US & World Daily Markets Financial Briefing 24-10-2007

The world's most trusted name in professional trader education. Click Here

Online retailer stocks broadly lower; Amazon.com tumbles

NEW YORK - Shares of online retailers fell Wednesday, led by Amazon.com Inc. after analysts expressed concerns over the company's margin expansion in the coming holiday season. Shares of Amazon tumbled nearly 15% to $86.44.
   
After Tuesday's closing bell, Amazon reported third-quarter earnings of $80 million, or 19 cents a share, beating the 18 cents-a-share mean estimate of analysts polled by Thomson Financial. Revenue rose 41% to $3.26 billion, just above Wall Street's consensus view of $3.14 billion.
   
The company said it expects fourth-quarter net sales of $5.1 billion to $5.45 billion, surrounding analyst forecasts of $5.16 billion. It expects operating income of $221 million to $291 million.
   
Bear Stearns analyst Robert Peck, in a note to clients, said while Amazon reported another solid quarter, "the midpoint of [fourth-quarter] guidance implied a mere 6% incremental pro-forma operating income margin, a steep decline from the incremental margin of 11% in [the second and third quarters]."
   
"In addition, North American gross margins contracted significantly even when adjusting for the negative impact from Harry Porter. If those trends remain consistent, then significant margin expansion is likely to be a challenge for Amazon to achieve," Peck said.
   
Elsewhere, shares of Overstock.com fell 1.5% to $34.95, eBay Inc. fell 0.8% to $35.60 and Blue Nile Inc. dropped 1.2% to $80.81.
   
Shutterfly Inc. fell 1.1% to $32.80. VistaPrint Ltd. shed 0.2% to $37.68. The Internet Holdrs ETF (HHH) fell 4.3% to $64.39.

In the opening minutes of trading, The Dow Jones industrial average was down 29.51 to 13,646.72, The Nasdaq Composite had fallen 25.52 to 2,773.74 and the Standard & Poor 500 index was off 4.82 at 1,514.77.

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.

Major currencies locked in tight ranges; US housing data eyed

LONDON - Major currencies were locked in narrow ranges against each other ahead of the keenly awaited US existing home sales figures this afternoon.
   
The data is predicted to come in weak and if expectations are proven correct the dollar could be in for a bumpy ride this afternoon as hopes of a US rate cut strengthen.
   
"Although consumption and employment data have been modestly positive so far this quarter, the Fed will be concerned that the housing market is still not showing signs of bottoming out," UBS analysts said.
   
Economists polled by Thomson's IFR Markets said they are expecting an annual rate of 5.2 mln existing home sales in September, its lowest since November 2001. And against this backdrop, the real economy may not prove impervious indefinitely, they added.
   
In the short-term, each data representing a slowing US economy will likely weigh on the dollar but in the longer term the risk of a spillover effect on the global economy may well see the dollar gaining ground eventually.
   
"We believe subsequent risk liquidation and repatriation will prove supportive for the dollar and we therefore target the euro returning to 1.35 usd in three months," UBS analysts said..
   
Elsewhere, the euro survived a mixed set of euro zone PMI data, showing thev services sector holding up well but manufacturing continuing to suffer the effects of the credit crunch.
   
The euro zone 'flash' PMI index on manufacturing dropped to 51.5, its lowest level in over two years during October, though the services PMI rose above expectations to 55.6. Both, nevertheless, remain above the 50 level which marks expansion in the sector.
       
The yen, meanwhile, found some support amid rumours that Merrill Lynch will add to the write-downs on investments exposed to sub-prime it has already announced for the third quarter.
   
The Australian dollar got a fillip from strong inflation data which led to rising expectations of a rate hike even as the country heads for general elections end November.

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

Euroshares flat midday as investors digest flood of earnings releases

LONDON - Leading European exchanges turned slightly higher midday with a flood of earnings news engaging investors in an otherwise directionless market.
   
At 11.53 am, the Dow Jones STOXX 50 added 2.25 points, or 0.06 pct, to 3,802.74, while the STOXX 600 gained 0.66 points, or 0.17 pct, to 380.44.
   
"The focus is on earnings and economic data this week," one trader said. "We priced in the lower US futures earlier and that is why we came down a bit, but that can change easily if any of the upcoming company releases is significantly below or above expectations," he added. "Since there is nothing going on at the moment, the market is consistent and simply swinging up and down a little," he further noted.
       
In Europe, the technology sector was largely outperforming, led higher by STMicro, up 5.57 pct ahead, after presenting its third-quarter earnings results last night, which came in at the higher end of expectations.
   
Natixis Securities raised its stance to 'buy' from 'add', with a price target of 20.20 usd, also noting that the group's fourth-quarter outlook was reassuring. Sales for the third quarter totaled 2.565 bln usd, ahead of Natixis' forecast for 2.521 bln usd, and at the upper end of group guidance which was for 2-7 pct growth, Natixis analysts said.
   
Peer OC Oerlikon climbed 2.59 pct higher, after UBS hiked its price target to 530 sfr from 430 sfr, while reiterating its 'neutral' rating. Earlier this morning, the group's CEO Uwe Krueger told Swiss business weekly Handelszeitung that it is seeking acquisitions worth 10-250 mln sfr, in particular in the solar and space businesses.
   
But over in Brussels, semiconductor manufacturer Melexis SA slumped 7.80 pct after it announced flat third-quarter results and issued 2008 guidance that analysts described as "disappointing".
   
In the automotive sector, Daimler AG added 2.55 pct on news that the automaker has been contacted by a large investor interested in acquiring a stake in the German carmaker, chief executive Dieter Zetsche earlier told Manager Magazin in an interview to be published tomorrow.
   
Italian peer Fiat shed 0.87 pct as investors locked in some profits following the car maker's strong third-quarter results. The group also upped its targets for 2007, but some concern remains on whether the group can sustain this momentum.
   
Elsewhere on the earnings front, French building materials producer Saint-Gobain gained 2.93 pct, after it confirmed its full-year guidance last night and posted a 5.5 pct increase in nine-month sales, which came in a little ahead of analyst expectations. Reports that Wendel is ready to increase its stake in the group also added to the stock's momentum.
   
Volvo surged 5.82 pct as the company reported stronger-than-expected third-quarter sales and orders, upped its 2007 forecast for the European truck market, and said it expects the North American market to return to growth in 2008. The automaker's third-quarter profit after financials of 4.571 bln skr was slightly below consensus forecasts of 4.897, but analysts said this was due to unexpected net financial items related to hedging and interest payments, and that underlying profits were broadly in line with forecast.
   
Over in the Netherlands, TomTom NV climbed 6.73 pct as investors were pleased with the third-quarter earnings, operating and gross margins and a raised full-year sales outlook. Rabo Securities analysts in a note to clients said that although TomTom's average selling price (ASP) per sold navigation unit was below consensus, the gross margin of 48.8 pct was "much higher than we expected - and we were already above consensus".
   
In other news, Assicurazioni Generali SpA advanced 2.40 pct after a report in the MF newspaper said The Children's Investment Fund (TCI), a UK-based activist hedge fund, has criticised the insurer's governance rules.
       
In broker action, AstraZeneca fell 2.93 pct after Merrill Lynch downgraded its stance on the shares to 'sell' from 'neutral', saying the company has the worst pipeline and slowest EPS growth of any in the sector that it covers.  

Get a FREE $50,000 Forex demo.  Free streaming quotes, guaranteed executions, 1% margins, and zero commissions! Click Here.

Asian shares surrender gains as subprime concerns resurface

SINGAPORE - Stock markets across Asia turned lower in late trade Wednesday, with benchmarks in Japan, Korea and Australia surrendering early gains on concerns that the meltdown in the US subprime sector is continuing to create massive losses for US banks.
   
In Tokyo, semiconductor silicon wafer maker Shin-Etsu Chemical dropped 1.3 pct to 7,670 yen. The company said Wednesday its first-half net profit rose 27 pct from a year earlier thanks to buoyant demand for its product used in making 300mm semiconductor chips. The Nikkei 225 closed down 0.6 pct at 16,358.39 and the broader Topix lost 0.4 pct to 1,563.86.
   
Australia's S&P/ASX 200 shed 0.4 pct to 6,634.4 and the All Ordinaries was down 0.4 pct at 6,652.1. In Sydney, interest rate worry returned to the fore after third-quarter inflation data showed the core annual rate was close to the top of the Reserve Bank of Australia's 2-3 pct target range.
   
Shares fell as talk that Merill Lynch's subprime losses will be much greater than expected spread across trading rooms, said Joseph Youssef, private client advisor client at Macquarie Private Wealth in Sydney. "The Dow futures just got pummelled and that's the reason our market came off," he said.
   
In Korea, the KOSPI closed down 0.8 pct at 1,933.36. The index had briefly traded back over 2,000 early in the session.
       
There were pockets of strength, notably in China where the Shanghai Composite ended up 1.2 pct at 5,843.11, buoyed by optimism about earnings in the banking sector and a record opening level for the national currency, the yuan.

Sentiment was further boosted by the Chinese central bank's decision to set the yuan at 7.4938 to the dollar, its first time to break through the 7.50 yuan level since China revalued the currency in July 2005. "The yuan is expected to rise further against the dollar, which will boost assets of banks and property developers," said Hu Yu, an analyst at Chinalion Securities.
   
Industrial and Commercial Bank of China Ltd, the nation's biggest bank by assets, was up 1.9 pct at 7.03 hkd ahead of its third-quarter results announcement. China Construction Bank, the third-biggest bank, was up 0.6 pct at 7.33 hkd, while Bank of China, the No 2 bank, was down 1.7 pct at 4.51 hkd.
   
The Kuala Lumpur Composite also remained in the black, up 0.2 pct at 1,359.83 on talk that the government may remove remaining capital controls on the Malaysian currency, the ringgit.

In Hong Kong, the Hang Seng index closed down 0.2 pct at 29,333.53 ahead of the release of key economic data in Beijing tomorrow.
   
Retailer Esprit Holdings was up 0.2 pct at 120 hkd after its chief executive was quoted as saying that the group plans to buy a US or European luxury fashion brand and is currently in "intensive talks" with three or four companies.
       
Indian shares closed nearly unchanged as sentiment turned cautious ahead of the market regulator's final decision on its proposed restrictions on participatory rates and the expiry of October derivative contracts, both of which are due tomorrow.
   
The Bombay Stock Exchange's benchmark ended 0.11 pct or 20.07 points higher at 18,512.91. It had risen to a high of 18,832.49 points before being weighed down by the uncertainty which crept into Asian markets and spilled over to Europe.
   
The National Stock Exchange's S&P CNX Nifty was up 0.41 pct to 5,496.15 points. Among BSE-30 shares, 13 shares gained and 17 lost. In the broader market, 1,556 shares advanced, 1,176 declined and 53 were unchanged.  

Singapore's Straits Times Index closed down 1.3 pct at 3,649.12. The Philippines Composite closed up 1.8 pct at 3,763, while Taiwan's weighted index closed down 0.6 pct at 9,442.62. The Jakarta index closed down 1.1 pct at 2,524.98.

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

Copper extends losses on disappointing US home sales data

LONDON - Copper extended losses in midafternoon to trade at a day low after the US National Association of Realtors reported that existing home sales grew at their lowest rate since 1998 in September.
   
The data, which showed the sales rate fell 8 pct to 5.04 mln units and that prices were down 4.2 pct year on year ago, were below analysts' expectations for a fall to 5.20 mln units.
   
the construction industry is a key market for copper, which is used extensively in wiring and piping, and any slowdown in activity is likely to have a pronounced impact on demand for the red metal, analysts said.
   
"We believe that the dramatically slowing construction activity in the US will have an adverse impact on the copper price in the medium term," said Commerzbank analyst Eugen Weinberg, adding that he expects copper prices to dip below 7,000 usd per tonne by year-end.
   
At 3.10 pm, LME copper for three-month delivery was down 90 usd at 7,705 usd a tonne, having sunk to a day low of 7,680 usd immediately after the data.
       
Nickel prices meanwhile fell 600 usd to 31,150 usd a tonne, pressured by a rise in LME stockpiles this morning. Inventories were up 102 tonnes to 37,308 tonnes, the exchange said, around 18 pct higher than they were four weeks ago.
   
Nickel is also being dampened by news that stainless steel production is set to slow later this year, with the International Stainless Steel Forum yesterday cutting its full-year 2007 forecast for stainless steel production growth to 1.1 pct.
       
Other base metals also eased in line with copper. Lead was down 70 usd at 3,520 usd a tonne, while zinc slipped 62 usd to 2,850 usd a tonne. Elsewhere, aluminium dipped 14 usd to 2,508 usd a tonne, and tin was down 150 usd at 16,175 usd a tonne.

Oil continued lower on talk of more OPEC oil, rising US crude, gasoline stocks

LONDON - Oil continued lower as talk of more OPEC oil and expectations of an increase in US crude and gasoline stocks overshadowed simmering tensions along the Iraq-Turkey border.
   
Analysts expect US inventory data, to be released at 3.30 pm, will show crude stocks rose by about 1 mln barrels last week, while gasoline inventories rose by some 500,000 barrels.
   
Although the data is also expected to show stocks of distillates, which include heating oil, fell by about 150,000 barrels last week, the expected increase in crude stocks is weighing on prices for now.
   
Also, as Jim Ritterbusch, president of Ritterbusch & Associates points out, a lack of cold weather in recent weeks has been helping distillate balances improve. They rose by 1 mln barrels in last week's data.
   
At 1.45 pm, London's benchmark Brent crude contracts for December delivery were down 8 cents at 82.77 usd per barrel. Meanwhile, New York crude contracts for December delivery were down 16 cents at 85.11 usd per barrel.
   
Oil prices have been edging lower for four straight days, after rising to a record 90.07 usd in New York and 84.88 usd in London last week on geopolitical tensions and concerns over fourth-quarter supply tightness.
   
Most participants say the market is in consolidation mode and has not started trending lower, although many believe today's US inventory data holds the key to the near term direction of trade.
   
MF Global analyst Ed Meir said increases in US energy inventories could have a more pronounced effect on prices this week as compared to last week, when the data was overshadowed by Turkey-Iraq tensions.
   
By the same token, however, "a set of unanticipated (stock) draws could, equally, reverse the recent trend, as after three days of modest declines, the crude market is no longer oversold", he added.
   
Possible US stock falls aside, however, price supportive factors are for now being overshadowed by reports that some top OPEC members are pushing for yet more OPEC output hikes.
   
The cartel, supplier of more than a third of the world's crude oil, agreed in September to hike output by 500,000 bpd effective Nov 1, although recent tanker tracking data suggest it already raised output by this amount in October.
   

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.