US MARKET & NEWS 13.8.2009

Stocks sustained gains Wednesday after the Federal Reserve held interest rates near historic lows and signalled the
economy has finally started to stabilize. Wall Street rallied leading up to the Fed announcement as signs of improvement in the
housing market pushed investors back into stocks following a two-day retreat. The market seesawed a bit after the
announcement, with the Dow, Nasdaq and S&P 500 pushing toward fresh 2009 highs, before trimming those gains by the
close. The Dow Jones industrial average gained 1.3% (+120.2 pts, close 9,361.6). The Nasdaq gained 1.5% (+28.9 pts, close
1,998.7) and the S&P 500 index gained 1.2% (+11.5 pts, close 1,005.8). U.S. light crude oil for September delivery rose 71
cents to settle at US$70.16 a barrel on the New York Mercantile Exchange. (CNNmoney)
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The Federal Reserve plans to slow the pace of its purchases of U.S. Treasuries as the recession eases, and signalled
that the US$300bn program will end in October. The program was previously scheduled to end in September. Policy makers
acknowledged signs that the worst recession since the 1930s may be ending, saying that data “suggests that economic activity
is levelling out.” Chairman Ben S. Bernanke’s US$1trn expansion of the Fed’s balance sheet, providing emergency funding for
banks and markets from commercial paper to asset-backed securities, has helped thaw financial markets, which the Fed said
have “improved further in recent weeks.” (Bloomberg)
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The U.S. trade deficit widened less than forecast in June, reflecting a second consecutive gain in exports spurred by a
pick-up in economies around the world. The gap increased 4% to US$27bn from US$26bn in May, which was the lowest level
in almost a decade, Commerce Department figures showed yesterday in Washington. Exports gained 2%, helped by stronger
demand for goods such as semiconductors and aircraft engines, while imports rose 2.3%, led by a higher cost for oil.
Increases in both exports and imports signal the worst global slump in the post-World War II era is coming to an end, helping
the U.S. pull out of the recession. Federal Reserve policy makers today committed to keeping rates low to secure an economic
recovery after wrapping up a two-day meeting. The trade gap was projected to widen to US$28.7bn, according to the median
of 70 forecasts in a Bloomberg News survey of economists. Deficit projections ranged from US$31bn to US$25.5bn.
(Bloomberg)
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The U.S. budget deficit reached a record for the first 10 months of the fiscal year and broke a monthly high for July as the
recession curbed revenue and the government ramped up spending to rejuvenate the economy. The shortfall so far for the
fiscal year that ends Sept. 30 totalled US$1.27trn compared with a US$389bn year-to-date gap in 2008, the Treasury said
yesterday in Washington. The excess of spending over revenue for July climbed to US$180.7bn compared with a US$102.8bn
gap in July 2008 as the government spent more than in any month in U.S. history. Tax receipts are sliding and spending is
surging even as some economists say the recession may have ended. (Bloomberg)
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Home price declines in the U.S. accelerated in 2Q09, dropping by a record 15.6% y-o-y, as foreclosures weighed on values.
The median price of an existing single-family home dropped to US$174,100, the most in records dating to 1979, the National
Association of Realtors said yesterday. Total sales rose 3.8% to a seasonally adjusted annual rate of 4.76m from 1Q09 and fell
2.9% from 2Q08. Prices fell in 129 out of 155 metropolitan areas from a year ago and 39 states experienced sales increases
from 1Q09, the Chicago-based realtors group said. Home prices are falling even as a survey of economists indicates that the
U.S. economy is recovering from the worst recession since the 1930s. The economy will expand 2% or more in four straight
quarters through June, the first such streak in more than four years, according to the median of 53 forecasts in the monthly
Bloomberg News survey. (Bloomberg)
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Bank of England Governor Mervyn King said inflation may miss the central