Saturday, December 6, 2008
Dec-5 World Daily Markets Briefing
| by: ADVFN Newsdesk Forex FOREX-Euro falls vs dlr; weak U.S jobs data expected LONDON - The euro fell against the dollar on Friday on growing risk aversion ahead of U.S. employment figures, which are expected to show a sharp decline as the global economic downturn intensifies. The euro was on the back foot after German October manufacturing orders posted a surprising fall of 6.1 percent on the month, while falling share prices in Europe also weighed on the single currency. The U.S. currency gained traction, pushing the dollar index up 0.5 percent to 87.030 as investors dropped risky positions ahead of U.S non-farm payrolls for November due at 1330 GMT, which are forecast to fall by 340,000. Expectations point towards the biggest monthly drop in non-farm jobs in more than two decades, adding to the view that the U.S economy is slowing sharply. "We expect the numbers to be grim. With job losses steadily mounting you would question corporate earnings next year and there would be more pressure on carmakers because people without jobs wouldn't be buying them," said Tom Vosa, head of market economics at nabCapital in London. By 1208 GMT, the euro fell 0.7 percent to $1.2675, while the dollar rose 0.1 percent to 92.23 yen. The single European currency came under selling pressure as regional shares fell more than 2.0 percent. Concerns over the health of the global economy have battered stock markets and other asset classes deemed risky, causing investors to drop higher-yielding currencies such as the euro, sterling and the Australian and New Zealand dollars in favour of the U.S currency and the low-yielding yen. While analysts say that a dire U.S. jobs reading could be seen as dollar-negative on the view that it would reinforce the bleak economic outlook, some added that weak data could further spur risk aversion, pushing the U.S. currency higher. "If we do see equity markets coming off sharply (after the U.S jobs data) and it turns into a global equity markets sell off, then we could well see currencies coming back under pressure against the dollar, so it could actually be a dollar-positive," said Ian Stannard, senior foreign exchange strategist at BNP Paribas in London. Sterling rose marginally against the dollar to $1.4684 as some traders covered short positions in the currency, after it hit a near-seven-year low on Thursday. But the UK currency remained weak, hovering close to record lows against the euro, after the Bank of England cut interest rates by 100 basis points to 2 percent on Thursday. The European Central bank also cut rates on Thursday, slicing 75 basis points from its benchmark rate to 2.5 percent. Even after Thursday's big rate cuts, market participants believe that the interest rates of major countries around the world have more room to fall. This would shrink their spreads against the Federal Reserve's 1.0 percent rate and Japan's 0.3 percent, which are seen keeping the dollar and the yen supported in the longer term. Despite a spate of rate cuts this week, the gloom surrounding the global economy continues to linger. Data from the OECD showed the outlook for the world's leading economies has weakened further, with significant deterioration in the prospects for China, India and Russia. US Stocks at a Glance US STOCKS SNAPSHOT-Bleak jobs data pushes indexes lower NEW YORK - U.S. stocks tumbled at Friday's open after government data showed the economy lost the most jobs in 34 years, raising fears of a worsening economic crisis. The Labor Department said that 533,000 nonfarm jobs were lost, more than expected. The unemployment rate climbed to 6.7 percent, the highest since 1993. Falling oil prices hurt the energy sector, and Exxon Mobil weighed on the Dow. The Dow Jones industrial average was down 67.22 points, or 0.80 percent, at 8,309.02. The Standard & Poor's 500 Index was down 7.89 points, or 0.93 percent, at 837.33. The Nasdaq Composite Index was down 11.56 points, or 0.80 percent, at 1,434.00. Treasurys Ease In Wake Of Jobs Plunge Treasurys declined Friday after the Labor Department said the economy lost 533,000 jobs in November, more than economists expected. Some investors and traders had been bracing for an even deeper loss. Two-year note yields rose 2 basis points, or 0.02%, to 0.84%. Benchmark 10-year note yields rose 3 basis points to 2.58%. Bond yields move in the opposite direction of prices. The data adds to evidence that the recession may be accelerating, and may add to concerns among bondholders that it may raise Congress's willingness to pump up the economy, including a better chance of a bailout for U.S. automakers, all of which will be financed by increased debt issuance. "The worse the number, the more the stimulus is coming," said Andrew Brenner, co-head of structured products and emerging markets at MF Global. "Hence, Treasurys are not rallying initially." Economists surveyed by MarketWatch predicted 350,000 jobs would be cut. The unemployment rate rose to 6.7%, the highest since 1993. Expectations were for an increase to 6.8%. "This was a shockingly weak number," said James DeMasi, fixed-income strategist at Stifel Nicolaus & Co. "The economic downturn is intensifying. This can provide a lot more fuel for rates to move lower from here, strange as it sounds" with 10-year yields near the lowest since the 1950s. Two-year note yields are near the lowest since the 1970s. European Shares Europe shares fall as investors await U.S. job data LONDON - European shares were down at midday on Friday, banking and commodity stocks bearing the brunt of the falls as investors took a cautious view ahead of the release of U.S. unemployment figures. By 1147 GMT, the FTSEurofirst 300 index of top European shares was down 1.9 percent to 810.86 points. The index is 46.3 percent lower for the year. "There is lots of uncertainty ahead of the U.S. unemployment figures with Wall Street also closing lower overnight," said Bernard McAlinden, market strategist at NCB Stockbrokers. "There are worries these figures will show a bigger deterioration than expected," he said. "Despite massive policy reaction to the problems in economy and rapid unwinding of interest rates, the market is still worried on the shock side and that the economy is still showing no signs of reacting to the stimulus." Economists surveyed by Reuters have forecast 340,000 new jobs were lost in the month, compared with a loss of 240,000 jobs in October. The unemployment rate is seen at 6.8 percent, compared with 6.5 percent in the prior month. Energy stocks were the biggest fallers on the index as crude traded at about $44 a barrel, near its lowest in almost four years and just above the psychologically important $40 mark as a widening slowdown gnaws into oil demand. BG Group, BP, Royal Dutch Shellng>, Tullow Oil and Total slipped between 3.3 percent and 6 percent. Metals were lower as copper fell 3.8 percent and touched a fresh 3-1/2 year low on poor demand outlook. Anglo American, BHP Billiton, Lonmin and Xstrata were down between 5.9 percent and 12 percent. Banks also contributed to heavy losses on the index. Credit Suisse, BNP Paribas, UniCredit and Royal Bank of Scotland were between 2.5 percent and 5.1 percent lower. The European banking index is down 62.9 percent for the year. "There is a lot of economic risk, economic conditions are getting worse by the day, which mean credit losses are going to be accumulating in 2009 and there is not too much more that can be done with interest rates," said Darren Winder, strategist at Cazenove. On Thursday, the European Central Bank slashed interest rates by 75 basis points to 2.5 percent, while the Bank of England cut rates by 100 basis points to 2 percent. "There will be more write downs in the financial sector as the value of housing assets are declining. Anything which has been secured against housing values which has been an awful lot will fall in value," Winder said. Morgan Stanley widened its fourth-quarter loss estimate on Goldman Sachs, citing a fall in equity, credit and real-estate values in November, and rising negative marks on the firm's illiquid asset and principal investment portfolios. Across Europe, the FTSE 100 index was down 1.4 percent, Germany's DAX was 2.7 percent lower and France's CAC 40 was down 3 percent. Defensive stocks were in favour and contributed to the biggest gains on the index. The pharmaceutical sector led the way. GlaxoSmithKline , AstraZeneca and Shire were up 0.8 percent to 3.5 percent. Investors also turned to the food retailers with Tesco and Sainsbury up 2 percent and 3.6 percent respectively. Asia at a Glance Hang Seng Gains; BHP Billiton, MUFG, Honda Fall Asian stocks traded mixed Friday, with commodity stocks retreating in the wake of overnight falls in crude-oil prices, while investors chased up Hong Kong-listed stocks such as China Mobile and China Life Insurance Co., which are leveraged to the China growth story. Shares of Honda Motor Co. (HMC) fell 1.9% as the automaker announced Friday it will withdrawal from Formula One racing with immediate effect as it seeks to conserve cash and realign its engineering and development resources in a deteriorating global outlook for car sales. Hong Kong shares staged the biggest gains in the region, led by Chinese insurers and telecom stocks. "There is a bit more confidence developing that China's stimulus package will start to work," said Howard Gorges, vice chairman of South China Brokerage. Brokers said investors were also encouraged by rising turnover in Shanghai and reports that China's sovereign wealth fund had recently acquired stakes in leading mainland banks. Beijing indicated earlier in the week it would unveil new stimulus measures targeted at ensuring ample liquidity in the financial and sector. "China has to keep easing as it becomes ever clearer that the mainland economy faces a deflationary threat," wrote CLSA-Asia Pacific Markets strategist Christopher Wood in a note Thursday. Among gainers in Hong Kong, shares of Ping An Insurance closed 5.7% higher, while those of China Mobile (CHL) climbed 3.1% and China Life's shares added 5.9%. Markets in Thailand were closed for a holiday. The U.S. dollar slipped moderately against its Japanese counterpart, to trade at 92.19 yen vs. its level of 92.22 yen in late New York. Among decliners, BHP Billiton's (BHP) shares fell 4.9%, while Mitsubishi UFJ Financial Group (MTU) slumped 5.4%. South Korean stocks were higher, led by shares of steel makers and technology companies, with sentiment improving in the expectation of new government measures to support the economy. Shares of steel maker Posco rose 5.1%. Hyundai Motor's shared added 5.1%, with investors warming to the stocks after officials in Seoul indicated they were willing to explore ways to help the automotive and shipbuilding industries. "There seems to be a little bit of a general view circulating that with so much money sitting on the sidelines, it wouldn't take much for these markets to see a year-end rally," said Miles Remington, head of Asian sales trading at BNP Paribas in Hong Kong. Nomura Holdings' shares ended 4.1% higher after the broker, Japan's largest, announced Thursday it will cut up to 1,000 jobs to reduce payroll costs following its acquisition of some of the operations of now-defunct Lehman Brothers Inc. Shares of Chugai Pharmaceutical Co closed 8.3% lower after the U.S. Food and Drug Administration delayed approval of a rheumatoid arthritis drug being jointly developed by Chugai and Roche Holdings AG. Investors were on a mostly defensive footing following a softer session for U.S. shares Thursday, which saw the S&P 500 (SPX) decline 25.52 points, or 2.9%, to 845.22. Stocks were pressured by weak retail-sales data and notices of layoffs from corporate giants including AT& T Inc. and DuPont Co. Merrill Lynch cut its 2009 global growth forecast to 1.3% from the 3.7% offered in June, predicting next year's growth will be the slowest since 1982. The broker noted the 2008 financial crisis will bring about a shift in China's development model, along with other emerging economies, in coming years. "Expect long-run policies reducing ties to Anglo-Saxon consumption and a rebalancing in the global political power toward the emerging world," Merrill wrote in its Global Outlook report, dated Nov. 26. Japan's benchmark index, the Nikkei 225, finished 0.1% lower at 7,917.51. The Hang Seng Index closed 2.5% higher at 13,846.09, about flat for the week. a China's Shanghai Composite finished 0.9% higher at 2,018.66, packing on about 7.8% this week. Australia's S&P/ASX 200 closed 1.2% lower at 3,489.90. Sydney-listed coal miner Felix Resources saw its shares soar 36.6% after the firm said it has received expressions of interest from a foreign party. The Australian Financial Review reported Friday the miner is holding talks with China's Yanzhou Coal Mining, as part of a potential takeover that could fetch $1.9 billion. Hong Kong-listed shares of Yanzhou Coal were suspended from trading Friday. Shares of Nippon Oil jumped 11.2%, extending gains from the previous session after announcing it had reached an agreement to merge with Nippon Mining Holdings . Decliners in Sydney included Fairfax Media after the firm announced Friday its CEO David Kirk had resigned. Shares in the newspaper group fell 1.7%. Among other indexes, South Korea's Kospi added 2.21% at 1,028.13, Taiwan's Taiex fell 0.7% to 4,225.07, Singapore's Straits Times Index added 0.9 % to 1,659.17 and New Zealand NZSX-50 eased 0.9% to 1,206.72. Shares in Indonesia and India were both lower. The JSX Composite fell 0.3% at 1,202.34 and the Bombay Sensex was down 3.2% at 8,938.08. Malaysia's KLSE Composite fell 1%. January crude-oil futures were up as much as 24 cents at $43.91 a barrel. Crude oil futures ended at a near four-year low of $43.67 a barrel on Nymex Thursday, tumbling 6.7% to mark its fifth straight losing session. Metals PRECIOUS-Gold inches higher ahead of U.S. payrolls data LONDON - Gold inched higher to hold just below $770 an ounce, supported by slightly firmer oil prices, as traders took to the sidelines ahead of this afternoon's key U.S. jobs data. Spot gold was quoted at $769.60/771.60 an ounce at 1007 GMT, little changed from $765.70 an ounce late in New York on Thursday. The foreign exchange markets, which usually have a significant impact on gold, were quiet as traders awaited direction from the U.S. non-farm payrolls data, due at 1330 GMT. "This is the most important figure to be released and will have a significant impact on those markets which drive the gold price," said Dresdner Kleinwort consultant Peter Fertig. A stronger-than-expected fall in the payrolls number "would definitely be regarded by the markets as a sign of a deeper and more prolonged recession in the United States," Fertig said, adding that it could knock stock markets and crude oil prices lower. Economists polled by Reuters said they expect U.S. payrolls to fall by more than 300,000 in November as weakening consumer and business demand prompted companies to cut jobs. The dollar, a key external driver of gold, was steady ahead of the announcement. Gold is often bought as a hedge against weakness in the U.S. currency, and trades in the opposite direction to it. A larger-than-expected number could pressure the dollar as it would signify more trouble for the U.S. economy, but if risk aversion is boosted, the U.S. currency could rise as investors turn to dollars as a haven from risk. Oil, however, lent some support to gold as it managed to inch up above $44 a barrel. However, sharp falls in the crude price this week have sent oil down to near a four-year low. Firmer oil prices can boost interest in commodities as an asset class, according to analysts. However, gains in gold are being limited by expectations inflation will fall after sharp drops in the price of many raw materials such as crude oil and industrial metals. Oil prices have shed more than $100 a barrel since they hit an all-time high of $147.27 an barrel in July, while prices of copper, aluminium and tin have also declined sharply. "(Gold) prices (are) slipping due to near term deflationary pressures as commodities slip," said John Meyer, an analyst at Fairfax. "However, the yellow metal has been outperforming other commodities and equities." Among other precious metals, silver trod water along with gold, and was quoted at $9.47/9.55 an ounce against $9.46 late in New York on Thursday. Platinum and palladium inched higher but remained rangebound as they consolidated after sharp price falls earlier in the week. Both metals have come under pressure from a spate of bad news from the global auto market. Chinese official industry data showed China's passenger car sales fell more than 10 percent in November, a source told Reuters. The China Association of Automobile Manufacturers are due to release the data later on Friday. Meanwhile BMW said its global sales fell by a quarter in November. Spot platinum was quoted at $800/815 an ounce, up from $786.50 an ounce late on Thursday. "The metal continues to look to technical signals for direction, and appears to be waiting for some sort of clue as to how the 'Big Three' U.S. auto makers will go forward from here," said Standard Bank analyst Leon Westgate in a note. Spot palladium was at $168.50/176.50 an ounce against $166.50. Labels: Forex Analysis, Forex Trend, Market Analysis, Market Trend, money trading, Moving Average, World Market |
posted by Matbank at 1:41 PM
