Tuesday, December 16, 2008
Dec-16 World Daily Markets Briefing
| by: ADVFN Newsdesk US Stocks at a Glance US STOCKS SNAPSHOT-Wall St opens up on banks; Fed cut looms NEW YORK - U.S. stocks rose in opening trade on Tuesday as investors awaited an expected Federal Reserve interest rate cut and Goldman Sachs reported a loss that was smaller than some had feared. The financial sector was in the spotlight, with Goldman Sachs Group Inc shares rising 3 percent after it posted its first quarterly loss since going public in 1999. Around 2.15 p.m. (1915 GMT), the Fed is expected to lower benchmark rates closer to zero as it continues its aggressive campaign of cutting rates in an effort to stimulate growth. The Dow Jones industrial average rose 62.84 points, or 0.73 percent, at 8,627.37. The Standard & Poor's 500 Index jumped 9.44 points, or 1.09 percent, at 878.01. The Nasdaq Composite Index leapt 21.08 points, or 1.40 percent, at 1,529.42. Forex FOREX-Euro dips vs dlr but limited before Fed LONDON - The euro eased from a two-month high against the dollar on Tuesday but losses were limited on expectations the U.S. Federal Reserve will cut interest rates to near zero and take more steps to battle recession. The euro extended losses after purchasing managers' surveys released on Tuesday showed a bleak outlook for the region's economy. The single European currency had surged against the dollar since Monday as repatriation flows into the dollar ebbed and as market players covered positions ahead of the year end. "The data reminded markets a bit that the euro zone economy is not in great shape," said Daragh Maher, strategist at Calyon in London. He added, however, "the euro's losses are relatively modest in the context of its recent sharp gains against the dollar." At 1122 GMT, the euro was down 0.4 percent on the day against the dollar at $1.3653 after hitting a two-month high of $1.3739 in Asian trade earlier. A failure to break above a previous high near $1.3780 prompted players to take profits, dealers added. Data on Tuesday showed euro zone manufacturing and services activity sank to new lows in December, although less than forecast. The flash estimate of the Markit Purchasing Managers Index for manufacturing fell to 34.5 compared to 35.6 in November. That was slightly above a forecast of 34.3 but left the index way below the 50 level which separates expansion from contraction. The euro also dropped 1.2 percent to 122.81 yen. But traders were wary of taking on big positions until they see the outcome of the Fed's two-day policy-setting meeting later in the day. The U.S. central bank is widely expected to cut its key federal funds rate target by at least a half percentage point to an unprecedented 0.50 percent, but futures markets are pricing in a 62 percent probability of a bigger 75 basis point easing. Moreover, investors will focus on an accompanying statement for clues on whether the Fed will clearly state it will deploy so-called quantitative easing to restore growth. Any acknowledgment that the Fed is moving towards a quantitative easing approach by buying up government debt "could sour dollar sentiment in the near term," BTM-UFJ currency economist Lee Hardman said. Fed Chairman Ben Bernanke said earlier this month that the central bank could purchase long-term securities issued by the Treasury or government-sponsored agencies to cut yields and stimulate demand. Against a basket of currencies, the dollar rose 0.1 percent to 82.209 as it edged off a two-month low of 81.875. The U.S. unit fell 0.8 percent against the yen to 89.98 yen. Traders are also keeping an eye on U.S. consumer price and housing sector data before the Fed's decision. U.S. consumer prices overall are expected to have fallen 1.2 percent in November after a 1.0 percent decline in the previous month. Excluding volatile food and energy prices, consumer prices likely rose 0.1 percent. Separately, data showed British inflation slowed less than expected in November but is still forecast to fall sharply soon because of a cut in sales tax and tumbling fuel prices. The Office for National Statistics said consumer prices fell 0.1 percent last month to bring the annual rate down to 4.1 percent from 4.5 percent in October. That was the lowest rate since June but still well above the government's two percent target. In a letter to the government explaining why prices were rising by more than double the official target, Bank of England Governor Mervyn King said on Tuesday that UK inflation could fall below one percent next year. King also said a fall in sterling and market interest rates should support the outlook for activity and inflation . Sterling was down 0.4 percent at $1.5250. Europe News European stocks snap 3-day losing streak; Fed eyed PARIS - European stocks were slightly up about midday on Tuesday, gaining ground for the first time in four sessions, led by pharma and telecoms shares, as investors braced for a rate decision by the U.S. Federal Reserve. The market trimmed gains after a five explosive devices were found in a large store in central Paris following an anonymous tip off. "That's the last thing the market needs, right in the middle of the Christmas shopping season. It will scare people out of stores, it's a catastrophe for retailers," one Paris-based trader said. The banking sector remained under pressure ahead of quarterly results from Wall Street firm Goldman Sachs and after grim research notes on the sector. Credit Suisse was among Europe's biggest losers, down 3.8 percent after Morgan Stanley analysts downgraded their rating on the stock to "equal-weight" from "overweight", citing further impairment risk from forced shrinkage and winding down businesses. At 1145 GMT, the FTSEurofirst 300 index of top European shares was up 0.2 percent at 828.63 points. Europe's benchmark index is down 45 percent in 2008, but has gained 10 percent since reaching a floor late last month. "We've touched a bottom on Nov. 21 with the rescue of Citigroup, and I believe we're now in a stabilisation phase, with the prospect of a global recession already digested by the market," said Francois Chevallier, strategist at VP Finance, in Paris. "Falling credit spreads, and the fact that investors have started to brush aside negative macroeconomic data, are positive signals for stocks." The Fed is expected to lower interest rates closer to zero and point toward emergency tools it could deploy to end a year-long economic downturn, with room to cut borrowing costs running out. Economists expect the Fed to cut its target for benchmark overnight rates by at least a half-percentage point, to 0.5 percent, and clearly state it will aggressively use unconventional measures to restore growth. The rate decision and accompanying policy statement are expected at about 1915 GMT, after Europe's stock market closing bell. Mining shares got hammered as metal prices retreated on Tuesday, with Rio Tinto down 5.6 percent and Anglo American down 3.2 percent. On the macro side, investors got a bit of relief, with the euro zone Services PMI for December coming in at 42 compared with forecasts of 41.2, while the manufacturing PMI came in at 34.5 compared to forecasts of 34.3. "It's a little better than expected. We have all been surprised at the rate of decline in the past few months so we were worried it could fall further," said Dominic Bryant, analyst at BNP Paribas. The UK consumer price inflation slowed less than expected in November, official data showed, but is still forecast to fall sharply soon because of a sales tax cut and falling fuel prices. Defensive stocks were the best gainers, with GlaxoSmithKline up 2.9 percent and Sanofi-Aventis up 3.9 percent. Across Europe, the FTSE 100 index was up 0.3 percent, while Germany's DAX was up 1.2 percent and France's CAC 40 was up 0.7 percent higher. Asia Markets Asian Shares End Mixed As Tokyo Retreats, Bangkok Extends Rally Asian markets ended mixed Tuesday in a volatile session marked by thin trading volumes as investors awaited the U.S. Federal Reserve's decision on interest rates. Japanese shares were dragged down by steelmakers such as Nippon Steel Corp. on a report Toyota Motor Corp. planned to ask its steel suppliers to cut prices sharply. Australian stocks also fell, with Telstra Corp. sliding on a broker downgrade of its target after the government excluded the telecommunications major from a tender process for a national broadband network. Thailand stocks rose sharply as investors snapped up beaten-down shares on hopes the appointment of Democrat Party's Abhisit Vejjajiva as the country's prime minister will result in a stable government after months of political turmoil. Stocks in Hong Kong wavered in a range on either side of break-even. Jamie Spiteri, head of trading at Shaw Stockbroking in Sydney, said a steep interest-rate cut by the Federal Open Markets Committee may result in an immediate positive reaction in equity markets, "but we are expecting lower rates as a common landscape across most markets to continue." "A lot of market activity is fading away as we get closer to Christmas and the New Year," he said. Ben Kwong, chief operating officer at KGI Asia, said a half-point reduction had been factored into the current market prices and was the most likely outcome, as the Fed "will leave some room for a further cut." Japan's Nikkei 225 Average dropped 1.1% to 8,568.02, while the broader Topix index gave up 2.2% to 828.62. Australia's S&P/ASX 200 index slid 1% to 3,556.20, South Korea's Kospi gained 0.3% to 1,161.56 and New Zealand's NZX 50 rose 0.7% to 2,695.08. In afternoon trading, India's Sensex added 1.5% to 9,983.92 and Singapore's Straits Times Index rose 0.4% to 1,782.09, while Indonesia's JSX Composite fell 1.2% to 1,342.84. China's Shanghai Composite advanced 0.5% to 1,975.01 and Hong Kong's Hang Seng Index edged 0.6% higher to 15,130.21, after straddling the 15,000 point level, while Taiwan's Taiex ended 0.1% higher at 4,616.89. KGI's Kwong said "window-dressing activity," or buying by institutional investors to shore up the value of their portfolios before the end of the year, continued in the market. In Bangkok, the SET Index rose 2.2% to 446.79 by late afternoon, extending gains from the previous session, as investors cheered the appointment of Democratic Party's Abhisit Vejjajiva as prime minister. "It's a very significant political development. This is the first time in eight years that we don't have a Thaksin [or Thaksin supported] government," said Kenric Singhakowin, vice president at Royal Bank of Scotland in Bangkok. He expects the SET Index, which is down nearly 48% in 2008 to date, to reach 500 by early next year, as retail investors and domestic institutional investors return to the market. Leading the gains in Bangkok, shares of Bank of Ayudhya climbed 6% and Thai Airways International rose 2.8%, while PTT Exploration & Production advanced 0.9%. Steelmakers dropped in Tokyo, with Nippon Steel Corp. (NISTY) giving up 4.4% and JFE Holdings Inc. (JFEEY) sliding 5.9%. The decline came after the Nikkei business daily reported that the auto giant plans to ask steelmakers to cut prices of sheet steel by about 30% during the next financial year because of weakening demand for automobiles and expectations that raw-material prices will drop further. Automakers and steel producers negotiate prices once a year, with the prices agreed upon by Toyota and Nippon Steel serving as an industry benchmark, it added. Shares of Toyota (TM) dipped 0.7%. Among other exporters, Sony Corp. (SNE) dropped 5.9% and Honda Motor Co. (HMC) skidded 5.4% on concerns about the impact of a strong yen on their earnings. In Asian currency trading, the U.S. dollar bought 90.19 yen, compared with 90.54 yen Monday. A year ago, the dollar was buying more than 110 yen, but has steadily lost ground against the Japanese currency in the wake of the global financial crisis. Shares of Toshiba Corp. (6502.TO) fell 1.5% on a Nikkei report the company plans large-scale production cuts at its semiconductor plants. Toshiba plans to halt production at its Kitakyushu plant for a month, in addition to a three-week suspension at another site in Kyushu and suspension of some production lines at its Yokkaichi plant in Mie prefecture. In Sydney, shares of Telstra Corp. (TLSYY) slid 3% after Citigroup cut the company's target to A$3.40 ($2.28) from A$3.65. The downgrade came a day after Telstra announced it was excluded by the government in the tendering process for the broadband network because it hadn't included a plan for involving small and medium enterprises in building the network when it submitted a proposal last month. Shaw Stockbroking's Spiteri said the news "had an effect on Telstra's share price and subsequently on some market confidence because there was a significant amount of capital which had been directed toward Telstra as a defensive play during these uncertain times." Shares of China Cosco Holdings Co. (CICOY) dropped 0.7% in Hong Kong and 5.2% in Shanghai, after the shipping company said it had incurred a loss of 3.95 billion yuan ($577 million) on forward freight agreements because of a sharp decline in marine freight rates. Shares of market heavyweight HSBC Holdings ended unchanged in Hong Kong after the bank said it has a combined exposure of about $1 billion, having provided financing to a small number of institutional clients who have invested in the collapsed funds group. January crude-oil futures rose 47 cents to $44.98 a barrel in electronic trading, after dropping $1.77 to $44.51 a barrel Monday on the New York Mercantile Exchange. Labels: Forex Analysis, Forex Trend, Market Analysis, Market Trend, World Market |
posted by Matbank at 11:29 PM
