Thursday, October 23, 2008
| by: ADVFN Newsdesk Forex FOREX-Dollar, yen surge as investors unwind risk LONDON - The dollar rose sharply on Wednesday, hitting two-year highs against the euro and a basket of currencies, while the yen continued its relentless ascent as investors liquidated riskier assets. Signs that money markets were finally easing did little to improve shattered confidence as fears of a looming and protracted global recession kept investors in deleveraging mode, with European share prices tumbling over 4 percent. The translation of deleveraging into FX markets sent the low-yielding yen up broadly as carry trades were unwound, helping it hit a 4 1/2-year high against the euro. "Yen and dollar are king as safe havens and central bank proactivity rule," Bank of New York Mellon currency analyst Neil Mellor said. By 1218 GMT, the euro was down 1.6 percent on the day at $1.2842. It earlier fell as low as $1.2740 according to electronic data system EBS, its lowest since November 2006. Against a basket of six major currencies, the dollar was up 1.37 percent at 85.577 .DXY, having earlier hit a 2-year high at 85.921. Against the yen, however, the U.S. currency fell 1.4 percent to 98.88 yen. The euro tumbled 3.1 percent to 126.85 yen, having earlier hit a four-and-a-half year low of 126.30. STERLING STRUGGLE Sterling slid to its weakest level against the dollar in five years at $1.6203, pummelled after Bank of England Governor Mervyn King said on Tuesday that Britain's economy was probably entering its first recession in 16 years. On Wednesday, King said in an interview that the Bank of England can counter the impact of the financial crisis on the UK economy by changing interest rates. The pound was last trading down 2.3 percent against the dollar at $1.6301, on track for its biggest weekly percentage drop since Britain's exit from the European Exchange Rate Mechanism in late 1992. FRESH DOLLAR GAINS Some analysts said the dollar and the yen were well-placed for further gains, with volatility running at high levels. One-month implied volatility for dollar/yen stood at 21.5 percent. "It's still a very, very volatile environment, but it's clear the dollar and the yen will go higher," Bank of New York Mellon's Mellor said. Standard Bank G10 currency strategist Steve Barrow said in a note to clients that markets were witnessing a massive unwinding of the speculative asset bubble that has developed in recent years. "History shows that, when bubbles burst, no amount of glue, from slumping libor rates or anywhere else, can stick them back together again. The law of 'what goes up must come down' has to work its way through and, right now, it is working its way through the currency market with a vengeance," Barrow said. On that basis, Barrow said the euro could push towards $1.20 over the coming six months. US Stocks at a Glance US STOCKS-Market slides at open on recession woe NEW YORK - U.S. stocks tumbled at the open on Wednesday as mounting concern that the global economy is hurtling toward recession, diminishing investors' appetite for risk and sending world markets lower. Uncertainty about the profit outlook weighed on sentiment despite more signs that the costs for banks to borrow from each other continued to fall. The Dow Jones industrial average slid 206.85 points, or 2.29 percent, to 8,826.81. The Standard & Poor's 500 Index tumbled 21.25 points, or 2.23 percent, to 933.80. The Nasdaq Composite Index declined 25.94 points, or 1.53 percent, to 1,670.74. HEADLINE STOCKS-U.S. stocks watch on Oct 22 Wednesday: SANDISK CORP The stock plunged by more than 25 percent to $11.01 before the bell on Wednesday after Samsung Electronics Co Ltd , the world's top memory chip maker, withdrew a $5.9 billion unsolicited bid for the flash memory card maker. Samsung cited the U.S. company's deepening losses and uncertain outlook. For details, see MCDONALD'S CORP The stock rose more than 4 percent to $57.50 before the bell on Wednesday after the fast-food company posted a quarterly profit above Wall Street's estimates. WACHOVIA CORP WELLS FARGO The U.S. bank on Wednesday poste d a $23.9 billion third-quarter loss, a record for any U.S. lender in the global credit crisis, underscoring the challenges Wells Fargo & Co will face after it acquires the lender. Wachovia shares ended on Tuesday at $6.09 on the New York Stock Exchange. APPLE INC The technology company reported a stronger-than-expected 26 percent rise in quarterly profit, spurred by strong sales of its new iPhone.] Apple shares were up 9.5 percent to $100.20 before the bell. BOEING CO The plane maker reported sharply lower third-quarter profit on Wednesday after a strike by its plane assembly workers wiped out almost a month of productio n at its Seattle-area plants. Boeing shares dropped 2.1 percent to $45.41 before the bell. NORTHROP GRUMMAN CORP The defense contractor reported a better-than-expected 5 percent increase in third-quarter profit, helped by higher sales of its military equipment. The stock ended at $44.84 on Tuesday. WASTE SERVICES INC The solid waste services company posted third-quarter profit that beat Wall Street estimates, but lowered its 2008 revenue outlook. Shares of the company rose 16 percent in trading after the bell on Tuesday. MANHATTAN ASSOCIATES IN C The company cut about 150 positions, or 6.5 percent of total positions at the supply chain management software developer, mainly in the United States, and forecast fourth-quarter earnings below market expectations amid challenging economic conditions. Shares of the company fell as much as 6 percent in after-hours trade on Tuesday. CERNER CORP The health-care information-technology company posted stronger-than-expected results on Tuesday, helped by strong bookings, revenue and expanding margins. Shares of the company rose 5 percent after the bell on Tuesday from a Nasdaq close of $35.02. CREE INC The LED lighting products maker posted a bette r-than-expected quarterly profit, driven by strong LED revenue growth and better gross margins, and forecast solid second-quarter earnings, sending its shares up 7 percent. Shares of the Durham, North Carolina-based company rose 6 percent after the bell. Europe share FTSE sags 2.9%; commodities hit by recession fears LONDON - Britain's FTSE 100 slid 2.9 percent by midday on Wednesday, as recession fears hit heavyweight commodity stocks and banks, with investors worrying about metal demand and more soured loans. By 1029 GMT, the FTSE 100 was down 122.47 points at 4,107.26, after losing 1.2 percent on Tuesday to snap a two-session recovery run. The UK benchmark is down 36 percent for the year. Energy stocks fell along with lower crude prices, which traded below $70 a barrel, on growing fears that output cuts by producer group OPEC will not be enough to offset weakening energy demand from leading consumers. BP sank 3.6 percent, Royal Dutch Shell sagged 3 percent, Cairn Energy lost 2.3 percent and Tullow Oil dropped 3.1 percent. Weaker metal prices also weighed on mining stocks, with BHP Billiton, Rio Tinto, Xstrata, Antofagasta, Anglo American, Vedanta Resources and Kazakhmys falling 4.9 to 11.8 percent. BHP warned that Chinese demand was set to weaken, but the company showed little sign of trimming production, lifting quarterly iron ore output by 15 percent. U.S. stocks dropped on Tuesday after a flurry of disappointing earnings and as commodity-related shares sank on fears of a global recession. In Asia, Japan's Nikkei average tumbled 6.8 percent to its lowest close in a week. Bank of England Governor Mervyn King said in a speech on Tuesday night that Britain's economy was probably entering its first recession in 16 years, a nd the outlook has not worsened as rapidly as it has in the past month for a very long time. "Each day that comes along brings yet another reality check of what we have to face. It's going to be tough," said Howard Wheeldon, senior strategist at BGC Partners. "Will we return to the lows? No. We will bounce around. Volatility will remain. The worse may be over but the cure is long way off." The Bank of England minutes showed all nine Monetary Policy Committee members voted for this month's globally co-ordinated 50 basis point emergency cut in interest rates. Banks were among the standout losers on the FTSE 100. Barclays, Royal Bank of Scotland, HBOS , Lloyds TSB, HSBC and Standard Chartered dropped between 0.5 and 9.2 percent. INVESCO Asset Management chief group economist John Greenwood said banks would face more losses as the recession began to bite and governments would have to come up with more bailouts. "The scale of the problem is so large that we should regard the (Henry) Paulson plan, the (Alistair) Darling plan in the UK and other bank bailout plans as really just round one in what would be a likely multi-round effort to stabilise the banking system," he said. "So far the losses that we have seen on the books of the banks are largely due to mortgage securities. So far we have not seen the losses due to the recession," he said. "Those losses are still to come. That may seriously impact bank balance sheets and may require further recapitalisation measures." Retailers were also down amid the g loomy economic outlook. Marks & Spencer, Next and Kingfisher were off between 2.3 and 7.7 percent. BSkyB, Smiths Group and Whitbread also fell after going ex-dividend. Hedge fund Man Group, however, advanced 2.2 percent after it said the net asset value of its main AHL fund rose 1.9 percent last week. Building materials distributor Wolseley and builders were also firmer as traders cited hopes that the UK may further cut interest rates next month. Wolseley added 0.9 percent, while mid-caps Barratt Developments, Taylor Wimpey and Persimmon gained 5.1 to 10.2 percent. Asia at a Glance Asian Market Summary Japan The benchmark Nikkei shed 631.56 points to finish at 8,674.69, its biggest one-day percentage loss since last Thursday's plunge of more than 11 percent -- which was in turn the biggest one-day loss since the 1987 stock market crash. The Nikkei has lost 23 percent this month but remains more than 500 points above the year's low of 8,115.41 hit on Oct 10. The broader Topix lost 7.1 percent to 889.23. China The yuan finished at 6.8341 against the US dollar on the over-the-counter (OTC) market, against yesterday's close of 6.8337. On the exchange-traded market, the yuan closed at 6.8361, compared with 6.8328 in the previous session, a Guangzhou-based trader with a foreign bank said. The yuan traded between 6.8393 and 6.8336 on the OTC market and between 6.8375 and 6.8361 on the exchange-traded market. The central bank set the yuan central parity rate at 6.8339 to the dollar this morning, compared with 6.8309 for the previous trading day. The yuan's daily trading band is currently set at 0.5 pct. South Korea The Korea Composite Stock Price Index closed at 1,134.59 points, the lowest finish since September 6, 2005, after hitting a low of 1,095.56 points. The KOSPI has shed 22 percent on the month, and is down 40 percent from the year's high of 1,901 reached in mid-May. Hong Kong The Hang Seng index closed down 774.57 points or 5.15 pct at 14,266.60, off a low of 14,038.41 and a high of 15,161.69. Today's close marks the index's lowest finishing level since Oct 28, 2005 when it ended at 14,215.83. Turnover was 54.09 bln hkd. Taiwan The weighted index closed down 80.13 points or 1.62 pct at 4,862.59, off a low of 4,839.17 and a high of 4,955.61. Turnover was 47.04 bln twd. Australia Australian shares fell 3.4 percent on Wednesday, hurt by a fall in resources stocks on global recession fears and by disappointing U.S. company earnings that stoked worries about the outlook for profit growth. The benchmark S&P/ASX 200 index ended down 146.4 points at 4,156.1, based on the latest available data, following a 3.9 percent jump in the previous session. New Zealand's benchmark NZX-50 index fell 1.8 percent to 2,899.4. India The 30-share benchmark Sensex of the Bombay Stock Exchange closed down 513.49 points, or 4.81 percent, at 10,169.90 and the National Stock Exchange's S&P CNX Nifty fell 169.75 points, or 5.25 percent, to 3,065.15. All Sensex-constituent stocks except consumer goods shares fell, led by Tata Steel Ltd. which plummeted 12.04 percent to 244.80 rupees. Private lender ICICI Bank Ltd. sank 8.04 percent to 396.45 rupees and index heavyweight Reliance Industries Ltd. lost 5.83 percent to 1,315.55 rupees. Number one engineering firm Larsen & Toubro Ltd. slipped 5.34 percent to 815.15 rupees and top property developer DLF Ltd. slid 5.05 percent to 271.85 rupees. |
posted by Matbank at 12:38 AM
