rock declined to comment. Rivals of Northern Rock were also boosted, Alliance and Leicester added 8.5 percent, Bradford and Bingley rose 6.4 percent and HBOS closed 4.9 percent higher.

Economics

UK Gfk consumer confidence (Sept) 10.30 bst

The coverage of the bank run on Northern Rock is likely to have dented people's perceptions of their future financial and economic prospects which is expected to drive down consumer confidence in September.

US Personal income and spending (Aug) 13.30 bst

Personal income is expected to be 0.4 percent and personal spending 0.3 percent, as prices were depressed by a decline in gasoline but auto sales improved. The core PCE deflator should rise 0.1 percent, taking the year on year rate down to 1.8 percent from 1.9 percent.

US Chicago PMI (Sept) 14.45 bst

Chicago PMI is seen falling from 53.8 to 52.5, which would be the lowest reading since February.

US Construction spending (Aug) 15.00 bst

Look for construction spending to continue to fall. A 0.2 percent decline is expected, assuming residential spending drops by 0.7 percent.

US University of Michigan confidence (Sept, final) 15.00 bst

The final reading is expected to be 83 for September

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