Wednesday, November 26, 2008
N0v-26 World Daily Markets Briefing
| by: ADVFN Newsdesk Forex FOREX-Euro falls; EU stimulus package raises concerns LONDON - The euro fell against the yen and the dollar on Wednesday as investors were pessimistic about whether a European stimulus package will be sufficient to ease the financial crisis. Risk aversion kept hold in financial markets on fears about the looming global recession. This pushed European shares down 1.2 percent and boosted the low-yielding yen, while further dollar repatriation flows and deleveraging supported the U.S. currency. The draft proposal -- which is due to be debated by member states next month -- also said there is scope for further interest rate cuts by the European Central Bank. Analysts said that the plan marked a step in the right direction, but uncertainty about its efficacy, and general concerns about a deep slowdown in the global economy were keeping investors in the mood to sell risky assets. "The sentiment is one of high risk aversion. The stimulus packages are a first step and are welcome, but the fundamentals across the world are still negative and recession fears are not fading," said Commerzbank currency strategist Antje Prafcke said in Frankfurt. "There are still concerns about whether the measures will work and how they will be financed." The European plan follows the announcement on Tuesday of an $800 billlion U.S. plan to rescue its debt securities markets. The euro dropped 0.8 percent to 123.46 yen, while it slipped 0.7 percent against the dollar to $1.2969. The dollar slipped 0.1 percent to 95.16 yen. Analysts said that the U.S. currency was on the back foot against the yen as concerns remained about whether the Federal Reserve's plan would be effective. Some also worried about its impact on the nation's balance sheet. The yen has rallied in the past month as risk aversion has triggered a massive unwind of carry trades, in which investors have used the low-yielding yen to fund purchases of assets in higher-yielding currencies. The Japanese currency pared some gains, however, after China surprised markets with a 108 basis point rate cut, its largest since 1997. The yen is often used as a proxy for the Chinese yuan, which trades in a tight band against the dollar. "The China rate cut reinforces the notion of global coordinated action to counter the downside risks to the global economy, which will erode the attraction of the yen safe haven quality," said Lena Komileva, G7 market economist at Tullett Prebon. She added, however, that worries about the global economy will limit any downside for the Japanese currency.Investors awaited a raft of U.S. data due later Wednesday, including jobless claims and University of Michigan consumer confidence figures. Weak readings are likely to exacerbate worries about the health of the U.S. economy. US Stocks at a Glance US STOCKS-Mounting economic woes hit market at open NEW YORK - U.S. stocks slid at the open on Wednesday as bleak outlooks from jeweler Tiffany & Co and manufacturer Deere & Co fanned recession fears. The Dow Jones industrial average fell 143.61 points, or 1.69 percent, at 8,335.86. The Standard & Poor's 500 Index dropped 12.04 points, or 1.40 percent, at 845.35. The Nasdaq Composite Index slid 16.68 points, or 1.14 percent, at 1,448.05 US Jobless Claims -14K To 529K In Nov 22 Week; Survey -12K WASHINGTON - The number of U.S. workers filing new claims for unemployment benefits fell last week as expected but remained at very high levels consistent with steep job losses. Initial jobless claims fell 14,000 to a seasonally-adjusted 529,000 in the week ended Nov. 22, the Labor Department said Thursday. Economists surveyed by Dow Jones Newswires had expected claims to drop 12,000. The previous week's level was the highest in 16 years. Yet the latest data don't signal any imminent recovery in the labor market. According to a Labor Department analyst, jobless claims tend to be high in November and December, and the government's seasonal adjustment process attempts to account for that cyclical increase. So last week unadjusted jobless claims actually rose quite sharply, just not as fast as government statisticians had expected, thus the decline in the seasonally-adjusted figure. The four-week average of new claims, which aims to smooth volatility in the data, rose another 11,000 to 518,000, the highest since January 1983 and well above recessionary levels typically associated with further increases in the unemployment rate. The four-week average was below 400,000 as recently as July. Nonfarm payrolls have fallen 10-straight months, pushing the unemployment rate to a 14-year high of 6.5% in October. The weekly claims data point to another sizable payroll drop this month in the 250,000 range and a further increase in the unemployment rate. Meanwhile, according to Thursday's report the tally of continuing claims, those drawn by workers collecting benefits for more than one week in the week ended Nov. 15, fell 54,000 to 3,962,000. However, the four-week average hit a fresh 25-year high, a sign of just how hard it is for the unemployed to find new work. The unemployment rate for workers with unemployment insurance was unchanged at 3%. Not adjusted to reflect seasonal fluctuations, Illinois reported the largest increase in new claims during the Nov. 15 week, 5,285, due to layoffs in construction, trade and manufacturing industries. California reported the largest decrease, 9,436. It didn't provide an industry breakdown. European News Shares in Europe decline as banks, oil weigh; Alcatel-Lucent up LONDON -- European shares snapped a two-session winning streak on Wednesday, as banks and oil majors gave back a portion of recent gains, although telecom equipment maker Alcatel-Lucent and caterer Compass Group managed to buck the lower trend. The pan-European Dow Jones Stoxx 600 index fell 0.9% to 196.99, paring gains made this week to just over 8%. Bank stocks and oil producers rallied in the last two sessions but gave back some of those gains on Wednesday, with Santander (STD) down 3.4% in Spain and Total (TOT) down 2.3% in Paris. Even with this week's gains, the Stoxx 600 index is down roughly 11% in November. National indexes were also lower, with the U.K. FTSE 100 index down 1.2% at 4,121.70, the French CAC-40 index down 1.2% to 3,172.55 and the German DAX 30 index down 0.8% at 4,522.35. Of European corporates updating on Wednesday, shares in insurer Swiss Life fell 3.6% after the firm said it will cut 200 positions in Switzerland as it moves to streamline its Zurich-based head office. "We want to achieve a clear separation of tasks between head office and the business units. The aim is to make the new corporate center as lean as possible and to concentrate on the essentials," said CEO Bruno Pfister. The insurer intends to considerably scale back its IT projects as it aims to trim its cost base by around 90 million Swiss francs by 2012. Other insurance firms were also lower, with Zurich Financial Services down 2.7% and AXA extending Tuesday's profit-warning-related losses to fall another 3.4%. However, it wasn't all gloom on the corporate front. Shares in telecom equipment maker Alcatel-Lucent (ALU) rose 1.8% after it said that Paul Tufano will become its new chief financial officer, effective Dec. 1. Tufano will succeed Hubert de Pesquidoux, who has decided to leave the company to pursue other opportunities. And caterer Compass Group climbed 5.2% after its fiscal-year sales rose 11.4% to 11.4 billion pounds and pretax profit climbed 29.8% to 566 million pounds. The firm said that it saw good levels of growth in all core sectors. The company said its new financial year has started well and that visibility on the sales pipeline is encouraging. Asia at a Glance Asian steelmakers rise after BHP pulls Rio bid HONG KONG -- Shares of Asian steelmakers were mostly higher Wednesday, as investors applauded the decision by miner BHP Billiton to drop its takeover bid for Rio Tinto, a tie-up that would have created the world's biggest miner with potentially greater sway in iron-ore contract negotiations. Shares of South Korea's Posco were up 4.8% in Seoul, while Angang Steel Co. climbed 7.6% in Shenzhen and 4.9% in Hong Hong. Wuhan Iron & Steel Co was up 7.3% in Shenzhen. Baoshan Iron & Steel, whose shares are listed in Shanghai, were down 1.4%. "Had the proposed bid gone through, the merged BHP/Rio Tinto outfit would have emerged as the world's biggest iron-ore supplier, allowing it to call the shots in the iron-ore talks with China, even in a depressed steel market," wrote UOB Kay Hian analysts headed by Foo Choy Peng in Hong Kong, in a note Wednesday. Foo said he expects contract negotiations between BHP Billiton (BHP) and Chinese steel mills for next year's prices will be difficult, matching the acrimonious tone last year. Those negotiations dragged on until midyear. The broker said iron-ore miners will likely try to stall contract talks in the hope of some recovery in global steel demand and firmer commodity prices. BHP will "want to hold out the talks with the Chinese mills for as long as possible to wait for an anticipated upturn in the Chinese steel market," Foo said. Analysts say iron-ore contract prices will fall as much as 50% for deliveries that begin in the year from April. UOB's Kay Hian said analysts it spoke with believe a 20% decline in iron-ore contract prices from current levels is more realistic. Output growth among Chinese steelmakers is forecast to slow to the mid-to-low single digits during the next two years. Metals Gold dips as risk appetite firms but oil supports LONDON - Gold edged lower in Europe on Wednesday as the dollar firmed and a sharper appetite for risk redirected investment to the equity markets, though rising oil prices lent support to the precious metal. Dealers are awaiting a raft of U.S. data due later in the session and a European Commission announcement on plans to stimulate the economy for clues to the next direction of trade. Spot gold was at $814.35/816.35 an ounce at 1055 GMT, against $819.85 an ounce late in New York on Tuesday. "It is surprising that gold is not stronger, given higher oil prices," said Commerzbank analyst Eugen Weinberg. "That is probably due to the fact that some risk aversion is coming out of the market, due to the new rescue package in the U.S. and the higher equity markets. These are probably pointing to some weaker demand for safe-haven gold." European shares turned positive in early trade on Wednesday after UK gross domestic product (GDP) data met expectations, and helped by news of an interest rate cut by China. The dollar, the main external driver of gold, firmed half a percent against the euro in early trade. A stronger dollar tends to pressure gold, which is often bought as an alternative investment to the U.S. currency. Oil climbed more than $1 a barrel, recovering from a near 7 percent decline on Tuesday. China's decision to cut interest rates by 1.08 percent boosted hopes a prolonged slowdown in oil demand can be avoided. Firmer crude prices increase interest in commodities as an asset class, and tend to boost gold's appeal as a hedge against oil-led inflation. Traders are awaiting the release of U.S. oil inventories data later in the session for clues as to the next direction for the market, analysts said. Investors are also turning their attention to the outlook for physical gold demand from jewellers as the festive season gets underway. Gold demand India, in the world's biggest bullion market, remains lacklustre as prices stay high, dealers said, while analysts said the impact of the credit crunch on consumer spending could keep gold sales low elsewhere. "Seasonally there is demand for the Christmas and New Year celebrations, although in light of the global economic slowdown we would expect jewellery sales to be more subdued this time," Fairfax analyst John Meyer said. Among other precious metals, spot silver was at $10.28/10.36 an ounce against $10.29. Spot platinum was little changed at $863/873 an ounce from $860 late in New York on Tuesday. Sister metal palladium was at $192.50/200.50 an ounce against $194.50. Both metals have slipped dramatically from the highs they hit earlier in the year, pressured by concern over the dire outlook for carmakers, the major consumer of the metals, which are used in catalytic converters. Labels: Forex Analysis, Forex Trend, Market Analysis, Market Trend, money trading, World Market |
posted by Matbank at 11:30 PM
