US & World Daily Markets Financial Briefing 16-01-2008

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

Stocks trade mixed after Intel shortfall

NEW YORK  - Stocks were mixed in early trading Wednesday after technology leader Intel Corp. announced disappointing earnings but JPMorgan Chase & Co. offered some relief for investors concerned about the health of banks.

The market was edgy, particularly after a plunge Tuesday that took the Dow Jones industrials down nearly 280 points. Investor patience has been tested by economists' predictions that a recession is at hand and by unsteadiness in the financial sector, where many banks are struggling to restore damaged balance sheets.

Intel's failure to meet earnings and revenue forecasts for the fourth quarter and new first-quarter revenue guidance that is at the low end of analysts' forecasts weighed on technology shares. Earlier this week there was market speculation that the technology sector, which sometimes benefits from a weak dollar and overseas strength, might be able to withstand the weakness sweeping other parts of the economy.

The technology sector saw some cheer Wednesday, thanks to Oracle Corp.'s deal to buy BEA Systems Inc. for about $7.85 billion. Last year BEA rejected a less expensive bid from Oracle, which raised its offer but not to the level sought by BEA.

JPMorgan Chase offered a first-quarter earnings report that revealed relatively light exposure to the subprime lending crisis as it booked a write-down of $1.3 billion, which was smaller than the massive losses of peers like Citigroup Inc. The company had a quarterly profit that fell below analysts' expectations.

In the first hour of trading, the Dow rose 37.31, or 0.30 percent, to 12,538.42. Broader stock indicators were narrowly mixed. The Standard & Poor's 500 index rose 3.60, or 0.26 percent, to 1,384.55, and the tech-dominated Nasdaq composite index fell 7.12, or 0.29 percent, to 2,410.47, reflecting investors' unease about Intel.

The Labor Department reported that consumer prices in December showed an increase of 0.3 percent for the headline figure and a 0.2 percent advance for the core rate, which strips out often-volatile food and energy prices. Both figures had been expected to rise by 0.2 percent, according to Thomson/IFR.

The Federal Reserve, in setting monetary policy, is known to pay closer attention to the core rate. In any case, investors appear more worried about the prospect of slower growth than that of higher inflation. In addition, Fed Chairman Ben Bernanke already has sent strong signals that another rate cut is on the way this month. The Fed's next monetary policy meeting is Jan. 29-30, and some investors are calling for a rate cut before then.

The Fed also said output at the nation's factories, mines and utilities showed no growth in December. Wall Street had expected industrial production to show a 0.2 percent decline in output, after a 0.3 percent November gain.

In overseas trade, Japan's Nikkei gave up 3.35 percent. In afternoon trading, London's FTSE 100 fell 0.21 percent, Frankfurt's DAX fell 0.38 percent and Paris' CAC rose 0.40 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 - Dollar regains composure, yen continues to soar on negative sentiment

LONDON  - The dollar regained some composure after recent heavy losses, amid speculation of aggressive US rate cuts, while the yen continued to soar, buoyed by negative market sentiment.

"Unlike in Monday when the dollar fell across the board due to the possibility of an inter-meeting rate cut of 50 basis points this week, the current currency dynamics see the dollar rally against most currencies while continuing its damage against the yen," said Ashraf Laidi at CMC Markets.

Market speculation that the Federal Reserve could cut US interest rates by as much as 75 basis points this month -- including the possibility of a move ahead of its scheduled Jan 29/30 meeting -- had caused a dollar rout, but the US currency is now recovering somewhat thanks to negative sentiment.

TICS investment flow data today, for example, may well show US investors bringing their money back home as the global economic outlook worsens -- a trend that would strengthen the dollar. "Signs that the recent volatility in global asset markets is triggering repatriation will underline the potential for the dollar to rebound against the high yielders and commodity currencies," said BNP Paribas analysts.

Also out today are US consumer inflation and industrial production figures, both of which will offer further insight into the likelihood of Fed cuts. Meanwhile, the yen continued its surge thanks to risk aversion that is hitting high yielders and commodity currencies, striking new two-and-a-half-year highs against the dollar but also making headway across the board.

The Swiss franc also strengthened. Like the yen, the franc has suffered for years under carry trades, a risky one-way currency bet that depends on bullish market sentiment. "Low yielders have been the star performers, with both the yen and Swiss franc making broad based gains," said BNP Paribas analysts.

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

Euroshares extend losses midday, Wall St seen down, banks & metals suffer

At 12.39 pm, the STOXX 50 was 28.72 points or 0.83 pct lower at 3,430.05, while the STOXX 600 lost 3.75 points or 1.12 pct to 332.19. Looking ahead, Wall Street is set for a second day of losses with IG Index expecting the DJIA to open some 87 points lower at 12,414.

In focus overseas, JP Morgan just announced fourth quarter earnings, which presented weaker-than-expected earnings per share at 0.86 usd versus the 0.92 usd seen by analysts. The investment bank said it remains "extremely cautious" for the year 2008, and said provisions for credit losses increased to 2.54 bln usd from 1.13 bln usd.

The banking industry in Europe gave up an aggregate 2 pct today with Credit Suisse down 5.62 pct, UBS trading 3.74 pct lower and Fortis losing 3.63 pct. Rio Tinto was off 4.4 pct. Other major fallers include Voest-alpine, off 8.40 pct and Xstrata down 3.89 pct. Over in Spain, renewable energy companies were in focus after a report that the government is mulling a property tax on their installations.

Shares in Acciona SA fell 4.72 pct, Iberdrola Renovables SA lost 2.90 pct and Gamesa dropped 3 pct. In other news, Accor shares fell 2.89 pct as its upbeat fourth-quarter sales report was somewhat tempered by analyst concern over the outlook for its US hotel business.

"At this stage, no slowdown is discernable at Accor in Q4," said analysts at Oddo Securities. "Nevertheless, the US market was stagnant in December and we are convinced that a slowdown will subsequently be felt in Europe."

Dresdner Kleinwort also downgraded the hotel group to 'hold' from 'add' and cut its price target to 54 eur. Staying with earnings news, Swiss SGS turned sharply higher, up 5.6 pct, after the group presented largely better-than-expected full-year earnings results.

SGS also showed some optimism for 2008 and said it expects sales growth of at least 10 pct and has also set itself a fresh mid-term earnings per share target of 105 sfr by 2011.

And regarding M&A chatter, Pfleiderer is in focus following a report in Financial Ties Deutschland, which suggests that management has been in talks with private equity companies One Equity Partners and Allianz Capital Partners to sell the business, possibly fetching a price of more than 1.5 bln eur. Shares in the MDAX-listed group rose 7.67 pct.

Click here to receive ADVFN's Weekly Forex Currency Review on US Dollar, Euro, Japanese Yen, British Pound, Swiss Franc, Australian Dollar, Canadian Dollar, Indian Rupee and the Hong Kong Dollar.

Asian shares tumble with Wall Street as US recession fears grow

The Hang Seng led the rout, shedding 5.4 pct to 24,450.85 points. The Nikkei closed down 3.4 pct at 13,504.51, its lowest level since October 2005 with a strong yen adding to the downdraft. The yen hit a two-year high against the dollar, with the greenback quoted at 105.94.  The broader Topix eased 3.5 pct to 1,302.37.

The S&P/ASX 200 finished down 2.5 pct at 5,809.7 and the All Ordinaries was down 2.5 pct at 5,870.8, closing the red for an eighth straight day.

"There's no question that the bears are holding sway at the moment. Eventually the quality stocks that have been unfairly (oversold) will bounce back but it's just a question of when," said Joe Youssef, a private client advisor at Macquarie Wealth Management.

The South Korean KOSPI lost 2.4 pct to 1,704.97. The Shanghai Composite was down 2.8 pct at 5,290.61 and the Singapore Straits Times fell 3.1 pct to 3,058.49.

The Philippine Composite closed down 2.8 pct at 3,351.66, while Taiwan's weighted index closed down 3 pct at 8,179.54. The Jakarta index fell 5 pct at 2,592.31. Malaysia's Kuala Lumpur Composite Index closed down 3.5 pct at 1,453.66. Citi, Intel spook investors

Taiwan Semiconductor Manufacturing Co closed down 3.7 pct at 55.40 twd, United Microelectronics shed 4.4 pct to 18.45 twd. Samsung Electronics finished down a more modest 0.4 pct in Seoul to 530,000 won as investors bet that its weaker rivals will cut production or delay investment in one of the worst memory chip industry cycles.

The Bombay Stock Exchange's 30-share Sensex shed 382.98 points or 1.89 pct to close at 19,868.11, its first sub-20,000 close since Dec 24. It recovered from the day's low of 19,513.25 points. The National Stock Exchange's 50-share S&P CNX Nifty fell 138.50 points or 2.28 pct to 5,935.75, its first sub-6,000 close since December 24.

Among the 30 blue-chips, 24 losers outshone 6 gainers. HDFC Bank Ltd declined the most, losing 6.12 pct to 1,675.85 rupees. India's largest private-sector lender ICICI Bank Ltd recovered in the last hour from the day's low of 1,310.90 rupees, to gain the most among the blue-chips, up 1.32 pct to 1,369.20 rupees.

Anil Ambani-controlled Reliance Energy Ltd, which owns 50 pct of Reliance Power, extended losses closing down 4.14 pct to 2,266.60 rupees. The share has declined more than 11 pct since Jan 9.

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

Oil falls towards 90 usd on US recession fears, hopes OPEC will up production

LONDON - Oil fell further towards 90 usd as fears the US economy is heading for a recession dominated the demand outlook, with the International Energy Agency revising its 2008 forecast lower in light of the slowdown.

Hopes OPEC will boost production when it meets on Feb 1 in Vienna have also been bolstered by comments from US President George Bush following his meeting with King Abdullah of Saudi Arabia yesterday, the cartel's titular political head.

At 12.58 pm, New York's WTI crude for February delivery was down 1.07 usd at 90.83 usd per barrel, some 9 usd away from its all-time high above 100 usd hit in the first week of the new year. London's Brent crude for February delivery was down 1.01 usd at 89.97 usd per barrel.

"We have been arguing for some time now that contraction in US growth will be a key factor that could undermine energy prices, as 'demand destruction' usually is not far behind," said MF Global analyst Ed Meir. "Although actual US demand figures have yet to show any signs of buckling, prices are nevertheless moving lower, in anticipation of such an eventuality."

In its January monthly report, the IEA said its full-year demand growth forecast has been revised downward by some 130,000 bpd.

World demand is expected to average 87.8 mln bpd in 2008, largely unchanged from last month's report, it added. But the oil product demand outlook for the OECD countries has been revised down by 83,000 bpd for 2008.

"The 2008 forecast, however, may be further revised if forthcoming assessments from the IMF and the OECD point to a weaker-than-expected outlook for the US economy, which may be only partly offset by strong GDP growth in the Middle East and China," said the IEA.

Slowing economic growth in the US has repeatedly been identified by analysts as likely to exert pressure on demand, and therefore on price.

Earlier, White House spokeswoman Dana Perino confirmed Bush had raised the issue of high oil prices and the damaging effect on the US economy with King Abdullah in Saudi Arabia yesterday, as the US president arrived in Egypt for the final leg of his Middle East tour.

"The president said there's a hope that as a result of these conversations that OPEC would be encouraged to authorise an increase in production," she said. As the world's largest oil producer and the most powerful member of the cartel, Saudi Arabia carries significant clout within OPEC.

But OPEC Secretary General Abdallah el-Badri reiterated today the cartel will only pump more oil if it sees a shortage in the market. "Let me be clear -- the high prices which we are witnessing are not because of any shortage of crude oil in the market," he said in a statement emailed to Agence France-Presse.

OPEC has consistently blamed oil's rally on historical highs on market speculation, geopolitical tensions and ageing US refining capacity rather than on supply shortages. King Abdullah has also previously played down the extent of the recent price surge, arguing at the OPEC Heads of State summit in November last year prices are little higher than they were in the 1980s, taking inflation into account.

With prices currently declining, a lower demand outlook and continued dollar weakness hitting member oil revenues and currency reserves, the cartel may be loathe to raise output despite the risk high oil prices could tip the US economy into recession. Later today, market players will be watching the weekly US stockpile report from the Energy Information Administration, due out at 3.30 pm GMT.

Analysts polled by Thomson Financial News are tipping crude oil inventories to have risen by 1.3 mln barrels, which would be the first stock build in nine weeks. Distillate stocks and gasoline are also expected to have risen by 960,000 and 2.1 mln barrels respectively. Prices could be pressured lower if the market sees recent supply tightness easing.

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.