US & World Daily Markets Financial Briefing 25-07-2008

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Stocks advance on upbeat economic reports

NEW YORK - Upbeat economic data lifted stocks Friday, placating a market pummeled a day earlier by concerns about housing and the financial sector.

A better than expected report on home sales helped Wall Street shake off some early uncertainty. The Commerce Department said June sales of new single-family homes fell by 0.6 percent to a seasonally adjusted annual rate of 530,000 units; the market expected sales to total 505,000. That report helped offset concerns raised by a weak reading on existing home sales on Thursday.

And there was good news about consumers, whose shyness about spending has troubled Wall Street. The Reuters/University of Michigan index of consumer sentiment for the first part of July came in at 61.2, while economists forecast a reading of 56.4, which was the level hit in June -- a 28-year-low.

Earlier, the Commerce Department said orders for durable goods rose 0.8 percent last month, far better than the 0.4 percent decline economists expected. It was the best showing since a 1.1 percent rise in February and reflected strength in demand for heavy machinery, primary metals such as steel and even a slight rebound in the beleaguered auto industry.

In midmorning trading, the Dow Jones industrial average rose 27.84, or 0.25 percent, to 11,377.13. The Dow, which fluctuated in early trading, fell more than 280 points Thursday.

Broader stock indicators also rose. The Standard & Poor's 500 index advanced 3.01, or 0.24 percent, to 1,255.55, and the Nasdaq composite index rose 13.10, or 0.57 percent, to 2,293.21. Bond prices moved lower as investors were expected to shift back into stocks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.05 percent from 4.00 percent from late Thursday.

The dollar was higher against other major currencies, while gold prices rose. A barrel of light sweet crude fell $1.91 to $123.58 on the New York Mercantile Exchange. The oil market has been taken lower by the belief that flagging fuel demand can't justify recent high prices.

In corporate news, Juniper Networks Inc., the maker of networking equipment, reported a 40 percent increase in earnings for the second quarter, helped by a new product line. Results narrowly surpassed Wall Street projections. The stock rose $3.51, or 16 percent, to $26.08.

Chemicals maker Huntsman Corp. said it was approached by investors offering funding to help complete its $6.5 billion takeover by Apollo Management. Huntsman rose 51 cents, or 3.8 percent, to $13.78. Advancing issues outnumbered decliners by about 9 to 5 on the New York Stock Exchange, where volume came to 284.7 million shares.

The Russell 2000 index of smaller companies rose 5.89, or 0.84 percent, to 708.28. Overseas, Japan's Nikkei stock average fell 1.97 percent. In afternoon trading, Britain's FTSE 100 fell 0.84 percent, Germany's DAX index dropped 0.27 percent, and France's CAC-40 rose 0.67 percent.

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Forex - Dollar weighed by risk aversion ahead of economic data

London - The U.S. dollar weakened against most currencies as investors' aversion to risk grew, with stock markets falling sharply globally and oil prices edging higher.
   
Jitters in financial stocks and worries the U.S. economic downturn has further to run are keeping investors cautious over the greenback. "We expect financial market news to continue to dominate," said Hans Redeker at BNP Paribas.
   
At 1135 GMT, it had let the euro rise to $1.5745 from $1.5699 at 0800 GMT. Redeker noted weak economic data around the world is ending any talk of global growth de-coupling from the U.S. economy, which will limit falls in the greenback.
  
But for now a string of U.S. economic data is likely to remind investors growth is still too weak to allow the Federal Reserve to raise interest rates.
   
New home sales data for June will be closely watched after a slump in existing home sales on Thursday. They are expected to total an annual rate of 505,000 units, down from 512,000 annual units in the previous month and the seventh consecutive decline.
   
The University of Michigan consumer confidence indicator is expected to be revised down to 56.4 from 56.6 in July, while durable goods orders are expected to have declined by 0.4 percent in June after a flat reading in the previous month.
  
In the United Kingdom, the pound was mostly higher after second-quarter GDP came in at a quarterly rate of 0.2 percent, just below expectations for a 0.3 percent rate.
   
But analysts said because the data did not represent much of a nasty surprise, markets are more confident in pricing in the view the Bank of England will leave interest rates unchanged at its next meeting in August.
   
"We are still of the view that the MPC will avoid raising rates this summer," said Philip Shaw at Investec.  "Even so, it is clear that a cut in interest rates is a long way off and it is very likely that the economy will have to wait until early 2009 for any relief from monetary policy."

The pound rose to $1.9980 at 1135 GMT from $1.9869 at 0800 GMT.

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Euroshares tumble mid-morning; Munich Re warning adds to early gloom

LONDON - Europe's leading exchanges moved sharply lower mid-morning as a warning from Munich Re added to early gloom after sharp losses on Wall Street.
   
At 09.44 a.m., the DJ STOXX 50 was down 18.94 percent, or 0.67 percent, at 2840.58 and the DJ STOXX 600 was down 2.13 points, or 0.77 percent, at 280.03.     

Financials were lower, tracking their US peers and after Munich Re warned its 2008 profit will not meet the insurer's earlier forecasts. Ahead of the announcement, shares had been around 3 percent lower as Merrill Lynch cut its rating to 'neutral' from 'buy'. But after the announcement, shares tumbled 9.39 percent.
   
Credit Agricole was down 4.92 percent, Fortis fell 4.39 percent and Banco Santander down 2.31 percent. KBC was cut to 'neutral' from 'outperform' at Exane BNP Paribas.

Shares fell 3.57 percent. In other earnings news, Danone stormed 3.75 percent higher as in-line first-half results and an increase in full-year margin guidance reassured investors about the food manufacturer's ability to cope with tough trading conditions.
   
French building materials group Saint-Gobain rallied form opening losses as analysts said the group's first half update was not as bad as some had feared. The French group trimmed its full year profit growth forecast to reflect slower building activity in Europe which pushed its half-year operating profit 4.2 percent lower than a year earlier. Shares added 2.37 percent.

Credit Suisse maintained its 'neutral' stance saying the numbers were not as bad as some had feared and as the group's cost-cutting plans are reassuring. But Vivendi fell back 3.82 percent after its second quarter sales numbers which Goldman Sachs said were only just in line with market expectations and SG
Secs said were shy of the consensus forecast.
   
The French broker said weakness was mainly to do with new subscriber numbers "At this stage it is hard to determine whether these trends are a reflection of a general slowdown or not," the broker said, in a note to clients.
   
Telecoms group Belgacom SA reported a drop in profits and sales for the first half of the year on Friday and lowered its full-year sales guidance. shares tumbled 6.76 percent.
   
Pagesjaunes after the French phone directory company lowered its target for full year sales growth to between 3 and 4 percent from the previous target of 5 percent, citing difficult economic conditions in France and Spain.
   
Italian peer, Seat PG, fell back 2.8 percent. Yell, though, fell only 1.27 percent as Morgan Stanley upgraded the shares to 'overweight' from 'equal-weight'.

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Asian Stock market Summary

JAPAN

In late trade, stocks extended their losses as the yen strengthened to the upper 106 yen zone from  the 107.28-33 yen levels earlier in the day.
   
The Nikkei 225 Stock Average finished down 268.55 points or 2 percent at 13,334.76, off a session low of 13,324.22. It gained 4.1 percent over the week.
   
The broader Topix shed 34.29 points or 2.6 percent to 1,298.28. It was up 3.7 percent from a week earlier.
Decliners outnumbered gainers 1,404 to 262, with 60 issues unchanged. Volume dropped to 1.77 billion shares from 1.96 billion shares on Thursday.

SOUTH KOREA

The KOSPI index was down 25.13 points or 1.6 percent at 1,601.01 as of 0119 GMT, giving up more than a third of its 4.2-percent gain in the past two sessions.

SINGAPORE

The benchmark Straits Times Index closed down 55.0 points or 1.9 percent at 2,922.91. For the week, the index gained 1.5 percent.

AUSTRALIA

Australian shares fell 3.4 percent on Friday, the biggest one-day fall in six months, as further credit market losses at National Australia Bank Ltd

CHINA

The benchmark Shanghai Composite Index closed down 45.19 points or 1.55 pct at 2,865.10, ending the week up 3.12 pct. The Shanghai B-share Index fell 1.93 points or 0.89 pct to 214.22, while the Shenzhen B-share Index lost 5.48 points or 1.17 pct to 464.53.

INDONESIA

The Jakarta composite index was down 11.71 points or 0.5 percent at 2,245.34 on volume of 2.65 billion shares worth 4.35 trillion rupiah ($476 million).
   
For the week, the main index rose 113.2 points or 5.3 percent. The LQ45 index was down 3.67 points at 467.29. Decliners led advancers 99 to 81, while 70 stocks were unchanged. The rupiah was trading at 9,123/9,128 to the dollar against 9,135/9,140 late Thursday.
   
Bank Rakyat Indonesia fell 6.3 percent to 6,000 rupiah, Bank Central Asia lost 3.3 percent to 2,900 rupiah and Bank Mandiri fell 3.3 percent to 2,900 rupiah.
   
Index heavyweight Telkom also dropped 1.3 percent to 7,750 rupiah. Among the gainers, palm oil firm Astra Agro rose 7.7 percent to 21,750 rupiah, rival Lonsum gained 10.5 percent to 7,900 rupiah and Bakrie Sumatra Plantations rose 6.1 percent to 1,400 rupiah on stronger crude palm oil prices.

HONG KONG

The Hang Seng index closed down 347.01 points or 1.50 pct at 22,740.71, off a low of 22,542.08 and high of 22,843.20. Turnover was 61.39 bln hkd.

INDIA

India's main stock index, the 30-share Sensex of the Bombay Stock Exchange, closed down 502.07 points or 3.4 percent at 14,274.94 and the 50-share S&P CNX Nifty of the National Stock Exchange closed down 121.70 points, or 2.74 percent, at 4,311.85.

The Sensex, however, has gained nearly 4.7 percent this week thanks to a five-session rally that started on Thursday last week and peaked on Wednesday this week.

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Metals - Copper jumps on bargain hunting, weak dollar

LONDON - Copper jumped Friday having hit a five week low the day before on bargain hunting, as the dollar remained weak and as oil prices jumped, which boosted sentiment.
   
The red metal's gains were capped, however, as stocks are growing and expected to rise further and as global economic weakness is likely to weigh on demand going ahead.
   
The LME said Friday that global copper inventory rose by a healthy 2,600 tonnes to 133,475 in a daily report. Equity markets, meanwhile, used as a barometer for economic growth, were also weak today.

"Mounting concerns over the demand outlook and the arrival of the summer doldrums finally appeared to weigh on sentiment," said Standard Bank analyst Leon Westgate.
   
A rebound in crude oil from a seven-week low did lend some support to base metals, however, as it drew funds back into commodities asset class.    

At 10:53 a.m., three-month copper on the LME rose to $7,951 per tonne from $7,955 at the close Thursday. Aluminium was higher at $2,965 per tonne from $2,950.
   
Nickel rose to $18,820 per tonne from $18,775, zinc was up at $1,865 per tonne from $1,856, tin climbed to $22,450 per tonne from $22,350 and lead, the only metal to fall, tumbled to $2,140 per tonne from $2,271 at the close Thursday.

Oil prices edge higher

Oil prices rose slightly on Friday at the end of a week during which they had fallen sharply as concerns eased over tight supplies and strong demand for energy, traders said. New York's main contract, light sweet crude for September delivery, rose 18 cents to $125.67 a barrel.
   
Brent North Sea crude for September climbed 20 cents to $126.64. Oil prices had picked up on Thursday after two days of heavy losses, as the market weighed the impact of slowing global economic growth on energy demand.
   
U.S. gasoline stockpiles rose by 2.9 million barrels in the week ending July 18, far outstripping analysts' consensus forecasts for a gain of 200,000 barrels.
   
Gasoline consumption was also 2.4 percent lower compared to a year earlier, as drivers faced sky-high pump prices of $4.11 a gallon (3.78 litres) during a period when U.S. demand for motor fuel is traditionally at a peak.

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