ADVFN III World Daily Markets Bulletin
Daily world financial news from Thomson Financial News Supplied by advfn.com
17 Dec 2008 16:01:36
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US Stocks at a Glance
U.S. Stocks Down As Weak Earnings Trump Fed Cuts
Stocks opened lower on Wednesday after its best day so far this month as
exhilaration faded over record low interest rates and investors mulled
disappointing results from securities firm Morgan Stanley
The Dow Jones Industrial Average (DJI) fell 69.05 points to 8,855.09, with 25
of its 30 components sinking in early trade.
Alcoa Inc. (AA) was among the blue-chip index's gainers, its shares up 0.8%.
After hitting a five-week high Tuesday, the S&P 500 Index (SPX) fell 9.53
points to 903.65, with financial stocks fronting the declines.
The Nasdaq Composite (RIXF) shed 17.38 points to 1,572.51, with Apple Inc.
(AAPL) among those weighing on the tech-laden index.
Apple shares were lately off 6.3% after its downgrade by Oppenheimer to market
perform following word that Apple CEO Steve Jobs would not make his traditional
keynote at Macworld next month.
Crude-oil futures declined in early action on the New York Mercantile Exchange,
with the contract for January delivery off 34 cents at $43.26 a barrel ahead of
an official announcement on a production cut from the Organization of Petroleum
Exporting Countries. .
Early volume on the New York Stock Exchange topped 109 million, and declining
stocks passed those advancing roughly 4 to 3. On the Nasdaq, nearly 73 million
shares exchanged hands, and advancers beat decliners almost 6 to 5.
Shares of Morgan Stanley (MS) fell 4.5% after the former investment bank
reported a wider-than-expected fourth-quarter loss.
ConAgra Inc. (CAG) climbed 6.1% after it said profits in the second quarter
fell 31%, but the food producer's earnings proved nearly in line with forecasts.
General Mills (GIS) Inc. shares dropped 0.8% after the cereal maker reported a
decline in second-quarter profits.
Newell Rubbermaid Inc. (NWL) fell 6.7% after it cut its fourth-quarter
forecast, citing ongoing economic weakness and reduced consumer spending.
Stocks rallied Tuesday after the Federal Reserve slashed its target rate for
overnight loans between banks to between zero and 0.25%, and said it would buy
more debt and mortgage-backed securities.
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Forex
FOREX-Dollar hits 2 1/2-mth low vs euro on big US rate cut
LONDON - The dollar fell broadly on Wednesday, hitting a 2 1/2-month low
against the euro and heading towards a 13-year low versus the yen after the
Federal Reserve slashed interest rates to between zero and 0.25 percent.
The euro climbed as high as $1.4192 according to electronic trading platform
EBS in Asian trade, after the Fed said it would use "all available tools" to
support the economy from a recession after cutting the Fed funds rate from 1
percent to a record low.
It added that it was mulling possible purchases of longer-term U.S. Treasury
debt and would consider other ways to tap its burgeoning balance sheet to
support the economy.
The announcement triggered broad selling in the dollar, as the market had
expected a smaller rate cut of 50 basis points. Analysts said the outlook for
the greenback looked bleak going into the year-end, with repatriation flows
seen drying up.
"The main trend going into Christmas and year-end will be one of dollar
weakness," UBS currency analyst Geoff Kendrick said.
At 0855 GMT, the dollar had fallen 0.7 percent on the day to 88.21 yen,
hovering close to a 13-year low of 88.10 yen hit on trading platform EBS last
week.
The euro gained 0.2 percent against the dollar to $1.4126, not far off an
earlier two-and-a-half month high of $1.4192 hit on EBS during Asian trade. Yen
gains versus the U.S. currency helped to push the euro down 0.5 percent to
124.82 yen.
The yen has risen sharply in recent months as investors unwound carry trades
and fled out of riskier and higher-yielding assets. The gains gathered pace,
however, as the Fed's move brought the U.S. interest rates below the Bank of
Japan's 0.30 percent target for the overnight call rate for the first time in
well over a decade.
This has increased speculation that the BoJ will cut interest rates to almost
zero following its two-day meeting which ends on Friday. Analysts say Japan's
central bank may also follow the Fed into buying commercial paper outright or
purchasing asset-backed securities.
"With rates in Japan now higher than Fed rates, this puts further downward
pressure on dollar/yen," Bank of America G10 currency strategist David Powell
said. "It also increases the possibility that the BoJ will cut rates by 20
basis points on Friday," he added.
Two-thirds of analysts polled by Reuters now expect the BoJ to cut rates this
week, and most of them see rates falling to 0.1 percent. The yen's gains
prompted Naoyuki Shinohara, Japan's top financial diplomat, to declare on
Wednesday that rapid movements in currency markets are undesirable.
Market players say they remain wary about the risk of Japan intervening to rein
in the yen's climb, which is hurting the nation's exporters.
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Europe News
Bank worries push Europe shares lower by midday
LONDON - European shares fell by midday, hurt by worries over more losses at
major banks, but a rise in the price of crude on expectations of a production
cut lifted energy stocks, limiting broader market losses.
At 1144 GMT, the FTSEurofirst 300 index of top European shares was down 0.7
percent at 829.01 points, not enthused by a Federal Reserve rate cut and a
pledge of more unconventional steps to fight a deep recession.
Banks took most points off the index, with BNP sliding 16 percent after its
investment banking unit suffered a 11-month loss, hit by rocky capital markets
and its exposure to an alleged $50 billion fraud by U.S. financier Bernard
Madoff.
Deutsche Bank fell 6.4 percent amid market talk of a possible fourth-quarter
loss on investment writedowns. The bank declined to comment. HSBC and Societe
Generale were off more than 5 percent, and the DJ Stoxx European banking sector
index , the worst performing sectoral index this year amid a credit crisis,
lost nearly 3 percent.
"Generally there's a sense of nervousness going on with Madoff's alleged fraud
and BNP's losses," said Fox-Pitt, Kelton analyst David Williams.
"What the markets continue to be afraid of is all the uncertainty surrounding
so many aspects of banking right now, whether it's the trading revenues,
whether it's the credit revenues, whether it's the funding or the capital."
Across Europe, Britain's FTSE 100 was up 0.1 percent, while Germany's DAX was
down 0.6 percent and and France's CAC-40 down 0.7 percent.
But futures for the Dow Jones, S&P and Nasdaq were 1.2-1.6 percent lower. The
day's main diaried event is results from U.S. bank Morgan Stanley.
The Federal Reserve move on Tuesday to cut rates to a range of zero to 0.25
percent, pushed the dollar down to a 2-1/2 month low versus the euro, and
analysts said that this was hitting banks stocks as well.
But they said that this was just one in a long list of policy responses and
unlikely to make much difference on its own. "It's symbolic that we have gone
to zero, that's it. Am I as a company going to act any differently? No is the
answer," said John Haynes, strategist at Rensburg Sheppard Investment
Management. "There are too many big things going on for any individual big
thing to make much of a difference."
Data on Wednesday showed that a plunge in energy and food prices slowed euro
zone inflation in November to just above the European Central Bank's target,
official data showed, adding to expectations that the ECB will continue to cut
rates.
Oil rose $1.40 to around $45 a barrel as OPEC ministers met to remove a record
2 million barrels per day from oil markets in a race to balance supply with the
world's rapidly crumbling demand for fuel. BP was the top weighted gainer in
Europe, rising 2.2 percent. StatoilHydro and BG Group added 2 percent.
The FTSEurofirst 300 has fallen more than 45 percent in 2008, hurt a by a
credit crisis that has contributed to several major economies going into
recession.
UK unemployment data provided further evidence of economic weakness. The number
of Britons out of
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Asia Markets
HK shares gain 2 pct on rate cuts; Esprit plunges
HONG KONG - Hong Kong shares rose 2.2 percent on Wednesday as Chinese counters
soared on continued talk of fresh support from Beijing, while property stocks
climbed following interest rate cuts led by the U.S. Federal Reserve.
Shares of fashion brand Esprit, meanwhile, fell 8.2 percent, leading losses on
the main index, after Goldman Sachs cut its earnings estimates for the company,
factoring in slower growth, lower margins and current forex rates.
The benchmark Hang Seng Index ended 330.31 points higher at 15,460.52 as
investors ignored weak housing and inflation data from the United States on
Tuesday. But analysts expect the market to retreat in the near term, as
investors cash in on the recent rally.
"The Fed rate cut was too aggressive and some smart fund managers are taking it
to mean that the Fed knows something we don't, and also there is nothing more
the Fed can do from here on," said Peter Lai, director with DBS Vickers.
Market turnover was strong at HK$56.4 billion compared with just HK$40.3
billion on Tuesday. On Wednesday, Hong Kong's central bank followed the Fed's
lead by lowering its base rate by 100 basis points to 0.50 percent. The HK
dollar is pegged to the U.S. dollar.
Property counters gained strength even as local lenders including HSBC Holdings
decided to maintain their prime rates at current levels on Wednesday, citing no
room for adjustment. "HSBC seems to be playing hardball but sooner or later
they will have to cut rates," said Francis Lun, general manager with Fulbright
Securities.
Top developer Sun Hung Kai Properties rose 4 percent while Henderson Land added
7.8 percent. Hongkong Electric dropped 3.3 percent following a
larger-than-expected 5.9 percent tariff cut, effective Jan.1, 2009. Citigroup
had forecast an average 5 percent reduction in the power utility's tariffs.
The China Enterprises Index of top locally listed mainland Chinese firms.HSCE
rose 3.8 percent to 8,372.26 on continued speculation over another round of
interest rate reductions on the mainland. Cement maker China National Building
Materials climbed 14 percent, as the highly leveraged company was seen
benefiting greatly from lower loan interest payments.
Other commodity stocks also joined the rally, with Aluminum Corp of China
vaulting 13.5 percent and offshore oil producer CNOOC jumping 7.4 percent
But non-life insurer PICC P&C dropped 5.3 percent after rallying 17.5 percent
on Tuesday. "We continue to prefer the China life insurance sector over the
property and casualty sector owing to better market discipline, less price
competition and better valuation appeal. PICC is our least preferred exposure
to the China insurance sector," said Nomura analyst Ben Lin, calling Tuesday's
rally "unjustified".
China Unicom, the nation's second-largest mobile operator, climbed 4.2 percent
after agreeing to pay $940 million to acquire all the fixed line assets of its
parent group and China Netcom.
The deal is part of the government-led restructuring in the sector, kicked off
in June to usher in high-speed third-generation services. Unicom's bigger
rival, China Mobile gained 3.3 percent on hopes that China will grant 3G
licenses by the end of the year.
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Metals
PRECIOUS-Gold eases on profit taking after Fed rate cut
LONDON - Gold edged down in Europe on Wednesday as traders took profits after
the previous session's 2 percent gains on the back of a larger-than-expected
interest rate cut from the U.S. Federal Reserve.
The market is awaiting fresh direction from the crude oil market, which rose
ahead of an expected production cut from the Organization of the Petroleum
Exporting Countries (OPEC). Spot gold was quoted at $855.60/857.60 an ounce at
1024 GMT, little changed from $857.35 an ounce late in New York on Tuesday.
U.S. gold futures for February delivery GCG9 were up $14.70 at $857.40.
Gold is likely to consolidate after recent sharp moves, analysts said. "We have
jumped so much in a relatively short period of time without any major changes
on the fundamental side," said Wolfgang Wrzesniok-Rossbach, the head of sales
at Heraeus.
While gold was benefiting from dollar weakness and safe-haven buying as a
result of the financial crisis, physical demand for bullion was tailing off as
prices rose, Wrzesniok-Rossbach said. "Fundamentally the situation might not be
100 percent positive, but everything related to the financial crisis is
positive for gold."
Gold climbed in late New York trade on Tuesday after the Fed said it was
cutting rates to between zero and 0.25 percent, knocking the dollar lower and
prompting further rate cuts from Hong Kong and Kuwait.
The dollar hit a 2-1/2 month low against the euro on Wednesday after the cut.
However, "technical momentum signals are warning of an upside correction for
the greenback today," said Standard Bank analyst Walter de Wet. "This could
restrain precious metals." The other main external driver of gold, crude oil
prices, were broadly supportive, ticking up $1 a barrel ahead of an OPEC
decision on production quotas.
The cartel is expected to cut output by some 2 million barrels to shore up the
falling oil price, which has dropped around $100 a barrel from the highs it hit
earlier this year. Physical demand for gold was mixed, with traders reporting
falling interest in gold coins and bars in Europe and Indian buyers said to be
staying away until prices fall.
However, investment demand for gold-backed exchange-traded funds was firm. The
world's largest bullion-backed ETF, the SPDR Gold Trust GLD, said its gold
holdings rose 3.98 tonnes on Dec. 16 and are up 1 percent or 7 tonnes since
Friday.
Among other precious metals, platinum and palladium were little changed. The
two metals, which are primarily used to make catalytic converters, have fallen
sharply in recent months on fears demand would suffer from a slowdown in car
sales.
Platinum is now trading close to parity with gold, a situation last seen in
1996. However, the metal is likely to recover next year, analysts said.
"Current levels for platinum group metals are not sustainable for many South
African producers unless there is a sharp weakening of the rand," said Fairfax
analyst Marc Elliott.
"Consequently the eventual recovery of the automotive market appears likely to
prompt a shortage that should lift PGM prices perhaps to levels seen earlier
this year." "However, for the next few months we see little reason for a
substantial improvement, unless some major production cuts (or) disruptions
take place," he added.
Spot platinum was quoted at $856/866 an ounce against $860.50 late in New York
on Tuesday, while palladium was at $176.50/181.50 an ounce against $178. Silver
fell to $10.98/11.06 an ounce from $11.21.
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