US & World Daily Markets Financial Briefing 22-08-2008

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US STOCKS-Wall St extends gains after Bernanke comments

NEW YORK - U.S. stocks added to gains on Friday after Federal Reserve Chairman Ben Bernanke said the recent decline in commodity prices and stabilization of the U.S. dollar were encouraging. For details, see.

The Dow Jones industrial average .DJI rose 143.30 points, or 1.25 percent, to 11,573.51. The Standard & Poor's 500 Index .SPX shot up 11.82 points, or 0.93 percent, to 1,289.54. The Nasdaq Composite Index .IXIC climbed 24.66 points, or 1.04 percent, to 2,405.04.

The market was already broadly higher before Bernanke's speech at the Federal Reserve Bank of Kansas City Economic Symposium in Jackson Hole, Wyoming.

Expectations of an investment in U.S. bank Lehman Brothers underpinned an advance in shares of financial services companies. Shares of No. 3 U.S. bank, JPMorgan, more than 4 percent to $38.06.

A decline in oil prices boosted shares of big manufacturers, including United Technologies, airlines and consumer-oriented companies. Shares of major technology companies were another standout. United Tech was up 1.8 percent to $65.38.

HEADLINE STOCKS-U.S. stocks to Forcus on

LEHMAN BROTHERS 
State-run Korea Development Bank said Lehman  Brothers was one of its options for acquisitions, reviving  expectations that the U.S. investment bank might still bring in  a large investor to help it cope with its mortgage-related  losses. Lehman shares jumped 7.9 percent to $14.80 in premarket  trade on Friday.
   
AEROPOSTALE INC 
Shares of Aeropostale Inc fell 2.9 percent to $33 in  extended trade on Thursday after the company released quarterly results.
   
GAP INC 
Quarterly profit rose, helped by higher profit margins. The  stock gained about 1 percent to $19.20 in premarket trade on Friday.
   
BEBE STORES 
The women's apparel retailer posted a better-than-expected  fourth-quarter profit, helped by higher merchandising margins,  but forecast first-quarter earnings below market estimates. Shares of Bebe Stores closed at $10.50 on the Nasdaq on  Thursday.
   
INTUIT INC 
The maker of TurboTax tax preparation software reported a  wider loss in its seasonally weak fourth quarter, which ended  July 31. Intuit's shares ended at $30.03 on the Nasdaq on Thursday.
   
SHORETEL INC 
The company which provides business phone systems carried  over the Internet posted better-than-expected fourth-quarter  earnings, helped by higher product revenue.
   
Shares of the Sunnyvale, California-based company rose 7  percent in trading after the bell. They had closed at $5.30  Thursday on Nasdaq.

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FOREX-US dollar rebounds as oil, sterling weaken

NEW YORK - The U.S. dollar recovered on Friday from the previous session's sharp losses, buoyed by a pullback in oil prices, stock market gains, and an ailing pound after growth data increased chances of a recession in Britain.

Oil lost ground after soaring nearly 5 percent on Thursday. It last traded below $120 per barrel , down more than one percent on the day, easing inflation risks and aiding the dollar.

Further boosting the market's dollar optimism, analysts said, was the rise in Wall Street futures after comments from influential investor Warren Buffett saying he has no bets against the greenback and that U.S. stocks are more attractive now than a year earlier. For the full story, see

"The dollar is getting a knee-jerk reaction to the fact that we're getting a bit of a push-up in equities. Oil and gold have also come off and helped the dollar," said Tom Fitzpatrick, global head of FX strategy at CitiFX in New York.

"The FX market continues to trade closely with commodities. Generally, every time you see an oil move, you'll see a dollar move as well," he added.

In early New York trading, the euro  was down 0.7 percent at $1.4810, edging towards a six-month low hit earlier this week at $1.4631, according to Reuters data.

Losses in sterling also helped the dollar regain its footing, falling sharply after the UK economy posted its weakest performance since the recession of the early 1990s. Britain's second quarter gross domestic product (GDP) showed the economy ground to a halt in the three months to June, falling from a preliminary estimate of 0.2 percent rise.

The poor UK growth numbers added to an overall bleak picture of a slowing European economy after recent data showing contraction in euro zone GDP, increasing the possibility of European Central Bank and Bank of England monetary easing.

Sterling slid 1.2 percent to $1.8562 , while trade-weighted sterling hit its lowest since late 1996 The pound's losses helped fuel a 0.8 percent gain in the dollar versus a basket of major currencies to 76.627, not far from its 2008 peak at 77.413 hit early this week.

The dollar also rose 1.3 percent to 109.85 yen , recovering from a slide to 108.12 yen on Thursday and inching back towards an eight-month high of 110.66 yen touched a week ago.

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European shares rise on Lehman hopes, Bernanke eyed

FRANKFURT - European shares rose by midday on Friday, lifted by a rebound in financial stocks on the prospect that U.S. investment bank Lehman Brothers  might be bought, while oil eased below $120 a barrel.

Among individual movers, shares in TNT NV  surged 8 percent after London's Times newspaper reported rumours that U.S. rival United Parcel Service could make a bid as early as the weekend. TNT declined to comment. By 1158 GMT, the pan-European FTSEurofirst 300 index was up 1.1 percent at 1,166.99 points, on track to end some 2 percent down on the week.

State-run Korea Development Bank said on Friday Lehman was one of its options for acquisitions, reviving expectations that the U.S. investment bank might still bring in a large investor.

The news comes after a newspaper reported on Thursday that Lehman sought to sell up to a 50 percent stake to China's biggest brokerage, CITIC Securities, or Korea Development Bank. But the two Asian companies walked away after deciding the asking price was too high. "There is hope now that the financial crisis is not that bad after all and that we will all be rescued," a trader said.

Lehman shares traded in Frankfurt  rose 20.4 percent and the DJ Stoxx banking index rose 2.5  percent after falling 6.3 percent in the past five sessions.

HSBC  rose 1.9 percent, Royal Bank of Scotland  gained 5.7 percent and Barclays  rose 5.7 percent. Insurance shares traded higher after Aon Corp , the world's largest insurance broker, made a recommended cash offer for Benfield valuing the UK-listed broker at 844 million pounds ($1.6 billion).

Benfield shares rallied almost 30 percent, while Axa  rose 2.8 percent and Allianz  rose 2 percent.  U.S. stock futures jumped on comments from U.S. investor Warrent Buffett that he has no bets against the dollar and that stocks were more attractive than they were a year ago.

Buffett, speaking on CNBC television, said the U.S. economy was unlikely to improve before 2009, and that he expected the government to take action to support troubled mortgage financiers Fannie Mae  and Freddie Mac .

Fannie and Freddie shares have plummeted as speculation grows about a government bailout of the companies, which own or guarantee almost half of U.S. mortgages. Shares of both have fallen more than 90 percent in the last twelve months.

Referring to the problems at the two U.S. mortgage financers, Tammo Greetfeld, equity strategist at UniCredit in Munich, said: "Rescuing the bank does not mean rescuing the shareholder."

He said: "The U.S. government offered a safety net for Fannie Mae and Freddie Mac, but not a solution to the core problems. That's why it was clear from the start that the crisis would not be over by implementing a rescue package."

Later in the day, investors are likely to focus on what U.S. Federal Reserve Chairman Ben Bernanke has to say about the credit market and the financial sector in a speech at 1400 GMT.

Around Europe, the UK's FTSE 100 index was up 1.6 percent, Germany's DAX index rose 1.2 percent and France's CAC 40 added 1.3 percent.

Oil eased below $120 a barrel, a day after its biggest jump in three months as part of a wider commodities rally spurred by a slump in the U.S. dollar, and tension between the United States and Russia. Declines in Total  and BP  were among the strongest negative weights on the pan-European index.

Elsewhere, mining giant Rio Tinto  shares shrugged off early losses after Australia's antitrust regulator said the $128 billion bid from rival BHP Billiton  could raise competition issues in iron ore. Rio Tinto shares were up 0.6 percent, while BHP added 1.6 percent.

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Asian stock market summary

JAPAN
The benchmark Nikkei 225 Stock Average declined 0.7 percent to close at 12,666.04 on continuing global economic concerns and a firmer yen. 

A smaller trading volume showed that investors kept to the sidelines ahead of a series of economic data in the U.S. and Japan next week.  The broader Topix index fell 0.7 percent to end at 1,216.42.

SOUTH KOREA
The Korea Composite Stock Price Index closed down 1.04 percent at 1,496.91, a 16-month low, as tech issues tumbled on outlook worries and Kookmin Bank fell on concerns about its holding company plans.  

AUSTRALIA
The benchmark S&P/ASX 200 rose 1.1 percent to finish at 4,931.4, helped by a bounce for financial firms and by stronger resources stocks.

All Ordinaries closed up 1.2 percent at 5,010.2.

CHINA
The benchmark Shanghai Composite Index closed down 1.09 percent at 2,405.23, with investors again betting on the government announcing market-friendly measures over the weekend.
   
The Shanghai A-share Index was down 1.09 percent at 2,524.86, and the Shenzhen A-share Index fell 1.79 percent to 709.57.

The Shanghai B-share Index fell 1.34 percent to 154.80, and the Shenzhen B-share Index lost 0.93 percent to 376.11.

TAIWAN
The weighted index closed down 0.10 percent at 6,911.64, as a technical rebound gave way to lingering concerns over the investigation of alleged money-laundering by former president Chen Shui-bian and his family.
  
Financial stocks were prone to mood swings, rebounding early on a report that the Financial Supervisory Commission had found no administrative defects in merger and acquisition deals from Chen's time as president and then slumping on news that prosecutors had raided the home of an ex-intelligence chief as part of the probe, before finally ending a touch higher.
   
The key electronics sector suffered as firmer oil prices were seen eating into spending power. Weakness in the mainland China markets this morning also kept investors cautious.

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Oil prices sag after gains

LONDON - World oil prices edged lower Friday on profit-taking, after bumper gains on the deepening crisis between Moscow and the West over the Russian invasion of Georgia, analysts said.

London's Brent North Sea crude for delivery in October slid 41 cents to 119.75 dollars a barrel. New York's main contract, light sweet crude for October, fell 48 cents to 120.70 dollars a barrel in electronic deals.

Crude futures had rocketed higher on Thursday, gaining almost six dollars in value as traders tracked geopolitical tensions between the United States and Russia, as well as reacting to a weak dollar and large drop in stockpiles of U.S. motor fuel.

Meanwhile, "Cold War sentiment supported (oil prices) as tensions increased between the West and Russia over the deployment of a U.S. missile system in Poland, sparking fears of disruption to supply," said analysts at British energy consultancy John Hall Associates in a note to clients.

Russia, the world's biggest producer of crude oil after recently overtaking Saudi Arabia, promised to withdraw most forces from deep inside Georgia on Friday, but was set to retain a military presence in two separatist regions and a buffer zone.

On Thursday it had told NATO that it was suspending all cooperation, a spokeswoman for the Western military alliance said in Brussels.

Oil prices had also closed higher on Wednesday and Thursday after the US Department of Energy said that American gasoline (petrol) reserves slumped by 6.2 million barrels last week, compared with market expectations for a drop of only 2.4 million barrels.

Gasoline stocks are closely watched at this time of year as American motorists are on the highways for their summer vacations, typically pushing up demand for motor fuel.

Oil prices had closed up by more than one dollar on Tuesday after OPEC member Venezuela said it would ask the cartel at its September meeting to cut production if downward price pressure continued. Despite recent gains, world oil prices have tumbled sharply from record highs above 147 dollars a barrel set in July as weak economic growth dents global demand for energy.

Before ending higher, oil prices had fallen close to 110 dollars on Tuesday as Tropical Storm Fay missed energy production facilities in the Gulf of Mexico. Prices, which broke through the 100-dollar level at the start of 2008, remain well above year-ago levels.

Traders said interest was rising about what position the Organization of the Petroleum Exporting Countries (OPEC) would take at its September meeting. OPEC, which is steered by Saudi Arabia, produces about 40 percent of the world's crude.

A leading British energy consultancy, CGES, said Monday that OPEC might decide to cut output next month should the price of crude fall under 100 dollars.

Oil prices had begun the week by falling, pressured by news that the Baku-Tbilisi-Ceyhan (BTC) pipeline would soon reopen. British energy giant BP said Wednesday that tests were underway on the BTC pipeline after repairs were completed on the fire-damaged conduit.

It could not say when full operation would resume exactly but said oil-loading operations onto ships at the port of Ceyhan on Turkey's Mediterranean coast could start by "early next week."

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