Thursday, October 16, 2008
World Daily Markets Briefing
| by: ADVFN Newsdesk Forex FOREX-Dollar falls vs yen as data stokes recession worries NEW YORK - The dollar fell against the yen on Wednesday as a sharp slide in September retail sales left investors fretting the government's $250 billion injection into troubled banks may not keep the economy out of recession. A report showing U.S. retailers posted their biggest monthly decline in more than three years last month pushed the dollar to a session low at 100.88 yen, down more than 1 percent from late Tuesday. The euro also gave up ground against the yen and dollar as global stock markets weakened. The retail sales data "really highlights the problems we are seeing in the U.S. economy," said Kathy Lien, director of currency research at GFT Forex in New York. "The question on everyone's minds is how deep of a recession. Today's number indicates a very strong chance of negative growth for the third quarter" and hints at more interest rate cuts from the Federal Reserve, she added. The dollar was last trading at 101.10 yen, down 1.1 percent and close to a session trough of 100.88 yen. The euro was down 1.4 percent at 137.37 yen and down 0.2 percent at $1.3587. Sterling rose 0.8 percent to $1.7549. The low-yield Japanese currency rallies when risk appetite wanes as investors rush to get out of trades in higher-yielding currencies and assets financed with cheaply borrowed yen. Governments around the world in recent days have announced plans to kick-start lending and shock the financial system out of paralysis by injecting billions directly into banks and guaranteeing many types of bank borrowing. Traders said extreme fears about the financial crisis receded after short-term interest rates for dollars eased in response to the U.S. bank bailout announcement on Wednesday, which followed similar pledges in Britain, France and Germany. But even if that helps thaw frozen credit markets, analysts warn that the economic fallout from the crisis, which began more than a year ago, is likely to slow global growth sharply. The U.S. sales data bolstered that view, as did remarks late Tuesday from San Francisco Fed President Janet Yellen, who said the United States "appears to be in a recession" and "virtually every major sector of the economy has been hit by the financial shock." "As we move away from all of the 'shock' headlines, the market will, eventually, get back to fundamentals," said Dustin Reid, head of FX strategy at RBS Global Banking & Markets in Chicago. "And when it does, the market will likely trade on the notion that global growth is likely to have a very soft 2009." Weaker growth may indeed spell additional interest rate cuts from major central banks, which cut rates in concert last week as part of efforts to stabilize world financial markets. A separate U.S. report showing a relatively tame increase in core producer prices, which strip out food and energy, may provide cover for more Fed rate cuts by year end The European Central Bank is also expected to cut rates again after reducing its refinancing rate to 3.75 percent earlier this month in the concerted action. Euro-zone data on Wednesday showed that slowing growth in energy and food prices helped to curb inflation in the region in September. Norway's central bank cut rates by half a percentage point on Wednesday, sending the crown to a near 4-1/2-year low against the euro. The dollar was up 0.8 percent at 6.3301 crowns. US Stocks at a Glance US STOCKS-Recession worry pulls Wall St lower at open NEW YORK - U.S. stocks slid at the open on Wednesday as investors worried that efforts to ease the credit crisis would not avert a recession, overshadowing solid profits from Coca-Cola Co, a bellwether for consumer spending. The Dow Jones industrial average gave up 161.76 points, or 1.74 percent, at 9,149.23. The Standard & Poor's 500 Index fell 21.32 points, or 2.14 percent, to 976.69. The Nasdaq Composite Index lost 24.83 points, or 1.40 percent, to 1,754.18. US September retail sales fall 1.2%, largest in 3 years; down 0.6% ex-autos WASHINGTON - US retail sales fell in September at their fastest pace in three years as auto sales slowed again and sales dropped in nearly every major retail category, the Commerce Department said today. Commerce said September retail sales fell 1.2%, the largest drop since August 2005 and much worse than the 0.7% decline predicted by economists polled by Reuters. Retail sales have now fallen for three consecutive months. Even excluding the struggling auto industry, sales fell 0.6%, double the 0.3% drop expected by economists. Auto and auto parts dealers saw sales fall by 3.8%, after gaining 1.7% in August. In the first nine months of 2008, auto and parts sales are down 8.4% compared with the first nine months of 2007. September auto sales are down 18.5% compared with the sales level in September 2007, a record decline in any month compared to the same month a year earlier. Sales were down in every major retail category except health and personal care stores and gas stations, which both saw small gains. September retail sales excluding gasoline fell 1.3%, the largest decline since August 2005, and sales excluding autos and gas fell 0.7%, the largest decline in nearly a year and a half. Sales at furniture stores fell 2.3%, the largest monthly decline since February 2003. Sales fell 2.3% at clothing stores, 0.4% at general merchandise stores, 0.5% at food and beverage stores, and 0.6% at building material and supply stores. Commerce revised its August retail sales number to a 0.4% decline from a 0.3% decline, and revised August retail sales excluding autos to a 0.9% decline from a 0.7% decline. Europe share Europe shares slip; recession fears centre stage LONDON - European shares headed lower on Wednesday to break a two-day winning streak as the euphoria over bold government action to arrest a financial sector meltdown dissipated and recession fears took centre stage. At 0855 GMT, the FTSEurofirst 300 index of top European companies was down 2.8 percent at 939.10 points, after gaining a record 10 percent on Monday and 3 percent on Tuesday. On Wednesday, banks were the top weighted sectoral losers, with Standard Chartered falling 6.6 percent, Societe Generale shedding 3 percent, HSBC down 3.2 percent and UBS down 4 percent. KBC fell 13.7 percent. The Belgian banking and insurance group said it expected a third-quarter loss of up to 930 million euros ($1.3 billion) after Moody's cut the credit ratings on a number of structured investment products that KBC had invested in. Recession fears returned after trillions of dollars pledged for bank bailouts from Europe to Asia helped allay fears of an imminent financial meltdown. "After the colossal gains achieved at the start of this week, it would seem that the hangover has kicked in and investors have sobered to the reality that recession is here," said Andrew Turnbull, senior sales manager at ODL Securities. EU leaders meet in Brussels just days after stumping up 2.2 trillion euros ($3 trillion) to rescue European banks and jolt frozen money markets -- at the heart of worst financial crisis since the Great Depression -- into life. European leaders will press for an overhaul of the world's financial structures after Asia joined western bastions of capitalism in bailing out banks to avert a financial meltdown. Southeast Asian nations backed by Japan, South Korea, China and the World Bank were the latest to join the global rescue effort, agreeing on Wednesday to create a multi-billion fund to buy bad debt and help banks. The United States on Tuesday offered to take $250 billion worth of stakes in nine top banks. But concerns remained that the rescue would come at a huge economic cost and do little to repair the damage already done by a 14-month credit crunch, which has slowed the economy. Commodity shares also fell, tracking losses in metals and crude oil prices. Oil fell 1.3 percent to trade below $78 a barrel, a far cry from all-time highs of around $147 hit earlier this year. BP , Royal Dutch Shell, gas producer BG Group and Tullow Oil shed between 0.1 and 5.9 percent. Weaker metals prices dragged down mining shares, with BHP Billiton, Anglo American, Lonmin, Kazakhmys, Xstrata and Antofagasta falling between 2.6 and 13 percent. Global miner Rio Tinto fell 9.2 percent. It warned of slowing Chinese demand for commodities because of the world financial crisis and signalled a possible delay in plans to sell $10 billion in assets. Vedanta shares were down 11 percent. Britain's FTSE was down 2.7 percent, Germany's DAX fell 2 percent and France's CAC slipped 2.2 percent. The FTSEurofirst 300 index plummeted 22 percent last week -- its worst weekly performance ever, and is down nearly 37 percent so far this year. Asia at a Glance Asian Market Summary Hong Kong shares close sharply lower on profit-taking;Tsang speech has no impact HONG KONG - Share prices closed sharply lower, with the key index slipping back below 16,000, as investors locked in profits following the market's 13.8 pct gain over the previous two sessions. Profit-taking gathered pace in the afternoon after a weak open on European markets as fears of a US recession grew despite a rescue of the nation's large banks. Banks were mostly down despite government's pledge yesterday to guarantee all bank deposits and establish a stand-by facility to provide additional capital to local financial institutions if needed. The Hang Seng index closed down 834.58 points or 4.96 pct at 15,998.3, off a low of 15,961.92 and high of 16,609.09. Turnover was 52.21 bln hkd. The property sector index was down 779.36 points or 4.28 pct at 17,444.36. The Hang Seng China Enterprises index closed down 541.4 points or 6.42 pct at 7,894.06. The benchmark Nikkei added 99.9 points to end at 9,547.47. It fell as much as 1.9 percent at one stage. The Nikkei jumped more than 14 percent on Tuesday, the biggest one-day gain in its 58-year history, after losing 24 percent the previous week. The broader Topix dipped 0.08 percent to 955.51. Indian shares tumble on credit worries, fears of global recession; L&T drops Indian shares closed down more than 5 percent on Wednesday, tracking negative cues from other Asian and European markets, as worries about the credit squeeze and global recession dragged down sentiment. Analysts also said selling pressure intensified amid fresh shorts on anticipation of a slump today, and as investors exited cashed out of counters bought in the previous two trading sessions. The Bombay Stock Exchange's benchmark Sensitive Index tumbled 674.28 points or 5.87 percent to 10,809.12, while the National Stock Exchange's S&P CNX Nifty dipped 180.25 points or 5.12 percent to 3,338.40. All 30 Sensex constituents felll, led by private engineering company Jaiprakash Associates Ltd. Shares of Jaiprakash plunged 14.47 percent to 72.70 rupees, while those of its larger peer Larsen & Toubro Ltd. sank 110.50 rupees or 11 percent to 893.15 rupees. Shares of L&T fell due to the broad selling pressure seen in capital goods companies and despite the company posting a 32.2 percent rise in second-quarter net profit. About 2.2 million shares of L&T changed hands, more than twice the 50-day average daily volume of 1 million shares and almost thrice the 200-day average of 0.8 million. India's biggest private lender ICICI Bank Ltd. slid 7.36 percent to 414.20 rupees, while the country's biggest-listed private firm Reliance Industries Ltd. slipped 6.2 percent to 1,519.25 rupees. The BSE capital goods index led all the 13 BSE sectoral indices that declined, sinking 8.88 percent. In the broader market, where about 220 million shares traded, there were almost four advancers for each decline. Among the 50 shares which the Nifty tracks, 47 retreated and were led by Reliance Infrastructure Ltd. as it tumbled 12.25 percent to 555.45 rupees. Drug maker Sun Pharmaceuticals Ltd. gained the most, rising 1.05 percent to 1,398.55 rupees on the NSE on which 453.1 million shares traded. Labels: ADVFN NewsDesk, Forex Analysis |
posted by Matbank at 1:21 AM
