US & World Daily Markets Financial Briefing 07-11-2007

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General Motors Wall Street opens lower as dollar slides

NEW YORK (AP) - Stocks pulled back sharply and bonds jumped in early trading Wednesday after the dollar sank further amid speculation that China will seek to diversify some of its foreign currency stockpiles beyond the greenback.
   
Unease about the dollar dogged stock markets worldwide and in the U.S. comes a day after stocks  continued their recent zigzagging to finish with sizable gains.
   
The 13-nation euro hit a fresh record against the dollar -- rising to $1.4729 -- before falling back. The dollar fell not only against the euro but in Asia following a report that a senior Chinese political figure said China should diversify its $1.43-trillion foreign exchange reserves into the euro and otherstrong currencies.

The euro's rally put it well above the $1.4554 the currency bought lateTuesday in New York. The previous record high, also set Tuesday, was $1.4571.
   
The swooning dollar for a time sent oil above $98 per barrel and also pushedgold higher.
   
In the first hour of trading, the Dow Jones industrial average fell 112.91,or 0.83 percent, to 13,548.03.
   
Broader stock indicators also fell sharply. The Standard & Poor's 500 index fell 13.45, or 0.88 percent, to 1,506.82, and the Nasdaq composite index fell 24.96, or 0.88 percent, to 2,800.22.
   
Government bonds jumped as the dollar sank. The yield on the 10-year Treasury note, which moves opposite the price, fell to 4.35 percent from 4.37 percent late Tuesday. The yield rose to 4.38 percent in after-hours trading Tuesday.
   
Light, sweet crude rose 95 cents to $97.65 in premarket electronic trading on the New York Mercantile Exchange. December gold surged $18.20 to $841.60 anounce in early trading on the New York Mercantile Exchange.
   
Economic data arriving Wednesday appeared to offer some upbeat news, although investors remained concerned about the faltering dollar and rising prices for oil and gold. The Labor Department reported that worker productivity surged at an annual rate of 4.9 percent in the summer, the fastest pace in four
years, while wage pressures eased.
   
Other economic data due Wednesday includes figures on wholesale trade and consumer credit figures for September.
   
Some corporate news didn't offer Wall Street much reason for cheering. General Motors Corp. reported a $39 billion loss for the third quarter due to an accounting shift. The company warned late Tuesday it would book a $38.6 billion noncash charge largely related to establishing a valuation allowance. A valuation allowance is taken when the future benefit of the deferred tax assets is less likely to be realized.
   
GM's loss came to $68.85 per share, compared with a net loss of $147 million, or 26 cents per share, in the third quarter a year earlier. The stock fell 83 cents, or 2.3 percent, to $35.33

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Euro hits new high above 1.47 usd as dollar's relentless falls continue

LONDON - The euro hit fresh record highs of 1.4929 against the dollar as the US unit's relentless falls continued, taking major currencies surging past levels which only a few months ago would have seemed
astonishing.

Today's trigger came from China, where a key official warned that the Asian giant may well diversify its reserves away from the dollar.  
   
The news sent an already weak dollar tumbling across the board, taking the euro above 1.47 usd and the pound over 2.10 usd. The euro's rise also marks a key event -- at current levels the euro is now higher against the dollar than the Deutschmark ever was.   
   
Furthermore, the dollar is not expected to recover any time soon, given the ongoing credit market concerns and the fairly dismal outlook for the US economy.
   
The dollar's weakness has also been further exacerbated by sharp rises in commodities, with global investors piling into safe-haven gold for protectionagainst the falling US currency.
      
Oil prices have also smashed through record highs this morning and commodity currencies have proved the most significant gainers against the dollar as a result.
   
The Canadian dollar has risen by well over 1 pct against its US counterpart to hit another multi-decade high of 0.9056 per usd, while the Australian dollar which gained an additional boost from the Reserve Bank of Australia's rate hike overnight -- has come very close to the 0.94 usd mark.

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Euroshares down midday after dollar hits fresh record low, Tele Atlas surges

LONDON - Europe's leading exchanges were lower midday,
   
At 12.16 pm, the Dow Jones STOXX 50 fell 24.57 points or 0.65 pct to 3,749.84, while the STOXX 600 shed 3.61 points or 0.95 pct to 375.03.

 Automakers were hit badly with the sector falling an aggregate of 2.10 pct. Renault was the biggest decliner, down 4.44 pct, followed by Pirelli, which fell 3.10 pct, and BMW, down 2.79 pct.

The German automaker was also in focus after Credit Suisse downgraded the stock to 'neutral' from 'outperform' with a lower target of 45 eur from 52 eur. Credit Suisse said that BMW's Q3 results,
released yesterday, disappointed in almost all areas.
   
News from the Netherlands provided a boost to the M&A landscape earlier in the day as TomTom raised its bid for rival Tele Atlas to 30 eur a share, valuing it at 2.9 bln eur. The improved offer significantly exceeds the 2.3 bln eur bid made by Garmin last week.

TomTom said it is planning to buy the outstanding 28.3 pct of shares today and added that it expects Tele Atlas to support the bid. The latter said it will review the bid and react 'as soon as possible'.
  
Over in the UK, Rio Tinto climbed 2.48 pct higher on the back of strong commodity prices as well as rumours that BHP Billiton is mulling a bid.    
   
In earnings news, the financial sector stepped into the spotlight with Societe Generale turning lower with the market after a strong performance in the morning following the release of its third-quarter earnings results.
     
Meanwhile, ING shed 2.26 pct after broadly in-line quarterly results. ING also announced a restructuring of its wholesale banking unit, which it hopes will yield 30 mln eur in cost savings and 100 mln in revenue benefits by 2009.
  
The construction sector was also awash in earnings reports. Vinci resisted a falling market and edged 0.11 pct higher after the French infrastructure group posted forecast-beating results and maintained its full-year guidance. Meanwhile, Holcim also outperformed, down 0.15 pct, after the cement maker's 9-month results topped analyst estimates riven by the steady demand for construction material due to the rapid urbanization in emerging markets, notably Asia. Italcementi, however, proved to be the fly in the ointment.

The Italian cement group cut its guidance for full-year operating profits after its third-quarter results came in below market expectations. The stock was off 4.89 pct.
  
Total rallied 3.37 pct on a solid set of third-quarter results and confirmation of its target for 4 pct average annual growth in production over the 2006-2010 period. Broker Landsbanki Kepler said production momentum appears to be 'building up'.
  
In other earnings news, Henkel gained 2.79 pct after the household goods manufacturer released strong third-quarter sales figures and lifted its full-year outlook.
   
Shares in Clariant tumbled 15.57 pct to their worst level in four years after the Swiss speciality chemicals group posted disappointing third-quarter results and issued a weak outlook for the rest of the year.

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Asian money markets summary

BEIJING (XFN-ASIA) - Asian late money market rates (vs previous close):

Hong Kong: 3-month HIBOR rate 3.8 pct (4) overnight rate 0.5  pct (1.8)
Jakarta: overnight rate 11.29798 (11.14577)
Kuala Lumpur: 3-mth KLIBOR bid/ask 3.55/58 pct (3.55/58) overnight rate 3.48/50  pct (3.48/50)
Manila: overnight rate 6.53125 pct (6.65625)
Seoul: 3-yr corporate bond yield 6.02 pct (6.05) 3-yr state bond yield 5.39 pct (5.42)
Singapore: avg overnight rate 2.00 pct ( 2.125) 3-month SIBOR 2.25 pct (2.25)
Sydney: 90-day bank bill rate 7.112 pct (7.120)
Taipei: overnight rate 2.040 pct (2.040)
Tokyo: unsecured overnight rate 0.499 pct (0.497) 3-month TIBOR 0.85000 pct (0.85000)

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LONDON - International Energy Agency chief Nobu Tanaka said burgeoning oil prices should be tackled through a combination of increased crude output from producing nations to replenish falling inventories and greater energy efficiency among end users.
   
The growing importance of the developing world in demand growth, especially China and India, and tightening supply and demand fundamentals have been key factors in driving oil prices to their current record levels, said Tanaka at a press conference to launch the IEA's 2007 World Energy Outlook.
   
"Recent data reflect a tightening of oil market fundamentals, especially a lowering of OECD stocks," he said. "Current prices are signalling stocks need to be higher, something producers need to address."
   
But producers and consumers share a responsibility to assure greater investment in supply and greater energy efficiency among end users, he added.

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