US & World Daily Markets Financial Briefing 07-11-2008

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US STOCKS-Market opens higher on bargain-hunting

NEW YORK - U.S. stocks rose at the open on Friday as the steep declines of the past two sessions prompted investors to scour the market for beaten-down shares, offsetting a bleak report on unemployment.
      
The Dow Jones industrial average was up 94.78 points, or 1.09 percent, at 8,790.57. The Standard & Poor's 500 Index was up 8.94 points, or 0.99 percent, at 913.82. The Nasdaq Composite Index was up 20.29 points, or 1.26 percent, at 1,628.99.

U.S. job losses soar, jobless rate at 14-year high

WASHINGTON - U.S. employers cut payrolls by a much steeper-than-expected 240,000 jobs in October as the unemployment rate shot up to its highest in more than 14 years, underscoring the economy's steep slide.
      
According to the the Labor Department's report on Friday, last month's job cuts followed a steeply revised cut of 284,000 in September, the most severe monthly loss since November 2001 just after that year's September terror attacks. The department also revised August job cuts higher to 127,000 -- meaning a total 179,000 more jobs were cut in August and September than previously thought.
      
The national unemployment rate jumped to 6.5 percent from 6.1 percent in September, the highest since March 1994.
      
"We have entered the phase of serious recession conditions. Unfortunately we will encounter more of this going forward," said Richard DeKaser, chief economist for National City Corp. in Cleveland. "This is going to increase the urgency for another stimulus package to staunch the slide."
      
October job cuts were much worse than forecast by Wall Street economists, who had expected 200,000 would be cut and that the unemployment rate would be 6.3 percent. 
      
So far this year, 1.2 million U.S. jobs have been lost -- 651,000 of them in the past three months alone -- in a sign that a deterioration in labor markets may be gaining steam and heightening odds of deep recession.
      
In manufacturing alone, a whopping 90,000 jobs were cut in October -- a period when 27,000 Boeing Co. assembly workers were on strike. That followed a loss of 56,000 factory jobs in September.
      
Service-producing industries cut 108,000 jobs in October on top of 201,000 lost in September. Construction industries dropped 49,000 more jobs after eliminating 35,000 in September, many of them in specialty trades related to home building, the department said.
      
Average weekly hours of work held steady at 33.6 in October. At factories, the average workweek also held steady at 40.6 hours, while overtime was unchanged at 3.6 hours.

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FOREX-Dollar slips, market awaits U.S. jobs data

LONDON - The dollar slipped against major currencies on Friday as a rebound in European share prices eased some risk aversion fears, but trade was subdued ahead of U.S. payrolls data later in the day.

Investors tentatively sold off the dollar and low-yielding yen and bought into riskier assets, including higher-yielding currencies such as the euro and sterling.

The euro rallied around one percent to a session high of $1.2850, according to Reuters data. It later trimmed some gains but held above a low of $1.2654 earlier in the day. The dollar fell 0.4 percent to 97.38 yen.

"The sell-off in Asian equity markets was not so severe and S&P futures are up, leading to some dollar weakness," said David Powell, currency strategist at Bank of America in London. "But the repatriation bid is still very much alive."

Data from Europe on Friday reinforced the prospects for a prolonged global economic slowdown, which will likely keep investors wary of actively pursuing risks.

German industrial production fell by a larger-than-expected 3.6 percent in September, the largest monthly decline in nearly 14 years.

A bank lending survey from the European Central Bank showed banks will continue to tighten credit standards to firms and households in the fourth quarter . That would further slow growth and counteract the benefits of the central bank's 0.5 percentage point interest rate cut on Thursday.

More dismal data is expected from the U.S. jobs report due out at 1330 GMT which is expected to show 200,000 non-farm jobs were shed in October, which would be the biggest drop in more than five years.

Analysts said a weak reading would likely trigger initial selling in the dollar as it would add to the view that the U.S. economy is rapidly deteriorating, but added the U.S. currency may ultimately gain on the argument that a struggling economy may pose greater risks to the global economy. "If we see a really bad jobs number, we could see another round of risk reduction once again," said Geoffrey Yu, currency strategist at UBS in London.

Trade was choppy as investors still digested the impact of large rate cuts in Europe on Thursday. The euro had slipped on Thursday in an initial reaction to the European Central Bank's 50 basis point rate cut to 3.25 percent, which had disappointed investors who had argued that a struggling euro zone economy warranted a bigger reduction.

In contrast, the Bank of England's surprise 150 basis point cut, which took rates to their lowest in 50 years to 3.0 percent, was seen as a decisive move to help spur the ailing UK economy.

This helped to boost sterling by around one percent versus the dollar on Friday, although a slide against the euro briefly pushed the pound's value against a basket of major currencies to 84.8, its lowest level in 12 years.

Some analysts said while sterling may receive some initial support from the BoE's aggressive move, extreme economic weakness would continue to weigh, and the euro would also stay under selling pressure from the gloomy economic outlook for the euro zone.

"With possibly six months of very weak economic data to come from all the major developed economies, it seems premature to us to believe that currencies will strengthen on the back of monetary easing," analysts at BTM UFJ said in a research note.

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European stocks rise, buoyed by commodities

FRANKFURT - European shares edged higher in  early trade on Friday, recovering after a sharp drop on Thursday  as commodities stocks reflected a pick-up in crude oil and  metals prices.
   
The FTSEurofirst 300 index of leading European  shares rose 0.1 percent by 0937 GMT, after falling 5.8 percent  on Thursday, as rate cuts by the European Central Bank and the  Bank of England failed to assuage economic concerns.
   
"This is simply a technical rebound, nothing else, because  valuation wise, earnings and everything is still fairly bleak,"  said Franz Wenzel, strategist at AXA Investment Managers in  Paris.
   
"There is no fundamental reason other than maybe people  starting thinking about monetary policy in a more positive sense  and commodity prices are giving some support."
   
On Wall Street, stocks fell on Thursday on the back of poor  corporate outlooks and bleak sales from major retailers that  fuelled fears of a worsening economic downturn, while in Asia,
Japan's Nikkei index closed 3.6 percent down on Friday.
   
An easing in the U.S. dollar against a basket of major  currencies helped push up the price of copper and
aluminium as well as gold and platinum. BHP Billiton, Kazakhmys and Anglo American  rose between 1.8 and 4.1 percent.
   
Energy stocks also climbed, as oil rose 1.8 percent  to $62.35 a barrel, bouncing back from a session trough of  $59.97, its lowest since March 22, 2007. BP, ENI  and Total gained between 0.6 and 3 percent.
   
After Thursday's steep falls in equities, some analysts said  the rate cuts could now be reassuring investors. "We expect the rescue packages of governments for the  banking system, global rate cuts by central banks and the latest  recovery of share prices to have at least trimmed fears," said  Ralph Solveen, an economist at Commerzbank in Frankfurt.
   
Positive news also came from Germany, where data showed the  first monthly increase in exports in three months.  Defensive pharmaceuticals rallied, with Shire  climbing 1.1 percent, Merck rising 1 percent, and
Fresenius Medical Care up 1.1 percent.
    
Investors are waiting for the latest U.S. nonfarm payrolls  report, due at 1330 GMT, which is widely expected to show the  world's largest economy continued to shed jobs in October. The  median forecast of economists polled by Reuters last week is for  payrolls losses of 200,000 in October.
   
"Another big negative number is expected today but anything  too harsh here could act as another prompt for further selling  in the near term," said Matt Buckland, a dealer a CMC Markets. Financials tempered gains on the broader European market,  with BNP Paribas, Banco Santander and UBS  down 0.8 to 3.4 percent.
   
An exception was reinsurer Munich Re, rising 4.7  percent, after the company released third-quarter figures which  analysts said were not as bad as they first appeared. 
   
Kepler analyst Fabrizio Croce in a note to clients that  Munich Re's 8 billion euro shareholders' repayment, its share  buyback of 2 billion euros and a dividend of at least 1 billion  euros per year by 2010 were  all positive.
   
In other news, Imperial Energy rose 20.6 percent,  after Russia's anti-trust office allowed Indian energy firm ONGC  to buy the London-listed but Russia-focused firm. 
   
Around Europe, the FTSE 100 index rose 1 percent,  while Germany's DAX gained 0.4 percent and France's CAC  40 rose 0.3 percent.

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Asian Market Summary

In moderate trade, the Nikkei ended down 316.14 points at 8,583.00, its lowest close this month, after a week of turbulent trade that saw it finally eke out a gain of 0.1 percent for its second successive week of gains. The broader Topix lost 3.3 percent to 879.00.

Panasonic lost 3.8 percent to 1,528 yen and Sanyo shed 0.49 percent to 203 yen prior to the announcement. Fellow carmakers tumbled, with Honda Motor Co losing 8.7 percent to 2,260 yen and Nissan Motor down 7.3 percent to 422 yen. Auto parts maker Denso Corp plunged 15 percent to 1,756 yen.

Trading company Mitsui & Co tumbled 8.8 percent to 943 yen on the back of the slide in oil prices. "There's still a lot of worry about the economy, and one big symbol of that is the tumble in oil prices due to a drop in demand on the dark economic outlook," said Yamagishi.

Fellow trading house Mitsubishi Corp, Japan's largest trading firm, slid 4.4 percent to 1,527 yen while Itochu Corp fell 4.9 percent to 504 yen.

Trade was moderate on the Tokyo exchange's first section, with 2.7 billion shares changing hands, compared with last week's daily average of 3.01 billion. Declining stocks outpaced advancing ones by more than 4 to 1.

The benchmark Hang Seng Index .HSI closed up 453.39 points at 14,243.43, wiping out a 3.8 percent loss at the open. Top telecoms firm China Mobile led gainers with a 3.6 percent rise. The index rose 2 percent for the week.

Mainboard turnover edged up to HK$48.8 billion ($6.3 billion) from HK$48.3 billion on Thursday. Hong Kong's top developer Sun Hung Kai Properties rose 6.2 percent on hopes that cheaper credit will encourage borrowing to fund real estate purchases.

Cheung Kong (Holdings), the real estate flagship of tycoon Li Ka-shing, gained 5.3 percent.

Singapore's Straits Times Index closed up 2.43  percent after earlier falling 5.6 percent and the Indonesia  Composite Index closed 2.33 percent higher.  Thai stocks edged up 0.19 percent but Malaysian  shares shed 0.22 percent and Philippines shares  fell 1.04 percent. 

The main 30-share BSE index rose 230.07 points to 9,964.29, with 25 components gaining, after opening down 1.05 percent. It is still down 51 percent in 2008 to be one of the worst performing Asian markets.
      
The index ended the week up 1.8 percent, after rising 12.5 percent the week before, although it closed below 10,000 points for a fourth week.
      
In the broader market, gainers outpaced losers 1,423 to 1,131 on volume of 286.5 million shares. The 50-share NSE index rose 2.78 percent to 2,973.00.

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Gold firms, platinum soars as dollar weakens

LONDON - Gold firmed in Europe on Friday as the dollar weakened against the euro, boosting the precious metal's appeal as a currency hedge, while platinum surged 5 percent as investors sought bargains after recent price falls.

Traders are eyeing U.S. non-farms payrolls data due out later in the session for clues as to the next direction of trade in precious metals.

Spot gold was quoted at $741.05/743.05 at 1038 GMT against $731.55 in late New York trade on Thursday. Platinum was at $856/876 an ounce against $823, having earlier touched a high of $865.50. Its sister metal palladium tracked it higher to a peak of $230 an ounce, before easing to $224/234 against $214.50.

A supply outage in major producer South Africa, where Anglo Platinum said a smelter shutdown would cut output by up to 200,000 ounces. A weaker dollar also helped platinum to rise, analysts said. "People are looking at the charts and realising both platinum and palladium have broken out of the downtrend in the charts, and that is bringing in more funds on the long side," says Mitsubishi precious metals strategist Tom Kendall.

"There is a reasonable chance that we have seen the lows in platinum, and probably in palladium also," he added. Interest in platinum has been renewed after the metal fell more than 50 percent from July onwards, with investors seeking to buy into the metal at lower prices, traders said.

Both platinum and palladium have been pressured sharply lower by fears demand for the metals from automakers, who account for around half of annual consumption, will decline in the face of the economic slowdown.

Beijing Automotive Industry Holding, Chrysler LLC's CBS.UL partner in China, became the latest carmaker to cut its sales forecasts for this year on Friday, to above 800,000 units from 1 million.

Meanwhile gold is also being helped by the weaker dollar and by fresh fears over the outlook for the global economy, which is boosting the precious metal's appeal as a haven.

A series of interest rate cuts in Europe on Thursday provided a temporary fillip to stock markets, but the gains were not sustained. "While this adds to the enormous monetary stimulus already in motion globally, markets remain unconvinced that it is enough to save the world from a major economic downturn," noted Standard Bank analyst Walter de Wet.

Nontheless, a low interest rate environment should boost the appeal of gold, as it will cut the opportunity cost of investing in non-interest bearing assets such as the precious metals. Traders are now turning their attention to the release of non-farms payrolls data at 1330 GMT, which is likely to have a significant impact on the currency markets.

The employment data is likely to show that job cuts hit a five-year high of 200,000 in October and that unemployment jumped to 6.3 percent from 6.1 percent a month before, according to a Reuters poll. The dollar weakened against the euro ahead of the data as investors sold the U.S. currency in favour of higher-yielding assets, lending support to the precious metals.

Oil prices also rose, climbing more than $1 a barrel as the weaker dollar offset fears over the demand outlook. Rising crude prices are typically positive for gold, which is often bought as a hedge against oil-led inflation.

Among other precious metals, spot silver rose to $10.14/10.24 from $9.96 an ounce late in New York on Thursday. "Silver production growth may slow as producers halt expansion," said Fairfax analyst John Meyer in a note.

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