Tuesday, November 11, 2008
Nov-11 World Daily Markets Briefing
| by: ADVFN Newsdesk Forex FOREX-Dollar, yen supported on weak tone in equities LONDON - The dollar and yen were broadly supported on Tuesday on a weak tone in equity prices, which prompted investors to shun riskier assets. The euro was flat against the dollar, its gains from a better-than-expected reading in a key German indicator survey ECON erased as the single currency was weighed down by weakness in European share prices. "There is still the risk aversion factor which is supporting the dollar and yen but it is not quite as much as before, as currencies are settling into ranges," said Daragh Maher, currency strategist at Calyon in London. Shares in European markets fell after tumbles in Asian shares and on Wall Street overnight. European shares were down 2.5 percent. The euro briefly rose after the ZEW Institute's index of German economic sentiment came in at -53.5 in November, improving from -63.0 in October. It also beat market expectations for a reading of -62.0. "The ZEW survey was a little better than expected, which has taken some pressure off the euro," Calyon's Maher said. At 1133 GMT, the euro was largely flat at $1.2732 after hitting a low of $1.2677 in Asian trade. But the outlook for the euro was not bright. "We expect growth conditions in the euro zone to keep on weakening, with further easing in rates to come, and under such conditions the euro will likely remain under pressure," UBS analysts said in a research note. Meanwhile, sterling was battered as it fell to its lowest in 12 years on a trade-weighted basis and hit a record low against the euro on concerns that the UK economy will suffer even more than the euro zone economy. Benchmark UK interest rates at 3.0 percent are also now lower than key euro zone rates at 3.25 percent, and some speculate the Bank of England will continue to make more aggressive rate cuts compared with the European Central Bank, widening the interest rate gap further. The euro hit a record high against sterling of 82.14 pence, according to Reuters data while the pound fell 0.5 percent against the dollar at $1.5527. Trade-weighted sterling fell to 84.6, its weakest level since September 1996. Against the yen, the euro edged lower by 0.2 percent to 124.55 yen. The Japanese currency also rose against sterling and the Australian dollar as global economic worries kept up the pressure to reverse carry trade positions, where low-yielding currencies like the yen are used to buy assets in higher-yielding ones. The Japanese currency was down 0.1 percent against the dollar at 97.88 yen. The dollar and yen are perceived as less risky currencies during times of market stress, and market participants said they may also be supported by the fallout on developing and emerging markets from the global financial crisis. Russia's central bank on Tuesday let the rouble weaken against a euro/dollar basket beyond the 30.41 level it has defended in recent months, spurring speculation of further gradual depreciation. US Stocks at a Glance US STOCKS-Wall St opens lower on economic anxiety NEW YORK - U.S. stocks tumbled on Tuesday, pulled lower by concerns that the global economic downturn is worsening. The Dow Jones industrial average fell 148.86 points, or 1.68 percent, to 8,721.68. The Standard & Poor's 500 Index lost 14.15 points, or 1.54 percent, to 905.06. The Nasdaq Composite Index was down 22.29 points, or 1.38 percent, at 1,594.45. Europe share European shares fall, led by banks and oils European shares fell 2.5 percent by midday on Tuesday, led by banks and oil stocks as optimism from China's near-$600 billion stimulus package announced on Monday faded. At 1155 GMT, the FTSEurofirst 300 index of top European shares was down 2.5 percent at 899.44 points, after rising 0.9 percent in the previous session on news of China's plans. The index has lost 40 percent this year, hammered by the credit crisis and resulting economic slowdown. Worries about the health of global economy were again evident, with U.S. and Asian stocks pulling back after shares of General Motors sank to a 62-year low on downgrades from analysts who cited cash levels that may fall below the minimum the company will need in the first quarter of 2009. Brokerages forecast that Goldman Sac hs will post its first-ever quarterly loss, also hitting global equities. "There's disappointment over the likes of GM. We're still in a volatile period," said Edmund Shing, strategist at BNP Paribas, in Paris. "The question is whether things are really as bad as the market would suggest, and the answer is probably no, but no-one is prepared to put their neck on the line and put big bucks on it." Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC-40 were down between 2 and 2.4 percent. Banks took most points off the Eurofirst index, with the DJ Stoxx banking index down 4.9 percent. Spain's Banco Santander was down 5.3 percent, extending its decline from Monday, when it announced a $9 billion rights issue. WestLB cut the bank's rating on Tuesda y to "hold" from "buy", while other brokers cut price targets. Deutsche Bank, HSBC, Lloyds, and UBS were down between 3.8 and 7.9 percent. Among insurers, Allianz, Axa Aegon and Swiss LIfe were down between 5.1 and 8.2 percent. Bucking the downward trend, mobile group Vodafone was the standout gainer, up 9.8 percent after reporting first half results slightly ahead of expectations and saying it would focus on cost cuts to maintain profits as it lowered its guidance on full-year revenue.. But most sectors on the Eurofirst 300 declined, with 275 out of 313 stocks lower. Crude prices struggled to stay above $60 as the economic slowdown again dominated investor concerns. "Wit h oil still falling lower, a hope for stronger demand after China's actions seems to be fading," said Ian Griffiths, a dealer at CMC Markets, in a note. Total, ENI, BP, Repsol, Statoil, and BG were down between 2.2 and 7.3 percent. With copper and gold prices lower, miners fell, with Anglo American, BHP Billiton, Rio Tinto, Lonmin and Xstrata 3.1-7.2 percent lower. Analysts said that Tuesday's decline for shares was not that sharp in view of recent volatility, and European equities seemed to be in a bottoming-out phase. Recession fears were fuelled by gloomy economic data from Britain in particular, with house sales reaching their lowest level in at lea st 30 years and retail sales falling by the biggest amount in three years in October. InterContinental Hotels, the world's largest hotelier, fell 5.5 percent after warning of a sharp fall in October trading as the global economic slowdown hit the industry, overshadowing a forecast-beating 14 percent rise in third-quarter profits. Spain's Telefonica edged up 0.3 percent, BT, which reports on Thursday, was up 0.4 percent. Telekom Austria was up 9.2 percent after announcing job cuts late on Monday. Shares of coffee chain Starbucks Corp fell 3.1 percent after the closing bell on Monday following fourth-quarter results that fell short of expectations. Asia at a Glance HONG KONG - Hong Kong shares slid 4.8 percent on Tuesday, weighed down by banks on concerns the global economic downturn will increase bad loans, while local developers dropped as the outlook for the property sector dimmed. Hong Kong developers Cheung Kong (Holdings), controlled by billionaire Li Ka shing, plunged 9.2 percent, while Sun Hung Kai Properties shed 5 percent. "The market is pricing in the likelihood of a continued drop in property prices. The potential rise in the unemployment rate will depress demand further," said D. Gorton, analyst at Louis Capital Markets. Hong Kong's home prices are expected to fall 15 percent in 2009, while rents may decline 10 percent, Nomura International (HK) said in a research report on Tuesday. In light trade, the benchmark Nikkei ended down 272.13 points at 8,809.30, after falling more than 4 percent earlier. The broader Topix declined 3 percent to 889.36. Indian shares fell 6.61 percent on Tuesday, their biggest fall in more than two weeks reversing most of the 8 percent-plus rise of the previous two days as fears of a protracted global recession saw investors pare risk again. HSBC shed 4.7 percent to HK$88 after it said on Monday that it took a $4.3 billion hit for bad debts in the United States, up $700 million from the previous quarter. JP Morgan cut HSBC's price target 25 percent to HK$82. "The results of HSBC were discouraging. The big worry is that its U.S. operations will continue to deteriorate and they will have to set aside more funds to cover bad loans in the future," said Y.K. Lee, an analyst at Core-Pacific Yamaichi. Shares of Semiconductor Manufacturing International Corp (SMIC), China's top contract chip maker, soared 29 percent. The stock earlier rose as much as 61 percent in its biggest one-percentage gain ever after it said it planned to sell a $172 million stake to Beijing-based Datang Telecom Technology & Industry Holdings Co Ltd. The benchmark Hang Seng Index .HSI closed down 703.73 points at 14,040.90, snapping a two-day 7 percent rally. A total of HK$54.4 billion ($7 billion) changed hands, down from HK$60.7 billion on Monday. Standard Chartered Bank fell 6.5 percent after it said on Monday its local subsidiary in Brazil had agreed to acquire some fixed assets from Lehman Brothers Brazil. The China Enterprise Index of top locally listed mainland Chinese companies fell 3.7 percent to 7,136.92, led by a 5.8 percent slide in the nation's top insurer, China Life Insurance. Chinese banks and construction-related stocks gave up earlier gains as investors were sceptical about their earnings prospects with the slowing mainland economy. Top lender ICBC lost 2.3 percent, while smaller rival China Construction Bank fell 3.7 percent. The world's No. 3 alumina producer Chalco fell 2.6 percent, while cement maker Anhui Conch lost 8 percent. Chalco on Tuesday said it had lowered its spot alumina prices by 10.3 percent, the fourth reduction since June. Shares of Lenovo, the world's No. 4 PC maker, fell 7.8 percent after Credit Suisse cut its earnings forecast for the company by 58 percent and 48 percent for 2009 and 2010, respectively, due mainly to slow corporate demand. The stock hit a nine-year low on Monday after Morgan Stanely downgraded the company. Hong Kong-based consumer goods exporter Li & Fung slid 12.5 percent after it said at the weekend it had imposed a hiring freeze and would lay off some employees, among other cost-cutting measures. Shanghai Electric Group rose 9.4 percent. The company said late on Monday it had received official approval from regulators for its planned A share sale and merger proposal. 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posted by Matbank at 11:35 PM
