US & World Daily Markets Financial Briefing 24-08-2007

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Stocks are flat ahead of home sales data

NEW YORK - Stocks opened little changed Friday following a better-than-expected durable goods report and as investors awaited data on new home sales for July.
   
The Commerce Department reported demand surged for expensive goods during July. The broad-based increase topped projections in a key barometer of capital spending by businesses.
   
Orders for durable goods rose by 5.9 percent last month to a seasonally adjusted $230.70 billion. Durables -- goods designed to last at least three years -- rose 1.9 percent in June, revised from a previously estimated 1.3 percent advance.
   
In the first hour of trading, the Dow Jones industrial average fell 7.31, or 0.06 percent, to 13,228.57. Broader stock indicators were also flat. The Standard & Poor's 500 index slipped 0.83, or 0.06 percent, to 1,461.67. The Nasdaq composite index fell 5.08, or 0.20 percent, to 2,536.62.
   
Investors appeared unwilling to make major bets ahead of a Commerce Department report expected to show further slowing of new home sales and a drop in home prices during July. Economists surveyed by Thomson Financial predicted, on average, that sales of new single-family homes will have fallen in July to a seasonally adjusted annual rate of 825,000 units, down from 835,000 in June.
   
The report will be closely watched by some economists who contend the U.S. is moving toward a recession because of a slumping housing market.
   
The housing figures will also be scrutinized by the Federal Reserve. Many on Wall Street hope the Fed will cut the benchmark fed funds rate to ease the impact of a tightening of the credit market due to troubles in subprime mortgages.
   
Wall Street snapped a five-day advance on Thursday as investors had lingering worries about the impact of credit problems on the economy.
   
Oil prices rose 41 cents to $70.24 in premarket trading on the New York Mercantile Exchange. Crude prices had fallen this week after it appeared there was no major damage to oil rigs as Hurricane Dean pushed through Mexico.
   
Overseas, Britain's FTSE 100 rose 0.16 percent, Germany's DAX index shed 0.34 percent, and France's CAC-40 rose 0.18 percent.

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Dollar off lows as market eyes US data; pound boosted by UK GDP

LONDON - The dollar was off day lows in a relatively calm market, as investors kept one eye on data coming out from the world's largest economy, while keeping the other on any fresh news of further turbulence on credit markets.
   
The lesser of today's two main pieces of US data came in on the strong side to help the dollar claw back some lost ground.
   
New orders for durable goods in the US jumped 5.9 pct in May, up not just on the expected take-off in aircraft orders at Boeing, but with significant increases in demand for autos, communications equipment, machinery, metals and military equipment as well.
   
It was the biggest increase in new durables orders since September of last year. Analysts had expected a far smaller increase of 1.1 pct following June's upwardly revised 1.9 pct growth.
   
But there is a further test for the dollar to clear today at 3.00 pm BST when US property market figures are released. New home sales in the US are predicted to fall to an annual rate of 825,000 from 834,000 during the July.

However, should this be the case, it could also "spark fresh fears of what's happening in the broader market," and increase opinion that the subprime contagion is spreading and thus support dollar instead.
   
Conversely, if new home sales unexpectedly improve, then dollar may recover slightly if investors interpret this to mean the economy is not doing too badly, although this is unlikely to happen given the large inventory overhang, Friend added.
   
Elsewhere, the pound was boosted against the dollar after the preliminary estimate for the UK's GDP was left unchanged, suggesting that growth in the British economy remains robust.

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Euroshares weaker midday, Dow seen lower ahead of new homes data

LONDON - Leading European exchanges were slightly lower midday with the Dow expected to head lower in opening deals and all eyes on today's US new homes data.
   
At 12.38 am, the Dow Jones STOXX 50 fell 8.8 points or 0.24 pct to 3,699.03 as the STOXX 600 slipped 0.89 points or 0.24 pct to 368.44.
    
BNP Paribas shed 0.7 pct - largely in line with its sector. The group is in focus this morning after it announced it will reopen the three funds it froze earlier. The bank also said none of the funds have lost more than 5 pct of their value.
   
One sector analyst said the news of the reopening of the funds was only "mildly positive" since BNP had stated several times it would do so before the end of the month.
    
Standard Chartered fell 4.01 pct as the biggest loser in the industry, as doubts over the possible exposure of Chinese banks to the sub-prime market induced a 9 pct drop in shares of Bank of China. The banking group also felt pressure as Merrill Lynch removed it from its Preferred banking list
    
Other European banks were also lower, with Commerzbank declining 1.31 pct, Societe Generale fell 1.36 pct and Fortis fell 0.78 pct.
    
In Milan, Mediolanum added 0.06 pct as the group's CEO said it is ready to increase its stake in Mediobanca.
    
In broker action, ArcelorMittal headed 2.014 pct higher as Merrill Lynch upgraded its rating on the stock to 'buy' from 'neutral' and said ArcelorMittal is trading at a 25 pct discount to global peer multiples.
    
Ahold continued to rise -- up 1.5 pct -- ahead of next week's earnings as broker's say the shares have underperformed during the recent market turmoil but next week's numbers will be strong.
    
In earnings news, Belgacom gained 2.3 pct after the telecoms group posted a rise in net profit for the first half and upped its full-year guidance for its fixed-line as well as mobile business. Net profit rose to 564 mln eur from 434 mln a year earlier, whilst EBITDA came in at 1.08 bln, slightly below last year's 1.11 bln.
    
Oil shares tracked their US peers higher as oil moved back towards 70 usd per barrel. Total added 0.71 pct. Repsol added 0.15 pct.
    
Airlines and airport operators were also in the spotlight. Deutsche Lufthansa reiterated the its stance in regard to peers Iberia and Alitalia which are up for sale. Board member Stefan Lauer said that while both are interesting in principle, Iberia is overrated by the market and the necessary conditions for bidding for Alitalia are not present.
    
Lauer also said the flagship carrier is "well on track" to reach its full-year targets.
    
Lufthansa shares fell 0.34 pct -- largely in line with its index -- while Alitalia dropped 0.07 pct and Iberia added 0.91 pct.  British Airways -- which is expected to launch a bid for Iberia imminently -- fell 1.79 pct.

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Asian stock markets fall as traders consolidate recent gains
 
SINGAPORE - Stock markets across Asia fell Friday, snapping a four-day winning streak as renewed weakness on Wall Street provided traders with an excuse to lock in gains.
   
Asian markets have recovered the bulk of last week's losses in the past four sessions as concerns about the credit crisis in the US eased following action by the Federal Reserve.
   
In Tokyo, the Nikkei 225 Stock Average closed down 67.35 points or 0.4 pct at 16,248.97. The blue-chip gauge climbed 975.29 points or 6.4 pct during the week. The broader TOPIX index slipped 5.96 points or 0.4 pct to 1,585.85.
   
The remarks by Bank of Japan Governor Toshihiko Fukui Thursday that he expects the mortgage market problems in the US to take at least several more weeks to be resolved were not surprising, he said.
   
Fukui said the central bank has been closely monitoring the financial markets worldwide to see if the recent turmoil has had any impact on Japan's nascent economic recovery.
   
Looking ahead, the key driver for the market next week will remain further developments in the subprime crisis in the US. "If sentiment stays generally upbeat the Nikkei may retrace its recent declines, moving back up towards 16,700 points next week. 

South Korean share prices closed lower but well off their lows on solid retail investor support late in the session, which partially offset continued selling by foreign investors on global credit problems.
   
The KOSPI index closed down 8.39 points or 0.5 pct at 1,791.33. However, even after today's retreat, the market fared well this week, with the mainboard index rising 153 points, more than making up for the previous week's 190-point loss.
   
Australia's S&P/ASX 200 closed down 71.2 points or 1.2 pct at 6,088.5. However, the market staged its best weekly gain in 32 years as investors focused on solid earnings reports and positive outlook statements over most of the week.  The benchmark index gained 417.5 points or 7.4 pct over the week.
   
The All Ordinaries index fell 62.5 points or 1 pct to settle at 6,087.5. Over the week, the broader market index rose 417.2 points or 7.4 pct, its biggest gain since a 12.3 pct weekly rise in June 1975.
   
Hong Kong's Hang Seng Index closed down 45.08 points or 0.2 pct at 22,921.89. For the week, the index is up 2,534 points or 12.4 pct. Taiwan's weighted index closed down 42.75 points or 0.5 pct at 8,690.09, while Malaysia's Kaula Lampur Composite Index fell 10.10 points or 0.8 pct to 1,273.52.
   
Philippine shares closed lower tracking regional markets, ahead of a three-day weekend. The Manila composite index lost 22.21 points or 0.7 pct at 3,206.94. The 30-company index rose 11.1 pct from the previous week, after posting its biggest single-day point gain in seven years on Tuesday, rebounding after huge losses last week. The broader all-share index fell 12.08 points or 0.6 pct to 2,052.44.
   
Singapore's Straits Times Index fell 1.46 points to 3,369.45. For the week, the index was up 7.6 pct, wiping off last week's losses.
   
China and Indonesia bucked the trend. In China, the Shanghai composite index closed at a record for the fifth straight day led by banks, as newly-established mutual funds continued to accumulate blue chips amid optimism over corporate earnings. The benchmark Shanghai Composite Index closed up 75.17 points or 1.49 pct at a record 5,107.67. It gained 9.69 pct for the week. Jakarta's composite index closed up 25.45 points or 1.2 pct at 2,143.11.

Indian shares rose, bucking the weak trend on other Asian exchanges, as the political uncertainty surrounding a controversial nuclear deal with the US became more subdued. The Bombay Stock Exchange's benchmark Sensex rose 1.84 pct, or 260.89 points, at 14,424.87, while the National Stock Exchange's S&P CNX Nifty was up 1.70 pct, at 4,184.80.

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Gold rises as players watch wider markets, strong physical demand ahead

LONDON - Gold rose above 660 usd as commodities continued to track wider financial markets for clues about how serious current credit problems are.
       
At 2.06 pm, spot gold was trading at 662.05 usd an ounce against 659.70 usd in late New York trade yesterday.
   
US economic data out earlier -- US durable goods orders -- gave the dollar a little boost but failed to spark a gold sell-off.
   
The precious metal moves in the opposite direction to the US currency as it is seen as an alternative asset. More US data (New Homes Sales) out later today might move the dollar, and in turn gold, but analysts said gold's direction will be largely driven by recent credit worries.
       
Looking ahead, gold also has seasonal strength to look forward to. The end of the sleepy second quarter, when players worldwide are away from their desks on long vacations, means trade will soon pick up.
   
Physical demand is poised to strengthen too with Diwali, Eid and Christmas festivals all likely to bring a boost.
   
In other precious metals, silver was up at 11.67 usd, platinum was down at 1,237 usd from 1,238 usd, and palladium was also lower at 320 usd from 325 usd.

All base metals apart from lead were lower in afternoon deals on the LME ahead of a long weekend which will see the exchange close on Monday. While players took note of very tight lead supplies, the fundamental balances for all other metals were largely ignored as investors continued to obsess over a possible global credit crunch.
   
Commodities have taken a back seat as markets worldwide are still uncertain over the extent of damage US sub-prime loan defaults may have caused. Fears of a global crunch are lingering, and commodities remain vulnerable to a sell off as players flee the risky markets and try to raise cash to cover losses elsewhere.

At 2.39 pm, copper for three-month delivery was trading at 7,200 usd against 7,252 usd at the close yesterday.
 
Elsewhere, lead was up at 3,179 usd from 3,135 usd. Stocks of the metal tracked by the LME stand at less than two days consumption, said Dresdner Kleinwort analyst Peter Fertig.
   
Earlier this week, the International Lead and Zinc Study Group said global lead surplus more than halved in the first half of 2007 as strong demand growth from China outweighed a more modest increase in production. Lead's price is now higher than zinc for the first time since 1980.
   
In other metals, nickel was was lower at 27,200 usd from 27,805, aluminium was down at 2,530 usd from 2,533, zinc slid to 3,120 usd against 3,150 usd and tin fell to 14,440 usd from 14,650.

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