investors lose nerve ahead of fomc

World Summary: INVESTORS LOSE NERVE AHEAD OF FOMC
08:54, Wednesday, 28 June 2006

Sydney - Wednesday - June 28: (RWE Australian Business News) -
US investors seem to have lost their tickers as the FOMC meeting looms
to set the new interest rate for the month on Thursday.
Financial markets are uncertain on whether the Fed will come
down heavily on inflation or use a lighter hand to protect economic
growth.
Whichever way it goes, the Federal Open Market Committee meeting
is pretty certain to run up 25 basis points to 5.25 per cent as the
target Fed Fund rate.
Investors voted with their feet, sending Wall Street's Dow
reeling 121 points and falling back through the 11,000 barrier by the
close of business.
The S&P 500 index shed a solid 11 points while the Nasdaq
composition lost 33 and the 100 index came off 29.
Industrial markets were also influenced by news from General
Motors that car sales for 2006 will be below that of the previous 12
months due to higher interest rates and gasoline prices.
GM plans to offer 0% financing on many of its vehicles to clear
inventory ahead of its new model year, heating up the incentive war
between American automakers.
The mixed economic data did nothing for bonds, which appeared to
go in the wrong direction.
However, US Treasuries rose overnight, breaking nine days of
losses.
Dealers are still speculating whether the Fed will soon end its
interest rate rise cycle which began mid-2004, although they are
convinced rates will rise Thursday and likely to rise again in July.
The 10 year cash paper yield fell 3 points to 5.21 per cent, the
30 year bond yield also came off 3 points to 5.25 per cent and the 2
year down 1 point to 5.25pc after today's $22 billion auction.
The Treasury sold the notes at a high yield of 5.239 per cent
with traders describing the results as just average.
Bid-to-cover ratio was 2.28%, in line with the average 2.22%
bid-to-cover ratio in the five previous two-year note auctions of 2006.
Indirect bidders, which include foreign central banks, accounted
for more than a third of the bids accepted, which should make Treasury
authorities a lot happier.
Analysts point to the wave of deals which is putting 2006 on
pace to be the most active merger year ever, with a total value that
could top $3.5 trillion.
In the latest development Univision's board has approved the
sale of the Spanish-language broadcaster for about $12.3 billion, plus
debt.
On the economic front, sales of existing homes fell for the
seventh time in nine months in May as interest rates rose.
But the Conference Board said consumer confidence rose to 105.7
in June, recovering part of May's decline.
The National Association of Realtors said sales of existing
homes slipped to an annualised rate of 6.67 million units, 1.2% below
April's pace and 6.6% below the 7.14 million unit pace a year ago.
In the market Intel has agreed to sell its division that makes
processors for handheld devices in a $600 million deal with Marvell
Technology, part of the chip giant's overhaul amid competition from AMD.
On the energy front, the August crude contract barely moved,
adding 12c to $71.92 barrel on the New York Mercantile Exchange.
The US dollar has been flat while the Aussie dollar slipped a
few points to US73.27c in New York trading overnight.
Gold declined $3.20 to $581.60 oz on the COMEX spot month while
most other metals also retreated.

WALL STREET ... The Dow Jones industrial average settled 120.54
points lower at 10,924.74. The Standard and Poor's 500 index ended 11.36
behind at 1239.2 while the Nasdaq Composite index fell 33.42 to 2100.25
and the Nasdaq 100 index 29.17 to 1527.00. Treasuries turned around on
the latest data. The 10 year cash paper rose 8/32 ticks to 99 11/32,
trimming the yield 3 points to 5.21 per cent. The 30-year bond yield
also lost 3 points to 5.24 per cent and the 2 year note yield slipped a
point to 5.25 per cent after the Treasury auction.

US DOLLAR ... has been subdued and mixed against major
currencies. It is trading at 116.27 yen from around 116.26 previously in
New York. The Euro is $US1.2580 against 1.2587 while sterling is
$US1.8220 compared with 1.8237. The US dollar has edged up on the Swiss
franc, trading at 1.2430 against 1.2427 previously.

AUSTRALIAN DOLLAR ... barely moved on the greenback. The dollar
is at US73.28c in New York trading. This compared with yesterday's local
close of US73.35c. Overnight, it has traded as high as US73.47 and as
low as US73.16c. Crosses are firmer with the Aussie worth 85.21 yen (pre
85.11), 0.5824 euros (pre 0.5820) and 40.21 pence sterling (pre 41.16).

AUSTRALIAN SHAREMARKET ... is expected to turn lower today, in
line with global sharemarkets and most metals. Local shares were firmer
yesterday, reflected by the All Ordinaries closing up 31.8 points to
4958 and the ASX 200 up 34.2 to 4999.2. But futures retreated overnight
and the September SPI 200 fell 44 to 4936 and December 38 to 4959. In
economic news the Housing Industry Association will today announce new
home sales in May. And in new listings, super and investment management
consultant Bravura Solutions will see its $1.12 shares open at midday.

EUROPEAN SHAREMARKETS ... finished lower as many investors were
prepared to wait until after the US Federal Reserve makes its decision
on interest rates on Thursday. Talk of the ECB lifting its rates soon
was another deterrent. Key markets all retreated led by Zurich down 57,
Frankfurt 55, Paris 30 and London 29. All the smaller European exchanges
tracked the majors. Traders even lost interest in M& A movements. The
Dow Jones Stoxx 600 fell 0.7% to 310.19.
Subdued business reflected trader caution. However, resource
stocks including oil companies BP and Royal Dutch Shell gained as light
sweet crude edged higher in both London and New York.
Meanwhile, European Central Bank president Jean-Claude Trichet
said the bank was prepared to lift rates quickly if inflation took hold.
In Paris Arcelor rallied on speculation that Russia's Severstal
may come back with a better bid for the steelmaker after Arcelor and
Mittal Steel agreed to a $34 billion deal over the weekend. Mittal
shares dipped in Amsterdam.
In Zurich, Swiss pharmaceutical company Roche fell after saying
it has halted a phase III trial in the US evaluating Avastin, in
combination with gemcitabine chemotherapy, as a first-line treatment for
advanced pancreatic cancer. Tyremakers Continental and Michelin fell
after Japan's Bridgestone reduced its 2006 profit forecast by 35% to 65
billion yen and its operating income target by 16.2% to 165 billion yen.
Michelin closed lower.
In Amsterdam Dutch satellite navigation company TomTom and media
firms were active after Morgan Stanley cut TomTom to equalweight from
overweight, saying that supply issues are expected to offset positive
market share developments in the US.
At the close, London's FTSE fell 28.9 points to 5652.30, the
Paris CAC-40 dropped 30.25 to 4771.24, the Frankfurt DAX shed 55.48 to
5459.15 and Zurich lost 56.8 to 7406.83. Other markets also retreated.
Amsterdam fell 4, Brussels 18, Madrid General 6, Milan 84 and Oslo
finished 10 lower.

METALS ... weaker. The COMEX June gold spot month contract
finished $3.20 lower at $581.60 oz while the August contract slipped
$3.30 to to $584.40 oz. June silver shed 4.4c to $10.185. July platinum
gained $7 to $1183.30 oz while spot copper (June) ended 15.7c lower at
328.70c lb in New York.
Three-month closing LME bid prices were copper $6730 tonne, tin
$7850, lead $955, zinc $2910, aluminium $2480 and nickel $19,900 tonne.
Earlier, on the three-month official bid prices, copper gained $61 to
$6880 tonne and tin rose $10 to $7850 but lead weakened $26 to $952.
Zinc gained $23 to $2979.50, aluminium retrieved $20 to $2505 and nickel
ended $550 higher at $20,050 tonne.

OIL ... settled 12c higher at $71.92 barrel on the spot August
contract on the New York Mercantile Exchange with a high of $72.50 and
low $71.60. The September contract crept up 6c to $72.80 barrel with a
high of $73.35 and low $72.50. The Brent ICE June crude futures advanced
34c to $71.07 barrel with a high of $71.56 and low $70.65.

The CRB index fell 0.3 to 337.07.