US & World Daily Markets Financial Briefing 21-11-2008

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U.S. stocks rose on Friday as investors snapped up energy and other beaten-down sectors after Wall Street's two-day slide to an 11-year low on deepening economic fears.

But even with the search for bargains, fresh worry about the future of embattled No. 2 U.S. bank Citigroup kept a lid on gains, with the stock down more than 22 percent.

"The movement is not likely fundamentally driven, just a function of the extreme weakness in the performance and valuation as a result of the carnage the past couple of days," said Dean Gulis, vice president at Loomis Sayles & Co in Pontiac, Michigan.

The Dow Jones industrial average climbed 35.60 points, or 0.47 percent, to 7,587.89. The Standard & Poor's 500 Index gained 4.50 points, or 0.60 percent, to 756.94. The Nasdaq Composite Index rose 8.03 points, or 0.61 percent, to 1,324.15.

Citigroup shares sunk to $3.63 on the New York Stock Exchange following news reports that the company is considering selling pieces of its business or the entire company outright.

Investors remained jittery about the economy after Goldman Sachs forecast the economy would contract by 5 percent at an annual rate in the current quarter and the unemployment rate soar to 9 percent by late 2009 from 6.5 percent in October.

On the bright side, shares of Exxon Mobil Corp , up almost 3 percent, ranked as a top boost to the Dow, countering a drag from Citigroup and JPMorgan, whose stock fell more than 10 percent to $20.81.

Shares of Wal-Mart Stores Inc rose 0.4 percent to $550.81 after the world's largest retailer said Lee Scott was retiring as chief executive and named Mike Duke, who heads Wal-Mart's international operations, as successor.

Investors were cautious as concerns about the failure of U.S. automakers, including General Motors Corp.

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The dollar and the yen fell sharply against higher-yielding currencies on Friday as a rebound in global stocks from the previous day's rout prompted some investors to creep back into riskier assets.

European shares managed to stay in positive territory, taking a lead from gains in Asian stocks, while talk that beleaguered U.S. bank Citigroup could explore a merger deal helped to quell Thursday's extreme risk aversion.

Analysts said Friday's move was a correction of yen- and dollar-buying earlier in the week, when investors dumped risky assets, including those in euros, sterling and the Australian and New Zealand dollars, on concerns about a global recession and the ongoing financial crisis.

"It's a 'three steps back, one step forward' move today," said Geoffrey Yu, currency strategist at UBS in London, adding that traders were adjusting positions in higher yielders following three days of heavy selling.

"The market is trying to be optimistic, but not get carried away."

Despite a slight lift in risk aversion, market participants pointed out that surprisingly weak purchasing managers indices from the euro zone on Friday offered a reminder that the euro zone's recession may be more severe than thought.

The euro traded 1.0 percent higher at $1.2589 by 1218 GMT, after climbing as high as $1.2624 in early trade. The euro was boosted by a 0.6 percent rise in European shares, while U.S. stock futures pointed to a higher market open.

Stocks rebounded, as investors were cautiously optimistic that Citigroup, which has lost half of its market value this week, is weighing various options including selling part of the company or merging with another firm

Worries about the future of Citigroup on Thursday helped to push the S&P 500 index to its lowest point since 1997.
The euro climbed nearly 2 percent against the yen to 119.40 yen, bouncing back from a three-week low around 116.45 yen hit according to Reuters data in Asia very early in the day.

The dollar was up 0.8 percent on the day at 94.82 yen , recovering from a three-week low of 93.55 yen struck early in Asia.

The yen was on the back foot after investors took comments from Japanese Finance Minister Shoichi Nakagawa that authorities must be ready to deal with big market swings as a reminder that Japan will step in to stem the yen's rise if needed.

There was little reaction to the Bank of Japan's widely expected move to hold rates at 0.30 percent.

The Australian and New Zealand dollars were both up roughly 2 percent against the greenback and 3 percent versus the yen, while sterling jumped as much as around 2 percent to a session high of $1.5060.

The Swiss franc remained under pressure a day after the Swiss National Bank stunned markets with a surprise interest rate cut of 100 basis points. The dollar rose as high as 1.2298 francs, its strongest level since June 2007.

The economic fragility that prompted the SNB's aggressive move was also highlighted on Friday by a report that showed euro zone manufacturing and service sectors contracting much more quickly and deeply than expected in November.

The flash purchasing managers' indices tumbled to record lows and also showed that inflationary pressures in the 15-nation currency bloc were fading fast..

The weaker-than-expected PMI survey "likely will feed the recession fears gripping markets and pose more downside for risk assets," JP Morgan currency strategists said in a note.

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Shares in Rensburg Sheppards fall 6.2 percent as Numis cuts its forecasts for next year and the year after in spite of better-than-expected first half results as weak equity markets drive down funds under management.

The broker increases its pretax profit forecast for the current year to end-March 2009 by 2.1 percent, while lowering that for the year to end-March 2010 by 12.4 percent, and for the year to end-March 2011, by 14.4 percent.

The broker cuts its target - price to 567 pence from 628 pence to reflect its forecast downgrades, but keeps its "buy" recommendation on the stock.

European stocks stay in red as U.S. shares gain ground in early trade on Wall Street, as investors start to look for bargains after recent hefty losses.

At 1438 GMT, the FTSEurofirst 300 index of top European shares is down 0.4 percent at 777.66 points.

Pharma shares are among the biggest losers in Europe, with Novartis down 5.8 percent and Sanofi-Aventis down 6.7 percent.

UK Small Caps gain 0.1 percent

The FTSE Small Cap index gains 0.1 percent, while the blue chips fall 0.1 percent, and the mid caps add 0.9 percent.

The FTSE Developed European Small Cap index climbs 1.2 percent, while the FTSEurofirst 300 sheds 0.4 percent.

Lo-Q jumps 20.6 percent as the virtual queuing technology company says it expects results for the year ending Dec. 31 to be significantly ahead of market expectations, with Arbuthnot Securities reiterating its "strong-buy" recommendation on the company.

Woolworths tumbles 40 percent as concerns mount regarding the troubled retailer's future, with Altium Securities cutting its rating to "sell" from "buy" on the grounds that the firm won't find a buyer.

Flughafen Wien rises on capex cuts, valuation
Shares in Vienna airport operator Flughafen Wien rise as much as 13.5 percent to a high of 29.50 euros after the company says that it is reviewing its capex plans and may put off for several years plans to build a third runway.

Analysts also say that the share has fallen by so much more than rivals including Fraport or Flughafen Zurich this year that its valuation is now attractive.

Vodafone falls, ABN Amro cautious on stock

Shares in Vodafone Plc. slide 5.6 percent to 115.05 pence as investors take profits after a recent rally and ABN Amro sounds a note of caution on the telecom group's prospects.

Nordex gains after Commerzbank upgrades to "hold"

Shares in German wind turbine maker Nordex rise 5.1 percent to 9.06 euros, among the biggest gainers in Frankfurt's technology index, after Commerzbank upgrades the stock to "hold" from "reduce".

Nordex cut its 2009 sales growth forecast to 10-15 percent on Thursday, having previously said it is expecting to grow sales by 50 percent each year. Its shares fell as much as 12 percent.

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Southeast Asian stock markets ended mixed on Friday, with Singapore climbing nearly three percent on buying of financials such as UOB and DBS Group in reaction to a government stimulus package.

Singapore's benchmark Straits Times Index closed up 2.98 percent, snapping four days of falls, with UOB up 2.63 percent, DBS Group 4.8 percent higher and OCBC  adding 2.22 percent.

Dealers attributed the gains to a S$2.3 billion ($1.5 billion) government stimulus package to help companies access credit amid the global financial crisis.

Other Asian markets rebounded from a five-year low on Friday as a variety of rumours, such as China cutting interest rates, prompted investors to cover short positions before the weekend.

Malaysian shares ended a three-day losing streak to inch up 0.18 percent, with Telekom Malaysia up 0.72 percent. IOI Corp was unchanged at the close, erasing its early fall caused by tumbling crude palm oil futures.

Thai shares gained 0.9 percent, although dealers said sentiment remained cautious ahead of a planned anti-government rally at the weekend.

Thailand's biggest bank Bangkok Bank rose 1.6 percent and top coal miner Banpu gained 1.8 percent.

Indonesian shares drifted 0.75 percent lower, recovering from a 4.5 percent fall earlier, after the central bank pledged to respect the free movement of capital.

Bank Rakyat slipped 2.9 percent and Telkom Indonesia shed 4.35 percent.

In Manila, the main stock index lost for a second day to fall 4.15 percent to its lowest since Oct 29, with Philippine Long Distance Telephone down 5.5 percent and conglomerate Ayala Corp 3.87 percent lower. Vietnam shares fell for a fifth day, ending down 2.08 percent at their lowest since Oct 28. Decliners included Lam Son Sugar Co, down 5 percent, and Bach Tuyet Cotton Co , down 5 percent.

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Gold gained 2 percent on Friday, as the dollar weakened against the euro and oil prices climbed higher, while platinum rallied more than 6 percent in erratic trade.

Gold rose to a session-high of $760 an ounce and was at $757.90 an ounce by 1105 GMT, versus $745.10 an ounce late in New York on Thursday.

Gold was 28 percent below a lifetime high of $1,030.80 struck in March, which it has been unable to revisit after selling choked off recent rallies. It hit a two-month high of $931 in October but losses in equities forced investors to cash in to cover losses.

Gold tends to move in the opposite direction to the dollar, as a strong U.S. currency makes bullion more expensive for local currency holders.

Oil rose above $50 a barrel, rebounding from a three and half year low and buoyed by rallies in Europe and Asian equities on talk that China may cut interest rates later in the day.

The World Gold Council said investment demand rose 56 percent to 382.1 tonnes for the third quarter of this year as heightened levels of economic and financial uncertainty stirred safe-haven buying.

The council said the global demand for gold was expected to be steady around 843 tonnes in the fourth quarter of 2008 on festive demand and buying from investors.

Platinum jumped more than 6 percent on bargain-hunting, after falling to a three-week low of $759 an ounce in Asian trade as weak demand from the auto industry continued to weigh on prices.

The metal, used mainly in autocatalysts to clean exhaust fumes, was trading at $791.50 an ounce, up from $762.50 an ounce in New York's on Thursday.

Honda Motor Co said it would build fewer cars in Japan, Europe and North America to reflect an increasingly bleak outlook for sales as the global economic crisis discourages big-ticket purchases.

New York gold futures GCZ8 rose $10.2 an ounce to $758.7.

Silver was at $9.18/9.26 from $8.95 and palladium at $177.50 from $173.

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