US & World Daily Markets Financial Briefing 23-11-2007

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Stocks open higher after pullback

Stocks opened higher Friday as investors awaited signs of how well retailers might fare during the holiday shopping season.
   
Friday's shortened session -- the market closes three hours early at 1 p.m. EST -- will cap a volatile Thanksgiving week. On Wednesday, the Dow Jones industrial average and the Standard & Poor's 500 index each fell more than 1.5 percent, with the Dow giving up more than 200 points.
   
In the first minutes of trading Friday, the Dow rose 88.52, or 0.69 percent, to 12,887.56.
   
Broader stock indicators also rose. The Standard & Poor's 500 index rose 11.41, or 0.81 percent, to 1,428.18, and the Nasdaq composite index rose 18.93, or 0.74 percent, to 2,581.08.
   
Friday's session could prove more an aberration than a continuation of recent trends. Volume on such holiday-shortened days is often so thin that market watchers dismiss much of what they see. Many of Wall Street's principal players are on vacation.
   
Friday's gains come after Wednesday's session in which the Dow fell below its August low -- breaching a psychological barrier some investors had hoped would be avoided in the latest pullback. And the S&P's decline Wednesday left the index in negative territory for the year. The news was unwelcome as many
investments such as mutual funds mirror or are measured against the index.
   
Government bonds fell Friday. The yield on the 10-year Treasury note, which moves inversely to its price, rose to 4.04 percent from 4.01 percent late Wednesday.
   
The dollar was lower against other major currencies while gold prices rose. With no major economic news scheduled to arrive Friday, investors will be searching for any new insights into the health of the economy, particularly with Black Friday, the unofficial kickoff of the holiday shopping season, under way.
In one bright spot, oil prices, which have hovered near $100 per barrel, pulled back slightly.
   
Light, sweet crude fell to 5 cents to $97.24 per barrel in premarket electronic trading on the New York Mercantile Exchange.
   
A modest drop in energy prices, however, won't erase investors' concerns about how well the overall economy will perform in the coming months amid pressure from a weak U.S. housing market, a deterioration of credit and a weak dollar.
   
Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where volume came to 666.7 million shares.
   
The Russell 2000 index of smaller companies rose 7.31, or 0.99 percent, to 747.61.
   
Overseas, Britain's FTSE 100 rose 1.32 percent, Germany's DAX index rose 0.34 percent, and France's CAC-40 rose 1.58 percent. Hong Kong's Hang Seng index closed up 2.06 percent. Markets in Japan were closed Friday for a holiday.

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Forex - Pound lower as data hint UK economy slowing

The pound was steady at weakened levels against the euro and the dollar on figures showing the UK economy grew more slowly than thought in the third quarter.
   
The office for National Statistics said the economy grew by 0.7 pct in the third quarter, below the previous estimate of 0.8 pct. Annual growth was revised down to 3.2 pct from 3.3 pct.
   
The figures suggest the UK's period of above-trend growth is coming to an end, adding to the argument for UK interest rates to drop sooner rather than later.
   
Michael Saunders at Citigroup said the slower growth "fits with other signs that risks for economic growth lie on the low side of the MPC's base case (which itself is the weakest forecast they have published since 2001)".  "As the economy weakens, policy rates are likely to head lower," he said.
   
The Bank of England's Monetary Policy Committee is expected to cut rates at least once next year, following its dovish November inflation report. The first cut could come as early as next month, although most economists predict rates will not fall until early 2008.
   
Last night, BoE rate-setter Rachel Lomax hinted she might lean towards a pre-emptive cut in rates, saying the Bank "can and should respond quickly and flexibly to early signs of the changing economic weather".
   
The pound, which earlier hit a new four-and-a-half year low against the euro of 0.7215 stg in late Asian trade, was edging back down to those lows as the afternoon progressed.
   
The dollar was also stronger against the pound, as well as the euro, recovering from its fall to new euro lows of 1.4966 usd in Asian trade as US economic concerns were magnified by the effect of scant liquidity.
   
The US and Japan are both celebrating public holidays, putting many investors on the sidelines. The prospect of the Federal Reserve Bank cutting interest rates again in the coming months is also likely to put pressure on the dollar. Markets are pricing in a quarter-point cut at December's meeting to follow 0.75 pct points of reductions since the summer, as the economy threatens to slow.

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Euroshares up midday as Wall St seen up, financials rally

At 11.51 am, the STOXX 50 added 41.23 points or 1.15 pct to 3,611.2, while the STOXX 600 rose 3.74 points or 1.06 pct to 355.58.
      
Deutsche Postbank added 5.39 pct, as Commerzbank supervisory board chairman Martin Kohlhaussen said his bank has always been interested in acquiring Deutsche Postbank and would be keen to submit an offer if the latter were up for sale.
   
Commerzbank shares were 0.77 pct higher. CNP Assurances surged 9.25 pct following a report in the French press that Axa might be mulling a takeover bid for the French life insurance group.
   
Societe Generale was up 2.13 pct, Credit Agricole added 3 pct and BNP Paribas moved 1.78 pct higher after Moody's rating agency said the outlook for the sector remains stable.
   
Other financial stocks were also higher; Aegon was up 2.33 pct and Unicredit rose 2.55 pct. Meanwhile, IKB fell 1.04 pct after a report in Boersen-Zeitung said a consortium of banks, which supplied the bank with a 3.5 bln eur risk shelter, does not wish to increase its coverage.
   
German financial watchdog BaFin yesterday met with IKB and KfW, as well as representatives of state-owned and municipally-owned banks, Financial Times Deutschland reported, without citing sources. Following news that IKB is considering transferring loans to Deutsche Postbank AG, concerns arose that the company may be having trouble meeting levels of liquidity demanded by German regulation, the newspaper said.
   
Staying with M&A news, Sonaecom SGPS and PT Multimedia advanced 3.2 pct and 3.26 pct respectively, on reports that Soneacom has been in contact with several PTM shareholders to sound out the possibilities of a friendly merger.
   
Vedanta stormed more than 10 pct higher mid-morning as talk emerged that the Chinese state mining company is preparing to bid for the group.
   
The healthcare sector continued its recovery, as Deutsche Bank said the sector is attractively valued and reiterated its 'buy' recommendations on Novartis, Roche and Astrazeneca.
   
Pharmaceuticals began to move higher yesterday after Citigroup upgraded the sector to 'neutral', saying most of the bad news in the sector has now been priced in. Astrazeneca added 3.9 pct. Novartis climbed 5.16 pct. Roche was up 2.31 pct.
   
But Philips led the STOXX 50 risers - up 4.16 pct - after Dutch MPs  passed a bill doubling the limit on the amount of tax-free share buybacks a company can make.

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China Construction B Asian stocks mixed on continued uncertain US outlook

Stock markets across Asia ended mixed Friday with Hong Kong gaining as investors sought bargains after recent declines, while Korea pulled back as foreign investors reduced their holdings on continued uncertainty about the US market and economy.
   
Japanese market was closed for a public holiday. Wall Street was closed Thursday for the Thanksgiving holiday and will trade for just half a day today.
   
The Hang Seng index closed up 2.1 pct at 26,541.09, finding further support from news that Henderson Land chairman Lee Shau-kee, who has been dubbed "Asia's Warren Buffet", is ready to invest 10 bln hkd in the local market.
   
The KOSPI index closed down 1.5 pct at 1,772.88.  The S&P/ASX 200 closed down 0.1 pct at 6,330.2 and the All Ordinaries was down 0.04 pct at 6,392.4.
   
The Singapore Straits Times closed up by 0.4 pct at 3,325.89 and the Malaysian KLCI was closed up 0.7 pct at 1,353.55. The Shanghai Composite closed higher by 0.96 pct at 5,032.13.  The Taiwanese Taiex closed down 1.9 pct to 8,342.
   
Among individual stocks, Hong Kong banks rose after Standard & Poor's raised ratings on the top three lenders. China's biggest bank by assets ICBC rose 3.47 pct to 5.96 hkd. Bank of China gained 1.5 pct to 4.05 hkd, while China Construction Bank rose 3.05 pct to 7.09 hkd.
   
CNOOC Ltd rose 4.4 pct to 13.3 hkd. China's biggest offshore oil producer said it has made 10 new oil and gas discoveries in the mainland so far this year.
   
In Seoul, Samsung Electronics was a standout, closed higher by 3.3 pct to 557,000 won on an improving chip industry outlook. The stock gained 4.7 pct on Thursday.
   
The rally was accelerated by hopes that the company's governance structure will become more transparent and that it will gain more independence from Samsung Group as prosecutors investigate allegations of bribery at South Korea's largest conglomerate.
   
Mirae Asset Securities, South Korea's second largest brokerage by market capitalization, fell 14.3 pct to 138,000 won. The Financial Supervisory Service (FSS) recently said it will inspect the company's sales operations and fund management arm amid growing concerns about a newly launched investment fund
product.
   
Meanwhile, Manila's composite index was up 0.5 pct at 3,494.44 on a technical rebound led by index heavyweight Philippine Long Distance Telephone Co, snapping a three-day decline. The market was also supported by rotational interest into cheaper stocks.
   
In Indonesia, the composite index closed up 0.6 pct at 2,584.35, led by Astra International and miners, but gains were limited as some market players squared positions ahead of the weekend.

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Metals - Gold up on weak dollar; volumes light as US holidays continue

Gold rose as the dollar remained weak, having hit a record low against the euro in Asian trading hours, which sparked demand from those trading in other currencies as they found the metal to be cheaper.
   
Dollar-denominated gold moves in the opposite direction to the dollar and in line with high oil prices, as it is seen as a hedge against inflation. Oil, while lower on the day, was still within sight of a record high around 99 usd struck earlier this week.
   
The US was on holiday for Thanksgiving yesterday and although some players have returned to their desks, ongoing celebrations will again keep volumes on the light side and no economic data is scheduled for release.
   
Gold surged to 845.58 usd an ounce in early November, just 0.5 pct lower than its all-time record high price of 850 usd in January 1990.
   
At 12.02 pm, spot gold was trading up at 809.63 usd per ounce against 803.25 usd in late London trade yesterday. Earlier today gold hit a day-high of 815.60 usd.
   
Safe-haven buying has also helped lift gold's value. Credit-crunch jitters have hammered equity markets and gold has been bought as a hedge, as it is seen as a safe store of value.
   
"Sentiment remains bullish as the latest credit jitters prompt further safe-haven positioning by investors and speculators...the recent period of consolidation has improved the technical picture, signalling a re-test of 850 usd," said James Moore, analyst at TheBullionDesk.Com.
   
Some analysts warned however that after such dramatic price increases, short-term corrections are likely at some point.
   
"There is the potential for short-term price corrections, we would view these in the context of what remains a strong medium-term uptrend for gold," said Barclays Capital analysts.
   
There is also a strong possibility traders might sell off as the end of the year approaches to book profits.
"I'm generally still bullish on gold but there is a definite possibility of a correction at the end of the year" said Walter De Wet, analyst at Standard Bank.
   
Looking ahead, there is no important US economic data today to impact the dollar or gold. In other precious metals, platinum was steady at 1,468 usd per ounce from 1,468.50 usd.
   
Silver was up at 14.54 usd per ounce against 14.53 usd late in London yesterday, while palladium edged down to 349 usd per ounce against 349.50 usd.

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