While you were sleeping: China adds to positive tone

While you were sleeping: China adds to positive tone

(BusinessDesk) December 14 - Equities on Wall Street began the final five-day trading week of the year on a positive note amid takeover news and optimism about the global economy.

The three benchmark U.S. stock indexes were up at least 0.13% in midday trading, with the Standard & Poor’s 500 index nearing the level it was at before the failure of Lehman Brothers in September 2008.

Investors drew optimism from takeover announcements including by General Electric Co which said it would buy British oilfield services company Wellstream Holdings Plc for about 800 million pounds (US$1.3 billion).

Dell Inc agreed to buy data storage company Compellent Technologies Inc for about US$960 million in cash.

“If good things happen to GE, like buying other companies, that feeds more optimism about the U.S. market in general," Jack DeGan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire, told Reuters.

Meanwhile, Wall Street’s biggest banks were set to complete their best two years in investment banking and trading, buoyed by 2010 results likely to be the second-highest ever, according to data compiled by Bloomberg News.

Bolstering optimism about economic growth worldwide was the decision by Chinese authorities to tighten lending practices rather than increase interest rates, even as the country’s inflation increased to the fastest pace in more than two years.

The central bank has told six of China's biggest lenders that a special increase in required reserves would be extended, Reuters reported, citing three industry sources

A special increase in reserves that had been due to expire this week will be renewed for three months, the sources told Reuters. That followed an official reserve requirement increase for all banks - the third in a month - that was announced on Friday.

Also expected to keep interest rates steady is the Federal Reserve, which has its final 2010 meeting tomorrow in Washington.

As a backdrop to the Fed policy meeting, Moody’s today said the latest tax package agreed to between President Obama and the Republican leadership could lead it to lower the AAA rating it has on the U.S.

The tax package has yet to receive approval in Congress.

If passed and if Moody’s changes its outlook on the U.S. rating to negative, a cut in the rating could take place in the following 12 to 18 months.

U.S. Treasuries rose, erasing their decline earlier in the session, as less American debt was submitted to the Fed in its buyback today.

“People were taken aback that the securities offered in the buybacks was only US$18 billion, way down from US$30 billion,” Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York, told Bloomberg News. “It’s just less securities being offered, meaning people’s positions have been pared down.”

Meanwhile the greenback weakened, declining 0.4% to 83.55 yen and 1.3% to 0.9673 Swiss francs, a typical safe haven. The euro was up 1.1% at US$1.3382.

Oil futures for January delivery traded at US$89.11 a barrel as of 7:16 a.m. in New York.

Oil has gained 30% from this year’s low on May 20, though is still down 40% from the record US$147.27 reached on July 11, 2008.

Exxon Mobil Corp CEO Rex Tillerson said global oil markets were well-supplied.

"Inventory levels are still very healthy in the U.S. and other OECD [Organisation for Economic Co-operation and Development] countries," Tillerson told reporters at an event in Qatar's industrial city of Ras Laffan.

"You still have OPEC with spare capacity of something like 6 million barrels per day. I would say there's plenty of supply," he said.

In fact, OPEC was breaching its production limits the most in six years, signalling the world’s biggest suppliers were ready to pump more crude next year as oil rallied toward US$100 a barrel, according to Bloomberg.

(BusinessDesk)

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