US & World Daily Markets Financial Briefing 11-12-2007

Can you identify the Next Major CURRENCY Trend? ...
with the Electronic Currency Trading System (ECTS) Help You Can! Click Here

Stocks move higher ahead of Fed decision

Wall Street rose modestly Tuesday as investors awaited the Federal Reserve's interest rate decision and absorbed more fallout from the mortgage and credit crisis.

Investors are expecting policymakers to cut rates Tuesday afternoon for a third straight time, and perhaps indicate that more might be forthcoming. Most economists are expecting a quarter-point cut in the federal funds rate to 4.25 percent -- though there are some hoping for a half-point cut in the Fed's last meeting this year.
   
The central bank has been trying to help the economy weather a severe slump in housing, spreading mortgage defaults and financial market turbulence. But, there has been fresh evidence just this week that the world's banks and brokerages are still suffering from the subprime loan crisis.
   
Washington Mutual Inc. became the latest lender to resort to a massive stock sale to shore up its finances. WaMu's plan to sell $2.5 billion worth of convertible preferred stock follows a move by Switzerland-based UBS AG to sell $11.5 billion in shares to Singapore's sovereign-wealth fund and an unidentified Middle Eastern investor.
   
The slightly higher open extends Monday's advance, when the Dow Jones industrials rose more than 100 points. Investors have sent shares higher in recent weeks as they've grown more confident in the Fed's openness to loosening its policy again.
   
In midmorning trading, the Dow rose 14.55, or 0.11 percent, to 13,741.58. Broader indexes also edged up. The Standard & Poor's 500 index rose 1.43, or 0.09 percent, to 1,517.39, and the Nasdaq composite index added 6.58, or 0.24 percent, to 2,725.53.
   
Bond prices advanced. The 10-year Treasury note's yield, which moves opposite the price, fell to 4.12 percent from 4.16 percent late Monday. Gold fell while the dollar was mixed against major currencies.
   
Washington Mutual shares fell $1.63, or 8.2 percent, to $18.25 after the nation's largest savings and loan also said it will close offices, lay off more than 3,000 workers, and slash its dividend. The bank also set aside up to $1.6 billion for loan losses in the fourth quarter.
   
In other corporate news, Texas Instruments Corp. added support to technology stocks after it lifted the low end of its earnings and revenue outlook. Shares rose $1.11, or 3.4 percent, to $33.77.
   
AT&T Inc. rose rose $1.95, or 5.2 percent, to $39.85 after the telecommunications company said it will buy back 400 million shares and raise its dividend 12.7 percent. The buyback represents about 7 percent of the company's stock, and will be completed by the end of 2009.
   
H&R Block Inc., the nation's largest tax preparer, said in a preliminary earnings report it expected a huge second-quarter loss as it continued to wrestle with its disintegrating mortgage arm. Shares fell 95 cents, or 4.7 percent, to $19.00.
   
The Russell 2000 index of smaller companies rose 3.07, or 0.39 percent, to 794.27. Advancing issues outpaced decliners by a 4 to 3 basis on the New York Stock Exchange, where volume came to 27.3 million shares.
   

VantagePoint's market forecasts are nearly 80% accurate. Take a look at actual forecasts, become eligible for a Complimentary VantagePoint Market ($750 value!) and see the difference they will make. Click here to see two recent forecasts now.

Forex - Euro dips after weak German ZEW, but focus remains on FOMC meeting

The euro came under pressure after a weaker-than-expected German sentiment survey highlighted the worsening outlook for Europe's largest economy, though the focus remains firmly on this evening's interest rate decision in the US.

The latest ZEW economic expectations index for Germany fell to -37.2 points from -32.5 points last month, worse than economists' forecasts for a smaller drop to -35 points, and the index's lowest level since 1993. Calyon analyst Mitul Kotecha said the release was negative for the euro, particularly as the strength of the euro was cited by the ZEW in its accompanying press release as a concern for exports.

"It (the ZEW reading) does not change the outlook for the European Central Bank... with rates set to remain on hold for the foreseeable future, but it does highlight the dilemma for the ECB, with growth indicators turning lower and inflation gauges remaining high," he added.

The euro's falls were limited, however, as the market awaits the big market mover of the week this evening when the US Federal Reserve announces its latest interest rate decision.

Rates are widely expected to be cut again, but uncertainty continues to hang over the market over whether the Federal Open Market Committee will opt for a 25 basis point cut or a bigger 50 point drop. A cut in the discount rate is also widely forecast.

"The FOMC decision remains the key event today, and while the market is more than convinced the Fed will take its next step in easing, the degree of the move remains in question," said Alina Anishchanka at UBS. The Fed's accompanying statement will also be closely watched to see the extent to which it is concerned about inflationary pressures and for hints on the likelihood of further easing next year.

Trade Energy contracts? Get your FREE research. Click here.

Euroshares down midday; investors eyeing Fed Reserve rate decision, ZEW weighs

At 12.21 am, the Dow Jones STOXX 50 Index was down 7.84 points, or 0.21 pct at 3,796.74 while the DJ STOXX 600 Index tacked on 0.74 point, or 0.2 pct, to 374.3. Spread bettors IG Index said the Dow looks set to rise around 16 points, having risen 101.45 yesterday.

And disappointing German confidence data also weighed on sentiment. The ZEW research institute said its economic expectations index for Germany was at -37.2 points -- close to 15 year lows and well below forecasts.

ZEW said financial experts polled said that risks to economic growth in the US and other important industrial countries as well as the strong Euro are factors of uncertainty to the German economy, which heavily relies on exports.

But there was some good news, with semiconductor stocks up as investor confidence in the chip sector received a boost after US rival Texas Instruments lifted the low end of its forecast range for fourth-quarter earnings and revenue.

Infineon Technologies was last up 0.2 pct. But shares in STMicroelectronics tumbled 1.8 pct after the French-listed group it will buy Genesis Microchip Inc in an all-cash deal valuing the US maker of video and graphics chips at 336 mln usd.

According to an analyst at Oddo Securities, there are concerns about Genesis's performance. "Genesis is small and in decline. Its gross margins are falling, it's losing clients and suffering from strong downward pressure on prices," he said, adding that the trend is now getting worse and also expressing concern that the move does little to diversify STM's currency exposure.

Other smaller European chip companies also posted gains, with Soitec up 4.05 pct after International Business Machines Corp announced progress towards its target of introducing 32 nanometre semiconductors in the second half of 2009, a development analysts say is likely to boost demand for the French company's silicon-on-insulator wafers.

Elsewhere in the chip sector, shares in semiconductor equipment maker SEZ Holding Ltd surged 34.62 pct after Lam Research Corp made a 38 sfr per share takeover offer late yesterday. And mining stocks remained in focus as metals prices posted strong gains overnight and as bid interested re-ignited Xstrata shares.

Finmeccanica was up 3.99 pct. The company lifted its 2007 guidance on earnings before interest and tax and said its free operating cash flow will be positive this year against an earlier expectation of reaching a break-even.

Among utilities, Gaz de France rose 1.3 pct as a court decision to cancel the law freezing gas tariffs strengthened hopes that the utility will be able to up its prices in the new year and offset losses. And Iberdrola rebounded from yesterday's losses -- up 1.12 pct -- as it is expected to announce the IPO price for its Iberdrola Renovable spin-off later today.

But Union Fenosa fell another 1.57 pct -- still dogged by Government plans to reduce CO2 emission rights for power groups. EON and RWE were down 0.15 pct and 2.04 pct respectively, after Cheuvreux downgraded the German power companies to 'underperform' from 'outperform.'

The broker cited concern over price regulation and talk of of separating power generation and network ownership. In the case of RWE, it is also worried about the delay in the initial public offering of American Water unit.

Banks were also on offer after Washington Mutual said it will report a fourth-quarter loss due to an after-tax charge of about 1.6 bln usd for the write-down of the goodwill associated with its home-loans business. Shares in Lloyds TSB slipped 0.5 pct after ABN Amro cut its rating to 'hold' from 'buy', and cut its target to 540 pence from 640, saying it expects 2008 to be more challenging for the banking group.

And UBS fell back 1.9 pct. Yesterday the market welcomed the group's attempts to reveal the full extent of its sub-prime exposure. But today Cazenove downgraded the Swiss banking group to 'in-line' from 'outperform', saying the upside seems limited.

Inflation picked up in September in Europe as both areas show fragile economic growth. Just as in the U.S., rising energy prices are to blame. Read free, daily market reports available only at CMS Forex and open your free demo trading account today. Click here

Asian stock markets end higher on Fed rate cut hopes

Benchmark indices in Japan, South Korea, Australia, Singapore, Indonesia and Malaysia were higher, with investors remaining upbeat ahead of the Fed's rate-setting meeting later tonight. Policymakers are broadly expected to lower rates tonight by at least a quarter percentage point.

Stocks in Hong Kong rose on short-covering after yesterday's sharp fall, while Chinese markets extended yesterday's rally as investors shrugged off concerns about further credit tightening in the mainland. Beijing announced that the November consumer price index rose 6.9 pct from a year earlier, its sharpest rise in a decade.

"The market is up today because of encouraging economic data in the US and the investment of sovereign funds into UBS AG," said Peter Lai, director at DBS Vickers in Hong Kong. Banks rally In Australia, The S&P/ASX 200 finished 0.8 pct higher at 6,680.4 and the All Ordinaries ended up 0.8 pct at 6,738.1

Major banks rallied after being sold down recently on concerns about rising funding costs. Westpac climbed 2.2 pct to 29.60 aud, National Australia Bank rose 0.1 pct to 38.91 aud, Commonwealth Bank added 0.5 pct to 60.78 aud, and Australia & New Zealand Banking Group jumped 0.5 pct to 28.43 aud.

Rio Tinto fell 0.1 pct to 146.50 aud while BHP Billiton rose 1.4 pct to 44.20 aud, after Rio asked the UK's Takeover Panel to set a deadline for a firm proposal from BHP. China's Baoshan Iron & Steel Co Ltd, rumoured to be planning a bid for Rio Tinto, was suspended from trading in Shanghai Tuesday.

In Japan, the Nikkei 225 Stock Average finished up 0.8 pct at 16,044.72, its best level since Nov 7 when it settled at 16,096.68. The broader Topix index advanced 0.6 pct to 1,567.02. Exporters traded briskly, with Sony Corp up 2.6 pct at 6,230 yen, Toyota Motor Corp rising 20 yen to 6,360 and Komatsu climbing 3.5 pct to 3,280 yen.

South Korea's KOSPI index closed up 1 pct at 1,925.07. Kookmin Bank rallied 3.7 pct to 69,800 won and Woori Financial gained 2.5 pct to 18,300 won, both on fresh interest by investment trust companies.
In Hong Kong, property shares rose on hopes the authorities will match the impending rate cut in the US, and boost real estate demand. Cheung Kong (Holdings) was up 4.64 pct at 146.70 hkd and Henderson Land was up 7 pct at 76 hkd.

Sun Hung Kai rose 6.8 pct to 165.50 dollars after news that it has formed a joint venture with mainland developers KWG Property and Guangzhou R&F for a 10 bln yuan residential and commercial project in China. The Hang Seng index closed up 2.6 pct at 29,226.84.

Elsewhere, the Philippine Composite index finished down 0.1 pct at 3,672.38, while the broader all-share index was up 0.9 point at 2,243.75. The Taiwan weighted index closed up 0.5 pct at 8,638.33. The Singapore Straits Times index closed up 1 pct at 3,589.03 and the Jakarta index was up 0.7 pct at 2,810.96.

The Malaysian Kuala Lumpur Composite Index (KLCI) was up 0.6 pct at 1,434.16. The Shanghai Composite index gained 0.3 pct to 5,175.08.

Indian shares close above 20,000 mark for the first time

The Bombay Stock Exchange's benchmark Sensex soared at opening and built on the gains to close above the 20,000-mark. It ended the day 360.21 points, or 1.8 pct, higher at 20290.89, while the National Stock Exchange's S&P CNX Nifty closed 2.29 pct higher at 6097.25, also a record finish.

Stocks of companies with lower capitalisation also rose. The BSE's midcap index rose 69.54 points or 0.76 pct to close at 9186.98, while the smallcap index gained 1.2 pct to 11667.84.

Follow the futures and FX markets with our trading experts and read their analysis.  Click here to sign up now!

Oil prices rise on expected Fed rate cut

Oil prices rose Tuesday in anticipation that the U.S. Federal Reserve will cut interest rates later in the day, a move that would likely help the U.S. economy -- the No. 1 oil consumer -- and bolster demand for crude.

News of several crude oil pipeline shutdowns in the U.S. Midwest due to ice storms also supported prices. Light, sweet crude for January delivery rose 38 cents to $88.24 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. The contract had fallen 42 cents to settle at $87.86 a barrel on Monday.

In London, Brent crude futures rose 20 cents to $88.24 a barrel on the ICE Futures exchange. The Federal Reserve is widely expected to lower its key rate, now at 4.5 percent, by a quarter of a percentage point -- or perhaps more -- to try to keep troubles in the housing and credit markets from sinking the economy.

"What's been weighing down on the crude oil futures market is concern about the U.S. economy," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "If the expected cut indeed holds true or is actually larger, it will bolster the U.S. economic outlook, and that's supportive of oil pricing."

Others, however, said the rate cut would have to be something other than a quarter point to affect oil prices. "Today all eyes will be on the Fed but with a 25-basis-point cut already priced in, it will take a surprise to move (Nymex oil) out of its current trading range," said Olivier Jakob of Petromatrix in Switzerland.

Dow Jones Newswires reported that several crude oil pipelines, including ones operated by Enbridge and Magellan Midstream Partners, were affected by power outages which forced them to shutdown. There were no estimates of when the pipelines were expected to restart.

Oil futures have dropped more than $10 from their highs in recent weeks as OPEC increased output and as demand slid in the face of high prices.

Several recent reports have suggested U.S. demand for oil and gasoline is falling even as OPEC is boosting production. Total production by the Organization of Petroleum Exporting Countries rose to 31.15 million barrels a day in November, up 40,000 barrels a day from October, according to Platts, the energy research arm of McGraw-Hill Cos. Analysts surveyed by Dow Jones Newswires predict the U.S. government will report on Wednesday that domestic oil inventories rose last week.

Some analysts expect oil futures to trade in a range around $90 until more evidence surfaces of either further demand erosion or supply growth. Others believe futures have begun a seasonal move that could take them as low as $70 a barrel.

"It's nearly the end of the year and many investors are booking profits to boost their annual returns and hence their annual bonuses," Shum said. "Given that, I don't think we're going to rally to $100 a barrel again in the remaining weeks of this year unless there are some unexpected events."

Many analysts have blamed the weakening dollar, in part, for oil's run-up to nearly $100 a barrel last month. The dollar's continuing decline against the euro and other currencies makes oil look more attractive to foreign investors.

Heating oil futures rose 0.78 cents to $2.4852 a gallon (3.8 liters) while gasoline prices rose 0.23 cent to $2.2524 a gallon. Natural gas futures added 6.9 cents to $7.101 per 1,000 cubic feet.

Increase the odds for Forex Trading success with this free online course. Learn to build a solid Forex Trading foundation and discover proven strategies for continued success.  Access this wealth of knowledge here absolutely free.

Online Trading Academy - Learn more to earn more.