US & World Daily Markets Financial Briefing 22-09-2008

Previously featured on ABC News BusinessNow, B-TV, in BusinessWeek, Popular Mechanics and local news papers. Click here for the free StocksJournal analyst's report.

US STOCKS-Market drops on bailout angst, higher oil

NEW YORK - U.S. stocks fell on Monday as investors worried that political wrangling might snag a U.S. proposed $700 billion bailout to resuscitate financial markets and oil prices jumped, adding to concern about the economy.
      
Banks were among the biggest decliners as the Bush administration pressed Congress to approve one of the costliest U.S. bailouts for financial companies since the Great Depression.
      
Shares of JPMorgan Chase, the No 3 U.S. bank, dropped more than 8 percent to $43.17, making the stock the top drag on both the Dow and the S&P 500. Wells Fargo, the fifth-largest U.S. bank, fell 7 percent to $36.92. The S&P financial index declined nearly 5 percent.
      
Members of Congress have called for changes to the plan. But President Bush said in a statement, "Failure to act would have broad consequences far beyond Wall Street," he said. Delay would threaten small businesses and homeowners, Bush said.
      
"Now you've got all the politicians wrangling to get something on the bill that they like. That may not help the economy in the long run. We really don't know how this is all going to shape up," said Eric Kuby, chief investment officer at NorthStar Investment Management Corp in Chicago.
      
"You're getting down to the nitty gritty. What does this all mean? What does the world, the economy look like if this bailout plan goes through?"
      
The Dow Jones industrial average slid 148.38 points, or 1.30 percent, to 11,240.06. The Standard & Poor's 500 Index fell 21.97 points, or 1.75 percent, to 1,233.11. The Nasdaq Composite Index dropped 35.59 points, or 1.57 percent, to 2,238.31.
      
Uncertainty about the bailout overshadowed news that Mitsubishi UFJ Financial Group Japan's largest bank planned to buy a stake in Wall Street bank Morgan Stanley. Goldman Sachs and Morgan Stanley, whose shares were pummeled last week amid worries about their outlook, are abandoning their investment bank model of two decades to become bank holding companies.
      
Morgan Stanley shares were up 10.1 percent at $29.95, but Goldman Sachs shares fell 3.1 percent to $125.67. On Nasdaq, shares of Apple declined 2.2 percent to $137.85 after JPMorgan cut its price target on the iPod and iPhone maker's stock.
      
As oil prices rose, retail stocks suffered. The S&P retail index was off nearly 3 percent. Home builders also took a beating, with the Dow Jones home construction index down almost 5 percent.
 
U.S. front-month crude rose $3.82 to $108.39 a barrel amid a weaker dollar. Officials have said the bailout plan, in which the government will buy soured mortgage-related debt from financial institutions, will cost taxpayers hundreds of billions of dollars.

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

LONDON - The dollar dropped more than 1 percent versus the yen on Monday as sceptical investors sought the meat of a $700 billion U.S. bailout plan, aimed at tackling the worst credit crisis since the Great Depression.

The package, which is awaiting Congressional approval, would give sweeping powers to the U.S. Treasury to buy up toxic mortgage-related debt from financial firms, including U.S. subsidiaries of foreign banks.

Democratic leaders in Congress have promised swift action and lawmakers are striving to get a plan in place by the end of the week, fearful a delay could send markets reeling.

But while the package has gone some way towards taking the edge off market jitters, significant questions remain over its impact on the U.S. fiscal position.

"The Treasury will be able to fund this (bailout package) by extra Treasury sales and that's an extra burden on the U.S. fiscal position -- that's absolutely a dollar negative for the short and medium-term," said Geoff Kendrick, senior currency strategist at UBS.

Analysts also said the latest market ructions sparked by the collapse of Lehman Brothers last week and the $85 billion bailout of troubled insurance giant AIG had succeeded in snapping investor attention back from global concerns to the U.S. economy.

"The epicentre of the problem was the U.S. and markets seem to be re-focusing on that now ... until you get to a stage where the package starts to help the real economy," Kendrick said.

At 1120 GMT, the dollar was down 1.1 percent on the day at 106.18 yen, dropping from a near two-week high of 108.04 hit late last week.

The euro rose 0.9 percent to a three week high at $1.4625, but was weaker against the yen, falling 0.3 percent to 154.96 yen. Sterling also benefited from dollar selling, hitting its highest in more than three weeks at $1.8473.

U.S. stock index futures pointed to a lower Wall Street open, suggesting that U.S. share prices may give back some of the gains made in Friday's massive knee-jerk response to news of a U.S. bailout package.

Negative impact on the U.S. Treasury's balance sheet from the financial storm is mounting up at quite a pace, with the $200 billion bailout of troubled mortgage agencies Fannie Mae and Freddie Mac and co-ordinated money market liquidity injections adding to the burden.

But even as questions such as at what price the U.S. authorities pay for toxic debts and when the buying will start remain unanswered, analysts say no immediate action at all would have worsened the financial market turmoil.

"Despite concerns that a $700 billion fund to purchase assets from banks will crash the value of dollar, there are two points to bear in mind," said Richard Jerram, economist at Macquarie Securities.

" First, it is not very much money -- 5 percent of GDP -- and this is gross cost, not net. Second, it is cheaper than procrastination," he added.

Adding to the list of significant developments post the Lehman meltdown, Goldman Sachs and Morgan Stanley were granted approval on Sunday to become banking holding companies regulated by the U.S. Federal Reserve, enabling them to take deposits and gain easier access to financing as they fight for survival amid the financial market turmoil.

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

Europe shares fall, questions linger over US plan

FRANKFURT - European shares fell by midday on Monday as questions lingered over a U.S. financial sector package designed to tackle the financial crisis.
      
At 1142 GMT, the FTSEurofirst was down 0.6 percent at 1,144.13 points after an 8.2-percent rise on Friday, its biggest one-day gain on record. "One still sees nervousness in the market, moves up and down followed by the next moves up and down," said Heinz-Gerd Sonnenschein, equity strategist at Postbank in Germany.
      
Banking stocks, a major gainer on Friday, were mixed, with HSBC down 4 percent and Anglo Irish Bank 6.3 percent lower, while Credit Agricole was up 2.4 percent and Royal Bank of Scotland rose 3.6 percent. The DJ Stoxx banking sector index was down 0.4 percent.
      
On Friday, the European banking sector jumped following temporary bans on short-selling of financial stocks and the U.S. Treasury's proposal of the largest-ever bank rescue plan. "(Investors are waiting) to get a clearer picture about the total construction of this package, like whether non-U.S. banks can join, which assets will be allowed in, and how the prices will be created," said Sonnenschein.
      
Washington proposed a $700-billion taxpayer-funded plan in an effort to ease the global credit crisis and reverse the U.S. housing slump. "The devil will be in the details and questions remain for instance on the
price setting and profit and loss sharing mechanism," said credit analyst Stephane Zeisel at Barclays Wealth Research in a research note.
      
Analysts said much volatility could be expected on the market this week, as market players try to assess the impact of the package.
      
Meanwhile, Goldman Sachs and Morgan Stanley are giving up their investment bank status in return for cover under the U.S. Federal Reserve's wing to survive the crisis that forced rival Wall Street firm Lehman Brothers to file for liquidation.
     
The FTSE 100 index was down 0.22 percent, the German DAX was 0.24 percent lower and France's CAC 40 slipped 0.11 percent. Commodity shares bucked the trend and were the top weighted gainers on the index. Energy shares were higher after crude prices gained $1.90 to $106.45 a barrel. BP, Royal Dutch Shell and BG were up 1.1-2.3 percent
      
Miners tracked metal prices higher with copper up 2.2 percent. Eurasian Natural Resources, BHP BILLITON , Vedanta Resources and Xstrata rose between 2.3-3.85 percent.
      
The travel and leisure sector however took a hit from higher oil prices, with airlines such as Air France-KLM, Ireland's Ryanair and Britain's Easyjet down between 2 and 7.8 percent. Analysts said that the bailout package may be positive for stocks but added the damage from a year-long credit crisis had spread further into the economy.
      
"From a top-down standpoint this will not change too much in Europe, which is clearly facing a recession," said Heino Ruland, analyst at FrankfurtFinanz.

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

Asian stock market summary

JAPAN
The benchmark Nikkei average ended up 1.4 percent at 12,090.59, buoyed by financial shares, on hopes that the bank bailout proposed by Washington over the weekend will tackle the financial crisis.
   
Nomura Holdings shot up more than 9 percent on news that it has bid for both the Asian and European operations of Lehman Brothers, while GS Yuasa Corp plunged after the car battery maker said it had found improper accounting at a subsidiary.
   
The broader Topix gained 1.7 percent to close at 1,168.69.

SOUTH KOREA
The Korea Composite Stock Price Index closed up 0.31 percent at 1,460.34, on hopes prompted by a U.S. government plan to rescue the financial system, but caution over success of the plan and higher oil prices pared early gains.

AUSTRALIA
The benchmark S&P/ASX 200 index finished 4.5 percent higher at 5,020.5, boosted by a ban on short selling and renewed confidence after the U.S. government unveiled steps to rescue the financial system.

CHINA
The benchmark Shanghai Composite Index closed up 7.77 percent at 2,236.41, extending Friday's surge in the benchmark index, after regulators took further measures to support the markets following the recent global financial turmoil.
  
China's securities regulator announced yesterday that listed firms will no longer need to obtain prior approval for share buybacks. Analysts said an unprecedented US government plan to bail out its financial
institutions also encouraged investors.
   
The Shanghai A-share Index rose 7.78 percent to 2,348.57, and the Shenzhen A-share Index added 3.85 percent to 649.41.
   
The Shanghai B-share Index was up 7.08 percent at 130.20, and the Shenzhen B-share Index rose 1.03 percent to 314.89.

TAIWAN
The weighted index closed up 2.35 percent at 6,110.60, sharply higher after the US government unveiled plans to buy up to $700 billion of distressed assets from financial institutions in a bid to shore up the credit markets.
   
Dealers said the Taiwan market also got a boost from local curbs on short sales. Taiwan's top financial regulator announced a temporary ban on short-selling in 150 stocks to "maintain the order and stability of the stock market."

HONG KONG
The Hang Seng index closed up 304.47 points or 1.58 pct at 19,632.20, off a low of 19,137.67 and high of 19,869.02.

INDIA
The Bombay Stock Exchange's 30-share benchmark Sensitive Index closed down 47.36 points or 0.34 percent at 13,994.96 and the National Stock Exchange's broader 50-share S&P CNX Nifty closed down 22.20 points or 0.52 percent at 4,223.05.

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

LONDON - Gold climbed in Europe on Monday, reversing earlier losses in Asia, as the dollar weakened and fears spread that a $700 billion U.S. plan to stabilise the financial sector may not succeed.

PGMs also bounced, supported by the weaker dollar and gains in gold, and as traders speculated recent losses in metals may have been overdone.

Spot gold was trading at $872.50/874.50 an ounce at 10:40 a.m., up from $871.15 an ounce at the nominal New York close on Friday. Gold prices soared nearly 15 percent last week as fears over the outlook for the financial sector exploded.

"The U.S. plan has calmed nerves, but I don't think people believe it will take out all the problems yet," said Standard Bank analyst Walter de Wet. "Details are still sketchy. We need to see when and how the plan the will be implemented."

"The dollar is still fairly weak compared to where it was two weeks ago, so that also supports gold," he added.

Global stocks made their biggest gains in 20 years after the government announced a plan to tackle the worst financial crisis since the Great Depression.

Gold prices slipped in Asia as some of the safe haven buying that propelled the metal higher last week evaporated. But they recovered as caution crept back into the markets.

The precious metal rose as equity markets fell in Europe as investors awaited details of the plan, with uncertainty boosting gold's appeal as a haven from risk.

"While the U.S. Treasury's rescue package may be enough to calm some of the froth in the U.S. and global financial markets, the collapse, or near-collapse, of two major institutions and the domino effect this had on the financial sector may again draw more investor diversification towards gold as a safe-haven asset," said James Moore, an analyst at TheBullionDesk.com.

Weakness in the dollar is supporting gains in gold, which is often bought as an alternative investment to the U.S. currency.

The dollar fell more than 1 percent against the yen and 0.6 percent against the euro as traders worried about the financial crisis.

Investor demand for gold is firm. the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, said its gold holdings rose 24.5 tonnes or 3.7 percent on Sept 19.

The trust's gold holdings have risen nearly 11 percent from a week ago. Among other precious metals, silver tracked gold higher, rising to $12.83/12.90 an ounce from $12.55 at the nominal New York close on Friday.

Platinum meanwhile rose more than 4 percent, and palladium more than 5 percent, as the weaker dollar supported buying and traders judged the metals' recent slide had been overdone.

Platinum is down 18 percent and palladium down 15 percent from a month ago. "Some buying into the market is to be expected," said de Wet. "If platinum falls below $1,050, some of the producers start looking at the longer term viability of the PGMs."

"Of course, as the dollar weakens it is supportive," he added. Citi Investment Research cut its 2008 and 2009 price forecasts for the platinum group metals on Monday -- though it expects them to recover in the short term -- citing lacklustre outlook for car demand and a firmer dollar.

Spot platinum was at $1,190/1,210 an ounce against $1,134.50 at the nominal New York close on Friday, while palladium was at $242.50/250.50, from $231 on Friday.

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