US & World Daily Markets Financial Briefing 23-08-2007

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Stocks mixed as credit seen easing

NEW YORK - Wall Street turned mixed Thursday after a $2 bln capital infusion into Countrywide Financial Corp. relieved investors concerned about widening credit problems.
   
The market gave up a moderate early gain, but fluctuations were to be expected given the amount of uncertainty about the credit markets, and the fact that Wall Street had a big advance Wednesday, with the Dow Jones industrials rising 145 points.
   
Bank of America Corp. announced late Wednesday it will invest the money into the nation's largest mortgage lender to help it better weather problems with defaulting subprime loans. The investment was seen as a way to not only prop up Countrywide, but also prevent any further losses at the mortgage lender from hurting the underlying economy.
   
The move was reassuring to investors, although a number of major banks and home lenders continue to face difficulties. On Wednesday, Lehman Brothers Holdings Inc. said it would close its BNC Mortgage unit and slash 1,200 jobs; HSBC Holdings PLC and Accredited Home Lenders Holding Co. also said they would eliminate jobs.
   
Investors are still hoping the Federal Reserve takes further action by cutting interest rates at its Sept. 18 meeting to further alleviate Wall Street's anxiety. Last week the central bank cut its discount rate, the amount it charges banks to borrow money -- and five major financial institutions acted on it.
   
Borrowing money from the central bank is usually seen as a negative action by banks, but the move was designed to bolster the financial system. The weekly Fed report on bank borrowing from what's known as its discount window will be released after the market closes, giving more insight into other banks that have participated.
   
In the first hour of trading, the Dow rose 22.03, or 0.17 percent, to 13,258.16. Broader indexes were narrowly mixed. The Standard & Poor's 500 index was up 0.73, or 0.05 percent, to 1,464.80, and the Nasdaq composite index fell 4.33, or 0.17 percent, to 2,548.47.
   
Bonds, which have rallied in recent weeks as investors sought safer securities, were little changed on Thursday. The 10-year Treasury note's yield was unchanged at 4.65 percent. Oil rose 45 cents to $69.71 a barrel on the New York Mercantile Exchange. Crude prices have fallen after it appeared there was no major damage to oil rigs as Hurricane Dean pushed through Mexico.

Growing investor confidence was reflected Thursday in substantial gains overseas markets. Britain's FTSE 100 rose 0.60 percent, Germany's DAX index rose 0,68 percent, and France's CAC-40 rose 0.70 percent.
   
There was little in the way of economic data for traders to consider. The Labor Department reported new claims for unemployment benefits dropped to 322,000 last week, a sign the labor market remains in good shape despite the credit crunch. Though, some investors might be looking ahead to Friday's Commerce Department report on new home sales and prices.
   
Keeping Wall Street upbeat was BofA's bailout of Countrywide, which last week borrowed about $12 bln from U.S. banks to keep it going. The deal, which could ultimately give the bank a 16 percent stake in Countrywide, was viewed as a sign that U.S. financial companies are willing to step in.
   
Bank of America shares fell 9 cents to $51.56, while Countrywide rose $1.58 to $23.40.
   
Turkey and pork processor Hormel Foods Corp. said fiscal third-quarter profit fell 4 percent due to weakness in its chunk chicken and Chi-Chi's sauce businesses, but it reaffirmed guidance for the fourth-quarter and full year. Shares rose 9 cents to $34.49.
   
After the closing bell, earnings reports from retailers including Gap Inc., Aeropostale Inc. and Bebe Stores Inc. will be closely watched as another snapshot of consumer spending.

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Calm in broader markets sees a return to older trends

LONDON - The relative calm in broader markets and recovering appetites for risk saw the pound climb back above the two dollar level and the yen ease back along with the dollar.
   
Equity markets around the world enjoyed another day of gains while central banks appeared to be signalling that it is business as usual. In Japan, the Bank of Japan held off hiking rates but pretty much maintained its tightening bias, while the European Central Bank stuck to its guns, saying that its stance on monetary policy has not wavered. Both are predicted to hike rates in September.
      
The pound, meanwhile, enjoyed a good run, rising above the 2 dollar level, boosted by the recovery in risk appetite.
   
Provisional business investment figures for the second quarter which showed quarterly growth of 0.8 pct, compared with a 0.6 pct fall in the first, also helped the pound.
   
Elsewhere, the euro was steady, unaffected by figures confirming quarterly growth for the German economy was 0.3 pct in the second quarter, down from 0.5 pct in the first.
   
The euro had firmed strongly yesterday following a surprise announcement from the European Central Bank that hinted they may still raise interest rates in September.
   
In a statement, the ECB confirmed that its monetary policy stance has not changed from earlier in the month, when the bank's chief Jean Claude Trichet reinforced expectations of another quarter point increase in the key refi rate to 4.25 pct.
     
The dollar was on the back foot all day, and was little changed after US weekly jobless claims figures. Initial claims for US state unemployment fell 2,000 to 322,000 in the week ended August 18, exactly in line with expectations.
   
"The weekly jobless claims may provide a small degree of direction to the market but on balance it's the bigger money supply issues that will continue to dominate," said James Hughes, market analyst at CMC Markets.

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Euroshares higher midday, Dow seen up on Countrywide cash injection

LONDON - Europe's leading exchanges were higher midday as the Dow looks set to post strong gains in opening deals as news of Bank of America's handout to Countrywide Financial inspires confidence. At 12.33 am, the Dow Jones STOXX 50 added 35.63 points, or 0.96 pct, to 3,741.15 as the STOXX 600 rose 3.78 points, or 1.03 pct, to 372.4.
   
Banking and financial stocks were heavily featured on European leader boards as recent fears about the state of the global credit markets waned. Allied Irish Banks added 1.81 pct, Societe Generale added 1.52 pct and Aegon was up 1.34 pct.
   
Northern Rock was 6.04 pct higher as investors tried to cover their short trades. The gains in early trade prompted talk the group -- which has been heavily sold amid the recent market turmoil -- was a takeover candidate, with dealers saying ING was the latest name in the frame. ING, though, rejected the speculation. ING spokesman Peter Jong said Northern Rock "is not on our radar screen".
   
Standard Chartered was up 1.52 pct on press reports it is in talks to buy South Korean broker Hannuri Investment & Securities. Separately, the bank said it had acquired a 49 pct stake in Indias UTI Securities for around 36 mln usd.
   
Nordea added 1.5 pct after its shares were upped to 'neutral' from 'sell' in a Goldman Sachs banking review. HSBC slipped back 0.55 pct after reports Bank of China holds 9.7 bln usd of sub-prime assets.
   
Sweden's OMX added 0.83 pct as Sweden's FSA said that said Borse Dubai's press release about its bookbuilding process in OMX amounted to a public takeover offer and that the Middle Eastern exchange breached the law. But the FSA said it will take no action because Borse Dubai has since complied with the law.
      
Holcim charged 2.38 pct ahead after beating expectations with its first-half results and positive outlook. Although the market had very high expectations, the Swiss cement group still managed to beat them, said a Zuercher Kantonalbank analyst. The good news lifted other plays in the sector. Lafarge -- up 2.82 pct -- led the STOXX 50 risers board. Italcementi added 1 pct and Cimpor added 0.29 pct.
   
HedilbergCement added 0.86 pct on the day the High Court of Justice in England and Wales gave the green light to its takeover of Hanson, at a price of 1100 pence per share.
   
TUI was one of the leading gainers in Germany --up 2.04 pct -- as speculation continues that Geveran Trading Co, one of shipping billionaire John Fredriksen's investment vehicles, may be interested in raising the 3.07 stake it currently holds in TUI and possibly aim for a break up of the tourism and shipping giant.
   
Flughafen Wien was 0.73 pct higher as it released better-than-expected first-half net profit and lifted its passenger growth forecast for the year to 8 pct from 5 pct.
       
Elsewhere, hotel group Accor rose 2.2 pct after Kepler upgraded the French hotels group to 'buy' from 'hold', as well as on continued bargain-hunting by investors after the severe correction of recent weeks. In a note this morning, Kelper analysts argued that the recent drop in the stock was "excessive" and offers a buying opportunity.
   
Air Berlin was off earlier lows but down 2.35 pct after the group denied a rumour that it will issue a profit warning imminently. A spokesman said it would be inaccurate to say the airline would give a profit warning today. The rumours surfaced after Commerzbank said it was lowering its earnings forecasts for the carrier following TUIfly.com's weak second-quarter traffic results and disappointing indications for Air Berlin's second-quarter yields.
   
But Kuoni Reisen Holding shed 5.56 pct after it reported a disappointing first-half net profit of 3.5 mln sfr and issued a "vague" outlook statement.
       
In the automotive sector, Fiat was trading 1.73 pct higher after Moody's upgraded the group's corporate family rating and other long-term senior unsecured ratings yesterday to 'Ba1' from 'Ba2' with a positive outlook.  Staying with autos, MAN AG added 1.93 pct as traders noted that press reports of a possible joint venture in China were giving some support.
   
DaimlerChrysler -- up 2.39 pct -- and other car groups also found support as the price of oil wallowed below 70 usd. Daimler also overcame a hurdle in the renaming of itself as Daimler following an agreement with Ford Motor Co, whose Jaguar brand owns the rights to the name. Renault -- which launched its new Laguna model yesterday -- was up 0.69 pct.

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Asia end higher tracking Wall Street as credit fears ease for now

SINGAPORE - Share markets across Asia ended higher Thursday, taking their cue from an apparent easing of credit fears in the US overnight, with Japan's Nikkei benefiting from a softer yen which takes pressure off big exporters like Toyota.
   
The Nikkei ended up 415.68 points or 2.6 pct to 16,316.32, after earlier rising to as high as 16,333. The broader Topix index was up 46.92 points or 3 pct at 1,591.81. The Bank of Japan ended a two-day policy meeting with a decision to leave interest rates unchanged, as widely expected.
   
Central bank activity was also a focus in the US market overnight as four of the nation's biggest lenders -- Citigroup Inc, JPMorgan Chase, Bank of America and Wachovia Corp -- said they borrowed 2 bln usd from the US Federal Reserve's discount window.   Last Friday, the Fed lowered the discount rate by 50 basis
points in an effort to calm troubled markets.

Other markets across Asia joined the rally Thursday. In South Korea, the KOSPI index closed up 40.22 points or 2.3 pct at 1,799.72, while Taiwan's weighted index closed up 239.38 points or 2.8 pct at 8,732.84. 
   
Singapore's Straits Times Index closed up 49.41 points or 1.5 pct at 3,370.91, Malaysia's Kuala Lumpur Composite Index (KLCI) closed up 28.23 points or 2.3 pct at 1,283.62 and Jakarta's composite index ended up 54. 67 points or 2.7 pct at 2,117.66.
   
Meanwhile, China A-shares closed at a new record for the fourth straight day, with gains in large-cap financial and property companies with strong earnings prospects driving the main index past 5,000 points for the first time. The benchmark Shanghai Composite Index closed up 52.42 points or 1.1 pct at a record 5,032.49. It also hit an all-time intraday high of 5,050.38, surpassing the previous record of 4,999.19 set yesterday.
   
The Shanghai A-share Index was up 55.17 points or 1.1 pct at 5,283.93 and the Shenzhen A-share Index was up 17.83 points or 1.21 pct at 1,486.14. The Shanghai B-share Index rose 2.17 points or 0.7 pct to 316.47 and the Shenzhen B-share Index ended up 5.23 points or 0.7 pct at 725.65.
   
In Hong Kong, share prices closed sharply higher, extending gains for the fourth straight session. The Hang Seng Index closed up 620.09 points or 2.8 pct at 22,966.97. The index has gained 2,580 points or 12.6 pct so far this week, after shedding 1,405 points last week.
       
In Philippines, the market has now recovered more than two-thirds of the losses it made last week, mirroring the shift in sentiment around the world. The composite index closed up 89.69 points or 2.9 pct at 3,229.15, while the all-share index jumped 55.12 points or 2.7 pct to 2,064.52.
       
In Australia, investor confidence was boosted by a string of upbeat earnings reports and a bullish business outlook from the world's biggest miner, BHP Billiton Ltd. The S&P/ASX 200 index ended up 154.7 points or 2.6 pct at 6,159.7. The All Ordinaries index closed up 152.3 points or 2.5 pct at 6,149.7.

Indian shares closed lower, despite a blazing start to the day, on speculation the country's communists are unlikely to call a truce as they spar with the Congress-led coalition government over an Indo-US nuclear treaty.
  
The Bombay Stock Exchange's benchmark Sensex closed 0.59 pct, or 84.68 points lower, at 14,163.98. It had climbed as high as 14,554.93 points in early trade. The National Stock Exchange's S&P CNX Nifty closed 0.92 pct lower at 4,114.95 points. Among the BSE 30, 15 shares gained and 15 lost. In the broader market, 928 shares advanced, 1,665 retreated and 64 were unchanged.

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Gold edges higher on dollar weakness; higher equities

LONDON - Gold edged higher on dollar weakness following strong hints from the European Central Bank that interest rates will still rise next month, despite the recent turmoil stemming from the US subprime mortgage crisis.
       
At 1.35 pm, spot gold was trading at 663.08 usd an ounce against 659.40 usd in late New York trade yesterday.
   
A strong run on equities was also pointing to a degree of investor confidence returning to the markets, dampening fears of another bout of fund liquidation which has pressured gold prices in recent weeks as they look to cover losses elsewhere.
   
"All the signs from the credit and equity markets are that sentiment looks set to improve in the ultra short-term, although this could change on further bad news," said UBS analyst Robin Bhar.
   
Some analysts see gold taking a longer term boost should the wider markets once again turn sour on credit concerns. "(Gold will) benefit from further investment demand...as investors add safe-haven protection to their portfolios," said TheBullionDesk.com analyst, James Moore.
   
Strength in both oil and base metals prices, which has helped shore up confidence towards the commodities sector as a whole, is also lending support.
      
Among other precious metals, platinum rose to 1,247 usd per ounce against 1,234 usd yesterday, on renewed buying interest after its recent price decline, while its sister metal palladium was trading at 325.00 usd against 326.55 usd.
   
Lonmin, the world's third-largest producer of platinum, said yesterday that it has failed to resolve wage negotiations with workers who have been on strike for the last three days. Lonmin said on Tuesday that the strike by the National Union of Mineworkers has led to a production loss of around 3,400 platinum ounces per day at its Marikana operations.
   
Silver rose to 11.77 usd per ounce from 11.58 usd.

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