While you were sleeping: Beige Book, Treasury sale

While you were sleeping: Beige Book, Treasury sale; Wall St slips

July 30 - The pace of contraction in the U.S. economy slowed in the past two months, listing expectations recession in the world’s largest economy will abate soon.

The Federal Reserve’s Beige Book showed four of its 12 regional banks reported signs of stabilization while two more noted a slowing pace of decline. Still, retail sales remained sluggish with manufacturing “subdued” albeit in better shape that in the last report. Lending was generally “stable or weakened further.”

Investors will get more evidence of the state of the economy on Friday in the U.S., with government figures expected to show gross domestic product shrank at an annual pace of 1.5% in the second quarter, milder than the first quarter’s 5.5% slump.

Treasury bonds declined after a record sale of US$39 billion of five-year notes drew higher-than-expected yields and the amount bought by overseas central banks dwindled versus the previous month’s sales.

The sale of five-year notes yielded 2.689%, the second sales this week where investors have demanded higher yields than was forecast.

Indirect bidders, which include foreign central banks – the biggest holders of Treasuries - bought 36.7% of the notes, a decline from the 62.8% they snapped up in last month’s sale. At the sale of two-year notes yesterday, indirect investors bought 33%, down from 68.7% in June.

The bid-to-cover ratio, which measures total bids against the amount on offer, was 1.92%, down from 2.7% in June.

The yield on five-year Treasuries climbed 4 basis points to 2.64%. Ten-year yields fell 2 basis points to 3.66%. The yield on 30-year Treasuries dropped 5 basis points to 4.51%.

Durable goods orders eased in June though there were signs of a pickup in manufacturing, according to the U.S.

New orders fell 2.5% last month, the biggest decline since January, after a 1.3% gain in May. Still, excluding transport-related items, orders rose 1.1% in the latest month.

Inventories of manufactured durable goods fell 0.9% in June, the sixth straight month of declines. Shipments of manufactured goods fell 0.2%, the 11th straight decline.

Other data showed U.S. mortgage applications fell for the first time in four weeks, on a decline in home refinancing loans as interest rates rose.

Microsoft Corp. and Yahoo Inc. signed a 10-year agreement to collaborate of internet searching, in a challenge to Google Inc.’s dominance. Microsoft and Yahoo won’t combine display advertising at this stage.

The agreement, which requires regulatory approval, will see Microsoft's Bing search engine leverage Yahoo strength in attracting advertisers.

Shares of Yahoo shares tumbled 12% to US$15.14 on disappointment the two companies didn’t agree to a wider-ranging relationship. Microsoft rose 1.4% to US$23.80 and Google declined 0.8% to US$436.24.

Stocks on Wall Street fell for a second day as commodity prices fell and Chinese stocks weakened, while concerns rose about a glut of Treasuries after record sales of debt.

The Dow Jones Industrial Average fell 0.3% to 9070.72 and the Standard & Poor’s 500 declined 0.5% to 975.15.

Exxon Mobil shed 0.6% to US$71.43 as the price of crude oil declined, while
Alcoa Inc. fell 2.2% to US$11.01 as copper fell.

China’s benchmark stock index dropped 5% yesterday, having soared 79% this year.

Sprint Nextel Corp. fell 12% to US$4.05 after the third-largest U.S. mobile-phone company posted a bigger-than-expected loss.

Coca-Cola fell 0.2% to US$49.28 after the world’s largest soft-drink distributor raised its full-year earnings forecast.

The U.S. dollar strengthened as stocks fell, fueling demand for the greenback as a haven.

The dollar rose to $1.4036 per euro from $1.4167 yesterday while the yen strengthened to 133.33 against the euro from 133.95. The dollar rose to 94.98 yen from 94.55.

Gold futures for December delivery fell 1.1% to US$931.10 an ounce on the New York Mercantile Exchange.

Oil fell more than 5% after U.S. Energy Information Administration figures showed crude inventories surged by 5.1 million barrels last week.

U.S. crude dropped US$3.63 to US$63.60 a barrel in New York.
European shares rose as better-than-expected earnings stoked optimism the economic downturn is waning. The Dow Jones Stoxx 600 gained 0.8% to 220.37.

Akzo Nobel, the world’s largest maker of coatings and paints, rose 9.8% after earnings before interest, taxes, amortization and depreciation fell a smaller-than-expected 9% to 527 million euros. Bayer AG climbed 5.4% after earnings fell less than forecast to 532 million euros.

Peugeot jumped 11% after France’s biggest automaker reported a 962 million-euro net loss for the first half, beating a 971.5 million euro loss forecast in a Bloomberg survey.

Daimler gained 4.6% after posting a narrower-than-expected 1.06 billion euro loss in the second quarter.

ArcelorMittal fell 4.4% after missing estimates with a second-quarter net loss of US$792 million. BHP Billiton fell 2.4% and Rio Tinto slid 1.8% as commodity prices dipped.

The U.K.’s FTSE 100 rose 0.4% to 4547.53 and France’s CAC 40 rose 1% to 3365.62. Germany’s DAX 30 jumped 1.9% to 5270.32.

(BusinessWire)

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