Thursday, December 11, 2008
Dec-10 World Daily Markets Briefing
| by: ADVFN Newsdesk US Stocks at a Glance US STOCKS SNAPSHOT-Auto rescue hopes lift Wall St at open NEW YORK - U.S stocks rose at the open on Wednesday as optimism about an auto industry rescue bid overshadowed gloomy corporate outlooks from companies including Eastman Kodak. Rising prices of commodities, including oil, spur gains among shares of natural resource companies, with Alcoa Inc up 6 percent. Investors on the lookout for a possible vote as early as Wednesday in the House on the $15 billion proposal to aid U.S. automakers -- General Motors , Ford and Chrysler. The Dow Jones industrial average up 82.99 points, or 0.95 percent, at 8,774.32. The Standard & Poor's 500 Index up 7.04 points, or 0.79 percent, at 895.71. The Nasdaq Composite Index up 11.92 points, or 0.77 percent, at 1,559.26. Forex FOREX-Yen falls, US auto bailout hopes lift sentiment LONDON - The yen fell broadly, while the dollar dipped to a two-week low against the euro on Wednesday as a tentative agreement by U.S. lawmakers to rescue stricken automakers helped cool extreme risk aversion. The White House and congressional Democrats reached a deal in principle on a $15 billion plan to bail out and restructure auto firms, with officials saying the House of Representatives could vote on it as early as Wednesday. The news bolstered global shares by 0.78 percent and weighed on the low-yielding yen. "The market is focusing very much on the bailout deal for automakers," IDEAglobal senior strategist Maurice Pomery said. "We're seeing a bit of a short squeeze that is pushing the yen lower," he added. A tentative improvement in sentiment cooled a rush to unwind carry trades, which use the yen -- whose interest rate is near zero -- to fund purchases of higher-yielding assets. Analysts noted that fears of Bank of Japan intervention to prevent too much yen strength also weighed on the currency after BoJ Governor Masaaki Shirakawa said on Wednesday he was watching forex moves carefully. "There is a fear that the BoJ may intervene if dollar/yen falls below 90 yen," ING head of forex strategy Chris Turner said. At 1200 GMT, the dollar rose 0.7 percent to 92.73 yen, while the euro gained 0.9 percent to 120.01 yen. Cooler risk aversion also weighed on the dollar, with the euro edging up 0.2 percent to $1.2940, having earlier hit a two-week high of $1.3004, according to Reuters data. IDEAglobal's Pomery noted, however, that liquidity is extremely weak in the run-up to Christmas, with most market players only trading if they have to. "This means that what is no more than benign interest is producing swings that are bigger than normal," he said. Analysts believe the falls in the yen are likely to be short-lived as global recession fears keep risk aversion high. The prospect of interest rates in other developed countries falling towards the low rates in Japan will also keep the Japanese currency supported, they said. Traders waited to see whether the House of Representatives would approve the automaker bailout, which includes conditions to provide low-interest loans to avert a threatened industry collapse if one of the big three car firms were to fail. Some market participants are sceptical on whether such a plan, if passed, would actually save the struggling auto sector, while others argue that it would ultimately do little to cure the global recession. "The market may yet reach a stage where interest in risk assets cannot be justified by the underlying conditions in the global economy," analysts at UBS said in a research note. Europe News Glance-FTSE flat as Rio Tinto offsets weakness in banks LONDON - Britain's FTSE 100 was flat by midday on Wednesday, as banks fell on concerns of more profit and bad debt pain ahead, offsetting gains in miners led by Rio Tinto, which unveiled a plan to cut jobs. By 1126 GMT, the FTSE 100 was up 2.8 points, or 0.1 percent, at 4,384.06, after gaining 8.4 percent in the previous two sessions. The UK benchmark is still down 32 percent for the year on fears of a long and painful recession. "We are basically trading in a 10 percent range on the FTSE 100... since October 10," said Tom Hougaard, chief market strategist at City Index Markets. "The next 10 to 15 trading days will give us resolution one way or another if we are going to have a rally into March next year or head lower again back to 3,000," he said. Rio Tinto led the mining sector higher after the miner, saddled with nearly $40 billion in net debt, announced plans to cut 14,000 jobs, slash capital spending and boost asset sales as it battles a collapse in commodity markets. Firmer metal prices also boosted the mining sector. Rio surged 12.2 percent, while BHP Billiton, Anglo American, Xstrata, Vedanta Resources, Antofagasta, Eurasian Natural Resources and Kazakhmys rose between 2.2 percent and 6 percent. Energy stocks firmed as crude prices traded above $43 a barrel. Royal Dutch Shell gained 1.4 percent and BG Group added 2.3 percent. Banks, however, weighed heavily on the index. Credit Suisse said Europe's banks could see profit wiped out next year and in 2010 and may need to raise another 42 billion euros as a recent deterioration in economic conditions showed no sign of improving soon. The broker said European unemployment could rise 20 percent next year and it is possible that bad debts will approach levels of the early 1990s. Lloyds TSB was one of the broker's least favourite banks. Lloyd's eased 0.2 percent, while Barclays, HSBC , Royal Bank of Scotland and Standard Chartered were off between 1.8 and 4.7 percent. Britain's economy shrank by a full percentage point in the three months to November and the pace of contraction looks set to accelerate into the end of this year, the National Institute of Economic and Social Research said in its monthly assessment. The think tank revised its GDP estimate for the three months to October to show a decline to 0.8 percent, having originally estimated a contraction of 0.5 percent. "We had some good days recently ... essentially I still see that as a dead cat bounce. We've still got some torrid days to come," said Howard Wheeldon, senior strategist at BGC Partners. Across the Atlantic, the White House and Democrats are near a deal on a rescue for the battered U.S. car industry. Retailers took a beating on fears that Christmas sales this year could be the worst in many years. "Many retailers have entered the crucial Christmas selling period with too much stock ... We believe that profitability will come under significant pressure from both lower sales and higher discount -- a dangerous combination when coupled with 2-3 percent cost inflation," Morgan Stanley said in a report. "Marks & Spencer, Kesa and DSG International are most likely to disappo int." Marks & Spencer sank 5 percent and Next shed 4.2 percent and mid-cap Kesa Electricals dropped 4.8 percent. DSG International, however, soared nearly 14 percent after Nomura raised its rating to "buy" albeit with a lowered price target reflecting cuts to estimates. The latest quarterly FTSE indexes reshuffle will be announced after the market close, based on Tuesday's closing prices, and traders expect Stagecoach, Lonmin, Fresnillo, John Wood Group and Petrofac to exit the blue-chip index. Tate & Lyle, Serco, Randgold Resources , Amlin and Home Retail are expectedto be promoted to the top-flight. Asian Market China hopes propel HK shares to 2-mnth high HONG KONG - Hong Kong shares soared 5.6 percent on Wednesday to finish at a nearly two-month high as investors, pinning their hopes on massive stimulus measures from Beijing, snapped up China stocks. Local shares have surged nearly 15 percent in a week on talk that China will announce a slew of measures to boost private consumption and prop up the stock markets as a three-day meeting of top Chinese leaders concludes Wednesday. Hong Kong shares in China's flag carrier, Air China, shot up more than 22 percent after the aviation regulator encouraged airlines to cancel or postpone plane deliveries due in 2009 amid slackening demand for air travel. The benchmark Hang Seng Index ended 824.52 points higher at 15,577.74, its highest close since Oct.15. "People are basically buying into the China stimulus story. And talk about the 'through train' scheme also keeps popping up every now and then," said Howard Gorges, vice chairman at South China Securities. The 'through train' scheme, which is a direct investment scheme for Chinese individual investors to buy Hong Kong equities, was first proposed by mainland authorities in August 2007 but was stalled amid concerns over Hong Kong's volatile markets. But the territory's financial secretary John Tsang said earlier this week the scheme was still on track. Mainboard turnover rose to HK$61.9 billion from HK$56.9 billion on Tuesday. "Essentially there has been a change in sentiment, confidence has improved and volumes have picked up quite decently. Long term fund seem to have done most of their selling in the last two months and are slowly getting back to buying," said Gorges. The China Enterprises Index of top locally listed mainland Chinese firms rose 6.3 percent to 8,507.49. Chinese banking counters surged, with top lender ICBC jumping 5.9 percent while No. 3 lender China Construction Bank added 5.6 percent. Commodity stocks also defied the overnight drop in crude oil prices to extend Tuesday's rally on hopes that bold stimulus measures from governments across the world would help turn around the global economic outlook and boost demand for raw materials. Asia's largest oil and gas producer, PetroChina, rallied 6 percent, while offshore oil specialist CNOOC added 12.7 percent. Coal miner China Coal Energy gained 14.6 percent while gold miner Zijin Mining jumped 17.7 percent. Chinese carmakers joined regional rivals in cheering a tentative agreement on the rescue plan for the battered U.S. auto industry. Dongfeng Group vaulted 19.9 percent while Denway Motors bulked up 13.4 percent. Brilliance China jumped up 14.3 percent. Metals PRECIOUS-Gold climbs 1 pct as weaker dollar spurs buying LONDON - Gold rose 1 percent to its highest level in almost a week on Wednesday as a weaker dollar boosted interest in the precious metal as a currency hedge and oil prices firmed. Platinum and palladium also strengthened a touch as the market awaited fresh news on a potential rescue plan for ailing U.S. automakers, which could improve the demand outlook for the metals used in catalytic converters. Spot gold rose to a session high of $786.20 an ounce, and was quoted at $784.60/786.60 an ounce at 1016 GMT, up from $775.50 an ounce late in New York on Tuesday. U.S. gold for February delivery GCG9 was up $11.40 an ounce or 1.47 percent at $785.60 on the COMEX division of the New York Mercantile Exchange. "The main factor is the dollar-euro essentially, and that is clearly a lot weaker today at almost 1.30, compared to 1.26 at the end of last week," said Calyon metals analyst Robin Bhar. "With the jobs data out in the States (on Friday) we had a relatively strong dollar, and now that has gone into reverse," he said. "That is the driver (of gold)." The dollar weakened against the euro on Wednesday as a tentative U.S. plan to bail out carmakers relieved some risk aversion, which had benefited the U.S. currency. Traders sold the dollar and low-yielding yen as market volatility calmed. Rising crude prices, which can boost interest in commodities as an asset class and in gold as a hedge against oil-led inflation, are also supporting gold. Oil jumped more than $1 to just over $43 a barrel, as 4 percent falls overnight sparked by a downgrade to U.S. energy demand forecasts and fears of a worsening global recession prompted some light bargain hunting. Traders are looking ahead to next week's meeting of oil cartel OPEC, where production cuts will be discussed. "There is speculation that further OPEC oil production cuts could lift prices," said Fairfax analyst John Meyer. Traders are also eyeing the equity markets, which provided strong direction to gold on Tuesday. Stocks were higher outside Europe on hopes governments would implement stimulus measures to buoy up the lagging world economy. European equities were weak, however, as oil stocks and banks led indices down, though Rio Tinto jumped on plans to cut jobs and spending. However, demand for physical gold has been lacklustre in key markets. Gold jewellery sales in Abu Dhabi fell about 20 percent in November, the emirate's industry group said, and December sales are likely to be soft as high prices discourage buyers. Platinum prices were a touch firmer on Wednesday, as traders eyed a $15 billion U.S. plan to bail out ailing carmakers, whose woes have knocked the metal lower in recent months. The U.S. House of Representatives could vote as early as Wednesday on a plan to restructure carmakers but the project could still be blocked by the Senate, officials said. Lawmakers fear that a collapse of any of the Big Three automakers -- General Motors, Chrysler or Ford -- could deepen the U.S. recession. But while talk of the bailout has helped arrest the metal's sharp slide -- platinum has shed more than 65 percent of its value since its March peak -- it may not push it higher. "While we expect the metal to benefit from further bargain hunting in the coming sessions, strong resistance is anticipated around $882-88," said James Moore, an analyst at TheBullionDesk.com. Spot platinum was quoted at $815/835 an ounce, against $803.50, while sister metal palladium was steady at $174/182 an ounce against $174. Among other precious metals, spot silver rose to $9.97/10.05 an ounce from $9.79. Labels: Forex Analysis, Forex Trend, Market Analysis, Market Trend, money trading, World Market |
posted by Matbank at 12:37 AM
