Monday, November 24, 2008
Nov-24 World Daily Markets Briefing
| by: ADVFN Neswdesk Forex LONDON - Sterling was steady against the dollar on Monday with investors focused on the UK government's pre-budget report, while broader worries about global economic health pushed sterling down against the Japanese yen. Tax cuts and increased public spending are believed to be on offer, but the spending measures could send Britain's budget deficit ballooning to around 120 billion pounds in the next financial year. "It's OK to be granting significant tax cuts at this stage but obviously there is this issue of claiming it back in the future, " said Steve Barrow, head of G10 currency research at Standard Bank. Adding to a poor picture of UK growth, data from the National Institute of Social and Economic Research showed the economy could shrink by 1.5 percent next year and unemployment could rise as high as 2.5 million in 2010. The yen pushed higher as investors stayed in risk-averse mode after the U.S government extended a $300 billion lifeline to Citigroup Inc to avoid a collapse of one of the world\'s biggest banks US Stocks at a Glance US STOCKS-Wall St opens higher after Citi rescue NEW YORK - U.S. stocks rose on Monday after the U.S. government agreed to inject $20 billion of new capital into Citigroup, heading off a bank collapse that could have crippled the world's financial system. The Dow Jones industrial average rose 142.89 points, or 1.78 percent, to 8,189.31. The Standard & Poor's 500 Index gained 17.27 points, or 2.16 percent, to 817.30. The Nasdaq Composite Index was up 28.33 points, or 2.05 percent, at 1,412.68. Freddie Mac Pledged To Buy $17.4 Billion of Mortgage Bonds In Oct NEW YORK - Freddie Mac (FRE) reported Monday that it committed to buy $17.4 billion of mortgage bonds in October, up substantially from the slim $2.5 billion pledged in the previous month. During the same month, the U.S. Treasury bought $21.5 billion of mortgage bonds, more than quadruple the $5.1 billion it purchased in the previous month. The housing finance company, which was taken over by the U.S. government in September, also reported that its total mortgage portfolio shrunk in October by 0.8%. Delinquency rates on single-family homes also rose, according to Freddie Mac data, jumping to 1.34% from 1.22% in September. European News European shares surge, energy stocks lead rally FRANKFURT - European shares gained by midday on Monday, with energy stocks leading the bounce, after U.S. stocks rallied late on Friday and a rescue plan for banking giant Citigroup buoyed investor sentiment. At 1236 GMT, the FTSEurofirst 300 index of top European shares was up 3.5 percent at 787.21 points. The index lost 12 percent last week to close at its lowest in more than five years and has lost 47.8 percent this year, hurt by the credit crisis and the prospect of recession. "The initial driver today is the Citigroup rescue plan," said Giuseppe-Guido Amato, investment analyst at Lang & Schwarz, adding that the reports that U.S. President-elect Barack Obama has chosen his point person to combat the U.S. economic crisis is also instilling confidence in the markets. U.S. stocks stormed higher in a late rally on Friday after NBC news reported that Timothy Geithner, president of the Federal Reserve Bank of New York, would be nominated as U.S. Treasury secretary. "Geithner is good for sentiment, because he would be a Treasury secretary coming from the banking business ... he knows what the problems are, and they are tremendous." Energy stocks added the most points to the benchmark index, as crude oil rose back above $50 a barrel, rising 3.8 percent. Total, ENI, BP and Royal Dutch Shell all rose between 5.9 percent and 7.4 percent. "Commodity prices have been coming down recently, and commodity stocks have been reaching low levels from which they are currently bouncing back," said Darren Winder, strategist at Cazenove. Miners were also up. Anglo American, Antofagasta, BHP Billiton, Eurasian Natural Resources Corp. Kazakhmys, Vedanta Resources and Xstrata rose 6.9 percent to 13 percent. Cazenove's Winder said the stock markets' move upwards on Monday was unlikely to prompt a sustained rally, given the ongoing credit crisis and weak economic outlook. "The markets are bumping along the bottom at the moment ... we are stabilising but with high levels of volatility, continuing to see daily movements of 3 to 4 percent," he said. European stocks shrugged off a leading Ifo survey, which showed that German corporate sentiment fell sharply in November to its lowest level in 16 years. European financials rallied, with Barclays, Deutsche Bank, Lloyds and UBS up between 7.2 percent and 10 percent. Barclays was also boosted by news that investors have voted in favour of its 7 billion pound ($10.44 billion) fundraising. Bank of Ireland was up 16.4 percent after press reports that an Irish-led consortium of private investment firms is seeking to buy into the company, and possibly Irish Life & Permanent. But UK-based lender Standard Chartered was 6.2 percent lower after announcing a 1.8 billion pounds rights issue that it said would strengthen its balance sheet and give it the flexibility to take advantage of opportunities in the current turbulent markets. Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC-40 were up between 3.2 percent and 4.5 percent. Asia at a Glance Stocks Broadly Decline, Despite Citigroup Bailout Most Asian markets declined Monday as the U.S. government's rescue of Citigroup Inc. and hefty pre-weekend gains on Wall Street failed to cheer investors concerned about global economic uncertainties and a weakening outlook for earnings. Financials broadly paced losses across the region, although they briefly recovered lost ground after the U.S. government agreed to rescue Citigroup with a huge bailout plan that includes $20 billion capital infusion, guarantees of up to $306 billion of Citi's troubled assets and restrictions over executive bonuses. "Value investors may think things are looking cheap, but they don't know what's coming next. Today we talk about Citigroup [rescue], but how about next week? Is economic data going to be worse, or how much can interest rates be cut? There is no visibility," said Dale Tsang, managing director at Imperial Dragon Asset Management Co. Tsang said a few funds have lost more than half their assets under management this year, either through redemptions or in the form of market losses, and lacked the confidence to invest in the market. Hong Kong's Hang Seng Index finished 1.6% lower at 12,457.94, while the Hang Seng China Enterprises Index gave up 0.8% to 6,376.96. Japanese markets were closed for a holiday. China's Shanghai Composite was the worst hit, ending 3.7% lower at 1,897.06. Conita Hung, head of research at Delta Asia Financial Group, said investors were disappointed after the Chinese government and central bank didn't announce an interest rate cut, or other stimulus measures, over the weekend as investors anticipated. South Korea's Kospi slumped 3.4% to 970.14, although it narrowed losses on media reports about the U.S. government's bailout for Citi. In afternoon trading, India's Sensitive Index, or Sensex, was little changed at 8,916.10, while Singapore's Straits Times Index skidded 2.5% to 1,620.29. Australia's S&P/ASX 200 index finished 0.3% to 3,425.10, reversing early losses as resource stocks extended gains and banks pared losses toward the close. Elsewhere, Taiwan's Taiex also recovered some lost ground to finish 0.3% lower at 4,160.54, while New Zealand's NZX 50 index slipped 0.1% to 2,575.48, ending lower for a sixth straight session. Hirokazu Yuihama, head of regional strategy at Daiwa Institute of Research in Shanghai, said a sustainable rebound in the Asian markets was unlikely, as the U.S. economic downturn was likely to "continue well into the next year." "No one believes the price-to-earnings ratio at the moment because the quality of earnings is getting worse," said Yuihama. "I think the downward revision in earnings will continue and the extent of the revision will be bigger, going forward." HSBC ends at 7-year low Shares of HSBC Holdings, which have a weighting of more than 15% in Hong Kong's Hang Seng Index, ended at HK$74.75 ($9.65), its lowest level since Sept., 2001 as financials were broadly sold off across the region. News of Citigroup bailout helped some Australian banks rebound, with shares of Westpac Banking Corp. bouncing 0.9%, while Commonwealth Bank of Australia pared losses to finish 2.4% lower in Sydney. Mumbai-listed shares of State Bank of India and Housing Development Finance Corp. and Seoul-listed Shinhan Financial Corp. and KB Financial Group also briefly narrowed losses, but slipped back again on intensified selling. In Mumbai afternoon trading, State Bank stock slid 2.9% and HDFC lost 1.2%. In Seoul, Shinhan skidded 8.6%, while KB Financial shrank 8.8%. Shares of Standard Chartered lost 6.4% in Hong Kong trading on news the lender was planning to raise $2.66 billion via a rights issue to boost its capital reserves. The bank said it will issue shares on the basis of 30 shares for every 91 held at a price of 390 pence a share ($5.81), a 48.7% discount to the company's closing price in London on Friday. "The bank appears to be in reasonable shape, but their capital adequacy position is low among the big banks around the world and they need to boost capital," said Howard Gorges, vice chairman at South China Brokerages, adding that speculation of a capital raising program by the lender had been persistent for some time. In Mumbai, shares of Tata Motors gained 0.2% in volatile late afternoon trading. The shares weren't much affected by a report in the Sunday Times that Jaguar Land Rover, the automotive brands acquired by the company earlier this year, had requested a 1 billion pound loan from the U.K. government because of the impact of the economic downturn on the automobile industry. Resource stocks advanced on higher crude-oil and gold prices, with BHP Billiton rising 6.8% and Santos advancing 3.6% in Sydney. In Hong Kong, shares of Cnooc rose 2% and gold miner Zijin Mining Group Co. jumped 3.1% in spite of the broad market weakness. The advance in Cnooc shares came after the South China Morning Post reported that its parent, China National Offshore Oil Corp., has prepared a blueprint to invest 200 billion yuan ($29.4 billion) over the next 12 years to explore and develop deep-sea oil and gas fields in the South China Sea. The investment will be shared by China National, Cnooc, China Oilfield Services and Offshore Oil Engineering, and China National's overseas partners, the report added. January crude-oil futures fell 45 cents to $49.48 a barrel in electronic trading, after rising 51 cents to $49.93 a barrel on the New York Mercantile Exchange Friday. December gold futures rose $6.60 to $798.40 an ounce in volatile trading, after rallying $43.10 to end at $791.80 Friday. In currency trading, the U.S. dollar bought 95.38 yen in Asia, compared with 94.94 yen Friday. The Australian dollar purchased $0.6293 versus $0.619 on Friday. Metals Gold hits 5-wk high, financial crisis dominates LONDON - Gold prices jumped to a five- week high on Monday as investors piled in seeking safety from financial uncertainty after the United States unveiled a $300 billion rescue package for banking giant Citigroup. Spot gold rose more than two percent to $818.75 an ounce, its highest since October 16 and was up at $815.85/817.95 at 1130 GMT from $799.45 an ounce on Friday when the precious metal posted its biggest daily percentage gain in two months. The U.S. government has agreed to inject $20 billion of new capital into Citigroup, one of the world's biggest banks, to avoid a collapse that would have wreaked further damage to the world's financial system. "The Citigroup news can be read in two ways. One is relief because the bank was teetering on the brink, and that will be reflected in higher equity valuations," said Robin Bhar, analyst at Calyon. "The other is that $20 billion is a lot larger than expected, which is quite negative. The question is if Citigroup needs all this money, how much do the others need. The bottom line is good news for gold." Analysts say action taken by governments to pump money into the banking system has helped, but that investors are not sure it is enough. Until they are sure about financial stability investors will choose gold as a store of value. "Investors have been in pure panic, they think the world is ending," said Nicholas Brooks, head of strategy at ETF Securities. "When people get into that sort of mentality, one of the first places they go to is gold." Gold hit a record high of $1,030.80 an ounce in March and has since fallen on falling oil prices and a stronger dollar. A higher U.S. currency makes metals priced in dollars more expensive for holders of other currencies, while gold is used as a hedge against inflation, often triggered by rising oil prices. But oil has fallen to around $50 a barrel from a record above $147 in July. Other commodity prices too have tumbled and the fear fast taking hold across the globe is of deflation. To combat this central banks have slashed interest rates and many are expecting to see them fall further, possibly to zero, in the United States and many other parts of the world. "There is a sense of Armageddon, a sense of foreboding, deflation is being talked about," Bhar said. "As interest rates fall, gold becomes more attractive." That is because the interest earned on deposits falls, which will put cash on a par with gold. It is also why the precious metal has bounced from a 13-month low of $680.80 in October, when a sell-off in equities forced investors to sell bullion to cover losses. Silver, tracking gold, hit $9.94 an ounce, the highest since November 11. It was at $9.96/10.04 an ounce from $9.62 on Friday. Palladium was at $184/194 an ounce from $180. Platinum was at $832/852 an ounce from $811.50 on Friday. The metal used to make autocatalysts has come under heavy selling pressure as news from the auto sector in recent weeks has steadily deteriorated. "In the near term, concerns about economic growth and the slowdown in vehicle sales are likely to keep platinum prices under pressure," Barclays said in a note. "But beyond short-term weakness, upside potential still exists for prices longer term, as supply problems are likely to persist given the power problems (in South Africa), the shortage of skilled labour and the high level of costs of production. Labels: Forex Analysis, Forex Trend, Market Analysis, Market Trend, money trading, World Market |
posted by Matbank at 11:28 PM
