US & World Daily Markets Financial Briefing 10-01-2008

Can you identify the Next Major CURRENCY Trend? ...
with the Electronic Currency Trading System (ECTS) Help You Can! Click Here

Stocks open lower amid credit worries

In early trading, the Dow Jones industrial average fell 86.09, or 0.68 percent, to 12,649.22. Broader stock indicators also fell. The Standard & Poor's 500 index fell 12.73, or 0.90 percent, to 1,396.40, and the Nasdaq composite index fell 24.06, or 0.97 percent, to 2,450.49.

On Wednesday, Wall Street finished a volatile session sharply higher as investors sought bargains but remained concerned about the strength of the economy and upcoming corporate results. The Nasdaq showed its first gain in nine sessions, while the Dow gained nearly 150 points.

Oil prices fell Thursday, building on an overnight decline on a U.S. government report that the country's stockpiles of gasoline grew last week. Light, sweet crude for February delivery fell $1.72 to $93.75 a barrel in premarket trading on the New York Mercantile Exchange.

Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.80 percent from 3.83 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices fell.

In a positive sign, Wall Street also received an economic reading that indicated the labor market might be firmer than first thought. The Labor Department said Thursday the number of workers filing new claims for unemployment benefits tumbled to a two-month low last week.

Initial claims for jobless benefits fell 15,000 to 322,000 after seasonal adjustments in the week ended Jan. 5, the Labor Department said Thursday. Wall Street economists had expected a 4,000 rise. The weekly readings are volatile, however.

Meanwhile, retailers were issuing December sales reports that generally came in weaker than already expected, an indication that consumers are becoming more hesitant as they contend with higher gas prices and the ongoing housing slump.

Capital One fell $4.03, or 9.3 percent, to $39.32 after its warning. In other corporate news, Citigroup Inc. and Merrill Lynch & Co. are said to be in talks to raise more capital from foreign governments to offset losses stemming from the credit crisis, according to The Wall Street Journal. Citi slipped 31 cents to $27.18, while Merrill fell $1.37, or 2.7 percent, to $49.11.

A combination involving Delta Air Lines Inc. may be close, the head of the carrier's pilots union said in a letter to rank-and-file members Wednesday. In November, Delta denied reports that it was talking to UAL Corp.'s United Airlines about a combination. Since then, it has said little about the issue. Some analysts have suggested recently that a Delta-Northwest combination may be possible.

Delta gained 89 cents, or 6.5 percent, to $14.41. UAL rose $1.95, or 7.5 percent, to $27.98, while Northwest jumped $1.74, or 14.5 percent, to $13.75. Overseas, Japan's Nikkei stock average closed down 1.45 percent. In afternoon trading, Britain's FTSE 100 fell 0.81 percent, Germany's DAX index dropped 0.46 percent, and France's CAC-40 fell 0.52 percent.

VantagePoint's market forecasts are nearly 80% accurate. Take a look at actual forecasts, become eligible for a Complimentary VantagePoint Market ($750 value!) and see the difference they will make. Click here to see two recent forecasts now.

Forex - Unchanged BoE, ECB rate verdicts give pound fleeting reprieve

The pound, which has taken a battering so far in the new year, had been expected to fall further if the BoE delivered a back-to-back rate cut. Expectations of a cut had been growing due to mounting evidence of a weakening economy -- especially in the housing and retail sectors -- highlighted by a dismal trading statement from Marks & Spencer this week. In the event, the BoE opted not to move, and the pound rose slightly before returning to its losing ways.

Alan Castle, UK economist at Lehman Brothers, said the decision "was a surprise to markets which had moved to price in a back-to-back rate cut over the past few days." He said that as no accompanying statement was released with the decision, it will be difficult to determine the MPC's thinking on this decision before the minutes are released on Jan 23.

However, he said that "clear signs of normalisation in money markets" and the recent sharp fall in sterling may have been decisive factors. Divyang Shah at Commonwealth Bank said that while the pound rose after the BoE verdict, its gains have been limited, especially given that the decision was seen as a close call.

In any case, the BoE is widely predicted to lower interest rates next month along with its latest projections for growth and inflation. "I still think that the bias is for more broad-based pound weakness especially against both euro and the dollar," he added.

Over in Europe, the European Central Bank also kept interest rates unchanged, at 4.00 pct. There had been a some fears that the ECB may hike rates due to a sharp pick up inflation. The news weighed on the single currency.

BNP Paribas's global head of FX strategy Hans Redeker thinks Trichet will provide a very hawkish message by warning that any early signs of spill-over effects from rising energy prices will prompt swift action from the ECB.

If the euro rallies on this, Redeker reckons investors will then have a good profit-taking opportunity. The dollar too faces a test of its own today when US Fed Chairman Ben Bernanke speaks about financial markets and monetary policy in Washington at 6 pm GMT. A dovish set of comments from the Fed chief will stoke US rate cut expectations and weigh on the dollar.

Trade Energy contracts? Get your FREE research. Click here.

Euroshares flat midday, ahead of ECB, retailers hold onto gains

At 12.04 pm, the Dow Jones STOXX 50 Index was down 3.54 points or 0.10 pct at 3,575.14, while the STOXX 600 Index was down 0.50 points or 0.14 pct to 348.27.

Europe's Sainsbury and Metro already climbed to the top of the STOXX 600 this morning, following reassuring quarterly and Christmas sales figures. Sainsbury, up 7.26 pct, beat analysts' forecasts by stating like-for-like sales growth excluding fuel was 3.7 pct in the 12 weeks to Dec 29.

Metro, up 6.15 pct, said fourth-quarter sales rose 8.3 pct to 19.9 bln eur, helped by growth outside its German home market. In France, EADS gained 2.65 pct as encouraging comments emerged from the group's press conference today.

"They haven't given anything away on the current year's results, but so far they've said they're expecting operating margins of over 10 pct after 2015, and that their cash flow is up, so the market is pretty enthusiastic," a local dealer commented.

On the M&A front, S&N added 1.11 pct at last check. The UK brewer has rejected an improved takeover offer from Carlsberg and Heineken at 780 pence a share, although it said it might open talks with its two rivals if they entered a 800 pence bid.

Shareholders of Heineken and Carlsberg reacted to the news, and traded shares in companies down 2.84 pct and down 3.41 pct respectively.

Elsewhere, Logitech rose 6.69 pct on rumours Microsoft was mulling a 48 sfr a share bid for the company. In the banking sector, Northern Rock climbed 7.00 pct after RAB Capital, the UK hedge fund, said in a statement it now owns 7.79 pct of the embattled UK mortgage lender.

In addition, the Guardian reported that Goldman Sachs, the US investment bank brought in to try and find financing for Northern Rock, has widened its search for a bidder to include wealthy Middle Eastern governments.

US private equity firm Blackstone has cast an eye on UK investment bank Close Brothers. According to the Financial Times, the buyout firm might be willing to pay as much as 11 stg per share for the group, valuing it at around 1.6 bln stg, the paper said. Close Brothers' shares were up 1 pct.

Elsewhere in the sector, Dexia shares rose 2.35 pct as it continued to benefit from market speculation that American businessman Warren Buffett is interested in making an investment in Dexia's US unit FSA through his Berkshire Hathaway Inc holding company.

Later in the day, the focus will turn back to the US markets, with data on initial weekly jobless claims due at 13.30 GMT. Analysts are expecting the number of individuals filing first-time claims for unemployment in the week to total 340,000, up from 336,000 the previous week.

Meanwhile, November wholesale inventories are expected to have increased 0.3 pct after remaining unchanged in October. After the close in the European market, Federal Reserve chairman Ben Bernanke is due to hold a speech on "Financial Markets, the Economic Outlook and Monetary Policy," at the Women in Housing and Finance association in Washington.

Inflation picked up in September in Europe as both areas show fragile economic growth. Just as in the U.S., rising energy prices are to blame. Read free, daily market reports available only at CMS Forex and open your free demo trading account today. Click here

Most Asian stocks end lower as Wall Street fails to convince

The benchmark Nikkei 225 Stock Average closed down 1.5 pct at 14,388.11, the lowest closing since June 2006. In Australia, the S&P/ASX 200 reversed early gains to close down 0.2 pct at 6,078.7 after the banking sector came under pressure on concerns about exposure to the US subprime mortgage crisis. The All Ordinaries ended 0.2 pct lower at 6,147.3.

Hong Kong's Hang Seng index closed down 1.39 pct at 27,230.86 after the Chinese government froze prices of oil products and other commodities to curb inflation.

The South Korean Kospi closed down 1.1 pct at 1,824.78 after the Bank of Korea left rates unchanged, as expected. The revamped Singapore Straits Times Index ended down 0.9 pct at 3,315.91 on its first day of trade -- the index now has just 30 components, down from 48 previously.

The Shanghai Composite closed up 0.38 pct at 5,456.54 and the Taiwanese Taiex closed down 0.34 pct at the day's low of 8,057.27. Manila's composite index finished up 1.1 pct at 3,454.60.

The Malaysian and Indonesian markets were closed today for a public holiday. Goldman also cut its Australian 2008 GDP growth forecasts to 3.0 pct from 3.5 pct. For 2009, it now expects the economy to expand by 2.75 pct, down from a previous 3.2 pct.

Australian banks were mostly lower. ANZ lost 0.9 pct to 26.11 aud, Westpac lost 1.3 pct to 26.60 and National Australia Bank was down 0.8 pct at 35.32. Commonwealth Bank firmed 11 cents or 0.2 pct to 56.95 aud.

In Tokyo, Japan Airlines rose 2 pct to 250 yen after the Nikkei business daily reported the carrier will ask business partners, including Mitsui & Co and Mitsubishi Corp as well as oil refiner Japan Energy Corp, to provide a cash infusion of 90 bln yen.

In Seoul, POSCO ended flat at 543,000 won ahead of the release of its quarterly earnings. After the market close, the world's fourth-largest steelmaker said its operating profit in the fourth quarter fell 20 pct to 875 bln won from a year earlier as a drop in stainless steel prices outweighed the impact of its cost-saving efforts. The figure was well below the market consensus of 1.1 trln won based on forecasts compiled by Thomson Financial.

India Shares

The Bombay Stock Exchange's 30-share Sensex hit the intra-day high in the early trade for the fourth successive trading session and swung between 20,530.07 and 21,206.77 points, a range of 676.70 points. The market fell 287.08 points in the last forty-five minutes to close at 20,582.08.

The National Stock Exchange's 50-share S&P CNX Nifty slipped into the red in the last 90 minutes of trading to close 115.05 points or 1.83 pct down at 6,156.95.

Of the 30 Sensex companies, 29 companies declined, led by aluminium-producer Hindalco Industries which shed 4.78 pct to 202.35 rupees. Tata Steel Ltd, the country's largest private steel-maker, slipped 4.09 pct to 854.10 rupees.

ICICI Bank Ltd, the nation's biggest private-sector bank by market capitalisation, was the lone gainer in the 30 blue-chips closing at 1,356.70 rupees, up 3.53 pct after it after it confirmed plans to list four non-banking subsidiaries aimed at unlocking greater value. The share also touched a 52-week high of 1,399.90 rupees during the trade. 

Follow the futures and FX markets with our trading experts and read their analysis.  Click here to sign up now!

Metals - Gold consolidates below 880 usd after yesterday's all time high

At 10.01 am, spot gold was trading at 875.35 usd per ounce against 879.40 usd in late New York trade yesterday. Gold has risen by over 200 usd since the onset of the credit crunch in mid-August last year, as a series of factors have collided to propel the precious metal to new levels.

"At present, a number of factors are supporting the gold price, including the fragility of the USD, anticipation of lower US interest rates, inflation concerns stemming from high oil and agricultural commodity prices, and, possibly, also safe haven flows spurred by the stresses in international financial markets," said Commonwealth Bank of Australia analyst David Moore. The majority of investment banks have been upgrading their 2008 gold price forecasts as a result of the recent moves.

UBS strategists today upped their average price prediction to 825 usd for 2008, from 760 usd, forecasting that gold could touch 1,000 usd at some point this year. However, they added a note of caution that gold prices could lower in the second half of the year should the dollar rebound in line with their predictions.

"Standing at the starting gates of 2008 it is hard to be negative for the outlook for precious metals, at least for the first six months of the year," UBS analysts said. "Gold has taken out the 1980 highs of 850 usd per ounce and stabilised above this level. US economic data is surprising to the downside and the chances of US recession and further US dollar weakness continue to increase. "We continue to field calls from rich individuals who are looking at gold's safe haven characteristics, in some cases for the first time."

Later today, market players will be looking at the European Central Bank's interest rate decision at 12.45 pm GMT. The ECB is expected to hold interest rates steady, which should weaken the dollar in light of widespread expectations for further cuts from the Federal Reserve in a bid to bolster the ailing US economy. Gold could find a bid should the dollar fall.

Among other metals, platinum was trading at 1,536 usd per ounce against 1,544 usd in late New York trade last night, having yesterday hit a new record high of 1,561 usd. Sister metal palladium was trading at 370 usd per ounce against 376 usd. Finally, silver tracked gold lower, trading at 15.52 usd per ounce against 15.73 usd.

Increase the odds for Forex Trading success with this free online course. Learn to build a solid Forex Trading foundation and discover proven strategies for continued success.  Access this wealth of knowledge here absolutely free.

Online Trading Academy - Learn more to earn more.