Friday, November 7, 2008
Nov-06 World Daily Markets Briefing
| by: ADVFN Newsdesk Forex FOREX-Euro down vs dollar after ECB rate cut of 50 bps NEW YORK - The euro fell against major currencies on Thursday after the European Central Bank cut interest rates by half a percentage point, disappointing investors seeking a more aggressive, growth-supportive move. The ECB cut rates by half a percentage point to 3.25 percent, a relatively small step compared to the Bank of England's shock decision to slash UK rates by 150 basis points to their lowest in more than half a century. While rate cuts typically reduce the attractiveness of a currency, both currencies came off session lows with sterling in positive territory against the dollar as investors bet that rate cuts will help stimulate the stalling economies. In an environment of normal growth, "rate differentials matter but given the current situation, rate cuts are seen as a positive," said Boris Schlossberg, director of foreign exchange research at GFT Forex. "What matters now is their stimulative impact." In early New York trade, the euro was down 0.8 percent at $1.2860 and was down 0.7 percent against the pound at 80.65 pence. The euro fell almost 1.1 percent against the yen to 126.36 yen. The pound was up 0.1 percent against the dollar at $1.5936, and more than two cents higher than the session low of $1.5722 struck immediately after the BoE surprise. Analysts said the BoE cut indicated that the UK central bank was doing more than the ECB to bolster its economy, and pushed the euro lower across the board as a result. ECB President Jean-Claude Trichet said during his press conference after the rate cut that he did not exclude further rate cuts but that the bank was not precommitted in any respect. Some investors took that has a signal another reduction was possible later this year which helped take the euro well off the session low of $1.2746. The Swiss National Bank also surprised investors with an unscheduled interest rate cut, lowering rates by half a percentage point. The dollar was up 1 percent at 1.1705 Swiss francs. The dollar was last down 0.2 percent at 98.30 yen. Analysts emphasized that as fears of a prolonged economic downturn intensify, the market is largely rewarding proactive central banks who act to stimulate their economies. "One thing that markets like at the moment are decisive, pro-growth policies, which is what we got from the BoE and what we're not getting from the ECB, which is weighing on the euro," said Adam Cole, global head of currency strategy at RBC. Bigger rate cuts are usually negative for a currency as they shrink its interest rate differential against other currencies, making it a less attractive investment. Markets had expected the BoE to cut by just 50 basis points, but talk of a more aggressive move had circulated prior to the decision as a deteriorating UK economy suggests interest rates will need to fall substantially in the months to come. Initial market optimism following the election of Barack Obama as U.S. president was short-lived. and investor attention now turns to the U.S. jobs report scheduled for release on Friday. US Stocks at a Glance US STOCKS-Shares open lower on Cisco warning, bleak sales NEW YORK - U.S. stocks opened lower on Thursday as disappointing outlooks from companies including technology bellwether Cisco systems pointed to a deepening global economic downturn. The Dow Jones industrial average fell 16.41 points, or 0.18 percent, at 9,122.86. The Standard & Poor's 500 Index dropped 3.10 points, or 0.33 percent, at 949.67. The Nasdaq Composite Index slipped 9.05 points, or 0.54 percent, at 1,672.59. Europe share Financials lead Europe shares down; rates eyed LONDON - European shares fell in morning trade on Thursday, as economic concerns remained firmly centre stage after Barack Obama's U.S. election victory, and investors awaited rate cuts from the region's top central banks. At 1018 GMT, the FTSEurofirst 300 index of leading European shares wasdown 4.2 percent at 913.31 points. Banks took most points off the FTSEurofirst 300 index. BNP Paribas, Commerzbank, Deutsche Bank and HSBC were 5.6-7.7 percent lower. The index fell 2.2 percent on Wednesday, following six consecutive days of gains, and has lost more than 38 percent this year, hurt by the global credit crisis and resulting economic slowdown. Bigger-than-expected job losses in the U.S., a sharp contraction in services sectors, steep house price declines and a manufacturing retreat in Britain all underscored the global economic gloom. Investors are awaiting interest rate verdicts from the European Central Bank at 1245 GMT and the Bank of England at 1200 GMT. All 81 economists polled by Reuters last week expect the ECB to cut rates by 50 basis points to a two-year low of 3.25 percent and some in the market expect more. And 10 out of 62 analyst polled then predicted the BoE would lop a full percentage point off the current 4.5 percent benchmark interest rate. More have joined their ranks since, and all said a half point cut was a done deal. "We're back to the grim reality of economic data showing recessionary conditions, and lower earnings guidance," said Bernard McAlinden, investment strategist at NCB Stockbrokers. "The counterbalance is interest rate cuts. We're no longer in a situation where big cuts would cause panic," he said. "At least, it seems we've been spared stagflation. The threat of inflation has largely gone away." Across Europe, Britain's FTSE 100, Germany's and France's CAC-40 were 2.7-3.2 percent lower. Hedge fund specialist Man Group tumbled 25.6 percent after disappointing first-half results.The global financial crisis hit the results of several leading European banks and insurers. AXA, Europe's biggest insurer by market capitalisation, slumped 6.3 percent after posting a 0.9 percent fall in sales in the first nine months of the year, with revenue affected by outflows at its asset management division due to the market turmoil. Dutch insurer Aegon suffered a third-quarter net loss of 329 million euros, while RSA Insurance, Britain's biggest commercial insurer, posted an 11 percent rise in premiums for the first nine months. Insurance shares were mixed. Aegon was up 1.8 percent, RSA was off 4.2 percent, and Prudential slumped 9 percent. Anglo-South African insurer Old Mutual was up 4.7 percent after it said it had no plans to raise capital, though it reported a 4 percent drop in nine-month sales. Oil stocks fell as the price of crude slipped more than 2 percent to $63.84 a barrel. Total, ENI, BP, Royal Dutch Shell, and Repsol fell between 2.5 and 3.5 percent. Lower metals prices, notably in copper and gold, sent mining shares lower, with Anglo American, Antofagasta, BHP Billiton, Rio Tinto, Vedanta Resources and Xstrata down between 5 and 8.2 percent. World number two brewer InBev was a standout gainer in the gloom, up 5.1 percent after it said its $52 billion takeover of Anheuser-Busch was on track and third-quarter results slightly exceeded expectations. Asia at a Glance Asian Market Summary The Korea Composite Stock Price Index ended down 7.6 percent at 1,092.22 points after five consecutive gains. The index is still up some 22 percent up from the late October low of 892.16 points, but down 42 percent on the year. The benchmark Nikkei fell 622.10 points to 8,899.14 in light trade for its biggest one-day loss since Oct 24. The broader Topix slid 6 percent to 909.30, with investors quickly forgetting the bounce seen a day earlier from the election of Barack Obama as U.S. president. The weighted index closed down 284.14 points or 5.71 pct at 4,694.12, after trading between 4,688.11 and 4,741.14. Turnover was 56.83 bln twd. The benchmark Shanghai Composite Index closed down 42.89 points or 2.44 pct at 1,717.72 after gaining over three pct yesterday. Turnover retreated to 27.07 bln yuan from 37.57 bln yesterday. CBA shares fell 2.9 percent to A$39.80 and NAB dropped 4.6 percent to A$24.70. ANZ, which turned ex-dividend, lost 10.8 percent to A$16.95, while the benchmark S&P/ASX 200 index shed 4.3 percent. The Hang Seng index closed down 1,050.12 points or 7.08 pct 13,790.04, off a low of 13,674.07 and high of 14,081.76. Turnover was 48.25 bln hkd. The 30-share BSE index closed down 3.81 percent, or 385.79 points, at 9,734.22, its lowest close since Oct. 29. It had shed as much as 4.8 percent but in late afternoon trade suddenly trimmed losses to be down just 0.1 percent at one point on expectations that annual inflation data would show a substantial fall from a week earlier. But data released 30 minutes before the market closed showed wholesale price inflation rose 10.72 percent in the 12 months to Oct. 25, marginally above the previous week's annual rise of 10.68 percent and outpacing market expectations for around 10.5 percent. The main index had fallen 4.81 percent on Wednesday to 10,120.01, snapping a five-day winning run after a surge that had lifted the market more than 40 percent off a three-year low hit on Oct. 27. It is down about 52 percent in 2008. Labels: ADVFN NewsDesk, Forex Analysis |
posted by Matbank at 12:57 PM
