Tuesday, January 20, 2009
Jan-20 World Daily Markets Briefing
| by: ADVFN Newsdesk US Stocks at a Glance US Stocks Open Lower On Bank Worries Stocks slip at the opening as enthusiasm over the inauguration of President-elect Obama is tempered by worries about the financial sector on the heels of a beating taken by European banking stocks after the U.K. government announces a second bailout plan. Reported Earlier: US Stock Futures Drop On Bank Worries NEW YORK -- U.S. stock futures slipped Tuesday after a three-day break as enthusiasm over the inauguration of President-elect Obama was tempered by worries about the health of the financial sector after a beating taken by European banking stocks. S&P 500 futures fell 12.6 points to 836 and Nasdaq 100 futures dropped 14.8 points to 1182.80. Dow industrial futures lost 88 points. While U.S. markets were closed on Monday, banking sectors in Europe plunged as the British government announced a second bailout plan and the Royal Bank of Scotland Group PLC warned that it may lose about $42 billion in 2008 as it writes down loans, risky assets, and its acquisition of ABN Amro Holding N.V. The U.K. government also upped its stake in RBS to about 70% from 58%. U.S-listed RBS shares plunged by 66% in pre-open trade. "The problem with governments increasing their stakes in selected names is that the market then speculates that the barriers to further nationalization are lowered," said Jim Reid, a strategist at Deutsche Bank AG. Worries about the U.K. government's exposure to the nation's troubled banking sector sent the British pound to historic lows versus the U.S. dollar and Japanese yen on Tuesday, analysts said. The pound traded below the $1.40 level for the first time since 2001. The bank worries weren't limited to Europe, with Regions Financial reporting a $6.2 billion loss and State Street Corp. reporting a profit drop of over 70%. Bank of America Corp. and JPMorgan Chase & Co. also traded sharply lower. Nouriel Roubini, a New York University economist, was quoted by Bloomberg News as saying that U.S. credit losses may reach $3.6 trillion. Over the weekend, Obama's incoming economic adviser, Larry Summers, said the second half of a $700 billion bailout fund will come with more strings attached. "It is apparent that more steps are needed, and the trade-off will be that the administration will expect greater willingness of those financial institutions to lend," said Cormac Weldon, head of U.S. equities at U.K. fund manager Threadneedle. Also on the earnings front, Johnson & Johnson's 2009 guidance came in below Street estimates while International Business Machines Corp. results are due after the close. J&J shares slipped 1.5%. The larger focus on Tuesday may come from Washington, D.C., as Obama delivers his inaugural address. "President-elect Obama's inauguration speech is expected to be long on hope but short on specifics," said economists from UBS AG. Oil futures meanwhile slumped, losing over $2 a barrel. Three-month U.S. dollar LIBOR fell to 1.12% from 1.13%. Asian stocks ended lower on Tuesday, also paced by a retreat in the banking sector. The Nikkei 225 slumped 2.3% and the Hang Seng lost 1.3%. Europe stocks couldn't hold early gains, with banks losing ground for a second day. On Friday, U.S. stocks closed with gains heading into the three-day weekend. The Dow Jones Industrial Average rose 68 points, the S&P 500 added 6 points and the Nasdaq Composite rose 17 points. Bank of America is expected to cut several thousand employees in its capital markets businesses, starting this week, according to executives familiar with the matter, The Financial Times reported in its Monday editions. Shares fell 11% to $6.36. State Street's fourth-quarter net income slid 71% on steps the asset manager took to shore up some funds and restructuring charges, as flat results are expected for 2009. Results beat earning estimates. Shares dropped 35% to $23.61. Regions Financial Corp. swung to a fourth-quarter loss as it took a $6 billion goodwill write-down and sharply raised loan-loss provisions, although non-performing assets fell slightly amid the continuing disposal of problem assets. Results missed analysts' estimates. Shares fell 13% to $5.23. Swiss maker of computer peripherals Logitech International SA (LOGI) said Tuesday its fiscal third quarter net profit fell 70% from a year earlier on a sharp drop in demand and as the previous year figure was boosted by an exceptional gain. Shares fell 14% to $11.33 pre-market. ConocoPhillips approved a lower 2009 capital spending plan, saying it would cut about 4% of its work force and book goodwill impairment charges of $25.4 billion amid falling commodity prices and a drop in the worldwide economic markets. Shares fell 3.8% to $47.50. Watch List Biogen Idec Inc. reported there were no new cases of a rare brain infection in users of its multiple sclerosis drug Tysabri in a weekly Web-based update Friday. Fastenal Co. reported a 11% rise in fourth-quarter net income amid higher margins and sales at the construction-equipment retailer, but a marked slowdown occurred in November and December. Thailand's TMB Bank PCL, 30%-owned by Dutch financial services company ING Groep N.V. Tuesday said it swung to a 2008 net profit of THB423.7 million ($12.1 million) from a loss of THB43.68 billion the previous year. Parker Hannifin Corp. posted a 27% decline in fiscal second-quarter net income amid a drop in orders and weak margins as the hydraulic-equipment maker again slashed its full-year earnings target. Results beat estimates. TD Ameritrade Holding Corp.'s fiscal first-quarter net income fell 23% as return on equity slumped and the online broker cut its fiscal-year outlook. Revenue came in below low analysts' expectations. Volt Information Sciences Inc. said Friday it will delay filing its annual report and expects to report a fiscal fourth-quarter net income from continuing operations of about $12.3 million, or 57 cents a share, compared with net income of $19.3 million, or 86 cents a share, a year earlier. Speech and digital-imaging software maker Nuance Communication Inc. extended its previous offer to acquire the Canadian software company Zi Corp. to Jan. 30. The tender offer was previously scheduled to expire at 5 p.m. EST Friday. Forex Pound Nearly In Freefall, Dollar's Obama Bounce LONDON -- The pound is nearly in freefall in Europe Tuesday as concern over the U.K. banking system continues to eat away at investor confidence. The dollar, meanwhile, is mostly higher, lifted by apparent optimism over the inauguration of President-elect Barack Obama later in the day. The withdrawal from U.K. assets sent gilt prices tumbling as Jim Rogers, chairman of the Singapore-based Rogers Holdings, warned that the "U.K. is finished." Rogers was a cofounder of the Quantum Fund with George Soros. The decline in the pound has taken it down to a new record low under Y127.00. Sterling has also fallen to $1.3940, its lowest level against the dollar since July 2001. Negative sentiment has mounted over the last day or so as the U.K. Treasury's latest bailout of the country's banks, announced Monday as the Royal Bank of Scotland warned of a possible GBP28 billion loss in 2008, has failed to convince investors that the worst is over for the U.K. economy. Analysts said that investors were selling gilts not only because of the fall in the pound but also because gilt supply is set to explode as the government seeks to fund its various economic rescue packages. As investors pored over the details of the U.K. bailout and watched the RBS share price collapse by nearly 70%, risk appetite quickly declined. Although the U.S. was closed for a holiday Monday, Dow futures were marked lower and the Nikkei Index fell 2.3% on general concerns over the global economy. High-yielders were generally depressed with even the dollar starting the European day lower against the yen. However, as European trading got underway, some optimism crept in as investors started to bet on the so-called "Obama bounce" -- a general hope that the new president will inject fresh vigor into the U.S. economy. This helped to turn the dollar higher against most other major currencies, but only accelerated the pound's decline against the U.S. currency. The euro was also a major loser. The single currency had already been under pressure because of Monday's downgrade by S&P of Spain's sovereign debt. Poor European Union Commission growth forecasts and expectations of a further deterioration in German consumer confidence later in the day are all adding to the euro's woes. By 0945 GMT, the pound had fallen to $1.3984 from $1.4502 late Monday in New York, according to EBS. The dollar rose to Y90.92 from Y90.61, while the euro fell to $1.2948 from $1.3125. The single currency also fell to Y117.80 from Y119.01 while the dollar rose to CHF1.1447 from CHF1.1311. Europe Shares European Shares Mixed; Banks Slide Again Most banks dropped again in Europe on Tuesday, weighing on the broader market, as investors continued to worry about the prospect of write-downs and government stakes. The pan-European Dow Jones Stoxx 600 index declined 0.8% to 188.25 as the banking sector dropped 2.6%. Shares of Credit Suisse fell 5.3%, and shares of Lloyds Banking Group (LYG) slumped 22.3%. "The sector started to rally this morning, but that ended as everyone's extremely nervous," said Philippe Gijsels, strategist at Fortis. "Overall, it's clear that we're not at the end of the write-downs. It's a sector problem and they will have to continue to raise capital which is extremely difficult in this market or governments will have to step in," said Philippe Gijsels, strategist at Fortis. Royal Bank of Scotland, which dropped more than 65% on Monday after the U.K. government said that it would take a larger stake in the lender and the bank said it would report a huge loss, rose 12.9%. "What the market was fearing especially was that RBS would be totally nationalized which would wipe out the shareholders," noted Gijsels. BNP Paribas shares dropped 7.9%. Societe Generale slashed its rating on BNP Paribas to sell from buy, saying it believes there's a high probability the group will have to make a capital increase given the bad market conditions and the likely difficulty of selling assets. "As long as you have this bad news for the financial sector, it will be very hard for the market to have a decent rally," added Gijsels. Still, national markets weren't performing as badly as the Stoxx 600 index, helped by gains from telecoms such as Vodafone Group, up 2.5%. Overall, the French CAC-40 index declined 0.1% to 2,985.28, the German DAX 30 index rose 0.1% to 4,318.68 and the U.K. FTSE 100 index climbed 0.6% to 4,132.80. Asian markets traded lower on Tuesday as did U.S. stock futures. Meanwhile, U.S. trading resumes Tuesday after a holiday weekend. Barack Obama takes power as the 44th U.S. president on Tuesday and his inauguration speech is expected to lay out an agenda for change in troubled times. "We already have details of the $825 billion fiscal stimulus package. On some estimates the package will raise GDP by around 3% to 4% over the next couple of years and save or create around 3.5 million jobs. Success will crucially depend on the bank lending channel," noted economists at UBS. European companies detailing on Tuesday how they are coping with the economic downturn included Burberry Group , up 10.3%. Revenue in the three months to Dec. 31 rose 30%, boosted by currency moves. Merrill Lynch noted that the revenue came in 14% above expectations. Burberry is aiming cut costs further and plans to restructure its Spanish operations and consolidate U.K. manufacturing, with the potential loss of up to 540 jobs. German supermarket operator Metro rose 5.8% after it also launched a cost-cutting and restructuring program, which it said has the potential to improve its profit by 1.5 billion euros ($1.9 billion) through 2012. Alstom shares jumped 6% in Paris as the French power systems and transport firm said that third-quarter sales totaled 4.6 billion euros, up 11% compared to the same point a year ago. Orders booked in the quarter totaled 6.1 billion euros, a level Alstom termed "very satisfactory." "All the focus is on orders and here the number was well ahead of consensus," noted Merrill Lynch analysts. However, shares in Air France-KLM dropped 8.8%. The company said it will record an operating loss in the third quarter of fiscal 2009 due to a slight weakening in passenger unit revenue and a strong decline in cargo revenue. For fiscal 2009, the airline said operating income should remain positive, but the level of profit will depend on how the economic situation develops in the coming weeks. Logitech International shares slumped 10.5% as the Swiss-American computer mouse maker reported a 70% profit fall in its fiscal third quarter. Asia Markets Asian Shares End Lower; Fincl Sector Woes Take Center Stage SINGAPORE - Shares in HSBC Holdings and other banks slumped across Asia Tuesday, leading to red ink around the region. Techs were among big decliners in Tokyo as the yen gained ground against the euro, making Japanese exports less competitive on global markets. Only China bucked the overall negative trend, with stocks on the mainland ending in positive territory. Analysts said the declines in Asia were largely a reaction to the U.K. government's latest steps to rescue its banking system and growing concerns there will be no quick fixes to the most serious banking and credit crisis in a generation. "The plan highlighted the depth of problems of the global banking sector despite the write-downs that have already occurred. The focus is now on the remaining write-downs, which will probably be of the same magnitude that we have seen so far," said Dariusz Kowalczyk, chief investment strategist with SJS Seymour in Hong Kong. Japan's Nikkei 225 finished 191.06 points lower, or 2.3%, at 8,065.79. South Korea's Kospi Composite was off 2.1% at 1,126.81, Taiwan's main index ended 2.8% lower at 2,242.61, and Shanghai's Composite index was up 0.4% to 1,994.11. Hong Kong's Hang Seng Index eased 3.3% at 12,959.77, and Australia's benchmark S&P/ASX 200 index ended down 3.1% at 3476.6. Singapore's Straits Times index ended 1.8% lower, Malaysia's Composite index fell 1.1%, Philippine shares were down 1.3% and Thailand's main index was down 1.1%. Indonesian shares were down 0.5%. "The selloff in financials shows it is premature to call time on sector-based risk aversion," said analysts at UBS. "There are plenty of factors arising from the banking sector and the economy globally that (may) sharply limit or force an unwind in risk-seeking flows." There was some stop-loss selling in Japan and elsewhere; risk aversion was also hitting currencies with the euro and British pound falling against the U.S. dollar, hurt by dismal euro-zone economic data and weakness in the U.K. banking sector. Some analysts said regional Asian stocks were likely to firm up in the coming days as Mr. Obama's economic team takes office. "Markets will trade on hope the new administration will bring out fresh solutions that should help avert a deepening of the crisis," said SJS Seymour's Kowalczyk. But others warned the euphoria attached to the new administration and a coming fiscal stimulus package was overdone. One of Mr. Obama's biggest initial tasks could be managing expectations, with his administration unlikely to be able to quickly improve the consumer mood. The same holds true elsewhere: In Australia, Harvey Norman chairman Gerry Harvey told local radio the government's stimulus package had helped December sales but "I've looked at my first couple of weeks (of January sales and) they're not good." Singaporean shares were lower even as investors anticipated large-scale spending in the government's budget Thursday. "The bullish impact of budget goodies could dissipate within days amid renewed bearish developments in the U.S., on top of a slew of likely earnings shocks during the reporting period," said AmFraser Securities head of retail research Najeeb Jarhom. Among banks in Sydney, ANZ Bank was down 5.1% with Commonwealth Bank of Australia falling 3.9 %. Credit Suisse lowered its recommendation on banking stocks in Australia to underweight. In Japan, Mizuho Financial Group fell 6.2% with Sumitomo Mitsui Financial Group down 3.8%, while Korea's KB Financial was down 5.3% and Cathay Financial fell 4%. Techs dropped in Tokyo, Seoul, and Taiwan, with Samsung Electronics off 2.3%, Sony down 2.6% and Taiwan Semiconductor Manufacturing off 3.4%. Shares of Toyota Motor Corp. shrugged off the gloom, rising 2.3%. Late afternoon the Nagoya-based automaker said worldwide sales of Toyota vehicles fell 5% in 2008 to just shy of 8 million units and announced a management shuffle that will see founding family member Akio Toyoda appointed to helm the company, pending a shareholder vote in June. Hong Kong heavyweight HSBC was a large drag on the Hang Seng for another day, ending down 7.7%, its seventh-straight session of losses. The bank said in a statement to the local stock market Tuesday it was not seeking capital support from the British government. New Zealand's market ended 1.4% lower as Contact Energy closed out the session down 9.4% after warning of lower profits for the current fiscal year. Origin Energy, which owns 51.4% of Contact, fell 5.3% in Sydney. In Hong Kong, shares of Foxconn International Holdings closed 7.3% lower after the maker of cellular handsets for companies such as Nokia Corp warned its net profit for 2008 would show a "significant decline" from a year earlier. Shares of TPV Technology fell 10.5% after the flat-screen monitor maker also issued a profit warning. Metals Gold Down, Tracking Weaker Euro LONDON -- Spot gold was lower in European trading Tuesday, weighed by euro weakness against the dollar. At 0921 GMT spot gold was trading at $827.67 a troy ounce, down 1% from Monday's close. Spot silver was at $10.97/oz, down 1.4%. Spot platinum was at $938.50/oz, down 1.1%. Spot palladium was at $179.50/oz, down 1.4%. European stocks opened cautiously higher despite expectations for a lower opening. The dollar was stronger against the euro and crude oil was trading lower. Barack Obama will be inaugurated Tuesday, and that could give the U.S. markets a temporary boost, traders said. Spot gold and the precious metals complex as a whole were lower Tuesday, tracking the euro lower against the dollar, said a London-based trader. He said the short-covering rally at the end of last week was showing no signs of follow-through so traders decided to sell. Gold prices could be pressured further if the euro is weakened by poor eurozone data and lower equities in Europe, said Standard Bank analyst Walter de Wet. He also said the dollar could find support with Barack Obama's inauguration Tuesday, which would push gold prices down. Precious metals, and particularly gold, will continue to trade as a reflection of the currency basket, Goldman Sachs' Jeff Currie said. A basket of the euro, yen, Australian, Canadian and U.S. dollar and the rupee is a "very good reference of where the gold price goes," he said. Unless there is a "radical" change in the financial markets the precious metal will remain connected to currency moves, Currie said. Labels: Forex Analysis, Forex Trend, Market Analysis, Market Trend, money trading, World Market |
posted by Matbank at 11:24 PM
