US & World Daily Markets Financial Briefing 14-11-2008

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US STOCKS-Wall Street opens lower on data, recession fears

NEW YORK, Nov 14 (Reuters) - U.S. stocks fell at the open on Friday on more gloomy news pointing to a deepening global economic downturn, a day after Wall Street had its biggest surge in two weeks.

The Dow Jones industrial average fell 145.35 points, or 1.65 percent, at 8,689.90. The Standard & Poor's 500 Index dipped 15.37 points, or 1.69 percent, at 895.92. The Nasdaq Composite Index lost 35.22 points, or 2.21 percent, at 1,561.48.

US Oct import prices fall as petroleum plunges

WASHINGTON - U.S import prices recorded their biggest one-month drop since 1988 in October as costs for imported oil took their sharpest plunge in five years, the Department of Labor said on Friday.

Overall import prices declined 4.7 percent, the largest one-month decline since the index was first published monthly in December 1988, after falling by a revised 3.3 percent in September.

Analysts polled by Reuters had forecast import prices would drop 4.2 percent. But for the 12 months through October import prices were still up 6.7 percent.

Petroleum prices tumbled 16.7 percent after falling by a revised 10.2 percent the previous month. October's drop in petroleum import prices was the largest since April 2003, the Department of Labor said, highlighting the economic downturn in the United States and elsewhere.

Oil has lost more than 60 percent of its value since hitting an all-time high above $147 per barrel in July as fears escalate that a deepening global economic crisis will depress demand.

Prices for U.S. exports slipped 1.9 percent in October, declining for the third straight month, after easing by a revised 0.8 percent in September.

October's fall in export prices was the largest one-month decline since the index was first published in December 1988, the Department of Labor said. Analysts polled by Reuters had forecast export prices easing 1.0 percent in October.

Export prices were dragged lower by a drop in the prices for soybeans, corn and wheat. Export prices for the year through October were, however, still up 4.2 percent.

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REFILE-Trade-weighted stg hits 13-yr low; rate path weighs

LONDON - The pound hit a 13-year low against a basket of currencies as the UK currency continued to tumble on expectations of more steep cuts in interest rates.

The BoE's quarterly inflation report on Wednesday forecast a sharp decline in prices and economic growth, stoking expectations for more aggressive monetary easing, even after the central bank slashed rates by 150 basis points last week.

"We're seeing more sterling weakness across the board due to aggressive rate cut expectations," BTM-UFJ currency economist Lee Hardman said. "The BoE inflation report has set the tone for aggressive monetary easing."

Against a basket of currencies, sterling hit a 13-year low of 80.7. The pound slumped to a record low against the euro of 86.62 pence on Thursday and hovered close to that level at 85.54 pence by 0935 GMT.

Versus the dollar, sterling was steady on the day at $1.4885 but stayed near a 6-1/2-year low of $1.4555 hit on Thursday.

The pound's rapid descent also boosted implied volatility, with those on one-month sterling/dollar options  rising as high as 29.40 percent.

A raft of weak UK data recently have intensified fears of a prolonged and painful recession in the country.

UK retail group John Lewis -- seen as a barometer of British retail spending -- reported a 9.7 percent fall in sales at its department stores last week.

Markets expect the BoE will cut interest rates at its next meeting in December, possibly by as much as 100 basis points.

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European shares higher at midday on banks, oils

FRANKFURT - European shares were higher in midday trade on Friday, led by oil and bank stocks, while Continental rocketed higher as a takeover by Schaeffler looked more certain.
      
At 1253 GMT, the FTSEurofirst 300 index of top European shares was up 2.4 percent at 872.96 points. But the benchmark is down about 5 percent this week and has lost more than 40 percent so far this year, hit by worries that the banking crisis will result in a deep global recession.
      
Continental jumped 29.5 percent -- having gained more than 50 percent Earlier -- after ball-bearings maker Schaeffler said it plans to file for European Commission approval on a previously announced takeover of just under 50 percent of the German tyre and auto parts specialist.
       
Analysts said the announcement was helping shore up confidence in the company, but speculation also circulated of a possible short-squeeze driving shares up. Rumours that Porsche  might be considering taking over Conti along with Schaeffler were denied by the automaker. 
       
Analysts and traders pointed to the rebound in the United States setting off a round of bargain hunting on this side of the Atlantic. "A lot of bad news is priced into stocks and in many cases too much bad news is priced in. Investors who have a decent time horizon can use the current situation to pick up some stocks at very reasonable prices," said Henk Potts, equity analyst at Barclays Wealth in London.
       
Analysts, however, remain cautious about the medium term.  "European stocks fell 7.6 percent over the previous three days, led by basic resources that reacted badly to the deteriorating outlook for world economic growth as the OECD further downgraded its forecasts for next year," Arthur van Slooten, a strategist with Societe Generale, said in a note. 
       
Oils saw some of the highest gains. Total, ENI , BP, Royal Dutch Shell, Statoil , and BG rose between 4.5 and 7.5 percent.
      
Among banks, Credit Agricole, France's biggest retail bank, rose 4.5 percent after its third-quarter net profit, reported late on Thursday, fell less than forecast.
      
Deutsche Bank, Deutsche Postbank, Erste Group and Commerzbank gained between 3.4 and 5.3 percent. Dexia, however, fell 13.3 percent after posting a quarterly loss of 1.544 billion euros. It said it had agreed to sell its FSA insurance business to Assured Guaranty.
      
Among drugmakers, Bayer added 2.9 percent, GlaxoSmithKline rose 3.7 percent, and Merck rose 2.1 percent. G20 leaders headed to Washington on Friday for a summit aimed at seeking solutions to the world's biggest financial crisis in decades.
      
Across Europe, Britain's FTSE 100, Germany's DAX  and France's CAC-40 rose between 2.6 and 3.9 percent.

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Asian Market Summary

HONG KONG - Hong Kong shares rose 2.4 percent on Friday, snapping a three-day fall, buoyed by resource shares such as CNOOC, while China Overseas Land rose on hopes of further rate cuts on the mainland.

China Overseas Land, the nation's top developer, gained 3.8 percent, while smaller rival China Resources Land rose 2.3 percent. "The good news is, we have a new catalyst from China. We are likely to see another rate cut this weekend or next week," said Jackson Wong, investment manager at Tanrich Securities.

Hong Kong developer and port operator Wharf Holdings surged 9 percent after Merrill Lynch upgraded the stock to neutral from underperform, saying it was trading at a 60 percent discount to its revised 2009 net asset value forecast.

Asian markets rallied on Friday as investors went on the prowl for beaten down stocks, temporarily setting aside the grim outlook for the global economy.

Japan's Nikkei average  closed up 2.7 percent, ending a three-day losing streak.

The 30-share BSE index closed down 150.91 points at  9,385.42, its lowest close since Oct. 29, with 23 of its stocks  falling. It rose as much as 3.04 percent in opening deals and  then dropped as much as 2.82 percent during trade.

"Hong Kong got sold down very fast in the last three days, so we should have a very good day today," said Howard Gorges, vice chairman at South China Securities. "Asian markets are getting a bit mad today."

The benhmark Hang Seng Index closed 321.31 points higher at 13,542.66, snapping a three-day 10.3 percent drop. For the week, the index fell 5 percent.

China Mobile, Asia's biggest cellphone network, led gainers with a 3.7 percent rise. A total of HK$44.7 billion ($5.7 billion) changed hands, down from HK$51.8 bilion on Thursday, on caution ahead of the release of U.S. October retail sales and Hong Kong's third quarter gross domestic product data.

The Hong Kong data, which came out after the market closed, showed the economy tipped into recession in the third quarter as GDP shrank a seasonally adjusted 0.5 percent due to the impact of the global financial crisis. Please click on for story.

Resource stocks gained after oil prices climbed more than 4 percent overnight on worries OPEC may further cut production this month.

Oil and gas firm, PetroChina, rose 4.1 percent, while oil producer CNOOC gained 4.4 percent. Alumina maker Chalc rose 3 percent and steel producer Maanshan Iron and Steel rose 2.6 percent.

But CITIC Pacific fell 7.1 percent, reversing earlier gains, as Goldman Sachs and other brokerages lowered their price targets on the stock amid earnings concerns.

The China Enterprise Index of top locally listed mainland Chinese companies rose 3.3 percent to 7,021.64, led by a 5.8 percent gain in China Life Insurance.

Internet firm Tencent Holdings jumped 6.3 percent after it said this week that its third-quarter profit rose 73 percent.

Cathay Pacific Airways rose 3.6 percent. The airline may delay completion of its HK$4.8 billion third cargo terminal in Hong Kong for about a year due to the economic crisis, the South China Morning Post said.

Huadian Power surged 13 percent. The company said on Thursday it would seek shareholders' approval for its plan to issue up to 3 billion yuan worth of debt due up to 10 years.

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Gold falls on strong dlr, G20 news keenly awaited

LONDON - Gold fell more than 1 percent on Friday on the stronger dollar and lower oil prices, while investors will be watching for any news from the Group of 20 summit and U.S. economic releases for further guidance. "Gold is still fighting the headwinds of weaker oil and the stronger dollar," said Nick Moore, strategist at Royal Bank of Scotland.

Spot gold hit a low of $724.60 an ounce earlier before paring losses to trade at $727.50/729.50 an ounce at 1127 GMT, from $734.30 an ounce in New York late on Thursday. "We are coming up to the gifting season, and there is a firmer tone across the board this morning and part of that is preparing for the Christmas run up," Moore said.

Dealers said they expected steady physical buying from India, the world's main gold consumer, would also aid prices during the traditional wedding season, which runs until early 2009.

However, trading is expected to be steady ahead of the weekend summit of industrialised and emerging nations on the global financial crisis, which has stirred fears of falling demand for commodities and prompted investors to dump risky assets, even including gold.

"The G20 meeting over the weekend will most likely create another uncertainty and prompt short-term traders to square off their positions before the weekend," said William Kwan, bullion director at Gold Capital Management.

The market is also awaiting the latest U.S. economic figures for further signs of the health of the world's largest economy. U.S. retail sales in October are expected to fall 2.0 percent, compared with a 1.2 percent fall in September, according to economists in a Reuters survey. U.S. November preliminary consumer sentiment is also anticipated to weaken to 56.0 from 57.6 in the final October report.

The dollar's rise against the euro pressured gold prices. "We can continue to expect volatility for some time to come. I think the U.S. dollar very much is the driver still," said Darren Heathcote of Investec Australia in Sydney. The dollar has been rising since August when markets realised the financial crisis and economic slowdown would not be confined to the United States.

Weaker oil prices also pushed gold lower. U.S. crude futures for December were down 26 cents at $57.98 a barrel at 1117 GMT.

Gold has laboured to sustain the uptrend since hitting a two-month high of $931 in early October. Platinum traded at $831.00/851.00 from 821.50 an ounce. Prices of the metal used to make autocatalysts have plunged about 64 percent since a record high of $2,290 hit in March.

Johnson Matthey, the world's top platinum refiner and fabricator, will release its keenly awaited Interim Review on Tuesday. Palladium was at $214.00/222.00 from $210.00 on Thursday and silver at $9.30/9.38 from $9.38.

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