Thursday, November 20, 2008
Nov-20 World Daily Markets Briefing
| by: ADVFN Newsdesk Forex FOREX-Recession fear sweeps yen up; high-yielders fall LONDON - The low-yielding yen extended a broad rally against major currencies on Thursday after downbeat economic forecasts from the Federal Reserve underlined dire global conditions and heightened risk aversion. Investors were keen to continue cutting exposure to risk, and unwinding yen-funded carry trades in the process, due to fears about the viability of bank giant Citigroup Inc and major U.S. automakers. Meanwhile, at least one among household names General Motors Corp, Ford Motor Co and Chrysler LLC is at risk of liquidation if a last-minute bail-out plan fails. Analysts said that as moves in the yen were correlating strongly with equities, further steep stock market losses would hasten further rises for the Japanese unit, which could take it back to 13-year highs against the dollar. "Risk aversion has just completely dominated markets overnight -- this was accentuated by the minutes from the FOMC meeting last night," RBC currency strategist Christian Lawrence said. "We have a clear under-performance of high-yielders relative to their lower-yielding counterparts. You could have the worst data in the world coming out but the yen will still rally on risk aversion," he added. By 1113 GMT, the euro had fallen 0.4 percent to 119.55 yen, hovering above a one-week low of 118.59 yen hit according to Reuters data earlier in the global session. The dollar was down half a percent at 95.45 yen, while the higher-yielding Australian dollar tumbled roughly 2 percent to 59.76 yen. The traditional safe-bet Swiss franc was also hammered against the yen and dollar, losing out in the battle of low-yielding currencies as Japanese and U.S. borrowing costs now significantly undershoot those of Switzerland. While the dollar was trapped in narrow ranges against the euro and a basket of major currencies it gained traction versus the higher-yielding Australian and New Zealand dollars on continued investor deleveraging. The New Zealand currency slipped more than 1 percent to $0.5339, its lowest level since early 2003, and tumbled 1.5 percent against the yen. The minutes released on Wednesday from the Fed's October policy meet showed the central bank sees U.S. growth contracting in the second half of the year and the first half of 2009, even after a 50 basis point interest rate cut to 1.0 percent. This kept prospects high that U.S. rates could fall even further as the Fed tries to minimise the impact of the recession. Major central banks have been slashing rates aggressively in an attempt to boost their economies during an extreme slowdown. Figures this month show that Japan and the euro zone fell into a recession in the third quarter. "People are starting to give up on the hope that the economy is going to recover," said David Woo, head of currency research at Barclays Capital in London. US Stocks at a Glance US STOCKS-Market opens lower on autos, jobless data NEW YORK - U.S. stocks opened lower on Thursday as investors worried that failure by automakers to get a government bailout would add to the economy's woes, worries heightened by news of labor market deterioration. The Dow Jones industrial average was down 39.90 points, or 0.50 percent, at 7,957.38. The Standard & Poor's 500 Index was down 6.04 points, or 0.75 percent, at 800.54. The Nasdaq Composite Index was down 5.84 points, or 0.42 percent, at 1,380.58. US Jobless Claims +27K To 542K In Nov 15 Week; Survey -11K WASHINGTON - The number of U.S. workers filing new claims for unemployment benefits soared again last week to its highest level in 16 years, suggesting more pain ahead for already struggling labor markets. Meanwhile total claims lasting more than one week cracked the four-million mark, rising to fresh 25-year highs in a sign of just how hard it is for the unemployed to find new work as the economy struggles with the aftermath of the housing collapse. Initial claims for jobless benefits jumped 27,000 to a seasonally-adjusted 542,000 in the week ended Nov. 15, the Labor Department said Thursday. That's the highest since July 1992. Economists surveyed by Dow Jones Newswires had expected claims to drop 11,000. There was nothing unusual affecting the data, a Labor Department analyst said, explaining "the claims just came in higher than seasonal factors predicted." The four-week average of new claims, which aims to smooth volatility in the data, rose 15,750 to 506,500, 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. Thursday's weekly claims data - which include the survey week for the November employment report - point to another sizable payroll drop this month and further increase in the unemployment rate. In quarterly forecasts released Wednesday, the Federal Reserve said the central tendency of officials' unemployment rate forecasts for the end of 2009 was 7.1% to 7.6%, though individual forecasts went as high as 8%. 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. 8, rose 109,000 to 4,012,000. That's the highest level since December 1982. The unemployment rate for workers with unemployment insurance rose 0.1 percentage point to 3%, the highest since June 2003. Not adjusted to reflect seasonal fluctuations, California reported the largest increase in new claims during the Nov. 8 week, 15,532. It didn't provide industry detail. Kentucky reported the largest decrease in claims, due to fewer layoffs in the automobile industry. European Markets European shares fall on recession woes; Ahold gains FRANKFURT - European stocks fell on Thursday as fears of the impact of a recession hammered shares in banks and raw material producers, but supermarket group Ahold rallied on a higher than expected quarterly profit. By 1240 GMT, the FTSEurofirst 300 index of top European shares was down 2.7 percent at 790.05 points, having touched a 5-1/2-year low of 782.67 points. The slide echoed weakness in U.S. and Asian equity markets. "The mood among investors continues to be marked by an extreme risk aversion," said Markus Reinwand, equity strategist at German bank Helaba. European banks lost ground after Citigroup's shares tumbled 23 percent to a 13-year low overnight as investors questioned the U.S. bank's survival prospects. On Thursday, however, Citigroup rose 6.3 percent before the bell after CNBC reported that Saudi Prince Alwaleed plans to boost his stake back to 5 percent. In Europe, Credit Suisse fell 8.4 percent, Dutch financial group ING lost 7.1 percent, Germany's Deutsche Bank dropped 6.7 percent and Spain's Banco Santander traded 6.6 percent lower. But Royal Bank of Scotland swam against the tide, rising almost 13 percent ahead of a shareholder meeting to approve a fundraising plan. "It's positive sentiment ahead of the vote and the market expects a good outcome," a trader said. Insurers also fell, tracking a 10-percent-plus drop overnight for U.S. peers on the Dow Jones sector index. Britain's Aviva lost 12.9 percent, French AXA lost 5.1 percent and Swiss Life dropped 6.4 percent. All but two of the 38 industry groups in the FTSEurofirst 300 index were in the red at 1220 GMT, with analysts pointing to worries about a global economic downturn. That was a key reason behind a surprise 100 basis point cut in the Swiss National Bank's interest rates, which took the target range for the 3-month Swiss franc LIBOR to 0.50-1.50 percent. Societe Generale, in a note on Germany, the euro zone's biggest economy and the world's number one exporter, said: "The deepening of the banking crisis has made corporate funding conditions much tighter, considerably weakened international demand and intensified downward pressure on corporate margins." Standard & Poor's Equity Research downgraded the industrial sector to "underweight", saying: "Cyclical stocks have suffered a further leg down and many companies are now likely to undergo significant declines in capacity utilisiation". Ahold shares shot up 7.5 percent after the group reported a higher-than-expected 11 percent rise in core quarterly profit and reiterated its full-year margin target. Dresdner Kleinwort said the results "confirm that an acceleration in sales is no longer coming at a cost to margins" and that it was "encouraging to note that this is coming at a time when U.S. retailers are reporting an even more pressured U.S. consumer backdrop". Belgian metals and specialty materials maker Umicore , a leading manufacturer of catalysts for cars, was down 15.2 percent after a profit warning linked to the weak auto market. "Conditions are exceptional now, with destocking and production cuts in the auto industry," said ING analyst Arnaud Goossens. The price of palladium, two thirds of which is used in the auto industry, fell 15 percent overnight, with Fairfax citing destocking. "Markets are considering the fall out of an autos manufacturer going under," Fairfax said in a note. Carmaker PSA Peugeot Citroen was down 4.2 percent after unveiling plans to cut 2,700 jobs and saying that due to the financial crisis and the sector's turmoil, car sale volumes in main European markets would drop by at least 10 percent in 2009 and 17 percent in the fourth quarter. Renault shares fell 6.4 percent and Porsche lost 2.8 percent. Basic resources, which includes miners and steel makers, was the top loser among the DJ Stoxx sector indexes with a loss of 4.1 percent. Shares in ArcelorMittal, the world's biggest steel company, fell 7.6 percent while mining groups RIO Tinto and BHP Billiton shed 4.6 percent and 4.1 percent, respectively. Fears that recession will dent demand for oil saw the price of crude fall 2.5 percent to $52.3 a barrel, hitting sector stocks such as OMV, down 4.5 percent, ENI , down 2.5 percent, Royal Dutch Shell, down 1.4 percent and Petroplus, down 2.5 percent. Asia Markets Glace Asia Markets: Sell-off gathers steam; Nikkei sinks below 8,000 HONG KONG - Asian stocks suffered sharp losses Thursday, with Japan's Nikkei edging back toward the past month's lows, with Sony Corp. under pressure in a glum session for electronics makers after data showed Japan's exports continue to decelerate. Tokyo's Nikkei extended loses in the afternoon session, falling 6% to 7,774.63, dipping below the 8,000-point level for the first time since Oct. 29. Japanese exports declined 7.7% in October from a year earlier, their biggest drop in almost seven years, according to data released Thursday by the Finance Ministry. Japanese shares were also pressured after the U.S dollar weakened to 95.75 yen, compared to 95.85 yen in late Wednesday in New York and 96.75 yen there late Tuesday. Australia's S&P/ASX 200 was down 3.4% at 3,381.40, marking its lowest intraday level since August 2004. The Hang Seng Index ended the morning session 5.5% lower at 12,111.51, South Korea's Kospi fell 5.6% at 960.69 and China's Shanghai Composite was down 1.2% at 1,993.62. Brokers said the regional downtrend remained intact as hedge funds were forced sellers of shares to meet investor redemptions. "It's all about the October lows," said Benjamin Collett, head of hedge fund sales trading at Daiwa Securities in Hong Kong. "Investors are hoping we can hold on to the lows that were formed in October, or hold above there; if we don't, the outlook is very, very bad." New Zealand's NZSX-50 retreated 2.3%, Taiwan's Taiex was down 4.2%, Singapore's Straits Times fell 3.7%, and India's Sensex gave up 4.3%. In action in Tokyo, Sompo Japan Insurance led the sector lower on concerns of sharply-reduced earnings for the current fiscal year because of losses related to its large equity holdings. Shares of Sompo Japan were untraded amid a flood of sell orders at 679 yen. Among advancers were telecom-equipment maker ZTE Corp . The Hong Kong-listed firm climbed 2.5% as investors bet it could be a beneficiary of new equipment spending by mainland wireless carriers as part of the likely 3G licensing at year-end. Comba Telecom , another telecom-equipment provider, saw its Hong Kong-listed shares jump 6.2%. Makers of equipment used to produce semiconductors were lower as industry figures pointed to a 68% decline in October orders. Shares of Tokyo Electron and Advantest Corp. were down 7.3% and 3.9% respectively. Chipmakers were lower after an industry association forecast global sales would fall 5.6% next year, marking the first decline since 2001. Hynix Semiconductor shares were down 12.2%. Samsung Electronics Ltd. (SSNGY), the global leader in memory chip production, was down 2.4%. In Sydney, Rio Tinto led the commodity sector lower, its shares falling 8.4%, while Australia and New Zealand Bank retreated 4.8% Consumer electronics firms such as Sony Corp and Canon Inc were also under pressure from the combination of stronger yen and data that showed consumers in Asia that had held up fairly well while U.S. counterparts' curtailed spending was beginning to show signs of weakness. Shares of Sony were down 5.4% and Canon was off 5.7%. Japan's trade deficit hit 63.9 billion yen ($667 million), as imports climbed 7.4% on month, according to the preliminary Finance Ministry preliminary data. Japan's trade surplus with the U.S. contracted 27.5%, while that with the rest of Asia fell 38.7%. December crude-oil futures fell as much as 67 cents to $52.95 a barrel in electronic trading in Tokyo. In Nymex trading Wednesday, the front-month contract eased 77 cents, bring its cumulative four-session loss to almost 8%. Labels: ADVFN NewsDesk, Forex Analysis, Forex Trend, Market Analysis, Moving Average |
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