US & World Daily Markets Financial Briefing 06-07-2009

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Stocks showed a notable decline at the start of trading on Monday, with the major averages seeing some further downside after coming under pressure last week. The initial weakness reflects renewed concerns about the outlook for the economy.

With commodities prices moving sharply lower, resource stocks are turning in some of the worst performances in early trading. Oil service stocks are posting particularly steep losses, as the price of oil falls nearly $3 a barrel.

Most of the other major sectors have also moved to the downside, with transportation and telecom stocks posting notable losses. On the other hand, some real estate and electronic storage stocks are bucking the downtrend.

In the past few minutes, the major averages have moved well off their lows for the young session, although they currently remain firmly negative. The Dow is currently down 49.13 at 8,231.61, the Nasdaq is down 10.80 at 1,785.72 and the S&P 500 is down 5.46 at 890.96.

Commodities

Oil continues to fall

An increase in weekly gasoline supplies and a surprisingly big rise in US unemployment took oil prices more than $2 lower on Thursday.

US crude settled down $2.58 to $66.73 a barrel after Wednesday's decline of 58 cents to $69.31. Jitters about the much worse than expected jobs report sent oil traders for the door on Thursday on a thin day of trading ahead of the Independence Day holiday weekend.

NYMEX floor trading was closed on Friday in the US. In electronic trading US crude dropped by a further $1.22 late Friday to $65.51 a barrel while London Brent crude slid $1.35 to $65.30.

Gold futures fell Thursday as the dollar rose against major currencies following the disappointing jobs data.

A stronger dollar typically reduces the precious metal's appeal as an alternative investment.

Gold for August delivery fell $10.30 to settle at $931 an ounce on the Comex division of the New York Mercantile Exchange on Thursday, snapping the previous session's 1.5% rise.

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Asian markets ended in negative territory on Monday on concerns about growth following weaker than expected jobs report in the U.S, thus denting the hopes of recovery. Commodity prices also moved southward on demand concerns. Most of the traders across markets preferred to stay on the side lines ahead of the earnings season and preferred to wait for further cues before taking positions.

The U.S market was closed for holiday on Friday after drifting down sharply on Thursday following weak jobs report. On thursday, the Dow closed down by 223.32 points or 2.6% at 8,281, the Nasdaq fell by 49.20 points or 2.7% to 1,797, and the S&P 500 closed down 26.91 points or 2.9% at 896.

The Nikkei 225 Average opened sharply lower at 9,738 compared to its previous close of 9,816, and continued to drift in the negative territory on concerns about the global recovery. Softer metal and oil prices as well as thin volumes following wait-and-watch approach of the investors helped the index linger in the negative territory for the whole day. The index ended at 9,681 representing a loss of 135.20 points, or 1.38%. The broader Topix Index of all first section issues shed 8.20 points, or 0.89% percent, and closed at 912.

Banks and metal stocks dragged the indices lower. Among the banks, Mitsubishi UFJ slipped 0.67%, Mizuho Financial edged down 0.44%, Resona Holdings fell 0.44% and Sumitomo Mitsui lost 0.77%.

Among metal stocks, Pacific Metals Co., lost 5.19%, Nippon Light Metal Co., fell 3.81%, and Sumitomo Metal Mining declined 3.24%.

Shipping stocks ended weaker following drop in shipping rates. Mitsui O.S.K declined 4.38% , Nippon Yuesen fell 3.41% and Kawasaki Kisen lost 2.34%.

Retail stocks also ended weaker on demand concerns. Seven & I dropped 1.83%, Fast Retailing Co., fell 3.06% and department store operator Isetan Mitsukoshi Holdings Ltd. Edged down 0.95%.

Oil and trading companies also ended weaker. Inpex declined 2.99%, Nippon Oil Corp fell 2.82% and Showa Shell lost 3.13%.

In Australia, All Ordinaries Index opened lower at 3,819 compared to previous close at 3,827 and drifted sharply lower, following soft commodity prices and concerns about global recovery. The index continued to remain in the negative territory for the whole session and ended the day in the negative territory with a loss of 42.40 points, or 1.11%, at 3,784. The benchmark S&P/ASX 200 Index followed a similar trend and ended at 3,784, representing a loss of 44.50 points, or 1.16%.

On the economic front, a monthly report from TD Securities and the Melbourne Institute revealed that a gauge measuring inflation in the country increased 0.4% in June compared to May. According to the report, inflation was up 1.4% on an annual basis for June. A separate report released by the ANZ Bank revealed that the total number of job advertisements fell 6.7% in June compared to the previous month.

Financial stocks also ended lower on growth concerns. ANZ Bank lost 1.05%, Commonwealth Bank Australia edged down 0.38%, National Australia Bank slipped 0.09% and Westpac Banking fell 1.24%.

Among retailers, David Jones fell 2.46% and Harvey Norman lost 4.29%. However, Woolworths managed to end in the green with a gain of 0.77%.

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In Hong Kong, the Hang Seng Index opened sharply lower at 18,020 compared to its previous close at 18,203, mirroring the weak sentiment across the region and lower commodity prices. following losses in Wall Street on weak employment data. The index managed to cross the unchanged line in the morning session led by china-related stocks on optimism about growth in mainland China. However, the gains could not be sustained in lackluster trading as traders preferred to take profits and stay in the sidelines ahead of the earnings season. The index finally ended the session in the negative territory with a loss of 223.99 points, or 1.23%, at 17,979.

Resource stocks ended in the negative territory on softer commodity prices. Coal-miner China Shenhua declined 2.07%, Aluminum Corp of China, or CHALCO, lost 1.52%, PetroChina fell 2.23%, and CNOOC shed 2.24%.

Property stocks showed mixed response. While Hang Lung Property edged up 0.63% and Sino Land gained 1.68%, Wharf Holdings lost 1.79%, SHK Properties fell 1.36% and New World Development shed 2.54%.

Among financial stocks, HSBC Holdings lost 1.09%, Hang Seng Bank edged down 0.09%, China Construction Bank lost 2.52%, Bank of China declined 2.43% and Industrial and Commercial Bank of China fell 1.69%; However, BOC Hong Kong bucked the trend and 1.69%. .

In South Korea, the benchmark KOSPI Index ended in the positive territory defying weak global cues and growth concerns. The market opened nearly flat at 1,419 compared to previous close at 1,420 on weak cues. However, the index moved above the unchanged and managed to stay in the positive territory for the session amid volatile trading. Technology related stocks led the gains amid thin volumes. The index finally ended with a gain of 8.90 points or 0.63% at 1,429

Memory-chipmaker Samsung Electronics led the gains after reported a better-than-expected earnings estimate for the second quarter. The stock surged 5.49%. Electronics giant LG Electronics gained 3.8% and LG Display added 0.89%.

Among automakers, Hyundai Motor advanced 1.1%. Kia Motor surged 3.89% after reporting strong sales for last month.

Financial stocks ended weaker on concerns about recovery. KB Financial Group lost 2.06%, and Hana Financial Group fell 1.83%. However, Shinhan Financial Group remained unchanged at previous close.

In India, the stock market ended sharply lower on the budget day after market's expectations for more sops and reliefs did not find the expected place in the budget released by the Finance Minister, Pranab Mukerjee.

The BSE Sensex finished at 14,043, down 869.66 points, or 5.83% from its previous close and the Nifty Index lost 258.55 points, or 5.84% points, to close at 4,164.

Among other major markets in the region, China's Shanghai Composite Index gained 36.30 points, or 1.18% to close at 3125. However, Indonesia's Jakarta Composite Index lost 1.94% or 40.29 points to close at 2035, Taiwan's Weighted Index fell 15.49 points, or 0.23%, to close at 6,650, and the Strait Times Index in Singapore lost 33.66 points, or 1.46% to close at 2,266.

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Banks, energy stocks fall

Banks are still among the worst performers in Europe in midday trade, while falling crude prices are weighing on energy stocks.

French banking giant Societe Generale said it expects its second-quarter net income to be 'slightly positive.'

The Paris-based group, which lost €278m in the first quarter, said solid operational performances in corporate and investment banking will absorb the 'significant' negative impact of the substantial tightening of credit spreads stemming from an improving market environment and reduced aversion to risk in mid-March.

SocGen said revenue will be hit by €1.3bn loss from CDS used to hedge its loan portfolio and from debt instruments issued by the group and booked at fair value.

The group was leading the fallers in Paris early on and is still among the worst performers on the CAC. Shares in the bank are currently down more than 3%.

Swiss bank UBS is reportedly planning a management shake up at its US brokerage after deciding not to sell the business.

The Financial Times is quoting people familiar with the matter as saying that UBS's chief executive Oswald Grübel has decided to keep the business for the time being.

Grübel, former chief executive of Credit Suisse, is now looking for a new leader for the unit, according to the paper, though it is not clear whether he wants to replace Marten Hoekstra, the current head of UBS's wealth management operations in the Americas.

Elsewhere in the sector, Credit Agricole, Commerzbank and BNP Paribas are also among the main fallers.

Energy shares, including Total and Eni, are lower after crude oil prices dropped below $64 a barrel.

Across the markets, the German DAX is down 85 points at 4,622 with the French CAC falling 47 points to 3,071. The Swiss market has dropped 30 points to 5,307.

Porsche fell after UBS cut its stance on the German sports car maker to "sell" from "neutral."


CAC 40 - Risers
Air France-KLM (AF) € 8.84 +2.23%
EADS (EAD) € 11.78 +2.17%
Pernod Ricard (RI) € 45.20 +0.69%
Essilor International (EI) € 35.04 +0.39%
Sanofi-Aventis (SAN) € 42.98 +0.39%

CAC 40 - Fallers
ArcelorMittal SA (MT) € 21.53 -4.59%
Dexia (DEXB) € 5.21 -4.05%
Peugeot (UG) € 17.19 -3.59%
Lafarge (LG) € 42.70 -3.42%
Schneider Electric (SU) € 52.04 -3.27%
Societe Generale (GLE) € 36.71 -3.17%
Credit Agricole (ACA) € 8.83 -3.01%
Saint Gobain (SGO) € 22.85 -2.97%
Alcatel-Lucent (ALU) € 1.62 -2.77%
Vallourec (VK) € 82.61 -2.69%

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Swiss Franc Drops To 2-day Low Against Euro

In early European deals on Friday, the Swiss franc slipped to a 2-day low against the euro as Switzerland's consumer prices continued to decline in June.

Against the currencies of U.S., U.K. and Japan, the franc pared its recent gains during this time.

Switzerland's Federal Statistical Office said the consumer price index or CPI dropped 1% year-on-year in June, the same as in May. Meanwhile, the CPI was forecast to fall 1.1%. A year ago, the rate of inflation was 2.9% in June.

On a monthly basis, consumer prices rose 0.2% in June, unchanged from May and defying economists' expectations for no growth.

At 5:50 am ET Friday, the franc touched a 2-day low of 1.5252 against the euro, compared to a 9-day high of 1.5175 hit at 5:20 pm ET Thursday. On the downside, 1.529 is seen as the next target level for the Swiss currency. At yesterday close, the euro-franc pair was quoted at 1.5189.

The Eurostat said today that retail sales in the Euro zone declined 3.3% year-on-year in May, faster than a revised 2.5% drop in the preceding month. Economists expected sales to fall 2.7%.

Month-on-month, retail sales were down 0.4% in May, reversing a 0.1% rise in the preceding month. Economists expected a drop of 0.1%.
 
The Swiss franc declined after reaching highs of 88.77 against the yen and 1.0833 against the dollar at 2:55 am ET Friday. Currently, the franc is trading at 1.0893 against the dollar and 88.10 against the yen, compared to yesterday's close of 1.0849 and 88.47, respectively. If the Swiss currency slides further, it may likely target 87.5 against the yen and 1.102 against the dollar.

The Swiss franc jumped to 1.7734 against the pound before losing ground at 4:00 am ET Friday. At present, the pound-franc pair is trading near yesterday's close of 1.7785. The next downside target level for the franc is seen at 1.785.

Data released by the Bank of England showed today that the housing equity withdrawal was minus GBP8.1 billion in the first quarter of 2009.

"The negative figure implies that individuals injected a net total of GBP8.1 billion into housing equity in the first quarter," the central bank said in a statement.

Economists were looking for a figure of minus GBP9 billion. The fourth quarter figure was revised to a minus GBP7.8 billion from a minus GBP8 billion initially estimated.

Financial markets are closed in the U.S. today in observance of the 'Independence Day'.

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