US & World Daily Markets Financial Briefing 09-09-2008

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US STOCKS-Dow, Nasdaq pare gains after housing data

NEW YORK - The Dow and the Nasdaq Composite Index pared gains in skittish trade on Tuesday following a report that showed a steeper-than-expected drop in pending sales of existing U.S. homes in July.

The S&P 500 was little changed as lower oil prices weighed on energy shares, tempering a rise in technology shares following positive broker action on computer maker Hewlett-Packard U.S. crude futures CLc1 were down $2.01 at $104.38 a barrel.

The National Association of Realtors Pending Home Sales Index, based on contracts signed in July, was down 3.2 percent to 86.5 from an upwardly revised index of 89.4 in June.

The Dow Jones industrial average was up 33.95 points, or 0.29 percent, at 11,544.69. The Standard & Poor's 500 Index was down 2.58 points, or 0.20 percent, at 1,265.21. The Nasdaq Composite Index was up 6.19 points, or 0.27 percent, at 2,275.95.

U.S. house prices rose a 2nd month in July - IAS index

NEW YORK - U.S. house prices rose for a second month in July, supported by increases in all regions except the western states, a residential property valuation firm said on Tuesday.
      
Prices rose 0.9 percent in the month, following a 1.1 percent rise in June, the IAS360 House Price Index showed. The index declined 11.4 percent in July from a year earlier, however, little changed from the annual drop seen in June.
      
Midwestern home prices increased 3.1 percent in the month, cutting the year-over-year drop to 0.4 percent, the index showed. Prices in the Northeast and South rose 1.6 percent and 1.7 percent, respectively, while those in the West eroded by 0.7 percent, it said.
      
The index is compiled by Denver-based Integrated Asset Services, which specializes in property valuation for the sales of bank-owned real estate. It tracks the monthly change in the median sales price of single-family homes.

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FOREX-Dollar retreats from 1-yr high, rally to resume

LONDON - The dollar fell on Tuesday, pulling away from a one-year high hit earlier in the day against a basket of currencies, although analysts reckoned the move would be just a blip in its climb higher.
      
The dollar's broad rally sputtered as traders locked in profits after huge gains spurred on Monday by the U.S. government's move to salvage top mortgage agencies Fannie Mae and Freddie Mac. "We're seeing some profit taking in the dollar after recent moves," said Kamal Sharma, currency strategist at JPMorgan Chase bank.
      
"But we're still in an environment where we've had the first big move in market positioning from dollar shorts to dollar longs ... that's likely to remain the dominant theme in the next few weeks or so."
      
The dollar has rallied on the view that other countries will track U.S. economic weakness, and a souring global growth outlook continues to favour the dollar, other analysts said.
      
The dollar fell 0.3 percent to 79.258 against its basket after jumping as far as 79.776, its highest in a year, earlier in the global session. The euro rallied nearly half a percent to $1.4200 by 1058 GMT, pulling back from an 11-month low of $1.4049 hit earlier.
      
A retreat in U.S. crude oil prices to around $105 a barrel did little to help the dollar during the European session, with the U.S. currency sliding nearly a third of a percent to 108.00 yen. Still, analysts said the dollar would soon resume the climb which has already driven euro/dollar down 3.5 percent so far this month.
      
"A large chunk of the dollar's rally has been driven by a relative growth shift in the global economy, with the United States relatively stable at a soft level while the rest of the world has been going down," Credit Suisse FX strategist Martin McMahon said.
       
The euro rose 0.3 percent to 153.25 yen, recovering from earlier losses as a 1.2 percent rise in European shares helped to warm some demand for riskier trades involving selling the yen for assets in higher-yielding currencies.
     
The yen pulled back from a broad rally against higher-yielding currencies since July as a wave of risk aversion has prompted investors to unwind carry trades.
      
But analysts expect the yen to keep gaining on the view that the U.S. Treasury's conservatorship of Freddie Mac and Fannie Mae, while addressing some of the systemic risk stemming from the now year-long credit crisis, will not solve the problems  afflicting the financial markets.
      
UBS strategists said while U.S. financial problems were far from over, with the Treasury having been forced into action on the mortgage agencies and unemployment jumping above 6 percent, the dollar's resilience had led it to revise up its forecasts.
      
"We have revised our long term targets for the USD higher across the board as America's economy is likely to come out of recession faster than the rest of the world. We now look for the euro to fall to $1.30 over the next year," UBS said in a note to clients.

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European shares climb as financial stocks advance

LONDON - European shares rose on Tuesday, led by banking stocks that extended gains after a strong rally in the previous session on the U.S. government's move to take control of top mortgage companies.
      
A sharp decline in crude prices also eased inflation concerns and lifted market sentiment, analysts said.  At 0906 GMT, the FTSEurofirst 300 index of leading European shares was up 1 percent at 1,174.86 points after closing 3.3 percent higher on Monday. But the benchmark is still down 22 percent this year, battered by a credit crisis that has hit bank stocks especially hard.
      
Banks were the top-weighted gainer the FTSEurofirst 300 on Tuesday, with Lloyds TSB rising 2.5 percent, HBOS advancing 3.7 percent, Standard Chartered Bank gaining 1.9 percent and Barclays rising 4.9 percent.
      
BNP Paribas was up 2.7 percent, Credit Agricole added 2.8 percent and Fortis rose 2 percent. "Banks have been oversold which is typical of bear markets. Now there has been some rectification and return to some normality," said Howard Wheeldon, senior strategist at BGC Partners. 
     
Stock markets worldwide rose sharply on Monday, powered by financials as investors applauded the U.S. government's move to rescue mortgage financiers Fannie Mae and Freddie Mac was up 0.7 percent.
      
Dealing on the London Stock Exchange was halted for several hours on Monday, meaning that activity on Tuesday could be in part an overhang from trades investors were unable to carry out in the previous session.
      
Energy shares were mixed, with BG Group falling 0.2 percent, Royal Dutch Shell rising 0.1 percent, Tullow Oil down 0.1 percent and BP gaining 0.7 percent.
      
Miners fell, tracking weaker metals prices, with BHP Billiton, Anglo American, Lonmin, Kazakhmys, Xstrata, Antofagasta and Rio Tinto all falling between 0.7 and 2.4 percent.
      
Shares in Germany's Bayer rose 3.5 percent on market talk of takeover interest from U.S. rival drugs company Pfizer, traders said. Bayer declined to comment, while Pfizer was not immediately available to comment.
      
Telekom Austria rose 0.2 percent after a newspaper report said Egyptian telecoms operator Orascom was looking at buying the company. Telekom Austria declined to comment.

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Asian stock market summary

JAPAN
The Nikkei 225 Stock Average ended 1.8 percent lower at 12,400.65, as investors moved to take profits after the Nikkei gained 412 points in the previous session, while a stronger yen dampened interest in exporters.

SOUTH KOREA
The Korea Composite Stock Price Index fell 1.5 percent at 1,454.50, after gaining more than 5 percent in the previous session, with declines led by technology exporters that had posted the biggest gains on Monday.
   
CHINA
The benchmark Shanghai Composite Index closed up 0.11 percent at 2,145.78, with most shares rising although heavyweights China Petroleum & Chemical Corp. (Sinopec) and PetroChina were a drag on the index.
   
The Shanghai A-share Index was up 0.11 percent at 2,252.20, and the Shenzhen A-share Index rose 0.39 percent at 612.83.
   
The Shanghai B-share Index rose 1.07 percent to 142.69, and the Shenzhen B-share Index was up 0.24 percent at 353.23.

AUSTRALIA
The benchmark S&P/ASX index fell 87.4 points to close at 4,980.1, as the effect of the bailout of two U.S. mortgage lenders that had driven shares up Monday waned, and concerns over the health of the U.S. economy returned.

TAIWAN
The weighted index closed down 3.51 percent at 6,424.77 on profit-taking, after the market had surged more than 5.5 percent Monday on the U.S. government's move to take control of mortgage finance giants Fannie Mae and Freddie Mac.

HONG KONG
The Hang Seng index closed down 303.16 points or 1.46 pct at 20,491.11, off a low of 20,299.97 and high of 20,543.15

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Oil prices slide to five-month lows before OPEC meet

LONDON - Oil prices slumped close to $101 a barrel on Tuesday, the lowest level since the start of April, as the market waited to see whether OPEC would announce a change to its crude output levels.
   
Brent North Sea crude for delivery in October dropped as low as $101.27 a barrel in electronic dealing on Tuesday. It later stood at $102.06, a loss of $1.38 from Monday's close.
   
New York's main contract, light sweet crude for delivery in October, shed $1.27 to $105.07 a barrel after briefly falling under the $105 mark.
   
Saudi Arabia expressed satisfaction with recent steep falls in oil prices on Tuesday and appeared in no mood to approve a cut in output by OPEC despite fears among some members of oversupply.
   
"We have worked very hard since June's meeting to bring prices to where they are now. I think everything is in balance," said Saudi Arabia's Oil Minister Ali al-Nuaimi ahead of an OPEC meeting due to start late on Tuesday in Vienna.
   
The Saudi kingdom, the world's biggest crude producer and de facto leader of the Organisation of Petroleum Exporting Countries (OPEC), has come under fierce pressure from the United States and other allies over record high crude prices.

The country agreed in May and June to pump an extra 500,000 barrels per day (bpd) to help bring down the runaway oil market, which peaked at $147 a barrel in July but has now fallen back to close to $100 a barrel.
   
OPEC produces about 40 percent of the world's oil.

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