Tuesday, November 4, 2008
Nov-04 World Daily Markets Briefing
| by: ADVFN Newsdesk Forex FOREX-Dlr slips; investors await US election verdict LONDON - The dollar slipped broadly on Tuesday as global stock markets took on a brighter complexion, with investors anticipating aggressive interest rate cuts to help stimulate flagging economies and the U.S. election outcome. As Americans voted on Tuesday, Democrat Senator Barack Obama was seen leading in the polls in 5 out of 8 key states. Trade was overall subdued ahead of the verdict, but an Obama victory, which is widely anticipated by the markets, was seen as dollar positive due to expectations for further fiscal stimulus. "We are seeing some euphoria around markets for an expected Obama win," said Neil Mellor, currency strategist at Bank of New York Mellon. But even a surprise win by Republican John McCain could be supportive for the dollar, some said. "In the broader picture, the fact that (President George W) Bush, who has taken a benign neglect stance to the dollar, is leaving will be taken as a dollar positive," said Derek Halpenny, European head of global currency research for Bank of Tokyo-Mitsubishi-UFJ in London. But the dollar was on the defensive as European share prices looked set to make a sixth straight day of gains, with extreme risk aversion side-lined for now. At 1255 GMT, the dollar index, which measures the U.S. unit's value against a basket of currencies, was down 1.2 percent at 85.360. The euro was up 1.5 percent against the dollar at $1.2770 and up almost 2 percent at 127.23 yen. The dollar was up 0.5 percent at 99.63 yen. The Australian dollar bounced back from an early tumble to $0.6597 after the Reserve Bank of Australia cut rates by 75 basis points to 5.25 percent, more than the expected 50 basis points. Analysts said the euro was benefitting from the Aussie's comeback, with the prospect of further large interest rate cuts from the European Central Bank and Bank of England on Thursday seen as stimulative to their respective economies. "The current grim economic conditions could justify a cut of any magnitude," said Calyon analysts wrote in a research note on prospects for UK monetary easing. US Stocks at a Glance US STOCKS-Wall St rises ahead of presidential election NEW YORK - U.S. stocks rose on Tuesday as Americans began voting in the race for the White House, while an interest rate cut from Australia raised hopes of further aggressive global moves to ease an economic slowdown. The Dow Jones industrial average rose 168.06 points, or 1.80 percent, to 9,487.89. The Standard & Poor's 500 Index gained 17.88 points, or 1.85 percent, to 984.18. The Nasdaq Composite Index added 27.79 points, or 1.61 percent, to 1,754.12. Global stocks gained after Australia's central bank cut interest rates by a bigger-than-expected 3/4 point. Central banks in the euro zone and the Bank of England meet later in the week and could add to global efforts to lower the cost of borrowing. But the election will be in the spotlight, with Democrat Barack Obama leading Republican John McCain in five of eight key battleground states, according to a series of Reuters/Zogby polls released on Tuesday. "The fact is, the passage of the U.S. election might actually come as a relief to the market rather than uncertainty, as once the election is done, the political spectrum of the U.S. will be quite clear for the next four years," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto. The inter est rates banks charge each other for short term loans also fell again, providing further hope that measures to shore up the credit markets are taking hold. The Treasury Department is considering using more of its $700 billion rescue package to buy stakes in a wide range of financial companies beyond just banks and insurers after tentative signs the program is working, according to the Wall Street Journal. The paper cited sources familiar with the matter saying the companies in focus include bond insurers and specialty finance firms such as General Electric Co's GE Capital unit and CIT Group Inc. For details, see. Shares of GE rose 2.2 percent to $19.72 in premarket action, while CIT gained more than 12 percent to $5.20. Europe share Europe shares up 2 pct by midday; banks, oils lead LONDON - European shares rose 2 percent by mid-session on Tuesday, looking set for a sixth straight day of gains as banks and oil shares advanced and investors bet on likely rate cuts in Europe later this week At 1145 GMT the FTSEurofirst 300 index of top European shares was 2 percent higher at 952.44 points. The FTSEurofirst 300 has lost nearly 40 percent this year in a global equities slump, sparked by a credit crisis that has shaken the world's top banks and brought a slowing global economy onto the brink of recession. Investors fretting over the future of the U.S. economy had their attention firmly fixed on the U.S. presidential election. Democrat Barack Obama leads Republican John McCain in five out of eight key battleground states, according to a series of Reuters /Zogby polls released on Tuesday. Across Europe, Britain's FTSE 100 rose 1.8 percent, Germany's DAX gained 2 percent and France's CAC rose 2.3 percent. "The odds are slightly better for higher indices by the end of the year," said Bernd Meyer, head of pan-European equity strategy at Deutsche Bank in London. "We now have a more favourable seasonality. Typically, the market is relatively weak in September and October, but the period of November to January tends to be a positive period." Banks were the biggest gainers. BBVA rose 5.7 percent and Societe Generale jumped 8.2 percent. SocGen's chief executive told French newspaper Les Echos that it could issue another 1.7 billion euro ($2.17 billion) hybrid bond next year. But Royal Bank of Scotland slid 5.8 percent after it reported a smaller-than-expected writedown on toxic assets in the third quarter but said it faced more writedowns this quarter and bad debts are rising sharply. UBS AG was 0.4 percent lower after it said a government bailout is helping to stem client money outflows but warned that it could take a 6 billion Swiss franc ($5.20 billion) hit in the fourth quarter due to accounting effects. Australia joined several other central banks on Tuesday by cutting its benchmark cash rate by 75 basis points. The focus now shifts to the European Central Bank and the Bank of England, which are widely expected to serve up 50-basis point cuts on Thursday. "We see it happening all around the globe. We had the U.S., Japan and now Australia, and we will have cuts in (the UK) and the euro zone," Meyer added. The energy sector was a standout riser, with BP, Total and Royal Dutch Shell gaining between 1.2 and 2.5 percent as U.S. crude rose more than 1 percent towards $65 a barrel. UK gas and oil producer BG Group rose 2.3 percent after it beat analysts' forecasts with a sharp rise in third-quarter profit and gave a buoyant outlook. Marks & Spencer Plc surged 9.1 percent. Britain's biggest clothing retailer posted a 34 percent drop in first-half profit on Tuesday, which was not as bad as expected in the context of a deepening consumer downturn, and self-confessed mistakes at its food business. Chemicals group Clariant soared 16.4 percent after it beat forecasts with its quarterly profit. Defensive pharmaceuticals also climbed. Roche added 2.6 percent, AstraZeneca rose 1.5 percent and Novartis put on 1.6 percent. Swiss Re, the world's second-biggest reinsurer, reported a surprise third-quarter net loss, sending shares down 3.6 percent. Asia at a Glance Asian Market Summary Japan's Nikkei rose 6.3 percent to a two-week high on Tuesday as investors bought back exporters on a softer yen and relief over a quiet three-day weekend, with Panasonic jumping after sources said it was planning to take over Sanyo Electric. Shares of big Japanese banks such as Mitsubishi UFJ Financial Group and Mizuho Financial Group advanced after Credit Suisse raised its stance on the sector to "overweight", saying that all bad earnings news is likely out after a series of profit warnings last week But Nissan Motor Co tumbled 10.6 percent after it more than halved its annual profit forecast and retracted its dividend target, hit by a slumping market and a strong yen. Trade was thin, with many investors reluctant to buy actively ahead of the U.S. presidential election, a factor that also dampened activity in New York on Monday, when Japanese markets were closed for a holiday. "While people are holding back a bit ahead of the election, their big concern is less who wins than whether the result will be decided quickly or not," said Takashi Ushio, head of the investment strategy division at Marusan Securities. "The worst thing would be an extended political vacuum, with no sign of what economic policies could be expected." In 2000, the election won by U.S. President George W. Bush was not finally decided until well into December, but trends in Tuesday's race between Democrat Barack Obama and Republican John McCain could become clear soon after the first polls begin to close at 6 p.m. EST (2300 GMT) in Indiana. The benchmark Nikkei ended up 537.62 points at 9,114.60. The broader Topix was up 5 percent to 910.70 points. Tokyo markets were closed on Monday for a holiday. Market participants said much of Tuesday's movements centred on short covering following a sharp sell-off ahead of the three-day weekend. Lehman Brothers collapsed on a three-day weekend in September, and Japanese investors have been shy of potential financial turmoil over long weekends ever since. Shares of Panasonic gained 6.8 percent to 1,614 yen, after rising as much as 9.3 percent at one stage. Sanyo soared 34.5 percent, up by its daily limit to 195 yen. "The reports about Panasonic are also positive for the overall market as they indicate industry realignment could happen across the board and across borders because stocks are so cheap now," said Fumiyuki Nakanishi, manager at SMBC Friend Securities. Mitsubishi UFJ Financial Group rose 4.9 percent to 627 yen and No. 3 bank Sumitomo Mitsui Financial Group climbed 7.9 percent to 412,000 yen. Mizuho Financial Group rose 7.1 percent to 248,400 yen. Trade was light on the Tokyo exchange's first section, with 2.26 billion shares changing hands, compared with last week's daily average of 3.01 billion. The Korea Composite Stock Price Index ended up 2.15 percent at 1,153.35 points after earlier losing as much as 1.3 percent in early morning trade. The KOSPI has risen for four consecutives sessions, taking its gains to 19 percent since Oct 29. Taiwan stocks closed flat on Tuesday, weighed down by tourism and tech shares, but transport shares rallied ahead of an agreement with China to launch daily cross-strait flights and direct cargo links. The main TAIEX share index slipped 0.05 percent, or 2.43 points to close at 4,992.63, after briefly flirting with the 5,000-point psychological barrier minutes before the market closed. The 30-share benchmark index rose 293.44 points to 10,631.12, its highest close since Oct 21, with 24 stocks rising, having been down more than 2 percent in morning trade. Labels: ADVFN NewsDesk, Forex Analysis |
posted by Matbank at 5:23 PM
