Friday, October 24, 2008
World Daily Markets Briefing
| by: ADVFN Newsdesk Forex FOREX-Dlr surges broadly, yen strong on risk aversion LONDON - The dollar hit two-year highs against the euro and a currency basket on Thursday as hobbled global shares highlighted the possibility of a looming recession and encouraged investors to continue cutting risk exposure. The low-yielding yen hit a six-year high against the euro and its strongest versus the dollar in seven months as traders rushed to unwind risky carry trades in acknowledgment that initiatives to rescue the banking sector would likely take a serious toll on the world's economies. The yen and the dollar have continued to surge against higher-yielding currencies this week as risk demand has shrivelled. Evaporating liquidity has led to severe volatility in most markets, and analysts said currencies remained vulnerable to erratic moves. sp; "It's a fast-moving market, and in general, risk aversion is high," said Tom Levinson, currency strategist at ING. "The strongest performers are the low-yielders like the dollar, Swiss Franc and the yen," he said, adding that while gains in those currencies have been extreme, the trend is unlikely to end anytime soon. Some market participants said dollar strength was being driven by demand from U.S. funds, including hedge funds, selling debt for dollars in preparation to pay out upcoming redemptions. Investors awaited a weekly reading of U.S. jobless claims due later in the day, as well as government testimony from a raft of U.S. financial heavyweights, including former Federal Reserve Chairman Alan Greenspan, and senior U.S. Treasury official Neel Kashkari. By 1100 GMT, the euro was down 0.2 percent on the day at $1.2822, trading close to a two-year low of $1.2726 hit on electronic trading platform EBS earlier in the day. Versus a basket of currencies, the U.S. currency was at 85.658, near 86.070 hit earlier on Thursday for the first time since late 2006, as a 2.4 percent fall in European shares kept demand low for riskier investments. The dollar was bolstered as trouble in emerging markets compounded worries about the outlook for the global economy, with countries such as Hungary and Argentina taking desperate measures to shore up their ailing economies. "We are going to see the recent pressures maintained as emerging markets tensions continue. The dollar will remain supported and the high-yielders will stay under pressure," BNP Paribas senior foreign exchange strategist Ian Stannard said. bsp; The dollar traded 0.2 percent lower at 97.70 yen, after falling to a seven-month low of 96.85 yen according to EBS. The euro was little changed at 125.35 yen, having hit a fresh six-year low of 123.43 yen. With one day still left in the trading week, the euro has already tumbled more than 8 percent against the yen since last week and looks set to clock its worst five-day run on record. The yen has shot up drastically versus the euro and other high yielders like the Australian and New Zealand dollars as investors dump positions that had used the low-yielding Japanese currency to buy assets in higher-yielding ones. A Wall Street Journal report that the U.S. is mulling a plan to forestall housing foreclosures briefly boosted sentiment as it showed that Washington was taking definitive steps to shore up its weak housing market. This had led to a trim in some of the yen's earlier gains, but analysts said that nervousness about risk remained firmly entrenched in the market. Sterling traded 0.4 percent lower at $1.6225, after tumbling to a five-year low against the dollar around $1.6150 on Wednesday as concerns about the country's vulnerability to the financial crisis remain. US Stocks at a Glance US STOCKS-Wall St opens up as energy shares rebound NEW YORK - U.S. stocks opened higher on Thursday as investors snapped up beaten-down energy shares, tempering unease about disappointing earnings and outlooks that have raised recession concerns. The jump in energy shares followed two days of steep losses. U.S. front-month crude jumped $1.28 to $67.95 a barrel. The Dow Jones industrial average was up 115.65 points, or 1.36 percent, at 8,634.86. The Standard & Poor's 500 Index was up 11.58 points, or 1.29 percent, at 908.36. The Nasdaq Composite Index was up 16.72 points, or 1.03 percent, at 1,632.47. Xerox Corp reported worse-than-expected profit as the weak U.S. economy damped spending by its largest customers. Shares fell 4 percent to $7.66. However, Alt ria Group Inc reported a higher-than-expected profit as price increases and cost-cutting offset sales of fewer cigarettes.. Interbank borrowing costs edged higher after declining sharply this week as rates were pressured by worries over a global recession. Goldman Sachs Group Inc plans to cut about 3,260 jobs, a source familiar with the matter said on Thursday. The cut would represent about 10 percent of the total staff of the bank. Europe share Europe stocks fall as earnings intensify econ fears LONDON - European shares fell on Thursday after bearish updates from engineering group ABB and auto group Daimler added to worries about the global economy that sent banks and commodity shares sharply lower. At 1002 GMT, the FTSEurofirst 300 index of leading European shares was down 2.6 percent at 851.49 points, having been as low as 847.79. The index fell 5.4 percent on Wednesday and has lost more than 43 percent this year, with heightened fears about a recession adding to a credit crisis. Banks took most points off the index. Swiss bank Credit Suisse Group AG fell 6.5 percent after it confirmed its 1.3 billion Swiss franc third-quarter loss, which it announced last week. BNP Paribas, Anglo Irish Bank, Barclays, Commerzbankng>, and UniCredit fell between 3.3 and 7.9 percent. ABB plunged 13 percent after posting a 26 percent rise in third-quarter net profit, helped by demand from emerging markets. The results missed forecasts. Daimler slid more than 7 percent after it announced it was suspending its share buyback programme, adding that in view of the current turmoil in financial and automotive markets, its forecasts were connected with a high degree of uncertainty. The shares later moved up from their lows. "It's a week of unremitting gloom, with the Governor of the Bank of England talking about recession," said Justin Urquhart Stewart, director at Seven Investment Management. "Tomorrow we'll get the figures (third-quarter UK GDP) proving recession." "The market is not looking at the little positive elements. Libor is easing, though not much. Interest rate cuts are likely to occur, and oil prices have halved. But they are mere Lemsips (symptom remedies), when we have this very nasty flu," he added. French car maker Renault was 6 percent lower ahead of sales data due after the market close and expected to show a decline. Volkswagen was down 14.4 percent. Across Europe, Britain's FTSE 100, France's CAC-40 and Germany's DAX were down between 2 and 3.5 percent. Agrochemicals and seeds group Syngenta rose 4.9 percent after it posted a strong rise in third-quarter sales. Opthalmic optics company Essilor International rose 11.8 percent after nine-month sales beat forecasts. Oils turned lower, despite the crude price rising more than $1 to $67.84. BP was down 1 percent, and Spain's Repsol, continuing to suffer from political and financial turbulence in Argentina, fell 5 percent. Miners were lower on weaker metals prices. Anglo American fell 4.6 percent after it posted a 12.7 percent fall in third-quarter copper output, its most important metal. Anglo said it would review capital expenditure plans due to uncertainty on markets. Antofagasta, BHP Billiton, Kazakhmys, Lonmin, Rio Tinto, Vedanta Resources, and Xstrata fell between 5.4 and 11 percent. Copper plummeted more than 7 percent to hit a three-year low as investors sold metals due to slower global growth and demand worries. Rio Tinto has cut its outlook for Chinese economic growth in 2009 to 8-9 percent, but expects commodity prices to bounce back some time next year. The dollar hit a two-year high against a basket of currencies as concerns about a worsening global economy prompted investors to cut risky assets. A stronger dollar usually means lower metal prices. Asia at a Glance Asia Market Summary The benchmark Nikkei shed 213.71 points to 8,460.98 after earlier falling as low as 8,016.61, its lowest in nearly five and a half years and down more than 7 percent. It has lost 25 percent this month. The broader Topix ended the day down 2 percent at 871.70 after earlier falling more than 6 percent. The Korea Composite Stock Price Index ended down 7.48 percent at 1,049.71 points, its lowest finish since mid-July 2005. The main board posted the seventh biggest daily percentage loss ever, and has lost 11 percent on the week. The Bombay Stock Exchange's benchmark Sensex plunged another 398.20 points or 3.92 percent to 9,771.70, while the National Stock Exchange's S&P CNX Nifty retreated 122 points or 3.98 percent to 2,943.15. Hong Kong shares trimmed losses to 3.6 percent on Thursday on hopes of further succour for the markets from the U.S. government, but the main index closed below 14,000 points to take losses this year to more than 50 percent. Energy stocks such as PetroChina plunged after crude oil prices stayed weak, while resources shares such as China Shenhua Energy fell on fears of slowing demand. Jiangxi Copper fell 7.9 percent to a two-year closing low of HK$3.83 on concerns about its bleak earnings outlook and an investment loss in the third quarter. But China Overseas Land dodged the downdraft, advancing 8.1 percent after the government announced measures on Wednesday to boost flagging property prices on the mainland. Guangzhou R&F Properties climbed 4.6 percent. The benchmark Hang Seng Index cl osed 506.11 points lower at 13,760.49 after dropping 6 percent earlier on Thursday. The index has shed 50.5 percent so far this year and lost 10.2 percent in three sessions including Thursday's slide. Shares of China Railway Group plunged 7.1 percent after the biggest railway and construction builder on the mainland disclosed 1.9 billion yuan ($278 million) in foreign exchange losses for the first nine months of 2008. The stock shed more than a fifth of its market value on Wednesday on speculation of the forex losses. China Railway Construction Corp fell 11.1 percent at the open after it reported a 320 million yuan foreign exchange loss for the third quarter. It scaled back losses to close 2.5 percent lower after analysts said the market had overreacted to the relatively small loss. Energy stocks plunged after crude oil prices stayed weak on a stron g U.S. dollar and signs of a slowdown in demand from China. Asia's largest oil and gas producer, PetroChina, fell 5.1 percent to HK$5.45, its lowest close in three years. Offshore specialist CNOOC tumbled 8.1 percent, taking its total loss this year to more than 60 percent. Coal miner China Shenhua Energy plunged 7.7 percent as analysts warned of lower demand for the commodity amid a global recession. Smaller rival China Coal plummeted 7.3 percent. Shares in Huaneng Power International, China's top listed electricity power supplier, fell 12 percent on Thursday as analysts said they did not expect it to return to profit in 2009. Labels: ADVFN NewsDesk |
posted by Matbank at 12:22 AM
