US stocks were mixed as investors tried to recover from Monday’s slump. Housing data confirmed weakness in the sector, the Fed stoked inflation fears and energy prices rose but none were decisive.
The S&P/Case-Shiller report showed that home prices were 15.4 per cent lower in the second quarter of 2008 than in the prior year.
A separate reading from the Commerce Department showed that sales of new one-family houses were at a seasonally adjusted annual rate of 515,000 in July. While the reading was slightly higher than in June, it was still 35.5 per cent below last year’s comparable reading.
Adding to concerns, the Federal Reserve said its next move would likely be a rate hike. The central bank said downside risks to the economy had diminished while inflation risks were rising.
However, there was some positive news. The Conference Board said its consumer confidence reading rose 56.9 points in July, up from 51.9 in June.
Many argued that the economic news should have moved the market, but investors’ reactions lacked decisiveness.
New York Stock Exchange volumes were thin at 1.45 billion as traders abandoned their terminals for the last official week of summer holidays.
The Dow was up 26.62 points, or 0.23 per cent at 11412.87, while the broader S&P 500 edged 4.67 points, or 0.37 per cent higher to 1271.51. The NASDAQ shed 3.62, or 0.15 per cent to 2361.97.
Financial stocks gained ground even after US Federal Deposit Insurance Corporation said 117 banks were on its troubled banks list at the end of the June quarter, up from 90 in the prior period.
Among the sector’s Dow components, Bank of America added 0.2 per cent, while Citigroup and JPMorgan both rose 1.3 per cent.
Lehman Brothers climbed 4.3 per cent on talk that it might set up a company funded by outside investors to buy some of its mortgage assets.
Embattled mortgage financiers Fannie Mae and Freddie Mac rallied 8.3 per cent and 20.7 per cent respectively. The companies gained after a Citigroup analyst said they had enough capital to make it through the year without a government bail out.
Among material plays, Rio Tinto’s ADR climbed 0.7 per cent after the company more than doubled its half year net profit. Meanwhile, BHP’s ADR was up 2.3 per cent.
COMEX gold for December delivery rose US$2.40 to US$828.10 an ounce.
Elsewhere, NYMEX light crude for October delivery rose US$1.16 to US$116.27. Oil futures rose on concerns that a Hurricane Gustav would disrupt supplies from the Gulf of Mexico.
Exxon Mobil, Chevron and ConocoPhillips added 1.6 per cent, 0.3 per cent and 0.7 per cent respectively.
Meanwhile, airline stocks took a hit. Delta lost 5.1 per cent, Northwest shed 4.6 per cent and AMR Corporation dropped 4.5 per cent.
Technology stocks were also weaker. Microsoft fell 1.4 per cent, Google was down 1.8 per cent and Sun Microsystems lost 1.1 per cent.
Microchip design company Marvell Technology dropped 6.6 per cent after it was downgraded on concerns about its hard disk drive inventory and weak cellular positioning.
UK Markets
British shares fell on Tuesday with investors factoring in falling markets in Europe and the US after its three day weekend break. Despite a rise in crude prices, oil companies were the biggest weight on the market, but losses were limited by surprisingly strong US consumer sentiment data.
The FTSE 100 was 34.90 points, or 0.63 per cent lower at 5470.70.
Recent volatility in oil prices dragged on energy producers. BG Group fell 2.3 per cent, Royal Dutch Shell was down 1.2 per cent and BP edged 0.6 per cent lower.
Cairn Energy reported a forecast-beating rise in first-half operating profit thanks to higher oil prices, but net profit was down sharply because last year’s numbers included a large one-off gain. Despite this its shares were down 3 per cent.
In the mining sector, shares of Rio Tinto fell 0.6 per cent even after the company reported first half net income more than doubled to US$6.91 billion, helped by strong commodity prices.
Suitor and fellow Aussie, BHP Billition sank 1.3 per cent. Ukrainian iron ore producer Ferrexpo was the FTSE's biggest loser, falling 8.8 per cent, while Kazakhmys dropped 3.5 per cent and Eurasian Natural Resources shed 3.1 per cent.
Also on the downside, London Stock Exchange sank 2.7 per cent, due to increased competition in the sector and general negative sentiment in the finance industry.
Banks had set the pace for London's gains last Friday but were left on the defensive Tuesday, with shares of Lloyds TSB down 2.5 per cent and Royal Bank of Scotland off 1.4 per cent.
On the plus side, Liberty International surged 5.3 per cent to top the FTSE 100 leader board after US real estate investor Simon Property Group raised its stake in the company to 4.22 per cent. The news fuelled speculation Simon was set to bid for Britain's biggest shopping mall owner.
Liberty announced details of Simon's new holdings shortly after Australia's Westfield Group said it had built a 2.96 per cent stake in the UK firm.
European Markets
European shares rose on Tuesday led by the tech sector and in particular mobile phone maker Nokia. Data out of the US also helped lift sentiment across the continent.
Germany’s DAX added 43.57, or 0.69 per cent to 6340.52, while France’s CAC 40 gained 12.68, or 0.29 per cent to 4368.55.
Nokia rose 2.9 per cent after the Finnish handset maker unveiled two new high-end models.
Also in the sector, Ericsson increased 2.6 per cent, Alcatel-Lucent jumped 4.7 per cent and STMicro added 3.4 per cent
Shares of Airbus parent EADS, which builds its planes in euros and sells them in US dollars, rose 2.5 per cent.
Drugmakers, whose largest export market is the US, advanced with GlaxoSmithKline shares rising 1.7 per cent.
In the banking sector, Roskilde Bank shares lost 87.8 per cent after the Danish government bailed out the bank over the weekend. The Danish central bank said investors could get some money back if there was surplus capital.
Japanese Markets
The Japanese bourse slipped 0.8 per cent on Tuesday dragged down by exporters and banks. Further credit crisis uncertainty added to the trend of increased market volatility.
The Nikkei 225 shed 99.95 points, or 0.78 per cent to 12,778.71.
The banks tracked a negative lead from across the Pacific, with Sumitomo Mitsui Financial Group falling 1.5 per cent and top lender Mitsubishi UFJ sliding 1.3 per cent.
The banking subindex was down 1.3 per cent for the day.
Among the exporters, Canon eased 1 per cent and industrial robot maker Fanuc lost 1.8 per cent, a heavy drag on the Nikkei by volume weight.
Kyocera Corp was 0.8 per cent cheaper and Sony dropped 1.6 per cent.
Asahi Homes, which trades on the Jasdaq startup market, plunged 28 per cent after it said its majority shareholder had collapsed with 62 billion yen (US$567 million) in debt, hit by higher costs and a housing slump in Japan.
Hong Kong Markets
The Hong Kong share market fell on Tuesday amid further concerns the bloodletting of US financial stocks was far from over. The index has fallen over 7 per cent this month as weaker earnings and subsequent broker downgrades depressed the market.
The benchmark Hang Seng closed 48.13 points lower, or 0.23 per cent to finish at 21056.66.
China Unicom, the smaller of China's two wireless service providers, tumbled 6.7 per cent to become the biggest drag on the index as analysts downgraded the stock on an overzealous capex plan.
China Netcom, which is soon to be merged into Unicom under Beijing's industry restructuring plan, also fell 6 per cent.
Power producers made solid gains on the back of a second power tariff increase, giving hope of further increases after a two year price freeze. Haunneng jumped 4 per cent, while Datang climbed 3 per cent.
Yanzhou Coal added 1.3 per cent to Monday's 5.8 per cent rally after the company reported a 160 per cent gain in first-half profit on the back of higher coal prices.
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