Friday, October 10, 2008
9-Oct World Daily Markets Briefing
| by: ADVFN Newsdesk Forex FOREX-Yen down as risk aversion eases; eyes on G7 LONDON - The yen fell broadly on Thursday, while higher-yielding currencies bounced as extreme risk aversion in financial markets receded after coordinated global central bank rate cuts the previous day. But the situation remained tenuous as investors waited for further steps by governments to stabilise the global banking system and stave off a prolonged economic downturn, with focus shifting to a meeting of Group of Seven (G7) finance ministers and central bankers on Friday. The low-yielding yen fell from a three-year high against the euro and a six-month peak versus the dollar hit the previous day, although both pairs were off lows by midday trade. "The yen crosses are relatively stable but they are not recovering," said Adarsh Sinha, currency strategist at Barclays Capital in London. While the steps taken by leading global central banks and the UK government's plan to recapitalise British banks were important, "there are still downside risks unless other countries take similar sort of steps," he said. At 1139 GMT, the euro was up 2.15 percent at 138.21 yen while the dollar was up 1.6 percent against the yen. The euro also regained some ground against the dollar , rising 0.6 percent to $1.3702. The high-yielding Australian dollar was up 5.7 percent against the U.S. dollar at $0.7014, after hitting a five year low on Wednesday. European equities were up 1 percent by midday trade. U.S. stock futures also pointed to a higher open, but markets were jittery after a ban on short sellers came to an end at midnight. Markets are looking to the G7 meeting, as well as a broader meeting of G20 countries for a more coordinated approach to the global financial crisis. U.S. Treasury Secretary Henry Paulson suggested on Wednesday the United States may follow in the UK's footsteps and inject capital into banks to strengthen their balance sheets. But a British proposal to provide guarantees on interbank lending may meet resistance. "What is needed is a coordinated plan, they need to agree on a broad set of principles," said Barclay's Sinha. "If they can show that, then it will be a positive, but if they fail, we will see more of the turmoil." Markets also expect global central banks to cut rates further after the Fed, the ECB and the central banks of Canada, England, China, Sweden and Switzerland cut rates simultaneously on Wednesday. "Having embarked on this easing cycle, all of the central banks will find it difficult to pull back now," said Calyon strategists in a research note. Markets will also keep an eye on further measures by central bank to revive frozen money markets. On Wednesday, the ECB also halved the premium it charges banks for emergency overnight borrowing, upped the amount it pays on overnight deposits and offered unlimited weekly funds at a fixed rate. See Debt...Indicators... Currency reports.. US Stocks at a Glance US STOCKS-Wall St opens higher on IBM boost NEW YORK - U.S. stocks rose more than 1 percent on Thursday as a stronger-than-expected profit from technology bellwether IBM suggested that the credit crunch is not stifling all business spending. The Dow Jones industrial average was up 133.25 points, or 1.44 percent, at 9,391.35. The Standard & Poor's 500 Index was up 13.58 points, or 1.38 percent, at 998.52. The Nasdaq Composite Index was up 32.22 points, or 1.85 percent, at 1,772.55. U.S. jobless claims drop as hurricane impact fades WASHINGTON - The number of U.S. workers filing new claims for jobless benefits fell 20,000 last week and was in line with forecasts as the impact of hurricanes Gustav and Ike eased, government data on Thursday showed. Initial claims for state unemployment insurance benefits declined to a seasonally adjusted 478,000 in the week ended Oct 4 from a revised 498,000 the prior week, the Labor Department said. It was the lowest reading since mid-September, but claims remain at levels indicating a weak U.S. employment climate. Analysts polled by Reuters had forecast 478,000 new claims versus a previously reported count of 497,000 the week before. Europe share European stocks break losing streak; banks gain LONDON - European stocks rose by midday on Thursday, breaking a three-day losing streak, as the previous session's concerted global rate cut and UK bank bailout emboldened investors to buy battered financials and commodities. At 1108 GMT, the FTSEurofirst 300 index of top European shares was up 1.1 percent at 951.11 points, but still down more than 12 percent so far this week, placing it on track for its worst week on record. The index sank to its lowest close since December 2003 on Wednesday as investors worried about economic growth despite concerted rate cuts by the world's top central banks. On Thursday, banks rose, led by Royal Bank of Scotland up 2.2 percent. On top of slashing interest rates, the European Central Bank also halved the premium banks pay for emergency borrowing over its main refinancing rate. The ECB also said it was raising the rate it would pay banks which deposited excess funds with it overnight, to 50 basis points below its main rate from 100 basis points below it. "They're opening the floodgates for liquidity," said David Schnautz, interest rate strategist at Commerzbank in Frankfurt. UniCredit's Greetfeld said he would like to see the UK bailout plan, which envisages the government taking stakes in banks and guaranteeing bond issues to an extent, replicated in other countries. "Taking stakes in the banks, and guaranteeing a certain amount of bond issues is a better way of doing it than the U.S. bailout plan. Encouragingly (U.S. Treasury Secretary Henry) Paulson is also speaking of injecting equity in U.S. banks playing a bigger role, which is positive." Other major movers included ArcelorMittal, which reaffirmed its third-quarter profit outlook and jumped 10 percent. Siemens rose nearly 8 percent, boosted by a newspaper report that the engineering group planned to settle a U.S. Securities and Exchange Commission investigation earlier and for a smaller fine than previously expected. A Siemens spokesman said it was still uncertain how proceedings in different countries might end. Asia at a Glance Asian Market Summary Japan Japan's Nikkei stock average fell 0.5 percent on Thursday to its lowest close in more than 5 years amid volatile trade, with hopes for new policy steps to contain the financial crisis warring with concerns over the global economy. The Nikkei failed to gain ground despite coordinated worldwide interest rate cuts on Wednesday, which came after it tumbled 9.4 percent in its biggest one-day loss since the 1987 stock market crash, with Tokyo shares shedding $250 billion of their value. The benchmark Nikkei fell 0.5 percent to its lowest close since June 2003, shedding 45.83 points to 9,157.49. The broader Topix finished up 0.7 percent at 905.11 after earlier rising more than 3 percent. China The benchmark Shanghai Composite Index, which covers both A- and B-shares listed on the Shanghai Stock Exchange, closed down 17.64 points or 0.84 pct at 2,074.58, off an intraday high of 2,130.87. Hong Kong Share prices closed higher as interest rate cuts by world's major central banks helped ease worries over the credit crisis, enabling the market to recoup some of its losses in yesterday's 8.2 pct slide. China stocks outperformed, with banks, property firms and telecom counters leading the way after China's central bank cut its key rates and lowered bank reserve ratio requirement following coordinated monetary easing by the US Federal Reserve and five other central banks. Oil refiners also posted strong gains as crude oil price dropped below 89 usd a barrel, while gold firms were mostly higher after recent gains in gold prices on safe-haven buying. Heavyweight HSBC was up 1.9 pct as it decided to keep its prime lending rate in Hong Kong unchanged despite cuts by the Hong Kong Monetary Authority (HKMA) and the US Fed of their benchmark rates. The Hang Seng index closed up 511.51 points or 3.31 pct at 15,943.24, off a low of 15,550.86 and high of 15,990.20. Metals Gold slips as equity rally spurs profit-taking LONDON - Gold fell more than 2 percent in Europe on Thursday as investors took profits after a rise of almost $20 an ounce on Wednesday, with firmer equities attracting cash back into the stock markets. Spot gold was quoted at $888.70/891.70 at 0851 GMT, down from $906.50 in late New York trade on Wednesday. Earlier it touched a session low of $881.15. "We are seeing some profit-taking," said Deutsche Bank trader Michael Blumenroth. "We had a lack of follow-through buying after we hit $920 yesterday. That seems to be a tough level of resistance." An uptick in equities is pressuring gold. European stocks climbed after fresh government and central bank action to combat the financial crisis. A group of major central banks including the Federal Reserve and European Central Bank opted to cut interest rates by 50 basis points on Wednesday, with South Korea, Hong Kong and Taiwan making cuts of their own early on Thursday. Investors have been pulling cash out of stocks and shares in favour of so-called safer assets like bullion in recent weeks as the financial crisis has unfolded. A reversal of that trend is likely to lead to a correction in gold prices, analysts say. Crude prices, an important external driver of gold, which is often bought as a hedge against oil-led inflation, are also softer, undermining support for bullion. Investors are worried about the effect of the credit crisis on demand. Standard Bank analyst Manqoba Madinane said vulnerability in the oil price could pressure gold, especially when coupled with equity index futures pricing strong gains in the U.S. markets. "This, coupled with oil prices weakness, could decrease systemic risk indicators thanks to the central bank cuts," he said. "Precious metal investment sentiment could be cautious today." The dollar slipped a touch against the euro, but rose against the yen. Aside from its value as a financial instrument, gold is also supported by firm fundamentals. South African gold output fell 23.2 percent year-on-year in August, Statistics South Africa said in a report. The republic has been plagued by power problems since the near-collapse of its electricity grid in January. South Africa is the world's second largest gold producer after China. Strong demand for physical gold from both institutional and smaller investors is still likely to support bullion. "People are buying all the physical gold available," said Blumenroth. "This will hold up the market." Buying of gold exchange-traded funds -- which issue securities backed by physical gold -- has been particularly strong. The largest gold-backed ETF, New York's SPDR Gold Trust GLD, says its holdings rose to a record 763.9 tonnes on Wednesday. They are up nearly 25 percent since Lehman Brothers filed for Liquidation on September 15. The world's biggest silver-backed ETF, the iShares Silver Trust SLV.A, also recorded an inflow on Monday, the last day for which data has been released. Its holdings now stand at 6,877.15 tonnes. Spot silver was trading at $11.58/11.65 an ounce against $11.70 an ounce in late New York trade on Wednesday. Among other precious metals, platinum fell to $994.50/1,018.50 an ounce from $990.50, while palladium slid to $195/205 from $192.50. Labels: ADVFN NewsDesk, Forex Analysis |
posted by Matbank at 1:34 AM
