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Overnight Briefing

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U.S. equities slumped

Fri, Sep 5 2008, 05:52 GMT
by Jyske Bank Team

Jyske Bank

• Yen hit 13-month high versus the euro

• Asian stock hammered anew

• Oil price steady near USD 108

Today’s main events:

• DEM Industrial Production

• USD Change in Nonfarm Payrolls & Unemployment Rate

• USD FED’s Yellen speaks

American Time Zone:

U.S. stock slumped

U.S. stocks fell, sending the Standard & Poor's 500 Index to the longest stretch of losses since January, after rising jobless claims heightened concern the economic slump is worsening and a decline in oil pushed energy producers lower.

Caterpillar Inc., Boeing Co. and United Technologies Corp. retreated as much as 5.9 % after higher unemployment spurred concern about tomorrow's monthly jobs report. Exxon Mobil Corp. dragged energy shares in the S&P 500 to the lowest level since February. Banks and brokerages fell 4.2 % after bond investor Bill Gross warned of a “financial tsunami”.

EUR fell and JPY rose

The euro fell to the lowest level of 1.4316 against the dollar this year as European Central Bank President Jean-Claude Trichet said the countries that use the currency are in an episode of weak activity.

The 15-nation euro dropped against the yen and the pound after Luxembourg Finance Minister Jean-Claude Juncker said the currency is overvalued. The yen and Swiss Franc rose sharply as US stocks dropped significantly.

Oil declined

Crude oil fell more than USD 1 a barrel as the euro weakened to the lowest against the dollar this year, curbing the appeal of commodities as an inflation hedge.

Far East Time Zone:

Yen hit 13-month high versus the euro

The yen surged to a 13-month high against the sliding euro on Friday as investors fled risky positions such as leveraged carry trades, spooked by a sharp fall in stock markets.

Escalating worries about global economic growth fed risk aversion among investors and hammered equities, with Japan's Nikkei share average tumbling 3 % after a sell-off on Wall Street.

Traders cited talk of more hedge funds going under after news earlier this week that Ospraie Management LLC, the world's biggest commodities hedge fund, was forced to close its flagship fund this week.

The sudden downgrade in expectations has forced a wide array of market players to unwind bets that favoured the euro, Australian dollar and commodities.

The euro sank to a 13-month low of 150.60 yen before pulling back to 152.40 yen, down 0.7 % from late U.S. trade.

On Thursday, the euro plunged 3.6 % against the yen -- the biggest one-day drop since the massive carry trade unwind in 1998.

The euro dropped 0.4 % at USD 1.4270 after sliding to a 10-month low of USD 1.4212 in frantic late U.S. trade.

Asian stocks hammered anew

Fears about economic growth and a 3 % slump in U.S. stocks sent Asian shares sprawling on Friday and investors sought safe-haven bonds and unwound currency carry trades, lifting the yen to a 13-month high versus the euro.

Wall Street suffered its steepest decline in more than two months after weekly government data showed an unexpected jump in the number of filings for jobless benefits, souring the mood before Friday's August jobs report, which is expected to show the eighth consecutive decline, with 75,000 jobs lost.

At 0125 GMT, Japan's Nikkei average was down 3 %, Australia's benchmark S&P/ASX 200 index was 2.2 % lower and Singapore's Straits Times index fell to its lowest in almost two years.

Oil price steady near USD 108

Oil prices were little changed near USD 108 on Friday after falling nearly 8 % this week as traders shed commodities positions to join a dollar rally and on signs that USD 100-plus prices were crippling demand.

Concerns about the health of the U.S. economy overshadowed an unexpected drop in weekly U.S. crude oil stocks, with a deeper draw expected this week as the industry registers the effects of Hurricane Gustav, which shut down Gulf refineries and oilfields.

U.S. crude for October delivery rose 1 cent to USD 107.90 a barrel by 0211 GMT. The contract fell on Thursday to settle at USD 107.89 a barrel, its lowest since April 4th.

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Published on  Fri, Sep 5 2008, 05:59 GMT