US & World Daily Markets Financial Briefing 18-09-2008

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NEW YORK - U.S. stocks opened higher on Thursday, helped by a coordinated push by the world's leading central banks to pump billion of dollars into global financial markets to thaw the credit freeze.

Even so, investors were likely to tread cautiously amid talks of possible mergers and while the financial sector looks for ways to stabilize after the demise of Lehman Brothers and bailout of American International Group.

The Dow Jones industrial average .DJI was up 142.08 points, or 1.34 percent, at 10,751.74. The Standard & Poor's 500 Index .SPX was up 17.43 points, or 1.51 percent, at 1,173.82. The Nasdaq Composite Index .IXIC was up 45.69 points, or 2.18 percent, at 2,144.54.

U.S. jobless claims rise on delayed Gustav data

WASHINGTON - The number of U.S. workers filing new claims for jobless benefits rose unexpectedly by 10,000 last week, as the first wave of job losses from Hurricane Gustav rolled in after reporting delays in Louisiana, the Labor Department reported on Thursday.
       
Initial claims for state unemployment insurance benefits rose to a seasonally adjusted 455,000 during the week ended Sept. 13 from 445,000 the prior week. Analysts polled by Reuters had forecast claims to drop to 440,000 last week.
       
Meanwhile, the number of continued claims - people remaining on benefit rolls after drawing an initial week of aid - unexpectedly fell by 55,000 to 3.48 million in the week ended Sept. 6, the most recent week for which that data is available, after an increase of 129,000 the prior week.
      
Analysts had expected continued claims to be almost unchanged from 3.53 million in the week ended Aug. 30, which was the highest reading since October 2003.

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FOREX-Dlr falls as financial worry deepens; c.banks act

LONDON - The dollar hit a three-week low  against a basket of currencies and dropped sharply against the
euro on Thursday, as investors shone a spotlight on U.S. financial sector health and jammed-up money markets.
   
Underscoring the seriousness of the situation in  bank-to-bank lending, major central banks moved in coordinated  fashion to inject dollar liquidity. Anxiety about the banking sector deepened this week after
the collapse of Lehman Brothers, while the bailout of U.S.  insurer AIG failed to stem a crisis of confidence as  financial institutions ran scared of lending to one another.
   
"There's general nervousness on the U.S. financial sector as  investors have become very much more concerned on the  U.S.-centric leg of the downturn. It's tough to stand in the way  of a dollar retracement until some degree of stability emerges,"  Rabobank markets strategist Jeremy Stretch said.
   
The U.S. Federal Reserve and the world's top central banks  offered to pump billions of dollars into global money markets to  ease funding pressure.  "Risk aversion has been increasing and riskier currencies
have tended to fall, but that trade seems to be softening a  little now (after the central bank moves)," Westpac economist  James Shugg said.
   
The central bank action helped ease deadlock at the short  end of interbank lending markets, with the London interbank  offered rate (Libor) for overnight U.S. dollars sliding sharply  to 3.84375 percent on Thursday from 5.03125 percent on  Wednesday. That's still almost 2 full percentage points above
the Fed's 2 percent target rate.
    
At 1125 GMT, the dollar index, which tracks the  currency's performance against six major currencies, was down  0.9 percent at 77.512, having earlier hit a three week low at  77.260.
  
The euro jumped 1.25 percent to $1.4478 and 1.4  percent against the yen to 151.50 yen. The dollar was
up 0.25 percent at 104.40 yen.  High-yielding currencies such as the Australian and New  Zealand dollars also benefitted, with the Aussie dollar climbing  2.5 percent to US$0.8059.
 
Sterling added 0.6 percent to $1.8256, firming after  British bank Lloyds TSB sealed a 12.2 billion pound  ($21.7 billion) deal to buy HBOS Plc and following data  showing an unexpected 1.2 percent jump in British retail sales  in August.
   
But fear about what the next item of bad news will be and  uncertainty about how to interpret recent developments continue  to dominate trading.
   
"No one is taking more than a 10 minute view on anything at  the moment, and liquidity is as bad as I've ever seen it," a  trader said. Underlining a high sense of unease amongst investors, gold  -- often viewed as a classic safe-haven in times of extreme  economic stress -- put in a stellar performance.
   
Spot gold traded as high as $892.10, after rising $90  an ounce on Wednesday in its biggest one day dollar rise in  history.
   
"What is left for people to put their money in?" said Afshin  Nabavi, head of bullion trading at MKS Finance. "They can't  trust the banks, they can't trust insurance companies, they  can't trust the stock markets."
   
U.S. data later in the day was set to offer little  respite with the Philadelphia Fed survey for September expected  to have rebounded from -12.7 to a still recessionary -10.0,  while leading indicators for Aug are expected to have fallen 0.2  percent month-on-month.

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FTSE up as central bank action, HBOS settle nerves

LONDON - Britain's top share index gained 1.9 percent by midday on Thursday, led by financials as major central banks poured in billions of dollars to boost liquidity and Lloyds TSB sealed a deal to buy HBOS.

By 1058 GMT, the FTSE 100 .FTSE was up 87.4 points at 4,999.7 but remained volatile, having bounced from a low of 4,883.3.

The UK benchmark lost 2.3 percent in highly volatile trading on Wednesday, and is down 7.8 percent on the week, the biggest fall since July 2002.

The turmoil in the markets prompted the Federal Reserve and other central banks to pump billions of dollars into the global money markets in a coordinated effort to ease a funding squeeze.

The move allayed some of the fears on the health of the global financial system that has seen traumatised investors dump shares.

"We've had a week of markets plunging, and there's been good news at a time when the market has been oversold," said Mike Lenhoff, chief strategist at Brewin Dolphin.

Lloyds TSB sealed a 12.2 billion pound ($21.7 billion) deal to buy HBOS, Britain's largest mortgage bank, to create a dominant mortgage and savings provider.

The deal lifted sentiment in a banking sector that has been battered by the financial crisis which has seen the demise of Lehman Brothers LEH.L this week.

HBOS gained 51 percent on the takeover by Lloyds TSB, which fell 4.7 percent. Other banking stocks gained with Barclays up 4.6 percent and Royal Bank of Scotland up 7.6 percent.

HSBC rose 1.9 percent. The bank was cited as a possible buyer of U.S. investment bank Morgan Stanley  by broadcaster CNBC but a person familiar with the matter said on Thursday HSBC was not interested.

Other financial stocks also gained, with London Stock Exchange adding 13.1 percent. Traders cited increased volumes and talk that rival platform Turquoise may suffer as a result of its backing by embattled investment banks.

Insurers Prudential and Aviva gained as The Times said the UK firm's were among a handful of European insurers expected to be front-runners in a multibillion-dollar auction of stricken insurer AIG's prime assets. Prudential was up 4.3 percent while Aviva gained 5.9 percent.

Miners benefited from stronger metals prices as a slight return to risk appetite boosted global demand. Anglo American was up 6.4 percent, Lonmin was up 3.8 percent and Rio Tinto gained 4.0 percent.

Similarly, energy stocks gained as crude oil CLc1 gained nearly $2 to trade around $99.00. BP added 2.5 percent, Royal Dutch Shell rose 2.8 percent and BG Group climbed 3.7 percent. Summer promotions and back-to-school shopping gave retail sales an unexpected boost in August.

Kingfisher gained 9.3 percent as Europe's biggest home improvements retailer beat first-half profit forecasts and said cost cuts would help it cope with very tough trading conditions. Enterprise Inns was up 13.8 percent after Goldman Sachs removed the company from its pan-Europe sell list.

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Asian stock market summary

JAPAN
The Nikkei average shed 260.49 points to a three-year closing low of 11,489.30, dragged down by financial shares on renewed credit fears, as major U.S. banks scrambled for merger partners.

SOUTH KOREA
The Korea Composite Stock Price Index closed 2.3 percent lower at 1,392.42, recovering slightly from losses of over 4 percent in the session, after U.S. shares dived on persistent financial fears and sent Asian indexes sharply lower.
   
The slide came despite the announcement on Thursday that South Korea had been upgraded to "developed market" status by the FTSE Group.

AUSTRALIA
The benchmark S&P/ASX 200 index gave up 114.9 points to end at 4,607.3, as investors shunned financial stocks on concerns about who could be the next victim of the global credit crisis and piled into gold miners.

CHINA
The benchmark Shanghai Composite Index closed down 1.72 percent at 1,895.84, as the U.S. financial sector chaos continued to weigh on global markets, although the key index was off its lows, even turning briefly positive late the session after a technical rebound in bank stocks.
   
The Shanghai A-share Index was down 1.71 percent at 1,990.90, and the Shenzhen A-share Index fell 2.27 percent to 574.34.
   
The Shanghai B-share Index fell 3.96 percent to 110.72, and the Shenzhen B-share Index was down 3.46 percent at 285.11.

TAIWAN
The weighted index closed down 2.74 percent at 5,641.95, as the U.S. government's bailout of American Internatinal Group Inc.(AIG) failed to restore confidence in the financial system and the Taiwan dollar's weakness aggravated fears of foreign capital flight.
   
Financials took a beating, with the sectoral index tumbling more than 6 percent, but the benchmark index came off the day's worst levels on apparent support from government-related funds.

HONG KONG
The Hang Seng index closed down 4.73 points at 17,632.46, off a low of 16,283.72 and high of 17,849.97.

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