US & World Daily Markets Financial Briefing 25-10-2007

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NEW YORK - Sales of new homes posted an unexpected gain in September although the improvement came after sales had fallen to the slowest pace in more than a decade.
   
The Commerce Department reported Thursday that sales of new homes rose by 4.8 percent last month to a seasonally adjusted annual rate of 770,000 units. That level of activity was still 23.3 percent below a year ago, indicating that housing remains in a steep downturn.
   
Analysts had been expecting sales would fall by 2.5 percent last month from an August sales pace that had originally been reported as 795,000 homes. However, that figure was revised sharply lower in the new report to show a sales rate of just 735,000 in August, the slowest sales pace in 11 years.
   
Meanwhile, the Labor Department said claims for unemployment dipped last week by a smaller number than economists predicted.
   
The Dow Jones industrial average was down 18.29, or 0.13 percent, at 13,656.96 in early trading.
   
Broader stock indicators were narrowly lower. The Standard & Poor's 500 index fell 1.71, or 0.11 percent, to 1,514.17, while the Nasdaq composite index fell 1.56, or 0.06 percent, to 2,773.20.
   
Bonds were also little changed, with the yield on the benchmark 10-year Treasury note at 4.33 percent, down from 4.35 percent late Wednesday.
   
Crude oil futures for December delivery rose $1.32 to $88.42 a barrel on the New York Mercantile Exchange.
   
The Russell 2000 index of smaller companies was up 0.30, or 0.04 percent, at 811.15.
   
In earnings news, Motorola Inc. managed in the third quarter to post its first quarterly profit this year. The cell phone maker's profit expectations for the fourth quarter were higher than forecasts. Shares rose 74 cents, or 4 percent, to $19.29.

Shares of iRobot Corp. rose Thursday after the company provided a revenue outlook that was above expectations. The Burlington, Mass robot maker said late Wednesday that it expects 2007 revenue of $240 million to $250 million, above the mean estimate of analysts polled by Thomson Financial of $236.1 million.
   
Shares of iRobot rose 16% to $17.94, and reached a 2-week high of $18.50 in intraday trading.
   
Stock markets overseas were mostly higher. In European trading, Britain's FTSE 100 rose 1.33 percent, Germany's DAX index rose 1.00 percent, and France's CAC-40 rose 1.16 percent.

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Dollar slumps after weak US jobless, durable goods orders data

LONDON - The dollar slumped after US jobless and durable goods orders came in far weaker than expected.
   
The Labor Department said that new claims for unemployment insurance in the week ending Oct 20 fell just 8,000 to 331,000, compared with expectations that they would fall further to 320,000 new claims.
   
Also pressuring the dollar, new orders for durable goods fell 1.7 pct in September, compared with forecasts for a smaller 1.5 pct fall, pulled back by a major retreat in defense spending and smaller declines in orders for autos and computers.
   
The dollar slipped against all the major currencies, with the euro hitting a high around 1.4340 usd and coming very close to all-time highs, while the Canadian dollar hit a new 31-year high against its US counterpart of 0.9611 usd.
   
The Ifo research institute said its business climate index for Germany in October fell to 103.9 from 104.2, marginally above forecasts for a reading of 103.8. Meanwhile, expectations for the next six months also fell, but only slightly, to 98.6 from 98.7 in September and again just above forecasts for a drop to 98.5.
   
On the one hand, the data confirm that the German economy is losing momentum as it suffers from the impact of a strong currency, higher interest rates and the recent credit crunch. On the other hand, some analysts stressed that the fact that the falls were not as big as they could have been may enable the European Central Bank to continue its hawkish rhetoric.
   
"German business confidence is responding only slowly to the accumulation of adverse shocks," said Gilles Moec at the Bank of America. "The resilience of the German economy can shift the ECB's attention from risks to growth to risks to inflation," he said.
   
Elsewhere, the pound rebounded, boosted by broad dollar weakness. The UK currency weakened overnight after the Bank of England's financial stability report, where it said the UK's financial system is not out of the woods yet and remains at risk of further shocks.
   
Speaking before the Treasury Select Committee today, UK Chancellor of the Exchequer Alistair Darling said there are lessons to be learnt from the Northern Rock crisis last month, but he defended the Bank of England governor and the UK's tripartite system of regulation.
   
The yen meanwhile fell further after rebounding overnight in the face of a rise in risk aversion in response to the news of Merrill Lynch's massive write-downs on sub-prime losses.

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Euroshares higher midday, flood of earnings news, telecoms extend gains

LONDON - Europe's leading exchanges gained ground midday with the telecoms sector charging ahead, as investors pondered a flood of earnings results across the board.
   
At 12.19 pm, the Dow Jones STOXX 50 added 41.21 points or 1.09 pct to 3,819.92, while the STOXX 600 advanced 5.01 points or 1.33 pct to 382.46.
      
Motorola's third quarter earnings results were inspiring, and lifting hopes for a recovery at the US handset maker. "Telecoms are a big theme today and are truly lifting the mood," one Frankfurt-based trader said.
   
The overall sector strode 3.20 pct ahead with France Telecom advancing 6.61 pct after the group topped analysts' forecasts with its third-quarter earnings reports and raised its guidance for full-year organic cash flow generation to 7.5 bln eur from 6.8 bln previously.
   
Other major telecom operators rose in sympathy, with Vodafone up 4.5 pct, while Deutsche Telekom rose 3.73 pct, Telefonica added 4.49 pct and Telecom Italia gained 4.29 pct.
   
The automotive industry was also in the spotlight with Daimler AG surging 3 pct after it posted a net loss of 1.533 bln eur in the third quarter compared with a profit of 868 mln eur a year earlier as it booked a 2.5 bln eur non-cash charge on the sale of its 80 pct stake in Chrysler.

The group's EBIT figure of 1.891 bln beat a consensus forecast of 1.822 bln eur. Sales, which the company said rose 6 pct at 25.7 bln eur, also beat market expectations. It "did not lower its guidance, like some had feared. That is probably the most positive feature," a Frankfurt-based trader said. Traders also noted the very strong numbers of Daimler's Mercedes unit.
   
Peer Renault was gained 1 pct, slightly underperforming its index, as its third-quarter sales figures received a mixed reception. "The sales were really just in line, there was nothing to get really excited about," a Paris-based trader said.
   
And the paper industry was in focus, with both Stora Enso and M-Real surging as they released third-quarter earnings.
   
Stora Enso's weak performance was largely expected as well as its bleak outlook, but the group surprised investors as it announced a restructuring plan which will include shut-downs of several of its mills and some divestments.  Shares were 2.72 pct higher.
   
M-Real climbed 7.69 pct higher as it swung to a small profit for the third quarter after counting in positive exceptional items and said a backdrop of healthy demand for key paper grades may enable it to push through price hikes before the end of the year.
   
The company said savings linked to a radical restructuring programme and a 2 pct increase in the price of uncoated magazine paper boosted profitability during the quarter.
   
Turning back to France, shares in L'Oreal dropped 3.15 pct as analysts noted limited upside for the stock, given its stellar performance since the beginning of the year, in spite of the group's excellent nine-month sales results released last night. Broker UBS downgraded L'Oreal to 'neutral' from 'buy'.
   
Elsewhere, shares in ABB gained 3.85 pct after the engineering giant reported a forecast-beating third quarter, driven by continued growth in demand, particularly for power infrastructure and further operational improvements, topping consensus forecasts by a wide margin.

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Most Asian markets rebound on US rate cut hopes

SINGAPORE - Most Asian stock markets except for China, Japan and Australia, rebounded Thursday as investors bet the Federal Reserve will again cut its key rate to stabilize credit market conditions when it meets next week.
   
Mainland Chinese markets retreated on concerns China may take further tightening measures to prevent the economy from overheating further. China's GDP grew 11.5 pct in the third quarter from a year earlier, after rising 11.9 pct in the second quarter.
   
The Japanese market turned lower as concerns over the ill effects of the yen's strength on corporate earnings continued to dampen sentiment. The Nikkei 225 ended down 0.5 pct to 16,284.17 as the yen's weakness sparked concerns that earnings of Japanese exporters will be hurt.
   
"A strengthened yen hit the market like a body blow," said Fumiyuki Nakanishi, chief strategist at SMBC Friend Securities in Tokyo. Analysts said many Japanese investors are on tenterhooks, awaiting corporate results before taking positions.

Australian shares also closed marginally lower after the Australia and New Zealand Banking Group (ANZ) posted disappointing year to September results due to bad debts. The Australian All Ordinaries index down 0.1 pct to 6,644.8 and the S&P ASX index down 0.2 pct to 6,624.3.

Hong Kong's Hang Seng index closed at another record today, ending up 1.8 pct at 29,854.49. It tested 30,000 points last week.
   
While China's robust economy supports the perception that its rapid growth will help cushion the impact in Asia of a slowdown in the US, it has also raised concerns that Beijing will announce new tightening measures. China's National Bureau of Statistics said after releasing third-quarter GDP data that it is still concerned about rapid economic growth and rising prices.
   
Fears of further monetary tightening in China sent the Shanghai composite index down 4.8 pct to 5,562.39, the biggest single-day percentage loss since July 5. The Shanghai B-share Index fell 4.7 pct to 352.87.
      
South Korea's annual GDP growth accelerated to 5.2 pct in the third quarter after expanding by 5 pct in the second. The KOSPI was up 2.2 pct at 1,976.75.
   
Singapore's Straits Times index finished up 1.6 pct at 3,707.14, with shipping and shipbuilding companies leading the gains. Cosco Corp Singapore added 65 cents to 7.60 sgd after winning orders for 29 bulk carriers valued at 1.34 bln usd. The strong demand for bulk carriers, reflected by record freight rates, also kept alive keen interest in shipping companies around Asia.
      
Malaysia's Kuala Lumpur Composite Index closed up 1.4 pct at 1,378.27, while the Jakarta composite index was up 2.8 pct at 2,596.66. The Manila composite index ended up 0.1 pct at 3,767.78, while Taiwan's weighted index closed up 1.3 pct at 9,568.26.

Indian shares closed well off the day's highs as traders await a decision by the Securities and Exchange Board of India that may impact the participatory notes route for foreign funds to invest in India. Investors also closed out short positions as October derivative contracts expired today.
   
The Bombay Stock Exchange's benchmark Sensex ended 1.39 pct or 257.98 points higher at 18,770.89. It had earlier hit a high of 18,900.10 points. The National Stock Exchange's S&P CNX Nifty ended 1.32 pct higher at 5,568.95 points. Among BSE-30 stocks, 22 gained and 8 lost. In the broader market, 1,586 shares gained, 1,144 lost and 70 were unchanged.

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Precious Metals Summary - London Fixings 12.00 BST

Gold           765.00  USD           2.0517
               760.17  USD           overnight

Gold           372.86  STG
               371.15  STG           overnight
 
Silver          13.71  USD
                13.48  USD           overnight

Silver         668.22  pence
               658.17  pence         overnight

Platinum       1442.00 USD 
               1440.50 USD           overnight

Platinum       702.83  STG
               703.33  STG           overnight

Palladium      360.00  USD
               360.50  USD           overnight

Palladium      175.46  STG
               176.01  STG           overnight

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