GLOBAL MARKETS-Oil hits $122, U.S. stocks rise on Microsoft talk

Reuters: [2008-05-06 22:11:00]

(Adds close of U.S. markets)

By Herbert Lash

NEW YORK, May 6 (Reuters) - Oil shot to a record over $122 a barrel on Tuesday, and U.S. stocks rose on energy-related shares and a gain in Microsoft over speculation it would resume takeover talks with Yahoo that fell apart.

Crude oil extended a rally that has seen prices double over the past year as Goldman Sachs forecast oil could hit $200 as part of a "super-spike" driven by a lack of adequate supply.

The price of U.S. 10-year Treasury notes dipped, erasing earlier gains, as reassuring comments from Fannie Mae <FNM.N>, the largest provider of U.S. home financing, helped send stocks higher and dimmed bonds' safe-haven appeal.

Fannie Mae executives were cautiously optimistic that the worst of a credit crisis that erupted from a housing market slump may have passed. That triggered a big rally in Fannie Mae shares and supported a wider advance in U.S. stocks.

The dollar extended declines against the euro and other major currencies for a second day, and U.S. gold futures ended slightly higher after initially scaling a one-week high.

U.S. stocks spent much of the morning underwater after Fannie Mae reported a $2.5 billion loss -- its third quarterly loss in a row. That renewed credit jitters and raised the safe-haven appeal of government debt.

But Fannie Mae shares shed early losses to turn higher as the tone of company executives on a conference call reassured investors, analysts said. Fannie Mae said it is improving its mortgage portfolio and shareholder value with the housing market in the middle of a down cycle.

"Whatever comments they're making are making people more comfortable," said Bobby Harrington, head of block trading at UBS.

Fannie Mae shares surged 8.6 percent.

The company earlier cut its dividend and set plans to raise $6 billion in fresh funds to weather the U.S. housing market slump.

The Nasdaq Composite Index briefly rose 1 percent in late trading as investors anticipated that Yahoo Inc may give in to pressure from its largest shareholders to reconsider Microsoft Corp's $47.5 billion offer.

Investors also noted conciliatory comments from Yahoo's chief executive, Jerry Yang.

Yahoo shares rose 4.4 percent, partially recovering from a 15 percent slide on Monday after Microsoft withdrew its bid to create a stronger competitor to Google Inc <GOOG.O>.

Microsoft rose 1.6 percent and Google was down 0.8 percent.

The Dow Jones industrial average <.DJI> rose 51.29 points, or 0.4 percent, to close at 13,020.83. The Standard & Poor's 500 Index <.SPX> added 10.77 points, or 0.77 percent, to finish at 1,418.26. The Nasdaq Composite Index <.IXIC> gained 19.19 points, or 0.78 percent, to end at 2,483.31.

Banks and insurers put European shares under pressure after UBS <UBSN.VX> sought to purge the ill effects of the credit crisis and Swiss Re <RUKN.VX> announced another round of write-downs.

UBS shares fell 4.5 percent and were the biggest drag on the broader European equity market.

The FTSEurofirst 300 index <.FTEU3> of top European shares closed down 0.5 percent at 1,351.25 points, having recovered from a decline of as much as 1.1 percent as stocks on Wall Street pared losses. The index has rallied about 13 percent since hitting near-three year lows in mid-March.

"A bear market rally usually lasts 35 days and (rises) an average of 12 to 13 percent, that is exactly what we've seen on the S&P, so this would be it," said Philippe Gijsels, a senior equities strategist at Fortis Bank in Brussels.

"If this is a bear market rally, it should stop around now."

Oil prices jumped on supply concerns spurred by rising tensions with Iran and disruptions in Nigeria.

U.S. crude <CLc1> settled up $1.87 at $121.84 a barrel after touching a record $122.73 earlier. London Brent crude <LCOc1> gained $2.32 to $120.31 a barrel, after hitting a record $120.99.

The dollar fell against major trading-partner currencies, with the U.S. Dollar Index <.DXY> down 0.25 percent at 72.999.

The euro <EUR=> rose 0.23 percent to $1.5526. Against the yen, the dollar <JPY=> fell 0.16 percent to 104.70.

U.S. gold futures ended slightly higher after initially scaling a one-week high. Bullion could run into heavy chart-based resistance in the near term, analysts said.

The June contract <GCM8> for gold in New York settled up $3.60 at $877.70 an ounce.

U.S. Treasury debt prices were mixed. The benchmark 10-year U.S. Treasury note <US10YT=RR> fell 8/32 to yield 3.90 percent. The two-year U.S. Treasury note <US2YT=RR> rose 2/32 to yield 2.38 percent. The 30-year U.S. Treasury bond <US30YT=RR> fell 16/32 to yield 4.64 percent.

Stock markets in Hong Kong <.HSI>, China <.SSEC> and Singapore <.FTSTI> were little changed. The main index in Australia <.AXJO>, where the central bank kept interest rates steady at a 12-year high and pointed to a slowdown in demand, retreated 0.5 percent.

Japan's exchange was closed for a holiday. (Additonal reporting by Caroline Valetkevitch, Richard Leong and Nick Olivari in New York, and Jane Merriman, Amanda Cooper and Atul Prakash in London; Editing by Jonathan Oatis)

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GLOBAL MARKETS-Oil at new record, U.S. stocks rise on optimism

Reuters: [2008-05-06 18:58:00]

(Recasts with U.S. markets, adds byline; dateline previous LONDON)

By Herbert Lash

NEW YORK, May 6 (Reuters) - Oil spurted to a record $122 a barrel on Tuesday, while U.S. stocks edged higher after home lender Fannie Mae eased jitters over a big loss and investors latched onto hopes that Yahoo could resume takeover talks with Microsoft.

The dollar extended declines against the euro and other major currencies for a second day as currency and fixed-income investors soured on quarterly results at Fannie Mae, the largest provider of U.S. home financing, which came in weaker than expected.

U.S. government debt prices rose as Fannie Mae's $2.5 billion loss -- its third quarterly loss in a row -- renewed credit jitters and raised the safe-haven appeal of U.S. Treasury bonds.

But Fannie Mae <FNM.N> shares shed early losses to turn higher as the tone of company executives on a conference call reassured investors, analysts said. Fannie Mae said it is improving its mortgage portfolio and shareholder value with the housing market in the middle of a down cycle.

"Whatever comments they're making are making people more comfortable," said Bobby Harrington, head of block trading at UBS.

Fannie earlier cut its dividend and set plans to raise $6 billion in fresh funds to weather the U.S. housing market slump, which initially drove its shares and the broader U.S. stock market lower.

The technology-rich Nasdaq Composite Index rose on hopes that a Yahoo deal could be reached despite comments from a Microsoft executive who cast doubt about any return to a takeover transaction.

Yahoo Chief Executive Jerry Yang told Reuters on Monday that he had "mixed feelings" about events over the weekend, when talks broke down, and he said he was still open to talks.

Yahoo shares rose 4.4 percent, partially recovering from a 15 percent slide on Monday after Microsoft withdrew its $47.5 billion bid for the Internet company in an effort to create a stronger competitor to Google Inc <GOOG.O>.

Microsoft rose 1.6 percent and Google was down 0.8 percent.

The Dow Jones industrial average <.DJI> was down 5.30 points, or 0.04 percent, at 12,964.24. The Standard & Poor's 500 Index <.SPX> was up 4.26 points, or 0.30 percent, at 1,411.75. The Nasdaq Composite Index <.IXIC> was up 9.04 points, or 0.37 percent, at 2,473.16.

Banks and insurers put European shares under pressure after UBS <UBSN.VX> sought to purge the impact of the credit crisis and Swiss Re <RUKN.VX> announced another round of write-downs.

UBS shares fell 4.5 percent and were the biggest drag on the broader European equity market.

The FTSEurofirst 300 index <.FTEU3> of top European shares closed down 0.5 percent at 1,351.25 points, having recovered from a decline of as much as 1.1 percent as stocks on Wall Street pared losses. The index has rallied about 13 percent since hitting near-three year lows in mid-March.

"A bear market rally usually lasts 35 days and (rises) an average of 12 to 13 percent, that is exactly what we've seen on the S&P, so this would be it," said Philippe Gijsels, a senior equities strategist at Fortis Bank in Brussels.

"If this is a bear market rally, it should stop around now."

U.S. Treasury prices rose as Fannie Mae's hefty quarterly loss reminded investors that problems in America's housing market, a major drag on the U.S. economy, may not yet have completely worked their way through the system.

"All this begins and ends with housing. Unfortunately, there is no end in sight," said Richard Iley, senior economist at BNP Paribas in New York. Iley forecast another 20 percent drop in home prices from current levels.

The benchmark 10-year U.S. Treasury note <US10YT=RR> rose 4/32 to yield 3.86 percent. The 2-year U.S. Treasury note <US2YT=RR> gained 3/32 to yield 2.37 percent. The 30-year U.S. Treasury bond <US30YT=RR> added 2/32 to yield 4.6 percent.

The dollar fell against major trading-partner currencies, with the U.S. Dollar Index <.DXY> off 0.39 percent at 72.899.

The euro <EUR=> rose 0.38 percent to $1.555. Against the yen, the dollar <JPY=> fell 0.30 percent to 104.56.

U.S. crude oil futures extended a rally above $122 a barrel on a weak dollar, supply concerns and a report by Goldman Sachs that predicted crude prices would reach $150 to $200. Refined product futures also set records.

June crude <CLM8> rose 1.88 percent to $122.22 a barrel after touching $122.49 as prices easily eclipsed Monday's $120.36 record peak.

In London, June Brent crude <LCOM8> rose 2.25 percent to $120.65 a barrel after touching $120.96.

Gold rose more than 1 percent on bargain hunting and record-high oil that lifted bullion's appeal as an inflation hedge. But investors remained cautious after a recent sell-off to four-month lows.

The spot gold price <XAU=> rose $7.55, or 0.86 percent, to $880.60 after midday.

Stock markets in Hong Kong <.HSI>, China <.SSEC> and Singapore <.FTSTI> were little changed. The main index in Australia <.AXJO>, where the central bank kept interest rates steady at a 12-year high and pointed to a slowdown in demand, retreated 0.5 percent.

Japan's exchange was closed for a holiday. (Additonal reporting by Caroline Valetkevitch, Richard Leong and Nick Olivari in New York, and Jane Merriman, Amanda Cooper and Atul Prakash in London; Editing by Jonathan Oatis) (Reporting by Herbert Lash) ((herb.lash@thomsonreuters.com; +1 646 223 6019; Reuters Messaging: herb.lash.reuters.com@reuters.net)) ((Multimedia versions of Reuters Top News are now available

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GLOBAL MARKETS-Oil almost hits $121, equities weak

Reuters: [2008-05-06 13:27:00]

(Updates, adds Wall Street outlook)

By Jeremy Gaunt, European Investment Correspondent

LONDON, May 6 (Reuters) - The price of oil shot to a new record just shy of a heady $121 a barrel on Tuesday, lifting gold prices and weighing on stocks as investors focused on the state of the U.S. economy and European interest rates.

Wall Street looked set for a poor start while the dollar was steady to weaker against major currencies.

Crude oil <CLc1> hit $120.93 a barrel after surging more than $4 to a then-new record of $120.36 on Monday, primarily because of supply concerns in Iran and Nigeria.

It later fell back to around $119.86.

Iran said on Monday it would not consider any incentive offered by world powers that would constrain its right to nuclear technology, and there is growing violence in Nigeria.

They are the world's fourth and eighth largest oil producers, respectively.

"We're seeing large oil-producing countries coming up as a question mark," said Mark Pervan, a senior commodities analyst at the Australian & New Zealand Bank.

The relentless surge in prices of commodities -- not just oil but metals and food such as rice as well -- is a key concern for central banks.

With questions about the U.S. economy and a possible spread of its slowdown to Europe and elsewhere hanging over investors, stocks fell.

European equities <FTEU3.> were down 0.8 percent as weakening banks -- after UBS <UBSN.VX> unveiled big job cuts and prepared to sell its $15 billion subprime mortgage portfolio -- -- eclipsed gains in the mining sector.

Japan's exchange was closed for a holiday.

The rising price of oil is likely to weigh on interest rate decision later this week. The European Central Bank and Bank of England both meet on Thursday.

"We expect the BoE and ECB to keep policy rates unchanged at 5.0 percent and 4.0 percent, respectively, as both central banks concentrate on upside inflation risks in their economies," Lloyds TSB said in a note.

GOLD RISES

Gold <XAU=> extended gains, adding to a rise of nearly 2 percent in New York on Monday, helped by bargain hunting and higher oil prices, which enhanced the metal's appeal as a hedge against inflation.

Gold was up 0.3 percent at $875.20 an ounce. It hit a four-month low of $845 on Friday.

Against a basket of six major currencies <.DXY>, the dollar was flat.

The euro <EUR=> bought $1.5502, up less than 0.1 percent. The dollar traded around 104.83 yen <JPY=> after it failed to sustain a high of 105.92 on Monday.

Euro zone government bonds were flat to higher. The 10-year yield <EU10YT=RR> was down 2 basis points at 4.143 percent while the two year <EU2YT=RR> was flat at 3.809 percent. ((jeremy.gaunt@reuters.com; +44 207 542 1028; Reuters Messaging: jeremy.gaunt.thomsonreuters.com@reuters.net;editing by Ian Jones))

Keywords: MARKETS GLOBAL

GLOBAL MARKETS-Oil holds near $120, boosts gold, dents stocks

Reuters: [2008-05-06 08:28:00]

(Adds European outlook, updates prices)

By Anshuman Daga

SINGAPORE, May 6 (Reuters) - Oil prices held near record highs on Tuesday after storming past $120 a barrel, pushing up gold prices and stalling a recovery in Asian stocks.

European equities <FDXc1> <FCEc1> were set to open flat to lower amid a flurry of results led by Swiss bank UBS <UBSN.VX>, which unveiled 5,500 job cuts and said financial market conditions remained tough. UK stocks were expected to dip as trading resumes after a holiday.

The U.S. dollar was broadly weaker as doubts resurfaced on about the health of the U.S. economy, while record oil prices lifted currencies of major commodity exporters.

The relentless surge in prices of commodities from oil to rice is a key concern for central banks, although some investors have started to price in the view that the worst of the credit crisis and the U.S. economic slowdown could be over.

By 0600 GMT, MSCI's measure of Asian stocks outside Japan <.MSCIAPJ> was down 0.2 percent at 498.2, slipping from a four-month high hit on Monday.

The MSCI benchmark has risen 2 percent in the last two sessions but is down 6 percent so far this year. Japan remained closed for national holidays for the second day in a row.

U.S. light crude for June delivery <CLc1>, a global benchmark, edged up one cent to $119.98 a barrel. It jumped more than $4 on Monday to a record high of $120.36 on supply concerns in Iran and Nigeria.

"A lot of this is supply-driven, with the market very vulnerable to any disruption in supplies," said Mark Pervan, a senior commodities analyst at Australian & New Zealand Bank.

"We're seeing large oil-producing countries coming up as a question mark," he said.

The rise in oil to a fresh record high raised market concerns about the outlook for U.S. consumer spending.

Prices of oil and other dollar-denominated commodities usually rise to adjust for inflation when the U.S. currency falls.

Stock markets in Hong Kong <.HSI>, China <.SSEC> and Singapore <.FTSTI> were little changed. The main index in Australia <.AXJO>, where the central bank kept interest rates steady at a 12-year high and pointed to a slowdown in demand, retreated 0.5 percent.

U.S. stocks declined on Monday on worries that Bank of America Corp <BAC.N> might walk away from buying troubled lender Countrywide Financial Corp <CFC.N>, talk which Bank of America denied. Record oil prices also hit stocks.

GOLD ADVANCES

Gold extended gains, adding to a rise of nearly 2 percent in New York, helped by bargain hunting and higher oil prices, which enhanced the metal's appeal as a hedge against inflation. [GOL/]

Gold <XAU=> rose to $873.70/874.10 an ounce, up from $871.15/872.55 in late New York trade on Monday. It hit a four-month low of $845 on Friday.

Against a basket of six major currencies, the dollar eased to 73.085 <.DXY>, having backed off a 73.698 high on Friday.

The euro bought $1.5520 <EUR=>, having recouped all the losses suffered after Friday's U.S. payrolls report was not as weak as expected.

The dollar traded around 104.76 yen <JPY=> after it failed to sustain a high of 105.92 on Monday.

The rise in commodity prices comes at a time when Wall Street does not expect the Federal Reserve to cut interest rates at its next meeting in June. [FED/R]

The Fed lowered its benchmark federal funds rate on April 30 by one-quarter point to 2 percent in what may be the last in a series of cuts aimed at aiding an economy hit hard by a housing slump and credit market turmoil.

The U.S. economy lost jobs for the fourth month in a row in April but at a slower pace than earlier in the year, easing fears the economy was slipping into a deep recession, although the rise in oil prices has raised some fresh doubts. [ID:nN02551119]

Europe will be a major focus of investors' attention this week as the European Central Bank and Bank of England hold policy reviews against a backdrop of weakening economic strength. Both are expected to keep rates on hold.

(Additional reporting by Chua Baizhen; editing by Kim Coghill)

((For the state of play of Asian stock markets please click on: <0#.INDEXA>))

((anshuman.daga@thomsonreuters.com; +65 6870 3837; Reuters Messaging: anshuman.daga.reuters.com@reuters.net)) Keywords: MARKETS GLOBAL

CORRECTED-GLOBAL MARKETS-Oil tops $120, boosts gold and dents stocks

Reuters: [2008-05-06 05:55:00]

(Corrects paragraph 17 to show market was in the mood to test resistance, not in no mood to test resistance)

By Anshuman Daga

SINGAPORE, May 6 (Reuters) - Oil prices held near record highs on Tuesday after storming past $120 a barrel on Monday, pushing up gold prices and stalling a recovery in Asian stocks.

The U.S. dollar was broadly weaker as doubts resurfaced on about the health of the U.S. economy, while high oil prices boosted currencies of commodity exporters such as the Australian and Canadian dollars.

The relentless surge in commodities from oil to rice is a key concern for central banks, although some investors have started to price in the view that the worst of the credit crisis and the U.S. economic slowdown could be over.

By 0230 GMT, MSCI's measure of Asian stocks outside Japan <.MIAPJ0000PUS> was 0.1 percent weaker, backing off a four-month high hit on Monday.

The benchmark has risen 2 percent in the last two sessions but is down 6 percent so far this year.

U.S. light crude for June delivery <CLc1>, a global benchmark, rose 22 cents to $120.19 a barrel. It jumped more than $4 on Monday to a record high of $120.36.

"A lot of this is supply-driven, with the market very vulnerable to any disruption in supplies," said Mark Pervan, a senior commodities analyst at Australian & New Zealand Bank.

"We're seeing large oil-producing countries coming up as a question mark," he said.

The rise in oil to a fresh record high raised market concerns about the outlook for U.S. consumer spending.

Prices of oil and other dollar-denominated commodities usually rise to adjust for inflation when the U.S. currency falls.

Stock markets in Australia <.AXJO>, Taiwan <.TWII> and Singapore fell between 0.2 percent and 0.5 percent.

Hong Kong <.HSI> eased while South Korea <.KS11> was flat as trading resumed after a holiday. Japanese markets remain closed for a national holiday.

U.S. stocks declined on Monday on worries that Bank of America Corp <BAC.N> might walk away from buying troubled lender Countrywide Financial Corp <CFC.N>, talk which Bank of America denied. Record oil prices also hit stocks.

GOLD ADVANCES

Gold extended gains, adding to a rise of nearly 2 percent in New York, helped by bargain hunting and higher oil prices, which enhanced the metal's appeal as a hedge against inflation. [GOL/]

Gold <XAU=> was changing hands around $873.70/874.70 an ounce, up from $871.15/872.55 in late New York trading on Monday. It hit a four-month low of $845 on Friday.

Against a basket of six major currencies, the dollar eased to 73.015 <.DXY>, having backed off a 73.698 high on Friday.

The euro bought $1.5500 <EUR=>, although dealers said the market appeared to be in the mood to test resistance around $1.5570.

The dollar was trading around 104.90 yen <JPY=> after it failed to sustain a high of 105.92 on Monday.

The rise in commodity prices comes at a time when Wall Street does not expect the Federal Reserve to cut interest rates at its next meeting in June. [FED/R]

The Fed lowered its benchmark federal funds rate on April 30 by one-quarter point to 2 percent in what may be the last in a series of cuts aimed at aiding an economy hit hard by a housing slump and credit market turmoil.

The U.S. economy lost jobs for the fourth month in a row in April but at a slower pace than earlier in the year, easing fears the economy was slipping into a deep recession, although the rise in oil prices has raised some fresh doubts. [ID:nN02551119]

Europe will be a major focus of investors' attention this week as the European Central Bank and Bank of England hold policy reviews against a backdrop of weakening economic strength. Both are expected to keep rates on hold.

(Additional reporting by Chua Baizhen; editing by Neil Fullick)

((For the state of play of Asian stock markets please click on: <0#.INDEXA>)) ((anshuman.daga@thomsonreuters.com; +65 6870 3837; Reuters Messaging: anshuman.daga.reuters.com@reuters.net)) Keywords: MARKETS GLOBAL