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Early World Summary: US EQUITIES TUMBLE ON RATE WORRIES
07:41, Wednesday, 31 May 2006

Sydney - Wednesday - May 31: (RWE Aust Business News)- Investors
again took fright overnight after the Fed suggested that inflation is
running at the upper end of the range for stable prices, indicating more
interest rate rises to come.
Wall St's Dow settled 184 points behind after selling accelerated
in the last hour of business.
Traders cut the S&P 500 by 20 points and knocked 45 points off
the Nasdaq composite and 35 points off the 100 index on the close.
Treasuries fell on renewed speculation of more rate rises.
The 10 year cash paper yield rose 3 points to 508 per cent while
the 30 year bond yield added 3 points to 5.19 per cent and the 2 year not
yield also gained 3 points to 4.98 per cent.
Michael Moskow, president of the Fed Bank of Chicago said, "We
know the dangers of inflation getting built into the economy.
"We know that inflation can have a great deal of inertia and we
have to be very diligent and very careful to make sure that doesn't
happen," Moskow said in an interview on CNBC financial television.
Officials at the Fed, the US. central bank, fear letting
inflation expectations start to rise, since stopping an
inflationary spiral once it starts can be hard and painful.
Meanwhile the Conference Board Consumer Confidence Index, which
had increased in April, declined in May with the index now standing at
103.2 , down from 109.8 in April.
The Present Situation Index decreased to 132.5 from 136.2 and the
expectations index fell to 83.7 from 92.3.
The Conference Board said that consumer confidence lost ground in
May after reaching a four-year high in April.
Consumer confidence fell less than forecast this month
despite a surge in gasoline prices and higher interest rates on
some home mortgage loans.
In other data the Chicago Federal Reserve Bank said its Midwest
manufacturing index rose in April, helped by a "very strong" performance
in the machinery sector.
The index rose 0.6 percent to a seasonally adjusted 116.5
from an upwardly revised 115.8 in March, originally reported at
114.9.
Compared with a year earlier, Midwest output was 6.3
percent higher, just outpacing the 5.9 percent national
Treasury debt prices fell with dealers worried by inflation
comments from a Federal Reserve official and a weaker dollar after data
showing a slide in consumer confidence.
Energy costs continue to rise as the July crude contract advanced
another 66c to $72.03 barrel on the New York Mercantile
Exchange and touched a high of $73.55 barrel on the August contract.

Traders showed more caution on commodities markets, encountering
mixed fortunes.
Gold rose $2.90 to $653.90 oz on the new June COMEX spot month.
The Australia dollar a tad better at US76.22c on New York trading
overnight.
In global news President Bush has named Goldman Sachs CEO Henry
Paulson as Treasury secretary, succeeding John Snow, amid public
skepticism about the economy's strength.
The US Supreme Court ruled 5-4 that government whistleblowers
don't have carte blanche free-speech rights. Justices also decided to
review an appeal by Philip Morris over jury awards.





WALL STREET ... The Dow Jones industrial average index settled
184.18 points higher at 11,094.43, the Standard and Poor's 500 index
ended 20.29 points lower at 1259.87 while the Nasdaq Composite index
finished 45.13 behind at 2164.74 and the Nasdaq 100 index lost 35.08 to
1571.29 on the close. Treasuries fell on the data, influencing rate rise.
The 10 year cash paper shed 7/32 ticks to 100 18/32, lifting the yield 3
points to 5.08 per cent, 30-year bond yield rose 3 points to 5.19 per
cent while the 2 year note yield also improved 3 points to 4.99 per
cent.


US DOLLAR ... has been weaker against major currencies, trading
at 112.14 yen from around 112.47 previously in New York. The euro is
$US1.2874 against 1.2753 while sterling is $US1.8838 compared with 1.8602
previously. The US dollar on the Swiss franc is a touch lower at 1.2111
against 1.2248.

AUSTRALIAN DOLLAR ... is a touch firmer on the greenback. The
dollar is currently US76.20c in New York trading. This compared with
yesterday's local close of US76.17c. Overnight, it has traded as high as
US76.45c and as low as US76.08c. The Aussie is worth 85.49 yen (pre
85.29), 0.5923 euros (pre 0.5949) and 40.48 pence on sterling (pre
40.77).


EUROPEAN SHAREMARKETS ... finished sharply lower after investors
marked down stocks in another selloff across exchanges. The huge loss by
the Vodafone Group influenced market sentiment despite reiterating its
buyback plan. Key markets tumbled with London down 139 points, Paris 121,
Frankfurt 133 and Zurich retreated 155. The Dow Jones Stoxx 600 Index
fell 2.2% to 315.85 at mid session.
Traders sold off autos, insurers and construction companies as
Wall Street started the week in negative territory after a string of
disappointing news including higher oil prices, worries about fresh rate
rises. a downgrade for General Motors and drop in Wal Mart sales for May.
On the continent Volkswagen and BMW sold lower while EADS, the
Airbus owner, fell heavily.
Among the main losers were HSBC and oil firm BP.
In London British mobile-phone giant Vodafone, rose after it said
that it will return £9 billion ($16.7 billion) to shareholders in August,
with £6 billion coming from the sale of its Japanese operations. BAA
shares rose after it rejected a raised offer from a consortium led by
Spain's Grupo Ferrovial over the weekend. The offer of 900 pence a share
-- which values BAA at £9.73 billion ($18.2 billion) -- is conditional on
BAA not paying its final dividend of 15.25 pence a share. The
consortium's last offer for the U.K. airport operator was 810 pence.
Ferrovial shares fell in Madrid.
In Frankfurt German chemicals group BASF slipped back from early
gains to trade sharply lower. The early gains came after Engelhard, a US
maker of catalysts, agreed to accept BASF's $5 billion takeover offer.
At the close, London's FTSE dropped 139 points to 5652.00, the
Paris CAC-40 slumped 121.45 points to 4893.87 while the Frankfurt DAX
lost 132 59 to 5622.43 and Zurich slumped 154.84 to 7533.31. In other
markets Amsterdam shed 11 points, Brussels retreated 105, Madrid General
shed 124 , while Milan fell 567 and Oslo ended another 11 points lower.



METALS ...mixed. Precious metals contracts moved into the next
months overnight. The new COMEX June spot contract rose $2.90 to $653.90
oz while the July contract gained a similar amount to $657.10oz. June
silver rose 33.8c to $13.013 oz, July platinum retreated $6.70 to
$1291.40 oz, Spot copper (June) fell 14.55c to 374.70c lb in New York.
Three months closing LME bid prices were copper $7970 tonne, tin
$8000, lead $1075, zinc $3710, aluminium $2700 and nickel $21359 tonne.
Earlier, on the three months official bid prices, copper rose
$140 to $8270 tonne while tin gained $150 to $8275 but lead eased $5 to
$1110. Zinc rose $170.50 to $3804, while aluminium gained $22 to $2793
and nickel ended $125 lower at $22,050 tonne.

OIL ... settled 66c higher on the spot July contract at $72.03
barrel on the New York Mercantile Exchange with a high of $72.75 and low
$71.90 barrel. The August contract gained 71 to $72.87 barrel with the
high of $73.55 and low $72.80. The Brent ICE June crude futures rose 46c
to $71.05 barrel with a high of $71.99 and low $70.45 barrel.

The CRB index rose 0.06 points to 347.88
ENDS