US & World Daily Markets Financial Briefing 24-06-2008

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U.S. consumer confidence falls in June to 50.4 vs 56.5 expected

In early deals on Wall Street, the Dow Jones Industrial Average was off 89.60 points at 1,1752.70, while the S&P 500 index was down 13.58 points at 1,304.42, and the Nasdaq Composite index was off 26.62 points at 2,359.12. 

U.S. consumer confidence fell for the sixth consecutive month in June, a key indicator of the economy showed. The New York-based Conference Board said its Consumer Confidence Index fell to 50.4 in June from an upwardly revised 58.1 in May. This month's Consumer Confidence Index registered the fifth-lowest reading on record.

Economists polled by Thomson Reuters IFR Market were expecting a more mild decline to 56.5 for June. Both major components of the index fell in June. The Present Situation Index, which measures how consumers feel about current conditions, fell to 64.5 from 74.2.

The Expectations Index, which measures consumers' outlook for the next six months, fell in June to a record low 41.0 from 47.3 in May.

"Consumers' assessment of present-day conditions continues to grow more negative and suggests the economy remains stuck in low gear," sad Lynn Franco, director of the Conference Board's Consumer Research Center. "Perhaps the silver lining to this otherwise dismal report is that Consumer Confidence may be nearing a bottom."

U.S. home prices continued to plunge in April, as two key measures of home prices fell at the fastest annual pace since a survey measuring them was started more than two decades ago.

The S&P/Case-Shiller 20-city home price index fell a record 15.3 pct to 169.85 for the year through April, the 16th-straight month of yearly price declines. The 10-city index fell even further, declining a record 16.3 pct to 183.15. The 20-city index fell 1.4% from March to April, while the 10-city index fell 1.6%.

The index, which has a baseline of 100 for prices in January 2000, showed yearly price declines in all 20 of the cities surveyed, 13 of which posted record low annual declines. Las Vegas and Miami posted the steepest annual declines, of 26.8 pct and 26.7 pct, respectively.

"One possible bright side to the annual figures is that three [of the cities surveyed] -- Chicago, Cleveland and Denver -- while still negative, showed some improvement in their annual figures over those reported last month," said David Blitzer, chairman of the index committee at Standard & Poor's.

He said that "if there is anywhere to look for possible improvement, it would be that the pace of monthly declines has slowed down for most of the markets."

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Forex - Dollar rangebound as markets await FOMC meeting outcome

LONDON - The dollar was trading within a narrow range against most major currencies as markets waited with bated breath for the outcome of the Federal Open Market Committee's monetary policy meeting which concludes on Wednesday.

While the FOMC is widely expected to keep its key Fed Funds rate unchanged at 2.0 percent at the end of its two-day meeting, market players will be keenly watching the accompanying statement for any hints that rates will rise in the coming months to control inflation.

"The dominant theme in currency markets for now -- especially the dollar crosses -- is one of churning as traders bide time ahead of the FOMC meeting that starts today," said James Hughes, market analyst at CMC Markets.

"There's no real belief that we'll see a rate hike, but it's the accompanying comments that will provide the most meaningful direction and a hawkish tone could easily see the greenback lock in the latest gains on a more permanent basis," said Hughes.

Before the meeting concludes though, market players will have a slew of U.S. data to chew over first on Tuesday. The Conference Board's consumer confidence is expected to dip to 56.5 in June from 57.2 in May. Also due are the S&P/Case-Shiller and OFHEO's U.S. house price indices. An analyst at Barclays Capital said that while these are likely to remain quite weak, "this is probably well factored into markets".

Elsewhere, the pound came under pressure after mortgage approval figures from the British Bankers' Association (BBA) fell to a record low. The number of loans approved for house purchase -- an indicator of future mortgage lending -- fell to 27,968 in May from a downwardly revised 34,752 in April -- the weakest level since the BBA's records began in September 1997.

"The drop in mortgage approvals and lending points to a housing market that is rapidly grinding to halt under the pressure of higher mortgage interest rates, tighter bank lending standards, and declining confidence," said Michael Hume, senior European economist at Lehman Brothers.

"Such a weak outturn for mortgage approvals points to further downward pressure on house prices over the next six months," he added.

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Euroshares open up as banking sector gains; offsets caution ahead of FOMC

At 09:04 a.m., the DJ STOXX 50 was up 10.22 points or 0.35 percent at 2941.55 and the DJ STOXX 600 was up 0.13 points or 0.04 percent at 294.95.

Bradford & Bingley stormed 13.64 percent higher after the UK mortgage lender said it has rejected Resolution's proposal of a 400 million pound capital injection.

The move by Resolution would usurp Texas Pacific Group's plans to take a 23 percent stake in the company, sparking hopes TPG will lift its offer. "We think that the very fact that this creates another option for shareholders will be viewed positively," said analysts at Credit Suisse.

The news Resolution has announced plans for a potential consolidation of smaller UK banks and lenders also lifted Alliance & Leicester 3.82 percent and Paragon 5.84 percent. And UBS was 1.9 percent higher as vague talk HSBC could be interested in the beleaguered Swiss banking group re-emerged.

And mining groups got a boost after Rio Tinto, up 2.33 percent, announced it has agreed much higher-than-expected iron ore price increases for the contract year starting April 1 2008. ING said it could lift its EPS forecasts by 6 percent for 2008 and by 7 percent for 2008 as a result.

The news also bolstered BHP Billiton, up 2.49 percent, and Anglo American, up 1.68 percent, as analysts began to estimate the impact a similar price increase would have on their models for the pair.

BHP found further support as it announced increases in its Australian iron ore reserves. Shares in ERG SpA were 3.59 percent higher after news it sold 49 percent of its refining operations to Lukoil for 1.348 billion euros, valuing the business at 2.75 billion euros.

BG was up only 0.4 percent, underperforming the energy sector, after it said it will proceed with a A$13.8 billion ($13.1 billion) cash offer for Australia's largest fully integrated energy group, Origin Energy Ltd., even though Origin's board had rejected the offer of A$15.50 per share.

Shares in discount supermarkets group Colruyt added 1.6 percent as analysts cheered the group's full-year sales numbers saying Monday night's update shows the resilience of the group's business model. Deutsche Telekom and Telecom Italia added 1.37 percent and 2.07 percent after receiving broker upgrades.

Morgan Stanley lifted its stance on the German telecoms group to 'overweight', while Sanford Bernstein upgraded its Italian peer to 'outperform'. But TNT fell 2 percent and Deutsche Post fell 3.4 percent as yet another profit warning from a German peer weighed.

UPS Inc., the world's largest shipping carrier, lowered its earnings expectations for the second quarter on Monday because of slowing U.S. economic growth and high fuel costs. "This further shows how important it is for Deutsche Post to find a solution to the problems facing its U.S. DHL operations," a Frankfurt-based trader said.

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Asian markets mixed on oil price concerns, caution ahead of Fed meet

The Nikkei was down 0.06 percent at 13,849.56, briefly touching positive territory in early trade. The Topix was up 0.09 percent at 1,349.19.

The KOSPI was down 0.3 percent at 1,710.84. The Hang Seng index closed down 1.14 percent at the day's low of 22,456.02 and the Shanghai Composite was up 1.5 percent at 2,803.02.

The Australian benchmarks bucked the trend, finishing the session with marginal gains led by miners. The S&P/ASX 200 closed up 0.1 percent at 5,290.0, ending a three-day losing streak which took the benchmark index to its lowest level in three months.

The All Ordinaries index gained 0.2 percent to 5,418.8. "The market is into two parts -- there's ongoing support for resources stocks because the outlook for prices is quite bullish, but the financial sector is in the doldrums because of worries about high interest rates and possibly the need to make extra provisions for bad debts," said Michael Heffernan, a private client advisor at Reynolds & Co in Sydney.

Commonwealth Bank slide 2.8 percent to A$38.60, while National Australia Bank fell 0.5 percent to A$26.41 and ANZ retreated 3.5 percent to A$17.95, it lowest level since January 2005. Westpac fell 3.5 percent to A$17.49 and its takeover target St. George lost 2.7 percent to A$27.35.

Banks in Tokyo were mixed, with Mizuho Financial up 0.4 percent at 539,000 yen, Mitsubishi UFJ Financial up 0.1 percent at 989 yen and Sumitomo Mitsui Financial down 0.4 percent at 866,000 yen.

The Jakarta composite index closed up 0.1 percent at 2,365.38 and the Kuala Lumpur Composite Index (KLCI) also closed up 0.4 percent at 1,200.28. Singapore's benchmark Straits Times Index (STI) fell 0.6 percent to close at the session's low of 2,962.16. This is the weakest closing level since the STI closed at 2,824.91 on March 20.

Taiwan's weighted index finished down 1.76 percent at 7,738.12, and Manila's composite index fell 1.0 percent to a 21-month low to end at 2,474.87.

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Metals - Copper slides on profit taking ahead of FOMC meeting

LONDON - Copper slid on profit-taking in quiet trade trade ahead of the U.S. Federal Reserve's two-day rate setting meeting. A modest 25-tonne rise in global inventory, as reported by a daily LME note, also held copper back.

"All eyes will be on whether the dollar can hold its gains. The market seems to be expecting a quiet day's trading ahead of tomorrow's FOMC meeting, but as there is a host of data out today and tomorrow before the FOMC meeting, there may be more than enough to move the dollar and therefore the metals and markets in general," said BaseMetals.Com analyst William Adams.

"Given last week's firmer tone in the base metals it will be interesting to see if the fundamentals are deemed strong enough to prompt further gains or whether the market is more concerned about changes in the dollar."

At 10:37 a.m., London Metal Exchange (LME) copper for three-month delivery was at $8,369.75 per tonne, down from $8,400 at the close on Monday.

Copper has risen some 8 percent in the past two weeks on a combination of dollar weakness and fears over tight supply and unabating demand from emerging economies.

But a report saying Chinese copper imports have fallen by 22.3 percent in the first five months of the year to 611,306 tonnes, according to customs data released on Monday, has weakened the demand picture.

In other metals traded on the LME, three-month tin was up at $23,490 per tonne against $23,350. Lead for delivery in three months slipped to trade at $1,830 per tonne from $1,865, while aluminium was down at $3,120 from $3,169. Nickel eased to $21,840 per tonne, basis three months, from $21,850, while zinc fell to $1,915 from $1,927.

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