Currencies
After the stormy session in the Far East yesterday there was a relative sense of calm to the market today as financial trading and interbank lending almost ground to a halt as banks grew fearful of dealing with each other following investment firm Bear Stearns, prompting talk of another round of coordinated central bank aid.
Risk aversion began to take hold once more as rumors circulated of Lehman's lines being pulled (stock -45%), UBS laying off staff and MF Global having a run on funds (stock -80%). Weak Empire manufacturing and Industrial Production data out of the US did little to soothe frayed nerves, but the surprising resilience of the Dow after the European bourses had fallen kept the USD above the new lows set in the previous session.
EUR/USD retraced after hitting the dizzy heights of 1.5905 last night and was below 1.5700 in London time, partially due to rumors of an emergency meeting of the ECB and BoE and also comments by the IMF chief, Strauss-Kahn, that there is ‘no need for central bank intervention’.
USD/JPY tried the downside once more at the 96.25/30 level but that down side probe failed and it rallied higher. By mid NY morning, the unit had tried the top side of 97.40 and it remained underpinned ahead of the 96.80
This pair recovered most of its lost grounds in late NY session on the back of good short-covering in the JPY crosses as it rebounded from 97.00-10 to 97.70-80 before closing at 97.30-35.
More rumors are sure to abound to keep the market on its toes in the days to come.
Energy
U.S. crude oil futures sprung back $1 to approach $107 a barrel on Monday evening after falling $4.53 in earlier trade on Monday.
April delivery crude reached $106.82 a barrel Monday evening.
Earlier on Monday, U.S. crude dropped $4.53 in its biggest single-day percentage decline in more than seven months to settle at $105.68 a barrel.
Monday evening's oil price was about 4.5 percent lower than the record of $111.80 struck in early trading on Monday.
Crude oil futures hit more than $100 a barrel for the first time on Jan. 2, and have surged in the early part of 2008 on a weak U.S. dollar and broad-based strength in global commodities.
Precious metals
Gold ended higher on Monday, holding slim gains even as a late-session selloff ate into solid early gains that had pushed bullion to a record high overnight on panic buying amid global financial turmoil.
Bullion should find support in the near term as investors flee to safe-haven assets while the dollar plumbs record lows and a recession-wary Federal Reserve cuts interest rates.
Dealers said gold will remain volatile in the near term, with prices in uncharted territory ahead of a rate-setting decision by the U.S. central bank on Tuesday.
Spot gold was quoted at $1,001.00/1,001.80 an ounce by New York's last quote at 18:15 GMT after falling to a low of $998.90. Earlier, it hit a record high of $1,030.80, against its close of $996.90/997.70 in New York late on Friday.
Other key precious metals finished lower, with platinum declining more than 4 percent to a one-week low and palladium slipping over 6 percent in a broad-based sell off, analysts said.
Stock Indices
The Dow industrials ended slightly higher, but the S&P 500 and the Nasdaq fell on Monday after JPMorgan Chase & Co's deal to buy struggling brokerage Bear Stearns at a rock bottom price failed to dispel fears of deeper fallout from the escalating credit crisis.
In a deal backed by the Federal Reserve, JPMorgan said it would buy Bear Stearns for $2 per share, or one-fifteenth of the price at Friday's close, rescuing the investment bank from collapsing under the weight of heavy bets on mortgages.
JPMorgan shares rose 10.3 percent to $40.31 and gave the Dow enough of a lift to enable it to finish slightly higher after an earlier slide of more than 190 points. Investors bought JPMorgan shares on optimism that the bank will turn a profit on its bargain basement investment in what was the No. 5 U.S. investment bank.
The Dow Jones industrial average rose 21.16 points, or 0.18 percent, to end at 11,972.25. The Standard & Poor's 500 Index slipped 11.54 points, or 0.90 percent, to 1,276.60. The Nasdaq Composite Index dropped 35.48 points, or 1.60 percent, to 2,177.01.
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