US & World Daily Markets Financial Briefing 18-03-2008

Welcome to the Investors Hub World Daily Markets Bulletin; your daily e-mail guide to important Domestic, European and Global market events. Market Briefing is here to keep you informed and up-to-date on key financial developments.

If you have forgotten your password, click here.

Dow jumps 270 ahead of expected rate cut

NEW YORK -  Wall Street barreled higher Tuesday as investors found relief in better-than-expected results from Lehman Brothers and Goldman Sachs, and anticipated a massive interest rate cut from the Federal Reserve. The Dow Jones industrial average surged more than 270 points.

Investors, while they've seen a number of huge advances amid the market's recent volatility, appeared considerably more upbeat than in the past few days. They're confident that when the Fed's meeting lets out at 2:15 p.m. EDT, it will reduce the key federal funds rate by a full point, bringing it to 2 percent. The central has shown it is trying everything in its power to revive the stagnant credit markets and rescue the financial industry from collapse -- it already relaxed its lending practices, and has backed JPMorgan Chase & Co.'s buyout of failing investment bank Bear Stearns Cos.

Quarterly results from two rivals of Bear Stearns -- Lehman Brothers Inc. and Goldman Sachs Group Inc. -- also gave some solace to a market fearful about investment banks weakening further from losing bets on mortgage-backed securities. Both Lehman and Goldman posted quarterly profits that were significantly lower than they were a year ago but higher than analysts predicted.

There had been particular concern about Lehman, considered the company most like Bear Stearns, and investors had sold off the company's stock on Monday. But Tuesday, Lehman shares spiked back up 33 percent, by $10.63 to $42.38. Goldman shares rose 12 percent, by $18.68 to $169.70, and Bear Stearns shares jumped as well, rising 40 percent, by $1.94 to $6.75.

There's no telling, however, how the market will react to the Fed's rate decision and accompanying economic statement. Anything less than a full-point cut could trigger frenetic selling, while anything more could rekindle the feeling that the credit markets and economy are in worse shape than Wall Street thought.

And meanwhile, the Fed's statement will be closely read for signs that the central bank is still willing to lower rates and come up with new ways to free up cash in the financial system. Many market watchers are unsure whether more rate cuts are going to be enough to give the markets and the economy the stimulus they need.

In late morning trading Tuesday, the Dow rose 270.45, or 2.26 percent, to 12,242.70. Broader stock indicators also surged. The Standard & Poor's 500 index rose 32.79, or 2.57 percent, to 1,309.39, and the Nasdaq composite index rose 49.79, or 2.29 percent, to 2,226.80.

A day earlier, the three major indexes finished widely mixed as investors sought the safety of blue chip stocks and abandoned companies viewed as riskier bets.

Bond prices fell as investors returned to stocks. The yield on the benchmark 10-year Treasury note, which move opposite its price, rose to 3.39 percent from 3.30 percent late Friday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude rose $1.51 to $107.19 a barrel on the New York Mercantile Exchange. After soaring Monday, JPMorgan rose another $1.59, or 3.9 percent, to $41.90 Tuesday. As of Monday's close, JPMorgan's buyout valued Bear Stearns at $2.21 a share, or $260.5 million.

The Fed on Sunday, in addition to guaranteeing up to $30 billion of Bear Stearn's most troubled assets for JPMorgan, lowered its discount rate -- the rate it charges banks directly -- by a quarter-point. It also is allowing more types of financial firms to borrow from the central bank, and is accepting more various types of collateral.

Wall Street was not concentrating on economic data with the Fed's rate decision on tap, but Tuesday's reports supported the notion that the economy is continuing to slide while costs are rising. The Commerce Department said home construction fell in February: housing starts fell 0.6 percent, while building permits plummeted 7.8 percent.

Meanwhile, the Labor Department reported a 0.3 percent rise in its Producer Price Index for February, in line with estimates, but the core PPI, which strips out food and energy prices, rose by a greater-than-expected 0.5 percent.

Stocks markets overseas rebounded from sharp drops a day earlier. Japan's Nikkei stock average bounced 1.50 percent, while Hong Kong's Hang Seng index rose 1.4 percent. In afternoon trading, Britain's FTSE 100 rose 2.75 percent, Germany's DAX index added 2.69 percent, and France's CAC-40 increased 2.49 percent.

Subscribers benefit from features such as: advanced search and reading functionality.
Click here for all the action.

Forex - Dollar steadies ahead of Fed's possible 100 basis point rate cut

LONDON - The dollar has held relatively steady above yesterday's lows but remains at the mercy of developments in financial markets ahead of this evening's expected 100 basis point interest rate cut by the US Federal Reserve.

Markets are now betting the Fed will cut interest rates by an unprecedented full percentage point following the collapse of Bear Stearns and the Fed's injection of liquidity into the money markets but there is a great deal of nervousness about the potential impact on financial markets if they fail to deliver.

Neil Mackinnon, chief economist at ECU Group, thinks dealing with the current financial crisis requires unique and elaborate responses, which could include nationalisations in the US, creative monetary policy measures from the Fed, such as buying mortgage-backed securities outright and coordinated intervention to halt the dollar's slide in currency markets.

"In the currency markets, the dollar is nearly down and out and the case for joint intervention is a very strong one," he said. "I don't think it's in the interest of the US Treasury or central banks generally for them to ignore the dollar... we are facing financial Armageddon if they don't put in place measures to stabilise financials, the US mortgage market and the dollar," Mackinnon added.

The last time the G7 group of leading industrial nations intervened was in 2000 when they joined together to prop up the fledgling euro. In the meantime, ahead of today's Fed decision at 6.15 pm, nerves have been steadied somewhat by better-than-expected financial results from Lehman Brothers and Goldman Sachs.

As a result, Wall Street is expected to open fairly solidly and that could set the dollar's tone, which has slumped to an all-time low against the euro of 1.5903 usd and a 12-year low of 95.72 yen. The pound, which is also on the retreat across a broad of currencies, is also back above 2.00 usd.

Today's US economic news would under normal circumstances likely have helped the dollar as both producer price and housing data were both better than expected. February's producer price index was up 0.3 pct, as anticipated, but the core rate jumped by 0.5 pct, thereby threatening the US inflation outlook.

Meanwhile, housing starts in the US fell by 0.6 pct to a 1.065 mln annual rate in February but the starting rate for January was much higher thanks to a generous upward revision. However, total permits fell by 7.8 pct, their largest one-month drop in 13 years and their ninth-straight monthly decline.

"At the end of the day, the FOMC decision and better than expected results from Goldman and Lehman are likely to carry a lot more weight in terms of trading sentiment," said Marc Ostwald, analyst at Insinger de Beaufort.

Elsewhere, the pound has recovered somewhat today against the euro after its huge falls yesterday which took the currency to a new record low against the single currency. The falls came after the Bank of England announced a 5 bln stg exceptional fine tuning operation in response to very tight conditions in money markets, as well as market fears that the UK could be badly exposed to the credit crisis.

Today's UK CPI news was in line with market expectations and likely to continue the hawks on the Bank of England's rate-setting body. The annual CPI inflation rate rose by 2.5 pct pct, above the 2.2 pct rate seen in January, and in line with analysts' expectations. It was the fastest rise since May last year.

For stock market quotes, company information, stock charts, historical quarterly reports and historical annual reports, click here

Euroshares bounce back in opening deals; all eyes on Fed rate decision

At 09.03 GMT, the DJ STOXX 50 was up 52.10 points or 1.81 pct at 2,925.43, while the DJ STOXX 600 added 4.91 points, or 1.69 pct to 295.17.  

In Europe, banks recovered a little from yesterday's 6 pct setback, with UBS adding 4 pct, Credit Suisse rising 3.3 pct and BNP Paribas gaining 2.2 pct.

Turning to European earnings news this morning, Metro AG shed 2.9 pct as investors expressed their disappointment with the retailer's outlook and its decision to wait for another two years before examining other options for its Real stores. Metro said it is considering all options if the unit fails to make a turn-around within two years. Analysts noted however that its full-year figures came in ahead of consensus.

Dutch peer Super de Boer rallied 4.5 pct higher following news that majority shareholder Casino has upped its stake to 57 pct from 51 pct, which triggered speculation that Super de Boer is the next target in the consolidation of the Dutch supermarket sector.

"There are two scenarios. Firstly, Casino is going to a 100 pct stake and trying to get full consolidation of Super de Boer and possibly going to do additional acquisitions as the Netherlands becomes a new focus area," Theodoor Gilissen analyst Jan Meijer said.

"Or the other scenario is that Casino will sell its entire stake to a consortium made up of CVC Capital Partners, Sligro or Jumbo," he added.

Meanwhile, TUI Travel added 3.08 pct this morning, after its first quarter results came in slightly ahead of expectations.

Elsewhere, Deutsche Telekom underperformed, up 0.2 pct, after three major rating agencies -- Moody's, Standard & Poor's and Fitch -- placed the company's ratings under review for a possible downgrade as a consequence of its plan to buy a stake in Greece's OTE.

Staying with M&A-related news, Alitalia fell another 16.9 pct this morning, although the shares were frequently suspended, while Air France-KLM gained 2.2 pct.

Last night, the Italian government approved the takeover of the ailing airline by its Franco-Dutch peer. Traders noted that Air France's bid came in well below market expectations.

Fast-loading, feature-rich and highly customizable interfaces for reading and posting messages. click here

Asian markets end mostly higher ahead of FOMC meet, Tokyo gains

The Nikkei 225 index closed up 1.5 percent at 11,964.16, while South Korea's KOSPI was up 0.9 percent at 1,588.75. The Taiwan benchmark was up 0.6 percent at 8,057.82 Hong Kong's Hang Seng Index closed up 1.4 percent at 21,384.61, while the Shanghai composite index ended lower by 3.96 percent at 3,668.90.

Worries over China's credit tightening measures also weighed on sentiment. Chinese Premier Wen Jiabao said rising prices and inflationary pressures are China's biggest problems, hinting that Beijing could be implementing more tightening measures.

"Investors seem anxious about China implementing more credit tightening measures," said Castor Pang, strategist at Sun Hung Kai Financial in Hong kong.

In Australia, the All Ordinaries index closed down 0.2 percent at 5,163.80 and the S&P/ASX 200 index was flat at 5,086.1. "We are seeing the resource sector coming under pressure, with virtually all the metal prices off quite sharply overnight, and that is a drag on our market overall," said Dominic Vaughan, a senior dealer at CMC Markets.

BHP Billiton fell 4.8 percent to 35.70 Australian dollars, while peer Rio Tinto was down 3.3 percent to 122.80 dollars. In Malaysia, the Kuala Lumpur Composite Index was up 0.2 percent at 1,180.02, while Singapore's Straits Times index closed up 1.5 pct at 2,833.58.

The Jakarta composite index closed up 1.2 percent at the day's high of 2,339.80, while the Philippine composite index closed 0.6 percent lower at 2,777.42. Taiwan's weighted index ended up 0.65 pct at 8,057.82.

In Hong Kong, Industrial and Commercial Bank of China, the nation's largest lender, rose 2.8 percent to 4.78 Hong Kong dollars and China Life Insurance Co, the mainland's biggest life insurer, gained 1.36 pct to end at 26.05 dollars. China Merchants Bank was flat at 2.140 Hong Kong dollars ahead of its 2007 results.

National Australia Bank was up 3.3 percent at 27.74 Australian dollars and ANZ Banking Group rose 2.2 percent to 21.00 dollars. Commonwealth Bank of Australia was up 0.6 percent at 37.57 dollars, while Westpac Banking was 0.8 percent higher at 22.48 dollars.

Australia's leading investment bank, Macquarie Group, rose 1.3 percent to 45.07 dollars, while the second largest, Babcock & Brown, added 3.6 percent at 12.70 dollars.

The Bombay Stock Exchange's 30-share Sensitive Index, or Sensex, edged up23.97 points or 0.16 pct at 14,833.46 off the day's high of 15,169.61 points while the broader 50-share S&P CNX Nifty of the National Stock Exchange closed 0.66 pct higher at 4,533 points.

The most traded market in the world; 24 hr market platform with the latest news, prices and charts gives you the knowledge to invest in this exciting and fast moving market.
Click here

Metals - Copper edges up as global equities recover ahead of Fed meeting

At 10.07 am, LME copper for three-month delivery was up at 8,115 usd a tonne against 8,051 usd at the close yesterday, when the metal dropped 3.7 pct on the day.

"The writing seems to be on the wall that the US financial system is in deep trouble, the economy is likely to slow further and contagion is more than likely going to unfold.

"Any pull back in commodities may be cushioned by ongoing (fund) diversification, but now is probably the time to start being more selective about which commodities to buy," said BaseMetals.com analyst William Adams.

Metals prices fell sharply yesterday, in line with steep declines in equity and commodity markets which were prompted by weekend news that the Federal Reserve, in an emergency move, had cut its discount rate by 25 basis points.

The discount rate is the rate at which the Fed lends to banks. Also weighing on markets yesterday was news that JP Morgan had bailed out its troubled rival Bear Stearns, agreeing to buy the bank for just 2 usd a share compared to the 70 usd it would have had to pay last week.

Markets are now on tenterhooks waiting for earnings reports later today from Lehman Brothers and Goldman Sachs. Should the banks too report huge losses, concerns over the fall out from the credit crunch will be re-ignited. "Things remains very uncertain, and we literally get the feeling that sentiment is changing on an hour-by-hour basis.

"If anything, the events of the past 24 hours have dispelled the notion that commodities are a safe haven in times of system-wide financial crisis, which is what we seem to be in right now," said MF Global analyst Ed Meir.

Prior to yesterday, commodities had been faring well as funds took the view that real assets like metals, gold and oil are a preferred investment in the current crisis, because they are unlikely to devalue as quickly as equities.

In other metals traded, nickel was up at 30,400 usd a tonne against 29,500 usd, recovering from yesterday's nearly 10 pct loss, while zinc rose to 2,490 usd against 2,478 usd.

Others were also higher, with aluminium up at 2,985 usd a tonne against 2,935 usd, tin climbing to 20,500 usd a tonne against 20,225 usd, and lead rising to 2,913 usd against 2,905 usd.

The latest streaming prices and news on major commodities from precious metals to crude oil, so you can keep up-to date and never miss a trading opportunity again.
Click here

Investors Hub Services