US & World Daily Markets Financial Briefing 06-10-2008

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US STOCKS-Wall St tumbles on credit, recession worry

NEW YORK - U.S. stocks tumbled on Monday  as investors feared that the widening fallout from the credit  crisis will push the economy into recession.
   
A slide of more than 3 percent in oil prices underscored  concerns about the toll of the credit crisis on the outlook for  global economic growth.
   
The Dow Jones industrial average was down 309.59  points, or 3.00 percent, at 10,015.79. The Standard & Poor's  500 Index was down 37.99 points, or 3.46 percent, at  1,061.24. The Nasdaq Composite Index was down 75.04  points, or 3.85 percent, at 1,872.35.
   
Earlier the Nasdaq fell by more than 4 percent.

1-Idex warns on profit, cites economy

NEW YORK - Idex Corp, a maker of pumps and fire suppression equipment, cut its third-quarter profit outlook on Monday, citing lower demand for its equipment used to dispense paint and coatings and the loss of a major retail contract, sending shares down 4 percent.
      
Idex expects to earn 52 cents to 53 cents per share in the third quarter, excluding restructuring expenses, down from its earlier range of 53 cents to 56 cents. It expects sales of about $365 million in the quarter.
      
Analysts on average were expecting profit of 55 cents per share on sales of $385 million, according to Reuters Estimates.
      
"Deteriorating economic conditions and lower capital spending in both Europe and North America resulted in a significant reduction in orders for capital equipment within retail paints and coatings," Chief Executive Larry Kingsley said in a statement.
      
In response, the Northbrook, Illinois-based company said it is cutting costs, but will continue to invest in markets such as health and science that stand a better chance of outperforming the economy.
      
It plans to report third-quarter results on Oct. 21.  Shares were down $1.19 to $27.65 in early trading on the New York Stock Exchange.

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FOREX-Battered euro sinks, yen soars as crisis bites

LONDON - The euro was pummelled against major currencies on Monday as concerns for European financial sector health increased without signs of a coordinated policy response, while the yen spiked as investors cut risk exposure.
      
Sentiment soured further against the euro after leaders of Europe's four biggest economies decided against a coordinated bailout plan at a weekend summit.
      
European banks have been hit hard by the fallout from a crisis that began in the United States when the housing market collapsed and bad mortgage debts multiplied.
      
With banking shares leading European share prices down a massive 5 percent on the day, Sweden became the latest country to act against the deepening crisis, with the government saying it would expand bank deposit guarantees and the central bank raising the amount of loans offered to banks.
      
It followed Germany's pledge on Sunday to guarantee private deposit accounts, a move which spurred similar action by Austria and Denmark. Ireland issued the first such guarantee last week, prompting criticism of a fragmented European Union response.
      
"Foreign investors had a love affair with the euro zone up until late last year. If you have an uncoordinated policy response it gives even less reason to invest in the euro zone and that is helping encourage these flows," said Chris Turner, head of FX strategy at ING in London.
      
"At the same time the scramble for dollar funding is still going on and that's giving the dollar a strong bid," he added.
      
At 1038 GMT, the euro was down 1.3 percent at $1.3583 after sliding to its lowest since late August 2007 at $1.3542 in early European trade -- leaving major technical support of $1.3667 far behind. Against the yen, the euro was down 3.5 percent at 139.82 yen -- a 2-1/2-year low according to Reuters data. The dollar was down 2 percent 103.10 yen.
      
European stock futures were down 5.2 percent at 1031.85, led by the banking sector, while the UK FTSE 100 index was down 5.4 percent at 4710.0.
 
The moves in Europe were in contrast to situation in the United States, where the government's $700 billion bank rescue plan was finally passed through congress on Friday. "The Paulson plan may be flawed, but it at least underlined that the drive for a solution to the problem is coming from the United States, and that is where the capital is likely to flow as a result, favouring the dollar,"

Daragh Maher, deputy head of global FX strategy at Calyon, said in a research note.  The dollar was also helped by strong dollar demand as global money markets remain frozen. "The market is in an extreme state of paralysis," said BTM-UFJ currency strategist Lee Hardman. "Global financial institutions are increasingly forced to procure dollar in the spot market and the dollar is rallying on the back of that."
      
More worries about the troubles plaguing the global financial system prompted heavy selling of riskier positions in carry trades and stocks. The Australian dollar plunged more than 5 percent against the yen at one point to a four-year low as investors were forced to dump long-standing carry trades favouring higher-yielding currencies.
     
The bellwether of emerging market stress however was Iceland, with the crown currency falling more than 7 percent to a record low against the euro as the country scrambled to avoid full-blown financial meltdown after failing to produce a stability plan at the weekend.

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European shares slump 4.8 pct over bank fears

LONDON - European shares fell sharply in early trade on Monday, with banks worst hit after further measures to bail out major financial companies over the weekend, and following a decline on Wall Street on Friday.  
      
At 0818 GMT, the FTSEurofirst index of leading European shares was down 4.8 percent at 1,037.36 points, with just three gainers among its 312 stocks. The benchmark is down more than 30 percent so far this year.
       
Banks took the most points off the index, with BNP Paribas down 3.4 percent, Credit Agricole falling 6.8 percent, Dexia slipping 11.2 percent and Societe Generale shedding 6.4 percent.
       
Commerzbank tumbled 15.7 percent on big volumes. HBOS, due to be taken over by Lloyds TSB, was down 14 percent. Lloyds fell 5.8 percent.      
       
"Obviously there's a negative read from the poor performance on Wall Street on Friday. There is no doubt the unemployment position there is looking pretty poor. The economy has lost jobs for the last nine months. It's a miserable state of affairs," said Henk Potts, strategist at Barclays stockbrokers. "And then you add to that the banking problems we've seen over the weekend."

BNP Paribas, France's biggest listed bank, said it was paying 14.5 billion euros ($20.1 billion) to take control of European financial group Fortis. Trading in Fortis shares was suspended on Euronext Amsterdam.
      
Over the weekend, German officials clinched a renewed rescue deal for property lender Hypo Real Estate and UniCredit, Italy's second-biggest bank, announced plans to raise new capital.
      
But Hypo Real shares were down 26 percent after slumping as much as 48 percent in early trade. Germany also offered a blanket bank deposit guarantee and South Korea pledged to use its $240 billion in official reserves to help its banks secure enough foreign currency liquidity.
      
"European governments are looking to stabilise the financial sector by attempting to rescue some major institutions. Whilst their actions are understandable, the smell of desperation remains strong," said Chris Hossain, senior sales manager at ODL Securities.
       
A $700 billion package to rescue the U.S. financial sector, passed by the U.S. House of Representatives on its second try on Friday and signed by President George W. Bush into law, also failed to cheer investors.
      
"There's uncertainty over the price at which assets are going to be bought. And the reality is that it will take some time to see the benefit, and there's uncertainty on how quickly the banks will lend to each other," said Barclays' Potts.
      
Across Europe, Germany's DAX index fell 4 percent, UK's FTSE 100 index slipped 4.1 percent and France's CAC 40 shed 4.8 percent.
      
Oils were another notable casualty, with crude prices falling as much as 4 percent to below $90 a barrel, on worries of weaker demand. Total, ENI, BP, and Royal Dutch Shell all fell between 4.1 and 4.7 percent.
     
A stronger dollar led lower metals prices, hurting mining shares. UBS and Merrill Lynch issued downbeat notes on the sector, cutting their forecasts for metals prices, and lowering price targets for shares. 
      
Eurasian Natural Resources Corp. fell 15.3 percent. Anglo American, Antofagasta, BHP Billiton,  Kazakhmys,  Rio Tinto, Vedanta Resources, Xstrata all fell more than 8 percent.

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Asian stock market summary

JAPAN
The benchmark Nikkei shed 4.3 percent to close at 10,473.09, its lowest close since February 2004, spooked by signs of growing global economic gloom.
   
Financial stocks were hit hard, with top bank Mitsubishi UFJ Financial Group losing 9.2 percent. Exporters and high-tech shares also dragged the Nikkei lower, with exporters undermined as the safe-haven yen surged.
   
Yoshinoya Holdings Co plunged more than 12 percent after the restaurant chain cut its net profit forecast for the year to February 2009 by 98 percent in what market participants said could be a harbinger of a wave of such downward revisions.
   
The broader Topix lost 4.7 percent closing at 999.05, its lowest close since December 2003.
 
SOUTH KOREA
The Korea Composite Stock Price Index closed down 4.29 percent at 1,358.75, the lowest finish since Jan. 2007, as investors ignored last week's approval of a U.S. financial rescue plan to fret about further economic fallout from the global credit crisis.
 
AUSTRALIA
The benchmark S&P/ASX 200 index ended down 3.3 percent at 4,540.4, its lowest close since November 2005, weighed down by mining and bank stocks, as investors fretted about global growth prospects amid the ongoing credit crunch.
  
Holiday-thinned volume steepened the falls for stocks caught in the sell-off, with no sector untouched.
   
The U.S. House of Representatives finally passed a $700 billion financial bailout on Friday, but it failed to lift sentiment on Wall Street, giving a negative lead for Australian stocks.
 
CHINA
The benchmark Shanghai Composite Index closed down 5.23 percent at 2,173.74, as investors returned from a week-long holiday, with the market tracking losses in the region amid worries that a financial sector rescue may not prevent the US economy from sliding into a recession.
   
Sharp declines in heavyweight stocks dragged down the key index, with banks and resources such as China Merchants Bank and China Shenhua Energy leading the way down. Both fell their 10 percent daily limit.
   
Meanwhile, brokers were aided by the announcement from China's securities regulator that it will launch margin trading of securities on a trial basis.
   
The Shanghai A-share Index lost 5.23 percent to 2,282.81, and the Shenzhen A-share Index was down 3.75 percent at 620.75.
   
The Shanghai B-share Index fell 5.29 percent to 125.73, and the Shenzhen B-share Index was down 4.50 percent at 297.29.

TAIWAN
The weighted index closed down 4.12 percent at 5,505.70, a four-year low, led by financials, on fears that the bailout program for the U.S. financial sector may not be able to avert a worsening of the economy.
  
Last month's heaviest US job losses in five years outweighed congressional approval of a sweetened $700 billion rescue package for stricken financial institutions.

HONG KONG
The Hang Seng index closed down 878.64 points or 4.97 pct at 16,803.76, off a low of 16,790.86 and high of 17,241.78.

INDIA
The Bombay Stock Exchange's benchmark Sensex nosedived 724.62 points or 5.78 percent to 11,801.70, while the National Stock Exchange's S&P CNX Nifty plunged 215.95 points or 5.66 percent to 3,602.35.
  
All 30 Sensex stocks fell, led by Sterlite Industries Ltd. Shares of the leading copper producer sank 15.26 percent to 335.35 rupees, on fears that a global slowdown may hurt demand for metals.
   
Heaviest Sensex component Reliance Industries Ltd. slipped 6.76 percent to 1,641.90 rupees and no. 1 engineering firm Larsen & Toubro Ltd. fell 6.49 percent to 1,083.25 rupees.
   
All 13 BSE sector indices declined, with the consumer durables index falling the most, down 11 percent. In the broader market, about nine shares declined for each advance. Forty-seven of the 50 Nifty shares declined, led by Sterlite. Tata Communications Ltd. led the advancers, up 2.33 percent at 461.45 rupees.

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Gold recovers as flight to safety balances dollar

LONDON - Gold recovered on Monday from losses made in Asia overnight, as worries over the outlook for the financial sector after a sharp slide in equity markets boosted interest in gold as a haven from risk.

But gains were limited as the dollar held near a 13-month high against the euro, denting the precious metal's appeal as a currency hedge, and oil prices slipped more than $4 a barrel.

Spot gold was quoted at $839.20/841.20 an ounce at 1000 GMT, up from $834.80 in late New York trade on Friday. Earlier it slipped nearly 1 percent as the dollar firmed.

"The initial sell-off was mainly because of the dollar," said Afshin Nabavi, head of trading at MKS Finance, adding that both the dollar and the financial markets will drive the gold market today.

But gold's gains were limited by dollar strength. The U.S. currency extended gains against the euro, hitting a 13-month high, as investors worried about the outlook for European banks after leaders decided against a common bank bailout plan over the weekend.

The other main external driver of gold, oil, also weighed on bullion prices. U.S. crude futures slipped more than $4 to below $90 a barrel as traders worried efforts to avert further financial turmoil would not stem falling demand.

Gold usually moves in tandem with crude, as it is often bought as a hedge against oil-led inflation. "(People want to) own gold as a safe haven investment, but the oil price is as low as last February," said Michael Blumenroth, a trader at Deutsche Bank.

Prices are being supported by strong investment demand for gold coins and bars, traders say, as well as interest in bullion-backed exchange traded funds. The two main gold and silver ETFs remain near record levels, despite recent outflows.

Holdings of the SPDR Gold Trust GLD, the world's largest gold-backed ET, eased 2 percent from last week's record highs on Friday, according to the fund.

The amount of metal held to back the largest silver ETF has also slipped from record levels. The iShares Silver Trust SLV.A said its holdings eased 3/4 of a percent or just over 50 tonnes week-on-week to 6,849.50 tonnes on Friday.

Silver ETFs have proved popular in recent months as lower silver prices attract more retail investors to the market. Spot silver was quoted at $11.09/11.17, unchanged from $11.09 in late New York trade on Friday.

Among other precious metals, spot platinum eased to $946/966 an ounce from $950. Earlier it slid more than 3 percent, pressured by fears slowing economic growth would dent demand from carmakers, major consumers of the white metal.

"Prices continue to fall fast as auto sales fall," said Fairfax analysts John Meyer. "(A) negative outlook from the Paris auto show has not helped sales." "ETF sales are visible and may create the appearance of a supply surplus this year," he added. Palladium slipped to $192/202 an ounce from $194.

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