US & World Daily Markets Financial Briefing 30-09-2008

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US STOCKS-Market higher after consumer confidence

NEW YORK - U.S. stocks held onto positive territory on Tuesday after a report showed a stronger-than-expected reading in a gauge of consumer confidence.

The report from the Conference Board provided an added positive spur as a gauge of manufacturing activity in the U.S. Midwest region also showed a stronger-than-expected reading, tempering fears about the economy's health.

A day after the House of Representatives rejected the proposed $700 billion rescue plan to reduce the U.S. financial sector, investors held out hope that leaders in Washington might work around any disagreements.

Investors snapped up beaten-down shares across the board, lifting shares of JPMorgan Chase, up 9.6 percent at $44.95 on the New York Stock Exchange. Shares of Apple Inc, among Monday's worst decliners, jumped 4.3 percent to $109.83.

The Dow Jones industrial average .DJI was up 264.11 points, or 2.55 percent, at 10,629.56. The Standard & Poor's 500 Index .SPX was up 35.13 points, or 3.18 percent, at 1,141.52. The Nasdaq Composite Index .IXIC was up 55.43 points, or 2.79 percent, at 2,039.16.

US home price drops hit fresh records in July - S&P

NEW YORK - Prices of single-family homes plunged a record 16.3 percent in July from a year earlier, extending declines that have plagued the housing market for two years, according to the Standard &
Poor's/Case-Shiller Home Price Indexes.
      
The S&P/Case Shiller composite index of 20 metropolitan areas fell 0.9 percent in July from June, S&P said in a statement on Tuesday. Since the peak of the housing boom in July 2006, the index has dropped 19.5 percent, it said.
      
S&P said its composite index of 10 metropolitan areas declined 1.1 percent in July for a 17.5 percent year-over-year drop. From two years ago, the index is down 21.1 percent. The pace of home price declines has slowed in the past three months, however, S&P said.

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FOREX-Dlr rallies vs yen; cautious optimism creeps in

LONDON -  The dollar jumped 1 percent against the yen on Tuesday, as shock at the failure of the U.S. Congress to approve a $700 billion bank bailout plan gave way to cautious optimism that a deal may yet be reached.
   
Talk that U.S. lawmakers may reach some kind of agreement by the end of the week and speculation that central banks could slash interest rates allowed risk aversion to ease, with U.S. stock futures rebounding after Wall Street on Monday experienced its biggest one-day sell-off since 1997.
   
Trading continues to be dominated by waves of volatility, however, making it difficult for currencies to establish firm direction. "We're seeing dollar/yen bounce around as optimism ebbs and flows about the U.S. bailout package, but we're not getting a trend," Standard Bank currency analyst Steve Barrow said.
   
"Markets tend to move when we're pretty certain about something. Here everyone's flying blind," he said, describing volatility as "astronomical". Implied one month dollar/yen volatility jumped to its highest since mid March at 19.1 percent.
   
The dollar slumped to a four-month low against the yen at 103.50 on trading platform EBS as investors scrambled into safe haven assets after U.S. lawmakers unexpectedly rejected the unprecedented rescue deal, which should have injected some life into frozen money markets.
   
But by 1104 GMT, the dollar was up 1.1 percent against the yen to 105.19, according to Reuters data. The euro fell 0.6 percent to $1.4416 and by 0.1 percent against the yen to 150.27.
   
The euro and the pound made very little headway against the dollar, staying not far above the 10-day lows reached on Monday as evidence continued to highlight the international complexion of the banking crisis.
   
The French government took a 25 percent stake in Belgian-French financial services group Dexia after a capital injection of 6.4 billion euros by France, Belgium and Luxembourg to shore it up.
   
Ireland's government announced a scheme to safeguard deposits on Irish banks, which it said guarantees around 400 bln euros of liabilities.
   
Banks in Britain, Belgium, Russia, Iceland and the United States have been rescued by authorities so far this week, prompting mammoth injections of cash into the global banking system by central banks on Monday aimed at lubricating money markets.
   
But interbank rates remained painfully high, showing the central banks have not succeeded in easing credit tightness. The market expects U.S. consumer confidence data and the latest purchasing managers' index on Chicago manufacturing activity later on Tuesday to underline the weakness of the U.S. economy.

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Europe shares seesaw ahead of Bush speech; drugs up

LONDON - European shares fell by midday on Tuesday in volatile trade as investors turned to safe haven drug stocks to offset weakness in the banking sector ahead of a speech by U.S. President George Bush on a rescue package.
      
By 1125 GMT, the FTSEurofirst 300 index of top European shares was down 0.1 percent at 1,045.98 in choppy trade after seesawing between 2.7 percent lower on the day and 0.5 percent higher.
     
President Bush is due to speak at 1245 GMT after U.S. lawmakers rejected a $700 billion financial sector rescue plan on Monday. The Senate is to return on Wednesday and the House on Thursday after a break for the Jewish New Year Holiday of Rosh Hashanah. No laws can be passed in their absence but staff could work on a revised plan.
      
"The logic is something has to be done when U.S. lawmakers re-assemble on Thursday. Otherwise it is likely actions will be taken by governments to safeguard bank deposits with the Irish government already taking this step," said Ed Menashy, strategist at Charles Stanley. 
      
Belgian-French financial services group Dexia gained 13 percent after the group got a 6.4 billion-euro ($9.18 billion) capital boost from public shareholders as a deepening global credit crisis shook European banks.
      
Anglo Irish Bank and Allied Irish Banks were 36 percent and 20 percent higher respectively after the Irish government guaranteed all bank deposits for two years. However, Royal Bank of Scotland, HBOS, UniCredit and BNP Paribas were down 2.7 percent to 6.9 percent.
      
Across Europe, the FTSE 100 index was up 0.4 percent, Germany's DAX was down 0.8 percent and France's CAC 40 was 0.07 percent higher. "No one really expected a no vote, but it's encouraging that they're clearly going to vote on this again. Bush and (Henry) Paulson will use their political might to twist people's arms -- if you call heads or tails and lose, you'll toss the coin again," one trader said.
       
"Some people are also seeing the Irish government stepping in as a sign that more governments will get involved. We're coming off oversold positions but people will sell in any rally.
        
The pharmaceutical sector was the top weighted gainer on the index as investors turned towards defensive stocks as trade remained volatile.  AstraZeneca, GlaxoSmithKline, Novartis and Sanofi-Aventis rose 0.6-2.6
percent.
      
"As no news on the approval of the TARP (Troubled Asset Relief Program) is likely to arrive until Thursday, safe haven-type trades should remain popular," UniCredit said in a note.
      
Miners were higher as copper prices rose 0.1 percent. Antofagasta, BHP Billiton, Lonmin, Rio Tinto, and Xstrata were up 0.2-5 percent.
      
However, energy stocks were in the doldrums despite oil steadying to around $98 after a near-10 percent drop in the previous session. Oil stocks BG Group,  Royal Dutch Shell, BP and Total were 0.6-1.1
percent lower.
      
Swedish fashion giant H&M slid 9 percent after the company reported a weaker-than-expected third-quarter pretax profit of 4.59 billion crowns. German automaker Daimler fell 5.5 percent as analysts pointed to the effects of the credit crunch on the group's financing unit. 

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Asian stock market summary

JAPAN
The benchmark Nikkei shed 4.1 percent to close at 11,259.86, the lowest finish since June 2005, after U.S. lawmakers rejected a $700 billion bailout plan for the financial system.
   
The broader Topix declined 3.6 percent to end at 1,087.41, after tumbling more than 5 percent at one stage.

SOUTH KOREA
The Korea Composite Stock Price Index closed down 0.57 percent to 1,448.06, paring losses after plunging as much as 5.5 percent on U.S. lawmakers' rejection of the bailout plan for the financial sector.

AUSTRALIA
The benchmark S&P/ASX 200 index finished down 4.3 percent at 4,600.5, the lowest close since December 2005, joining other regional markets in a sell-off after U.S. lawmakers rejected a bailout package for the troubled financial sector.

TAIWAN
The weighted index closed down 3.55 percent at 5,719.28, following a historic sell-off on Wall Street. Dealers said the effect of panic selling due to anticipation of margin calls was somewhat offset by the intervention of the National Stabilization Fund and other government funds, which stepped in to buy.

CHINA MARKETS SHUT FOR THE NATIONAL DAY HOLIDAY.

HONG KONG
The Hang Seng index closed up 135.53 points or 0.76 pct at 18,016.21, off a low of 16,799.29 and high of 18,029.77.

INDIA
The Bombay Stock Exchange's 30-share benchmark Sensitive Index closed 264.68 points or 2.1 percent higher at 12,860.43 points, wiping out nearly 443 points from the day's low before its upward march. The key index fell 11.7 percent in the month. The National Stock Exchange's S&P CNX Nifty ended higher by 71.15 points or 1.85 percent at 3,921.20.

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Gold slips as firmer dlr prompts profit-taking

LONDON - Gold slipped below $900 an ounce in Europe on Tuesday as a firmer dollar and weakness in other commodities such as oil and industrial metals encouraged profit- taking.

Platinum and palladium tumbled as investors worried about the outlook for carmakers who are major consumers of the platinum group metals.

Spot gold was quoted at $897.90/899.90 at 0930 GMT against $903.25 an ounce at the nominal New York close on Monday. "I am surprised gold is not higher," said Deutsche Bank trader Michael Blumenroth. "But the market is very long since we had the $100 move two weeks ago."

"Investors are starting to take their profits in the gold market," he added. "They don't want to leave it in any investment, they just want dollars."

The dollar rebounded against the euro and the yen, as investors cut back on risky positions after an emergency plan to rescue the troubled U.S. financial sector was rejected by lawmakers.  Both oil and industrial metals fell sharply on Tuesday in the wake of the news, with oil sliding more than $2 a barrel, nickel, lead and tin all falling 5 percent and copper 4 percent.

The markets are jittery after equities fell in Asia and Europe after the U.S. House of Representatives' shock rejection of a $700 billion plan to bail out beleagured financial institutions.

U.S. stock markets plummeted, but safe haven assets such as treasury bills and gold soared, with the precious metal rocketing nearly 5 percent to $920 an ounce.

However gold failed to hold gains, as even the traditional safe haven metal fell victim to selling pressure. But despite early profit-taking, traders say the metal is still outperfoming other assets.

"Gold is performing better than any other commodity at the moment," said Blumenroth. "Other commodities such as platinum or oil are all going south, and gold is just holding this level."

A poll of delegates to the London Bullion Market Association annual conference in Kyoto showed they believe spot gold will rise by about 6 percent to $958.60 by November next year, while platinum and palladium prices are expected to soar.

Among other precious metals, silver was quoted at $13.02/13.10 an ounce against $13.07 at the nominal New York close on Monday.

The platinum group metals slipped sharply as investors worried about the outlook for demand from carmakers, who are major consumers of the metals for use in catalytic converters. "Platinum is largely an industrial metal with its main market being in autocatalysts," said Fairfax analyst John Meyer.

"Consequently, despite being a precious metal it does not benefit in the same way as gold does during periods of weakening economies." Spot platinum was down nearly 4 percent to $1,040/1,060 from $1,080 an ounce at the nominal New York close on Monday, while palladium slid more than 1 percent to $208.50/216.50 from $211.50.

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