US & World Daily Markets Financial Briefing 20-08-2007

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Stocks waver as uncertainty remains

NEW YORK -  Wall Street wavered in early trading Monday as investors tried to assess whether the Federal Reserve will keep lowering interest rates.
   
Trading was expected to be uncertain after the market's big rally Friday in response to the Fed's lowering of its discount rate, the interest it charges on its loans to banks. The Fed said it would stand ready to make further moves to keep credit market losses from hurting the economy, but because it stopped short of a cut in the more important federal funds rate, uncertainty remained on Wall Street about the Fed's intentions. The Fed is not scheduled to meet formally until Sept. 18, and investors are expected to remain jittery until then.
   
Analysts also questioned how much conviction buyers had, as much of the previous session's rally was pinned on big institutional investors like hedge funds buying shares to cover their positions. Some investors had been shorting the market -- betting stocks would move lower -- and were caught off guard when the central bank cut the discount rate.
   
Right after the market opened, the Fed also announced it injected another $3.5 billion into the banking system. The central bank has infused the market with nearly $120 billion of liquidity since last week.
   
In the first hour of trading, the Dow Jones industrials rose 1.46, or 0.01 percent, to 13,080.54. Broader indexes were also higher. The Standard & Poor's 500 index fell 2.59, or 0.18 percent, to 1443.35; the Nasdaq composite index fell 1.37, or 0.20 percent, to 2,504.06.
   
Bonds, which have rallied in recent weeks as investors fled to safe-haven securities, continued to move higher. Yields on the benchmark 10-year Treasury bond fell to 4.66 percent from 4.68 late Friday.
   
Oil prices fell $1.12 to $70.86 in premarket trading on the New York Mercantile Exchange. Investors have been wary as Hurricane Dean heads toward Mexico, where major oil companies have already begun battening down oil rigs in the Gulf of Mexico.
   
This week will be light on economic reports, which makes it a bit more difficult for investors to assess what the Fed might do at its rate-setting meeting. The Conference Board on Monday will report on leading economic indicators. The index is expected to rise 0.3 percent for July, compared with June's 0.3 percent decline.
   
Also Monday, the Chicago Federal Reserve releases its July index on national business activity.
   
U.S. automobile makers moved higher after members of a union representing about 2,000 of auto parts maker Delphi Corp.'s hourly workers voted to ratify a new four-year contract with the auto parts supplier, the union said late Saturday. More cooperation between unions and automakers was seen as a positive, with Ford Motor Co. up 5 cents at $7.88 and General Motors Corp. up 45 cents at $31.01.
   
Lowe's Cos, the No. 2 U.S. home improvement chain, reported second-quarter profit surpassed Wall Street projections. The company said it will open 40 new stores during the current quarter, and believes sales will rise 6 percent for the year.
   
Positive results and outlooks from retailers could give Wall Street a better idea about consumer spending. Results will also give a better idea about the health of the housing industry. Lowe's shares rose $1.59, or 5.9 percent, at $28.46.
   
Nasdaq Stock Market Inc. rose 97 cents, or 3.1 percent, to $32.72 after the U.S. exchange said it will unload its 31 percent stake in the London Stock Exchange. The largest electronic exchange is now in the midst of fending off a rival bid from the Dubai bourse to acquire Nordic exchange operator OMX.

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FTSE 100 risers

Kazakhmys 1,182 up 57
Northern Rock 728-1/2 up 19
Antofagasta 674-1/2 up 30
Man Group 474-1/2 up 15-1/2
British Energy 450 up 18-1/2
Morrison 265-1/2 up 8-1/2
   
FTSE 100 fallers

Segro 514 down 13
British Land 1,225 down 16
Imperial Tobacco 2,137 down 23
Pearson 747 down 2
Tesco 401 down 2-1/2
Sainsbury 513 down 7-1/2
Barclays 627-1/2 down 12
BT Group 308-1/4 down 1/2

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Shares in Amsterdam were broadly higher around midday as US futures pointed up and investors engaged in bargain-hunting amid a string of recommendation upgrades, while Imtech surged on an upgrade from KBC.
   
At 12.45 pm, the AEX was up 7.60 points or 1.52 pct at 506.60, after opening at 503.85. Government bonds traded lower while the euro stood at 1.3494 usd versus 1.3489 usd late Friday.
   
Hagemeyer led blue chip gainers, adding 5.02 pct to 3.14 eur, amid bargain-hunting following steep losses last week and supported by an upgrade to 'hold' from 'reduce' at Rabo Securities. Nutreco lost 0.17 pct to 52.84 eur, CSM dropped 0.16 pct to 24.34 and Oce led decliners, losing 0.46 pct to 15.30 eur.

Milan shares were slightly higher midday with gains led by Alitalia and those shares, like Fiat and Finmeccanica, that have been most penalized over the past weeks and that failed to rebound on Friday. At 12.45 pm the Mibtel index was up 0.93 pct at 30,261 while the S&P/Mib gained 0.81 pct at 39,024 with turnover worth 2.451 bln eur.
   
Leading the index higher was Finmeccanica, gaining 3.10 pct at 19.88 eur on optimism that the defence company will receive new orders at the MAKS air show starting today in Moscow and after Societe Generale upgraded the stock to 'hold' from 'sell' with a 20 eur target.
   
Alitalia gained 2.31 pct at 0.8195 as there seems to be renewed interest in taking over the ailing airline after the first privatisation attempt fell through because of a lack of bidders. Fiat rose above the 18.0 eur psychological threshold; it was up 2.24 pct at 18.47 after having touched a new low for the year last week.
  
Paris shares were broadly higher at midday in a market buoyed by gains in New York and Asia after the US Federal Reserve sought to ease concerns about credit with its discount rate cut Friday. At 12.42 pm, the CAC-40 index was up 64.11 points or 1.20 pct at 5,427.74. There were 36 stocks up and four down.
          
IT services company Capgemini was up 1.46 eur or 3.35 pct at 45.08, while Vallourec was up 5.31 eur or 3.03 pct at 180.50 and ArcelorMittal was up 1.31 eur or 3.28 pct at 41.22.
   
Swiss shares were higher in early afternoon trade as US futures point to further tentative gains on early Wall Street trade. At 12.30 pm, the Swiss Market Index was 44.98 points higher at 8,588.01, while the Swiss Performance Index was 44.2 points up at 6,980.6.
   
Credit Suisse was the market's sharpest faller, dropping 0.80 sfr or 1 pct to 79.05, while UBS traded flat at 63.10 sfr. Other financials also slightly underperformed the general market with Swiss Re inching 0.30 sfr higher to 98.85, Baloise adding 0.40 sfr to 107.30 and Swiss Life climbing 2.25 sfr to 272.00.
   
ABB led the market, up 0.70 sfr at 26.70, after the group said it has won a 140 mln usd contract from Qatalum, a joint venture between Qatar Petroleum and Norway's Hydro Aluminium, to construct the world's largest aluminium plant built in one phase.

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Tokyo shares prices closed sharply higher Monday, tracking a rebound on Wall Street Friday after the US Federal Reserve cut its discount rate by 50 basis points to 5.75 pct in a move to stabilize financial markets that have been weakened by a widening credit crisis.
   
The Nikkei 225 Stock Average closed up 458.80 points or 3 pct at 15,732.48, off a high of 15,940.61. It was the index's biggest single day points rise since June 2006. The broader TOPIX index ended up 43.18 points or 2.9 pct at 1,523.57.   

China A-shares closed at a record high as global stocks rebounded. The benchmark Shanghai Composite Index, which covers both A- and B-shares listed on the Shanghai Stock Exchange, closed up 248.28 points or 5.3 pct at a record 4,904.86.
   
The Shanghai A-share Index was up 206.82 points or 5.3 pct at 5,149.24 and the Shenzhen A-share Index was up 61.41 points or 4.5 pct at 1,423.36. The Shanghai B-share Index rose 14.47 points or 4.8 pct to 314.34, while the Shenzhen B-share Index closed up 36.70 points or 5.5 pct at 707.86.

Shares prices in Seoul ended higher with the main KOSPI index making its biggest-ever single day gain on a recovery in the broader Asian market.The KOSPI index closed 93.2 points or 5.7 pct higher at 1,731.27.

Australian shares prices closed higher, with the S&P/ASX 200 index up 261.6 points or 4.6 pct at its high for the day of 5,932.6. The All Ordinaries index closed up 256.2 points or 4.5 pct at 5,926.5.

Shares in Taipei closed higher here as well. The weighted index closed up 425.31 points or 5.3 pct at 8,515.60.
 
Indian shares closed stronger, but off intraday highs, as a motley mix of reasons -- political and economic -- weighed on domestic sentiment. The Bombay Stock Exchange's benchmark Sensex rose 2.02 pct, or 286.03 points, to 14,427.55, while the National Stock Exchange's S&P CNX Nifty was up 2.46 pct at 4,209.05 points.
   
The Sensex had attained a high of 14,680.09, a gain of 3.8 pct, in early trades. Among the BSE 30, 25 shares gained and 5 lost. In the broader market, 1,925 shares advanced, 792 retreated and 46 were unchanged.

Indonesian shares closed sharply higher Monday in line with the strong rebound on regional markets after the US Federal Reserve cut its discount rate on loans to banks by a half percentage point Friday to
help stabilize financial markets.
   
The composite index closed up 132.95 points or 7.0 percent at 2,041.58 on volume of 4.47 billion shares worth 4.71 trillion rupiah. Last week, the index plunged 13.5 percent or 298.76 points. The LQ45 index rose 29.59 points to 423.56. Gainers led losers 220 to 13, while 9 stocks were unchanged. The rupiah was trading at 9,390/9,395 against the US dollar compared to 9,460/9,470 late Thursday.

Malaysian share prices closed sharply higher Monday with the benchmark composite index rising by more than four percent as the US Federal Reserve's surprise move to lower the rate it lends to banks led to hopes it will cut its key fed funds rate.
   
The Kuala Lumpur Composite Index (KLCI) closed up 51.84 points or 4.4 percent at 1,243.39. The FTSE Bursa Malaysia 30-large cap index gained 291.79 points or 3.8 percent to 7,957.41 and the second board index added 5.31 points or 5.6 percent to 100.17.
  
The Straits Times index of Singapore was up 191.67 points or 6.1 percent at 3,322.38. The index has already recovered more than half of last week's losses but it is still down around 9.9 percent from the all-time high of 3,688.58 reached on July 16.

The Hang Seng Index in Hong Kong closed up 1,208.50 points or 5.93 pct 21,595.63, off a low of 20,901.64 and high of 21,608.34. Today's performance marks the index's single-biggest one-day points gain since Feb 2, 1998, when it closed up 1,326 points.  Turnover was 105.33 bln hkd.

New Zealand share prices closed sharply higher on Monday, with investors taking their cue from a strong
rebound on Wall Street Friday and hefty gains on Asian markets today. The benchmark NZSX-50 index finished up 88.03 points, or 2.26 percent, at 3,982.38 on turnover worth 116.4 million New Zealand dollars.

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Coffee continues to rebound amid global market recovery

LONDON - Coffee continued to rebound from last week's losses, buoyed by recovering global markets following the Federal Reserve's decision to cut the discount rate on Friday.
  
Commodity prices had been lower across the complex last week, with coffee posting losses for four consecutive days, as investor confidence was roiled by fears of a global credit crunch in the wake of the US subprime crisis.
   
However, markets have rebounded since the Fed's decision to cut 50 basis points from the rate at which it lends to banks, easing the liquidity problems which had rocked stocks worldwide.
   
Coffee has risen alongside other commodities, as supply concerns remain over falling exports from Brazil.
   
"London is more stable this morning after a four day plunge," said analysts. "We are entering a new week in hopes of lower volatility in the coffee pit."
   
At 2.17 pm, coffee for September delivery was up at 1,678 usd on the Euronext Liffe from 1,654 usd at the previous close.
   
Coffee prices are supported by predictions for declining output next year, heightening supply concerns. Worldwide output will fall by 7.8 pct next year, with an estimated 24 pct fall in Brazilian production, the International Coffee Organization said in a report on August 7.
   
In other soft commodities traded on the Liffe exchange, cocoa for September delivery was down slightly at 924 usd from 926 usd, while No 5 sugar for October delivery was up at 282.3 usd from 281.8 usd.

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