Thursday, September 25, 2008
24-Sep World Daily Markets Briefing
| by: ADVFN Newsdesk FOREX FOREX-Yen falls amid Goldman deal, dlr skittish on Fed plan LONDON - The yen fell broadly on Wednesday as investors eased back from risk aversion, taking some comfort from news that Goldman Sachs would get fresh funding and the establishment of new Fed currency swap lines. But while the dollar found respite against the yen, nagging worry about U.S. financial sector health hampered its broader progress with uncertainty spreading over the U.S. government's proposed $700 billion package to mop up toxic mortgage debt. After getting caught in the eye of a financial storm that worsened last week when investment bank Lehman Brothers collapsed, investors took some reassurance from news that Warren Buffett's Berkshire Hathaway Inc said it would invest $5 billion in Goldman Sachs Group Inc. Goldman is also working out a deal to get several billion dollars from Sumitomo Mitsui Financial Group, Kyodo news agency reported. The U.S. Federal Reserve also set up currency swap lines with more central banks, aiming to boost short-term U.S. dollar liquidity and help drive down interbank lending rates. [ "Both the developments in the investment banking sector and the temporary arrangement the Fed has made with some more international central banks is reflected in the yen's pricing," SG currency strategist Phyllis Papadavid said. "But it's still a very uncertain environment and the risk backdrop is very difficult, despite policymakers efforts. There's a lot of uncertainty around what everyone is focused on, which is the U.S. policy package," she added. Euro's gains against the dollar were stemmed by data showing a bigger-than-expected drop in German corporate sentiment. The Munich-based Ifo economic research institute said its business climate index fell to 92.9 in September from 94.8 in August. It was the lowest reading since May 2005 and below market expectations of 94.1. At 1120 GMT, the dollar was down 0.1 percent against a basket of major currencies, while the euro rose 0.2 percent on the day to $1.4682. The dollar was up 0.5 percent at 106.05 yen after hitting a session high of 106.34 yen. The euro gained 0.7 percent to 155.64 yen. In a bid to help dollar-starved banks raise funds, the Fed said it would establish temporary currency swap lines with central banks of Australia, Denmark, Sweden and Norway worth a total of $30 billion yen. But bank-to-bank lending markets are still under stress. The interbank cost of borrowing overnight and three-month sterling jumped on Wednesday, the three-month cost of borrowing dollars and euro also rose, according to the British Bankers Association's latest daily fixing. The dollar, which had seen a stunning run higher before the latest bout of turbulence, has been on the back foot since last week's demise of Lehman Brothers and the $85 billion rescue of American International Group Inc. On Monday, if suffered its biggest one day fall versus the euro since the single currency's inception in January 1999. Dollar sentiment looked set to stay uncertain as doubts grew about the effectiveness of the U.S. government's proposed $700 billion bailout plan to tackle the financial crisis. "The Treasury plan will remain the focus of the market, and an early approval will likely remain critical to stabilisation in market sentiment," UBS strategists said in a research note. Traders will keep a close eye on comments by Fed chairman Ben Bernanke who is due to continue congressional testimony on Wednesday on the U.S. government's plan to buy up toxic assets from banks' balance sheets. Also slated for release on Wednesday are figures on the U.S. housing sector, which triggered the global credit crisis and is seen as key to any economic recovery. August U.S. sales of existing homes are forecast to have declined to a 4.93 million annualised rate in August, down from 5 million, according to a Reuters poll ECON. US Stocks at a Glance US STOCKS-Market opens higher on Buffett boost NEW YORK - U.S. stocks rose at the open on Wednesday after Warren Buffett made a $5 billion investment in Goldman Sachs Group Inc late on Tuesday, buoying sentiment in the beleaguered financial sector. But even as the Goldman Sachs news spurred some optimism, investors worried congressional wrangling could delay or weaken the proposed $700 billion plan to rescue the financial sector, increasing unease about the struggling U.S. economy. The Dow Jones industrial average was up 3.74 points, or 0.03 percent, at 10,857.91. The Standard & Poor's 500 Index was up 0.86 point, or 0.07 percent, at 1,189.08. The Nasdaq Composite Index was up 8.60 points, or 0.40 percent, at 2,161.93. Shares of Goldman Sachs rose 2.71 percent to $128.44 in composite trading on Wednesday after markets opened and following Warren Buffett's purchase of a $5 billion stake in the venerable Wall Street investment bank. Europe share Europe stocks ease as automobiles, commodities fall LONDON - European shares drifted lower on Wednesday, with falls in the automobile and commodities stocks outweighing stronger banks that advanced after Warren Buffett invested $5 billion into Goldman Sachs. At 1139 GMT, the FTSEurofirst 300 index of top European shares was down 0.1 percent at 1,107.28 points after trading in a range of 1,106.35-1,116.45. Banks were the top weighted gainers on the index, with UBS, Royal Bank of Scotland, Societe General, BNP Paribas and Credit Agricole rising between 1.2-5.5 percent. Billionaire Warren Buffett bet on a Wall Street revival by buying a $5 billion stake in Goldman Sachs and a Japanese bank looked ready to follow, but markets were on edge as U.S. lawmakers clashed over a financial sector rescue. Japan's third-largest bank, Sumitomo Mitsui Financial Group, also plans to invest in Goldman, Japanese media reported on Wednesday. A spokeswoman at Sumitomo said no decision had been made. Architects of the proposed $700 billion bailout for financial firms faced a second day of grilling by U.S. lawmakers on Wednesday as the debate threatened to delay a decision until next week. Some analysts were sceptical on Buffett's move to buy a stake in Goldman Sachs. "The market is really going sideways. Warren Buffett is not enough to turn the economy around," said Tom Hougaard, chief market strategist at City Index. "No one wants to be heavily invested," he added. French utility EDF gained 3.7 percent. The company said it launched a 12.5 billion pound ($23.14 billion) agreed bid for nuclear operator British Energy, in a revamped offer to take control of Britain's nuclear power industry. EDF, the world's top maker of nuclear energy, said it was offering 774 pence per British Energy share. It also proposed an alternative of 700 pence in cash plus one nuclear power note, a financial instrument linked to BE's future performance. The FTSE 100 was down 0.6 percent, the German DAX was down 0.2 percent and France's CAC 40 fell 0.6 percent. The automobile sector was lower, with Volkswagen down 1.5 percent after it said group vehicle sales fell 3 percent in August to 448,000 units. Fiat fell 2.3 percent. It said late on Tuesday that its truck business Iveco expected a 5 to 10 percent drop next year in the western European market, as a liquidity shortage pushed consumers to delay purchases. Energy stocks were also under pressure despite crude rising 2.4 percent. BG Group, Royal Dutch Shell, Tullow Oil and BP were down between 0.2-3.4 percent. "The trend is downward in commodity stocks. Energy stocks are not always correlated with the price of crude. Investors are still concerned about growth prospects," said Hougaard. Miner Anglo American was down 5 percent after ING cut its price target to 3,525 pence from 3,750 pence and said it has less growth potential that its peers. Vedanta Resources was 6.6 percent lower after it dropped plans to streamline its corporate structure into three units in view of recent changes in global financial markets. InBev was down 3.5 percent after Morgan Stanley cut the group to "underweight" from "equal-weight" with a price target cut to 40 euros from 60 euros. Labels: ADVFN NewsDesk, Forex Analysis |
posted by Matbank at 12:28 AM
