Wednesday, January 28, 2009
Jan-28 World Daily Markets Briefing
| by: ADVFN Newsdesk US Stocks at a Glance US Stocks Open Higher As Banks Rally Stocks are opening higher led by bank stocks reacting to a report the Obama administration is near a deal to buy illiquid or bad assets from banking firms. Bank of America is up 20%, Citigroup up 21% and Wells Fargo jumps 19%. The DJIA is up more than 100 points. Reported Earlier: US Futures Higher, Driven By Banks U.S. stock futures pointed to a strong start for Wall Street on Wednesday led by financials after a report the Obama administration is nearing a deal to buy illiquid or bad assets from banking firms, while markets were also focused on a Federal Reserve meeting. Financial stocks were up across Europe as well as a result. S&P 500 futures (SPY) rose 22 points to 861.20 and Nasdaq 100 futures (QQQQ) added 28.25 points to 1,214.00. Dow industrial futures (DIA) added 149 points. U.S. markets closed higher on Tuesday, wading through a heavy schedule of earnings results and taking cheer from a surprisingly positive report on the housing market. The Dow Jones Industrial Average rose 58.7 points, the S&P 500 rose 9.14 points and the Nasdaq Composite added 15.44 points. But banks took the stage after the close of trade Tuesday, CNBC reported that Obama was nearing a "bad bank" plan and Bloomberg News reported on Wednesday that the Federal Deposit Insurance Corp. may manage the plan. Some estimates are that the government could take on $1 trillion of bad assets. Traders sold the dollar and the yen on reports of the plan, and also left the safe haven of gold, where futures tumbled $13 to $886.50 an ounce. Citigroup (C) surged 21% in pre-open deals and Bank of America (BAC) rose 19%. Wells Fargo (WFC), which reported a $2.55 billion quarterly loss and said Wachovia's quarterly loss was over $11 billion, rose more than 15% in pre-market trade. Wells Fargo is maintaining a 34 cents a share dividend. Barclays (BCS) was one of several European lenders to advance, with the U.K. bank rallying 21% in pre-market trade. The pan-European Dow Jones Stoxx 600 advanced 2.1%. Asia shares were trading higher with indexes in South Korea and Singapore posting catch-up gains after a long holiday break. Another focus for U.S. markets Wednesday will be the U.S. Federal Reserve meeting, with a statement due at 2:15 p.m. Eastern. Some economists are calling for the Fed to push the Federal funds rate -- already effectively at zero -- deeper into negative territory. They want the Fed to demonstrate it's pulling out all the stops on the economy. "The Fed's job is going to be to convince markets and the broader public that they can still support the economy .. even with the funds rate at zero," said Al Broaddus, the former president of the Richmond Fed, in a television interview. Elsewhere, General Electric (GE) was flat as Moody's Investors Service moved a step closer to downgrading its Triple-A credit rating, which is vital for the group's financial arm. Of high-profile earnings, Boeing (BA) swung to a $56 million loss after a strike, while AT&T's (T) profit dropped 23% to edge just under analyst estimates. Legg Mason (LM) shares dropped 20% after reporting a $1.4 billion loss. At 10:30 a.m. Eastern, weekly energy inventories will be released. Crude-oil futures slipped 20 cents a barrel. Among the companies expected to see active trading in Wednesday's session are Yahoo Inc. (YHOO), Sun Microsystems Inc. (JAVA) and Wells Fargo & Co. (WFC). Yahoo rose 6.1% to $12.03 in premarket trading after the Internet giant said cost cuts enabled it to post better-than-expected fourth-quarter pro-forma earnings on revenue in line with reduced Street expectations. The company's first-quarter revenue guidance of $1.53 billion to $1.73 billion was in line with analysts' estimates. Money-losing Sun Micro swung to a fiscal second-quarter loss on $222 million in restructuring charges and sagging sales. But Sun's numbers topped Wall Street's low expectations for the long-struggling company, and showed rapid growth in sales of some hardware and software products. Shares rose 8.8% to $4.34 premarket. Wells Fargo & Co. (WFC), which reported a $2.55 billion quarterly loss and said Wachovia's quarterly loss was over $11 billion, rose 21% to $19.55 in premarket trading. The bank is maintaining its 34-cent dividend. Legg Mason Inc. (LM) swung to a fiscal third-quarter net loss on more than $2.3 billion in charges as the money manager reduced its exposure to structured investment vehicles and acted to support its money market funds. The company also announced plans for a "major reorganization" of its U.S. mutual fund portfolio, saying it will examine liquidating certain products. Shares dropped 16% to $16.25. Moody's Investors Service said it was reviewing for possible downgrade the coveted long-term AAA credit rating on General Electric Co. (GE) after the conglomerate's fourth-quarter loss on concerns about the strength of GE Capital. GE responded, saying it hopes to work with Moody's to maintain its rating and reiterating that it has adequate liquidity and is working to strengthen it. Shares fell after-hours but gained 1.5% to $13.25 in premarket trading. E*Trade Financial Corp.'s (ETFC) fourth-quarter net loss narrowed as the lender and online broker shrank its bank-loan portfolio during the period, but delinquent loans and charge-offs continued to rise amid a drop in deposits. Shares jumped 13% to $1.24 premarket. Emulex Corp.'s (ELX) shares fell 3.2% to $6.76 in late trading after the company's second-quarter results came in below analysts' expectations. It also forecast third-quarter results below the Street's view. Gilead Sciences Inc. (GILD) reported its fourth-quarter net income leaped 42% as the biopharmaceutical company managed once again to top Wall Street's expectations. Its HIV treatments continued to show resistance to the downturn in broader spending. Shares fell 2.8% to $46.90 in late trading as the company's revenue came in slightly below analysts' estimates. Several banks were among the highest gainers in premarket trading amid reports President Obama was nearing a "bad bank" plan. Some estimates are that the government could take on $1 trillion of bad assets. Citigroup Inc. (C) and Bank of America Corp. (BAC) traded higher, up 23% to $4.35 and 19% to $7.73, respectively. U.K. banks Barclays PLC (BCS), Lloyds Banking Group PLC (LYG) and Royal Bank of Scotland Group PLC (RBS) jumped as some traders returned to the companies on the belief the U.K. government won't fully nationalize them. Barclays rose 21% to $6.28, Lloyds gained 41% to $5.40 and RBS soared 23% to $5.45 premarket. Watch List: DeVry Inc.'s (DV) fiscal second-quarter net income grew 20% on strong enrollment growth. Stryker Corp.'s (SYK) fourth-quarter net income rose 0.6% as the company faced headwinds from a slowdown in hospital spending and the stronger dollar. Norfolk Southern Corp. (NSC) posted a 13% increase in fourth-quarter net income as growth in coal-shipping revenue offset smaller losses in the intermodal and general merchandise segments. C.H. Robinson Worldwide Inc.'s (CHRW) fourth-quarter net income rose 4.3% on a jump in margins. Earnings grew in most of the company's segments. Altera Corp.'s (ALTR) fourth-quarter net income climbed 27% as cost-cutting more than offset a decline in sales, but the chip maker forecast first-quarter revenue below Wall Street's expectations. Forex FOREX-Yen, dollar in retreat as focus turns to Fed LONDON - The dollar and yen fell broadly on Wednesday, with rallying world share prices reflecting a cooling of risk aversion as investors turned their attention to the U.S. Federal Reserve's policy meeting later in the day. Positive earnings on Wall Street the previous day helped to drive up European and Asian shares, while a key U.S. Senate panel expanded a proposed economic stimulus package to about $887 billion on Tuesday. The euro found support as consumers in France and Germany showed surprising resilience to widespread business pain with confidence indicators bucking dire expectations. Although U.S. policymakers seem to have run out of interest rate ammunition with the benchmark rate already targeted at zero to 0.25 percent markets will be looking for any announcement of new policy measures, such as purchasing long-dated Treasuries. Such a move would lower borrowing rates, seen as vital to stabilising the recession-hit U.S. economy. "Everyone is quite rightly expecting something -- especially as the Treasury started talking about buying purchasing mortgage backed securities, which they already started doing, and evaluating the merits of buying Treasuries," said Chris Turner, head of FX research at ING in London. "Maybe they have to show more details -- they can't just say they are still evaluating," he added. Turner also said that markets would be expecting more from new Treasury Secretary Timothy Geithner on the proposed stimulus package and talk that the U.S. will set up a "bad bank" to mop up toxic assets. By 1210 GMT the euro was up 0.7 percent against the dollar at $1.3273 and 1.1 percent versus the yen at 118.52 yen. The dollar gained 0.3 percent to 89.25 yen. The pound bounced after its slump to a 23-year low last week, hitting a one-week high of around $1.4325. The euro lost 0.4 percent against sterling to 92.77 pence. Mirroring ebbing risk aversion, world stocks rose 0.9 percent on the day. Investors were taking heart from positive signs on U.S. President Barack Obama's planned stimulus plan to stem the recession in the U.S., with Democrats hopeful they have enough votes to push it through. But analysts warned that the global economic outlook remained bleak and that slightly more positive sentiment seen this week could quickly turn. "Global growth and demand are still the key and confidence is shot," IDEAGlobal strategist Maurice Pomery said in a note to clients. "The bigger themes remain and I still believe the dollar will do well and yen strength with continue". The International Monetary Fund (IMF) is due to release revised forecasts later in the day, and a Group of 20 finance official told Reuters on Monday the fund would slash its projection for 2009 global growth to 0.5 percent from 2.2 percent in its last economic outlook in November. The Swiss franc fell to its lowest level so far this year against the euro after the key KOF economic barometer on Switzerland fell to its lowest since the series began in 1991. The euro hit its highest since late December at 1.5156 Swiss francs. Meanwhile, data out of Australia overnight showed consumer prices fell by their biggest amount in a decade during the fourth quarter, justifying talk of another aggressive interest rate cut next week. The Australian dollar initially dipped after the data, but the higher-yielding currency later recovered, helped by the pick-up in equities. It was last trading up 1 percent at $0.6691 versus the U.S. dollar. The New Zealand dollar fell, however, ahead of a Reserve Bank of New Zealand rate decision overnight, where analysts expect a large rate cut, possibly of 100 basis points, from the current level of 5.00 percent. The currency was last quoted at $0.5298 versus its U.S. counterpart. Europe Shares European Shares Climb On Hopes For Banks European stocks advanced on Wednesday, with advancers far outnumbering decliners as banks grew on hopes that bad assets would be taken off the books of U.S. peers and that European governments wouldn't nationalize them. The pan-European Dow Jones Stoxx 600 climbed 1.6% to 191.22, with most sector indexes advancing. Banks were particularly strong, with Lloyds Banking Group (LYG) advancing 40%, Deutsche Bank (DB) adding 13.6% and BNP Paribas rising 11.9%. The gains came as Bloomberg News reported that the Federal Deposit Insurance Corp. may manage the so-called bad bank that the Obama administration is likely to set up. A bad bank would absorb the troubled assets from banks' balance sheets. It also comes as nationalization fears receded. "I think what we are seeing is a retreat of the nationalization fears which gripped markets last week, people are buying into what they see as opportunity," said Patrick Gordon, a market strategist at the U.K. brokerage Killik & Co. By region, the U.K. FTSE 100 rose 1.7% to 4,265.80, the German DAX 30 added 2.7% to 4,441.09 and the French CAC 40 climbed 2.4% to 3,023.96. SAP (SAP), which reported a 13% profit rise on in-line license sales growth, said it would cut 3,000 jobs. Shares of the Oracle rival climbed 6%. Microchip maker STMicroelectronics (STM), which reported a $366 million loss, said it would cut 4,500 jobs. Shares of the Texas Instruments rival slipped 0.1%. "It will be crucial for ST how fast the company will be able to reduce its high operating expenses following the recent acquisitions," analysts at UniCredit said in a note to clients. Novartis (NVS) shares fell 3.3% as the group's operating profit didn't rise as fast as analysts forecast. Novartis also pushed back its plan to submit a vaccine for approval. "What is concerning about Novartis growth is that it mostly stems from older products that will soon lose patent protection," said analysts from Swiss brokerage Sarasin. Tate & Lyle shares dropped 4.5% as results for the year to March 31 will be at the lower end of market expectations, which the company blamed on its U.S. ingredients arm and to a lesser extent on ethanol demand. Rio Tinto (RTP) dropped 6.2% as the miner admitted it may sell shares to help cut its debt by $10 billion. Asia Markets Asian Shares End Up;Chip Stks Lift Kospi 5.9%; Nikkei Higher Asia shares ended mostly higher Wednesday, with indexes in South Korea and Singapore posting large catch-up gains after an extended holiday break. Tokyo and Sydney were also higher, as semiconductor makers, banks and mining companies benefited from some improvement in investor sentiment. But the markets' gains trailed Tuesday's strong performance in Tokyo, Sydney and Mumbai. Trading volume in the region was light, with markets in China, Hong Kong and Taiwan still shut for the extended Chinese New Year break. Japan's Nikkei 225 ended 45.22 points higher, or 0.6%, to 8106.29, building on Tuesday's 4.9% rally. Turnover was moderate at just over 1.9 billion shares. South Korea's Composite index jumped 5.9% to 1157.98, while Singapore's Straits Times Index surged 4.8% to 1766.08. Wednesday's session was the first day of trade for both markets since Friday. Sydney's S&P/ASX 200 index closed up 51.5 points, or 1.5%, at 3495.50, easing back slightly after hitting a five-day high of 3505.9. New Zealand's NZX-50 was up 0.4% at 2747.90, India's Sensex added 2.8% to 9257.47 and Malaysia's Composite was up 0.8% at 879.63. Thailand turned higher to add 0.8%, but shares in the Philippines were down 0.6% while those in Indonesia fell 1.1%. Investors were awaiting the outcome later Wednesday in the U.S. of a meeting of the Federal Open Market Committee. Economists weren't expecting a change in interest rates, though the post-meeting statement would be closely watched for any comments on the U.S. economic outlook, or any indication the Fed would buy long-term Treasurys. For now, despite gains over the past two days, investors remained cautious and some analysts suggested caution. "We believe any gains will likely be capped given the rising global job cuts," said Westcomb research head Goh Mou Lih in Singapore. "We would advise investors to sell into strength." South Korean markets were led by chip stocks as investors there had their first chance to react to Friday's news that German memory chip maker Qimonda had filed for insolvency as the global slump in memory chip prices scuppered a bailout plan. Investors viewed this as likely to reduce oversupply and bid up shares in the sector, though analysts at UBS said "we believe stability in demand is a prerequisite to an industry recovery." Samsung Electronics gained 10.5% and Hynix Semiconductor had risen by its daily limit of 15%. In Japan, Tokyo Electron was up 7.9%. Shares of Advantest were 5% higher ahead of its earnings release. After the market close the maker of testing equipment for use in the semiconductor industry said it posted quarterly loss of $87.5 million. Financial stocks gained in Tokyo with hopes for U.S. action to support its banking sector and thus inject confidence into global markets. Sumitomo Mitsui Financial Group was up 1.2% and Mitsubishi UFJ Financial Group ended 1.2% higher. But Sumitomo Mitsui said after the close of trading that its net income in the April-to-December period tumbled 74% because of losses from equity holdings and higher credit costs. Also, Nomura Holdings fell 2.2 % after saying Tuesday it lost nearly $3.8 billion in the quarter ended December, partially due to losses from Icelandic investments and financier Bernard Madoff's alleged Ponzi scheme as well as weak financial markets. Car makers were largely flat in Tokyo after some recent gains, with Toyota Motor ending little changed at 2,980.00 yen. In Sydney, bank and mining shares were mostly higher. Westpac rose 5.2% and ANZ up 3.9%. Lihir Gold gained 4% after its fourth quarter report surpassed market expectations. But mining giant Rio Tinto fell 3.9% after it said it wouldn't rule out a potential equity issue to help pay down its debt. Property company Westfield Group shares fell 1% after it warned its 2009 earnings were likely to be flat at best amid deteriorating retail conditions in many of its key markets. And building products maker Boral dropped 15% after it slashed its annual earnings guidance 40%, pointing to worsening housing market conditions in the U.S., Australia and Asia. That weighed on its peers with James Hardie Industries down 6.6%. Australia stocks were also boosted by expectations the Reserve Bank of Australia will further loosen money policy next week after data Wednesday showed consumer prices dipped 0.3% in the fourth quarter, marking the first deflation two years. "It looks like they are headed for their first recession in 18 years. They are clearly feeling the drag from lower global export demand," said David Cohen, director of Asian forecasting at Action Economics in Singapore, referring to the Australian economy. In currency markets, the dollar remained weaker against the euro, with the shared currency fetching around $1.32, and moved further south against the yen to around 89.23 yen. Other Asian currencies were mostly higher. Spot gold was down $1.90 at $895.800 a troy ounce from New York levels. March Nymex crude oil futures gained 33 cents to $41.91 a barrel on the Globex platform, after sliding $4.15, or 9.1%, in New York. Labels: Forex Analysis, Forex Trend, Market Analysis, Market Trend, money trading |
posted by Matbank at 5:39 PM
