Wall Street see-sawed between gains and losses following a surprise drop in US retail sales and a bigger-than-expected increase in US consumer confidence.
Tensions between the US and China may rise after US Treasury Secretary Timothy Geithner took a tougher stance on China to float its currency. It has been reported that US lawmakers are urging Mr Geithner to get China to revalue its currency, otherwise they will put forward their own legislation to penalise imports from China in an attempt to address the perceived imbalance the pegged currency is causing on trade.
The laws would impose anti-dumping penalties and countervailing duties on imports from China and other countries that are deemed to have 'fundamentally misaligned' currencies. 'I'm saying that it's important for China to understand that Congress will act if China does not act,' said Mr Geithner.
'The Chinese need to understand that the closer we get to September, the more likely we are to actually get this legislation passed by Congress,' he said, referring to the likelihood of lawmakers pushing the legislation through before US elections that are scheduled for November. [1]
The strong push by Mr Geithner sends a salient message that he is not confident that the US economic recovery has legs, and needs to boost US exports to make up for a lack of demand in the domestic market.
As a matter of fact, US retail sales figures released today showed a surprise drop of 1.2% for the month of May. The data suggests the US economic recovery may be more fragile than previously anticipated.
Equity markets globally dropped sharply on the weaker-than-expected US retail sales data. The Euro and Sterling slid sharply against the US Dollar, while the Japanese Yen gained broadly, benefiting from its perceived safe-haven status.
However, investors found some solace in the Reuters/Michigan Consumer Sentiment Index released today. The index reported a reading of 75.5 in June, which was stronger than expected. According to Bloomberg, this is the highest reading for the index since January 2008. The announcement, released an hour and a half after the US retail sales figures, was enough to erase earlier losses on Wall Street.
By 3.30pm (London time) the Dow Jones was trading relatively flat at 2.45 points (+0.02%) above its previous close at 10174.98. The broader S&P 500 index was 1.33 points (+0.12%) higher at 1088.17, while the NASDAQ 100 advanced 10.75 points (+0.58%) to 1840.84.
Shares in BP continued to rebound, rising 2.93% to $33.74 on the New York Stock Exchange and 6.7% to 390p on the London Stock Exchange. This is despite reports that the amount of oil being lost every day may actually be closer to 40,000 barrels, or double the previous estimate.
President Obama has been receiving some heavy criticism from commentators in the UK over his alleged 'anti-British' rhetoric, prompting the UK Prime Minister to step in to defend BP. This improved investor sentiment towards the oil major and saw shares continue to recover.
Pharmaceutical majors Pfizer and Bristol Myers Squib advanced this afternoon after clinical trials on a drug they are developing in partnership was found to be more effective than aspirin for treating irregular heartbeats. Pfizer gained 3.02% to $15.36 while Bristol Myers Squib added 2.92% to $25.36.
Merck & Co also benefited from promising results from one of its pipeline products called MK-4305, a drug used to improve sleep efficiency. Shares in Merck & Co rose 1.81% to $34.89.
On the NASDAQ, Medical Nutrition USA skyrocketed 42.09% to $3.95 after French food conglomerate Groupe Danone SA announced it will acquire the company for $4 a share.
Source: [1] Reuters (11 June 2010)
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'Spread Betting News 11 Jun 2010', Article by IG Index, last update: 11-Jun-10
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