Nov. 26, 2004
By Andre Grenon
Reuters
Yahoo Finance
NEW YORK (Reuters) - Trading was very thin on U.S. markets on Friday following the Thanksgiving holiday, with most stocks eking out small gains, while the dollar and bonds were savaged by a report China might be unloading dollar denominated holdings.
Wall Street and other markets opened only for a shortened trading sessions and many strategists and traders took the day off. Futures markets in oil, metals, coffee and other commodities were closed in New York and will reopen on Monday.
Stocks inched higher in lackluster post-holiday trading, helped by steel producers benefiting from a possible shortage of the metal, and by retailers luring customers into stores on "Black Friday," traditionally considered the start of the holiday shopping season.
Share trading was extremely sparse -- with the New York Stock Exchange recording its lightest volume so far this year.
"Its a very lackluster day and there's a holiday environment -- activity is very low and there's no trend," said Scott Lynch at CSFB.
The Dow Jones industrial average was up 1.92 points, or 0.02 percent, at 10,522.23. The Standard & Poor's 500 Index was up 0.89 points, or 0.08 percent, at 1,182.65. The technology-laced Nasdaq Composite Index (NasdaqSC:^IXIC - News) was down 0.57 points, or 0.03 percent, at 2,101.97.
For the week, the Dow gained 0.6 percent, the S&P 500 rose 1.08 percent and Nasdaq was up 1.51 percent.
DOLLAR CHINA SYNDROME
A report China may be trimming dollar-denominated holdings put more pressure on the already weak U.S. Currency, sending it to a new record low against the euro, before recouping somewhat.
"In the state that the market is in right now, where there is a lot of speculation about reserve shifts, the comments from China were taken quite seriously," said Bob Lynch of BNP Paribas in New York.
After Japan, China is the second biggest holder of U.S. Treasuries, with some $174 billion in September, according to Treasury Department data.
The report in China Business News was later retracted by the Chinese central banker quoted by the newspaper, but the damage had already been done.
The market also showed little reaction to comments by European Central Bank chief Jean-Claude Trichet in Rio de Janeiro that recent euro/dollar moves were "unwelcome."
"The market was looking for something to change the perceived threat of intervention by the ECB and he hasn't said anything in that direction," said Lynch.
The dollar slid to a record low of $1.3329 per euro overnight in Asia, but by midafternoon in New York, it was down 0.35 percent against at $1.3291. It hit a 4-1/2-year low of 102.18 yen according to Reuters data, but was trading at 102.52 in the afternoon, nearly flat on the day. The pound hit a nine-month high of $1.9040 in Asia and was trading at $1.8961 in New York, up 0.38 percent.
SYNDROME HITS BONDS
The China report also forced treasury prices down on fears of possible broader selling from Asian central banks.
But traders said thin volume exaggerated the extent of market action and argued offshore central banks were still showing plenty of interest in U.S. government debt.
"They still need to buy, that's all there is to it," said one trader at a U.S. primary dealer. "That doesn't mean rates aren't going higher, they are. I think the writing is on the wall, but it's not going to be a straight down type of market."
The benchmark 10-year Treasury note was trading 11/32 lower in price. Yields rose to 4.24 percent from 4.20 percent late on Wednesday, putting them near the top of a two month-old trading range. Two-year yields ticked up to 3.03 percent from 3.02 percent and at one point were quoted at two-year highs of 3.09 percent. Five-year notes were off 5/32 in price, lifting yields to 3.64 percent from 3.60 percent. The 30-year bond shed 22/32, taking its yield up to 4.89 percent from 4.84 percent.
DOLLAR WOES OVERSEAS
European stocks were dragged lower on Friday on concern the dollar's slide to a new low would hurt exporters.
The FTSEurofirst 300 index of top European companies ended down 0.15 percent at 1,028.6 points, a flat performance for the week and 1.2 percent below last Monday's 28-month peak of 1,040.55 points. The narrower DJ Euro Stoxx 50 index fell 0.2 percent to 2,899.
Japan's Nikkei average fell 0.61 percent to its weakest close in almost a month as the dollar hit a 4-1/2-year low against the yen.
The Nikkei ended down 66.59 points at 10,833.75, its lowest close since Nov. 1. The broader TOPIX index shed 0.30 percent to 1,091.21.
(Reporting by Megan Davies, Pedro Nicolaci da Costa, Andrea Ricci, writing by Andre Grenon, editing by Michael Miller; Reuters Messaging: andre.grenon.reuters.com@reuters.net; +1 646 223 6215)
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