Sunday, May 11, 2008; Posted: 06:02 PM
Oil surged above $126 a barrel, creating another drag on equities and exacerbated by an OPEC report that oil could reach $299 barrel.
In other commodities, corn production is expected to fall 7pc this year to 12 billion bushels, the USDA said, as wet weather has slowed plantings.
The ethanol industry will consume four billion bushels, up from three billion in 2007.
At the bell, the Dow finished almost 1 per cent lower - down 121 points and the broader industrial, S&P 500 off 9.
Technologies were more resilient with the Nasdaq losing a modest 6 and 100 index off 7.
Treasuries edged up as the credit worries re-emerged and sparked demand for safe-haven bonds and notes.
The 10-year notes had to their best week in nearly two months.
Bonds gained following news late Thursday that American International Group, the world's largest insurer, posted a record $7.8 billion quarterly loss.
The dismal AIG results fanned doubts about a recovery in credit markets.
Other financial companies including Swiss bank UBS and US home-finance company Fannie Mae have recently announced asset write-downs and credit losses stemming from subprime mortgages.
Credit fears have dragged equity markets from their recent peaks, and benchmark 10-year Treasury yields from their four-month highs reached earlier this week.
Treasuries were also influenced by some reassuring comments from Citigroup's new chief executive, Vikram Pandit, after the largest US bank unveiled a plan to sell $400 billion of assets in a bid to become more efficient and profitable.
Citi has suffered hefty losses from the sub-prime mortgage debt crisis and its fallout.
It plans to wind down more than $400 billion in assets over the next two to three years.
The US trade deficit narrowed 5.7pc to $58.21 billion in March, more than expected, as imports of cars and crude oil dropped amid record-high oil prices and a weak economy. Exports fell 1.7pc.
The decline reflected another strong month of US exports and a record $6.1 bn drop in imports to $206.7 bn, which showed the US slowdown has taken a toll on consumer and business demand for foreign goods.
On the economic data scene, falling US consumer sentiment suggests the world's largest economy will grow by less than 1pc this year, according to research just released by the Reuters/University of Michigan Surveys of Consumers.
The rapid diversification of the US economy in recent years of globalisation has also made it vulnerable to micro recessions that present new challenges to policy makers, Richard Curtin, director of the Surveys of Consumers, said.
"When GDP growth is barely above zero, as it is now, the economic landscape becomes potholed by micro-economic downturns," Mr Curtin said in a research note.
On the oil front, China will ship in 20pc more diesel and jet fuel while staying a net importer of gasoline in May, as a new rule to fatten stockpiles kicks in and a tax break on fuel imports encourages inflows.
China will import 600,000 tonnes of diesel in May, from 500,000 tonnes last month and up from just 20,000 tonnes in May last year, as a rule for wholesalers to maintain inventories equivalent to at least 15 days of sales - previously 10 days - came into force on May 1.
Bankrupt US vehicle parts maker Delphi Corp said on Friday its first-quarter net loss widened under production cuts at major customer and former parent General Motors Corp.
Delphi also said it expected to continue to have adequate access to liquidity for the rest of 2008 as it works on its reorganisation plan.
The net loss widened to $589m from $533m. In the market, Microsoft is appealing the nearly $1.4 billion fine imposed on the tech giant by the European Commission for failing to comply with a landmark antitrust ruling.
Circuit City is allowing Blockbuster and shareholder Carl Icahn to review its books, a sign the struggling electronics retailer is effectively putting itself up for sale. Shares rallied.
WALL STREET... Wall Street's Dow Jones Industrial Average settled 120.9 points lower at 12,745.88, Standard and Poor's 500 index finished 9.4 points behind at 1388.28, the Nasdaq Composite index shed eased 5.72 to 2445.52 and the Nasdaq 100 index dipped 6.57 to 1960.29 on the close. In Treasuries, the 10-year note added 2/32 to 100 27/32, while the yield slipped 1 point to 3.77pc. The 30-year bond yield lost 1 point to 4.52pc while the 2-year note yield rose 2 points to 2.23pc.
US DOLLAR... is changing hands at 103 yen, compared with 103.67 previously. The euro is at 1.5459 from 1.5402 previously while sterling is at 1.9507 from 1.9548. On the Swiss franc, the US dollar is 1.0427 from 1.0510.
AUSTRALIAN DOLLAR... is changing hands at US94.19c compared with US94.14c on the local close. Offshore the Aussie posted a high of US94.36c and low of US93.82c. The Aussie crosses are 97.01 yen (pre 97.91), 0.6092 euros (pre 0.6132) and 48.28 pence on sterling (pre 48.29).
AUSTRALIAN MARKET... could fall with the June futures contract down 11 points to 5755. The ASX 200 index closed 48.6 points ahead at 5771.8 and the All Ordinaries index gained 43.5 to 5844.4 on Friday. Today the Australian Bureau of Statistics reports March housing finance data. Ex dividend stocks are Oldfields, Envirozel and Ark Fund. The key item on the stockmarket this week is the CSR full year results on Wednesday. The Commonwealth will deliver the budget on Tuesday night.
EUROPEAN MARKETS... London's FTSE 100 dropped 66.1 to 6,204.70 , Paris CAC-40 dropped 95.02 to 4,960.56, Frankfurt's DAX fell 68.73 to 7,003.17, Madrid fell 13.46 to 1,499.14, Zurich dropped 102.18 to 7,483.97. On regional exchanges Milan dropped 263, Amsterdam 4, Brussels 46 and Oslo lost 8.
METALS... COMEX gold (Jun) rose $3.70 to $885.80 oz. The August contract gained $3.80 to $890 oz and reached $895 oz. May silver rose 49c to $16.843 oz. July platinum rose $49.90 to $2101.80 oz, but May copper lost 6.7c to 375.35c lb in New York.
The London Metal Exchange official cash prices: copper shed $241 to $8400 tonne, but tin rose $295 to $24,565, lead fell $295.50 to $2285.50, zinc lost $70 to $2165.50, aluminium dipped $15 to $2867.50, while nickel sold $1,570 lower at $26,860 tonne. The 3-month ask prices were: copper $8193 (pre $8445), tin 24,700 (pre $24,000),lead $2220 (pre $2435), zinc $2170 (pre $2250), aluminium $2895 (pre $2925) and nickel $28,900 (pre $28,600). OIL... June crude rose $2.33 to $125.96 barrel with a high of $126.25 and low of $124.08 barrel. The July contract gained $2.43 to $126.00 a barrel with a high of $126.20 and low of $124.04. Brent ICE for June climbed $2.56 to $125.40 with a high of $125.90 and low $123.30 barrel. Reuters CRB index rose 5.34 points to 427.48.
rweabn.com.au
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