Wednesday, November 5, 2008
Nov-05 World Daily Markets Briefing
| by: ADVFN Newsdesk Forex FOREX-Dlr rallies as Obama takes White House; ECB eyed LONDON - The dollar rose against a basket of currencies on Wednesday, rebounding from a big fall in the previous session, as Democrat Barack Obama sealed victory in the U.S. presidential election. Following the decisive vote results, investors turned their attention to the global recession, which kept risk aversion high and pushed stock prices lower. That helped the low-yielding yen while higher-yielding currencies such as the pound struggled. Both the Bank of England and the European Central Bank are expected to deliver big interest rate cuts on Thursday as they seek to dampen economic slowdowns in the UK and the euro zone. Analysts said the prospect of lower rates was pushing the euro and sterling down on Wednesday. After falling more than 2 percent on a trade-weighted basis on Tuesday, dollar buying kicked in shortly after media projected that Obama had captured the White House. "The dollar is working to recover some of yesterday's losses and the Presidential election result has certainly added it's own support," head of sales trading at CMC Markets Gary Thomson said, adding that a quick result was boosting the U.S. currency. At 1003 GMT, the dollar was up 0.8 percent on a trade-weighted basis at 85.266, while the euro fell more than 1 percent against the dollar to $1.2840. Market participants said that a 2.4 percent slide in European shares was also helping the dollar to gain as investors remained cool on risk. The yen gained meanwhile, with the dollar down over 1 percent at 98.45 yen and the euro falling more than 2 percent to 126.40 yen. Both the European Central Bank and the Bank of England are seen cutting borrowing costs by 50 basis points or more on Thursday, reducing the return on assets held in euros and pounds. "The ECB is expected to cut interest rates by at least 50 basis points and this is why we are seeing the euro pulling back," BNP Paribas senior currency strategist Ian Stannard said. Dovish comments on Wednesday from ECB executive board member Juergen Stark -- seen as one of the arch hawks among euro zone policymakers -- and more weak euro zone data helped cement rate cut expectations. Stark told the Financial Times Deutschland that weak euro zone growth and oil price fluctuations could push inflation briefly into negative territory. Euro zone retail sales fell 1.6 percent year-on-year, data showed while the Markit purchasing managers' index for the region's service sector was revised down to 45.8 in October, the lowest in the series' 10-year history. A reading below 50 marks contraction in the sector. Meanwhile, the dire state of the UK economy and fears about its reliance on the crisis-hit financial services sector prompted talk of the possibility of a rate cut of as much as 100 basis points by the Bank of England on Thursday. The decision on Wednesday by Abbey, the mortgage bank owned by Spain's Banco Santander to raise repayment rates on its tracker loans highlighted the urgent need for official borrowing costs to fall sharply. "Expectations for a 100 basis point cut by the Bank of England are starting to build. The Abbey move is very significant and highlights that the BoE needs to do a lot more in terms of cutting rates," BNP Paribas' Stannard said. The pound fell roughly 1 percent against the dollar to $1.5800. Talk of a significant fall in UK interest rates gathered pace after the Reserve Bank of Australia cut interest rates by a bigger-than-expected 75 basis points on Tuesday. Along with other central banks around the globe, the ECB and the BoE slashed interest rates by 50 basis points on October 8 to 3.75 percent and 4.5 percent respectively in a coordinated move. US Stocks at a Glance US STOCKS-Economic worries outweigh election euphoria NEW YORK - Wall Street opened lower on Wednesday a day after Barack Obama won the presidency as investors turned their focus back to concerns on the weakening global economy. The Dow Jones industrial average was down 111.98 points, or 1.16 percent, at 9,513.30. The Standard & Poor's 500 Index was down 10.70 points, or 1.06 percent, at 995.05. The Nasdaq Composite Index was down 20.36 points, or 1.14 percent, at 1,759.76. WASHINGTON - A key advisory group to Treasury on borrowing needs said in its quarterly report to Treasury that it fully expects the government to move to monthly 10-year note auctions as a way to raise the funds government needs to operate in the coming months and years. "There was universal consensus on the Committee for the Treasury to increase the frequency of 10-year notes to a monthly schedule," the November 4 report from the Treasury Borrowing Advisory Committee (BAC) said. "Ten-year notes are a key benchmark issue and the market again is widely anticipating that monthly issuance is imminent." Treasury today announced it is moving to a second monthly reopening of the 10-year note, introduced monthly 3-year notes, and moved to new-issue quarterly 30-year bond auctions, all steps supported by the BAC. But Treasury was silent on whether it would move to to monthly 1 0-year note auctions. Europe share European shares down; pharmaceuticals, oil fall LONDON - European share prices were down at midday on Wednesday as investors turned their attention back to the economy after Barack Obama's victory in the U.S. presidential election, with pharmaceutical and oil stocks the main drags on the index. By 1131 GMT, the FTSEurofirst 300 index of leading European shares was down 1.8 percent at 956.59, breaking six straight days of gains. The index has lost nearly 37 percent so far this year. The new Obama administration, which takes office in January, will face the world's worst financial crisis since the Great Depression, and a potentially steep downturn in the global economy. Pharmaceuticals were the bigest losers on the index. AstraZeneca, GlaxoSmithKline, Novartis and Sanofi-Aventis down 3.8-4.5 percent. "The market will always say that a (U.S.) Democratic (election) victory will always be bad news for pharmaceuticals and there has been selling there," said Jim Wood-Smith, head of research at William de Broe. "Ever since former president Bill Clinton's key policy was to reduce the cost of drugs to the consumer, the market has said a Democratic victory is not good for the sector. However, it is all half-hearted stuff and I would not read too much what Obama will or will not do, it is another story getting legislation passed," added Wood-Smith. Simon Mather, an analyst at WestLB, said: "The victory of Barack Obama opens the door for accelerating pricing pressure." Energy stocks dragged the index lowe r as crude fell 3.3 percent and analysts said an Obama win could mean a windfall tax on oil companies as he favours green or alternative energy. BG Group, Royal Dutch Shell and BP were down 2.3-3.1 percent. Shell traded ex-dividend, adding to the downward pressure on the stock. Banks also weighed. BNP Paribas lost 4.3 percent after the group said its third-quarter net profit more than halved due to higher provisions related to the financial crisis. Allied Irish Banks fell 2.8 percent after it cut its full-year earnings forecast, increased its bad debt charge expectations and cancelled its 2008 cash dividend to raise capital ratios. Across Europe, the FTSE 100 index was down 1.9 percent, Germany's DAX wa s 1.3 percent lower and France's CAC 40 was down 2.3 percent. Insurers were up as analysts suggested that Barack Obama is likely to place a higher tax on income which will lead the affluent to buy more tax-deductible insurance products. Insurers with exposure to the United States such as Aegon and Prudential were 1 to 5 percent higher. "If Obama were to raise taxes for wealthy people they would have an incentive to save more for their pension, because that's tax deductible," said Michael Van Wegen, insurance analyst at Societe Generale. The automobile sector was also one of the few to gain with Volkswagen 6.6 percent higher after analysts said the group was set to stay in Germany's bluechip DAX index at least for the short-term. Looking at individual stocks Stora Enso gained 1.6 percent after the group said it has signed an agreement to outsource most its financal transaction processiong to CapGemini . Asia at a Glance Asia Market Summary HONG KONG - Share prices closed sharply higher after Barack Obama won the US presidential election, raising hopes for fresh action to revive the world's largest economy. A stronger Shanghai bourse also encouraged investors, but the market finished off the day's best levels as some investors locked in profits. Mainland banks and property developers continued to benefit from Beijing's easing of credit controls, while resources stocks surged after a rally in commodity prices. PCCW gained nearly 27 pct after major stakeholders Pacific Century Regional Development and China Network Communications (Netcom) offered to buy out minority shareholders at 4.2 hkd a share. Large-caps HSBC, China Mobile and China Life tracked strong gains in their Americ an depositary receipts overnight. The Hang Seng index closed up 455.82 points or 3.17 pct 14,840.16, off a low of 14,750.04 and high of 15,317.83. Turnover was 63.37 bln hkd. The Hang Seng China Enterprises index rose 364.81 points or 5.32 pct to 7,225.69. Among China banks, Bank of Communications surged 0.23 hkd or 5.02 pct to 4.81, ICBC gained 0.14 hkd or 3.68 pct at 3.94 and Bank of China was up 0.11 hkd or 4.91 pct at.35. Among mainland property firms, China Overseas Land soared 0.88 hkd or 9.46 pct to 10.18, Guangzhou R&F leapt 0.64 hkd or 15.69 pct to 4.72 and Agile Property was up 0.25 hkd or 9.03 pct at 3.02. PCCW closed up 0.78 hkd or 26.9 pct at 3.68. The benchmark Nikkei gained 406.64 points to 9,521.24, its highest close since Oct. 15, in moderate trade. The broader Topix rose 6.2 percent to 966.91. The Korea Composite Stock Price Index closed up 2.44 percent at 1,181.50 points. It earlier crossed the 1,200 point level for the first time since Oct. 21 on its way to the session high of 1,217.82 points. Indian shares fell 4.81 percent on Wednesday, snapping a five-day winning run on heavy losses in Reliance Industries and as investors locked in gains on a surge that had lifted the market 40 percent off a three-year low. Shares in the Reliance, India's most valuable listed company, plunged 12.8 percent to 1,269.45 rupees, on foreign fund selling and concerns about its earnings after a paper reported it had shut five polyester and petrochemical plants near Mumbai. "I don't think the five units contribute to a very large part of the company's sales, but it is for sure affecting sentiment. Also, we feel their refining margins will fall further," said R.K. Gupta, managing director at Taurus Mutual Fund. Despite the fall, Reliance shares are still up 36.5 percent from an Oct. 27 low o f 930 rupees, which was its weakest in more than two years. Telecom stocks fell on concerns that a government move to charge more for radio spectrum may hurt earnings. Sector leaders Bharti Airtel and Reliance Communication fell 4.5 percent and 9.5 percent respectively. State Bank of India fell 3.6 percent, and rival ICICI Bank lost 1.6 percent, trimming gains made since the central bank cut its key lending rate and banks' reserve requirement at the weekend. The 30-share benchmark index lost 511.11 points to end at 10,120.01, its lowest close since Friday, with 27 components falling. Buoyed by gains in global markets and the U.S. presidential election, the market had risen nearly 3 percent in opening deals. "The selling looks like profit booking after the rally in the past 4-5 days. Stocks in construction, realty, metals had seen a strong bounce back. There may be weakness for another 1-2 sessions," said Dipak Acharya, fund manager at Baroda Pioneer Asset Management Co. The benchmark index is up 31.5 percent from a three-year low of 7,697.39 hit on Oct. 27, but is still down 50 percent in 2008. The 50-share NSE index was down 4.68 percent at 2,994.95. European stocks eased on Wednesday, after six straight days of global equity gains, as investors refocused on economic problems facing U.S. president-elect Barack Obama. Labels: ADVFN NewsDesk, Forex Analysis |
posted by Matbank at 11:24 PM
