US & World Daily Markets Financial Briefing 29-10-2007

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Wall Street rises as Fed meeting looms

NEW YORK - Wall Street advanced Monday as investors undeterred by surging oil prices eagerly anticipated an interest rate cut from the Federal Reserve.
   
The Fed begins its two-day meeting on Tuesday, and the market widely expects a rate reduction the following day. Central bankers lowered rates by a half-point in September to help combat a sluggish economy and turmoil in the credit markets.
  
But with energy prices soaring to new records, inflation risks may give policy makers some pause. Crude oil futures soared above $93 a barrel for the first time in overnight trading, after Mexico's state oil company said it was suspending about a fifth of its oil production due to a storm. A barrel of light sweet crude rose 40 cents to $92.26 in preopening trading on the New York Mercantile Exchange.
   
In addition to hopes for a rate cut, earnings reports Monday from health insurer Humana Inc. and electronics retailer Radioshack Corp. encouraged Wall Street that companies are still seeing rising profits despite the slowing economy.
   
In mid-morning trading, the Dow Jones industrial average rose 44.95, or 0.33 percent, to 13,851.65. Broader stock indicators also gained. The Standard & Poor's 500 index rose 5.21, or 0.34 percent, to 1,540.49, while the Nasdaq composite index rose 11.76, or 0.42 percent, at 2,815.95.
   
Treasury bond prices rose modestly. The yield on the 10-year Treasury note, which moves inversely to the price, slipped to 4.40 percent, from 4.41 percent late Friday.
   
Humana reported third-quarter profit nearly doubled year-over-year on strong membership growth and one-time gains in its government segment. Humana rose $3.75, or 5 percent, to $79.31.
   
Radioshack swung to a third-quarter profit despite a decline in revenue, thanks to reduced expenses and improved inventory. Radioshack rose $1.36, or 7 percent, to $20.98.
   
In other corporate news, investors awaited the fate of Merrill Lynch & Co.'s chief executive Stan O'Neal, who is reportedly close to resigning amid broad criticism for leading the company to its biggest quarterly loss since it was founded 93 years ago. An announcement was expected to come as soon as Monday while Merrill's board finalizes details of the dismissal, and begins to search for a replacement.
   
A spokeswoman for Merrill Lynch declined to comment on Monday about O'Neal's possible dismissal. Merrill shares fell 53 cents to $65.56.
   
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 156.9 million shares. The Russell 2000 index of smaller companies rose 1.97, or 0.24 percent, to 823.36.
   
Stock markets overseas were mostly higher. In European trading, Britain's FTSE 100 rose 0.51 percent, Germany's DAX index rose 0.61, and France's CAC-40 added 0.58 percent.

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Dollar sees minor recovery but further falls likely as US rate cut looms

LONDON - The dollar recovered very slightly from earlier sharp falls, but the ailing currency looked set to remain firmly under pressure on expectations that the Federal Reserve will deliver another rate cut on
Wednesday.
   
The prospect of a further rate cut has battered the dollar, which this morning slumped to new record lows against the euro. Meanwhile, confidence that the move will stave off a US recession and not unduly impact the rest of the world have boosted risk appetite and high-yielding currencies have enjoyed yet more gains.
   
"The US dollar remained under pressure against the high yielders and European currencies overnight, with euro/dollar setting a new record high of 1.4438 in early London trading," said Sophia Hardy at UBS. "The dollar is likely to remain under pressure ahead of the FOMC decision due Wednesday," she added.
   
In addition to the euro's gains, the Australian dollar hit a 23-year high of 0.9270 against its US counterpart, helped by expectations that the Reserve Bank of Australia will raise interest rates again at its meeting next week. The Canadian dollar meanwhile hit another 33-year high of 0.9576 per US dollar.
   
Elsewhere, the pound came close to the 26-year high of 2.0653 usd it reached in July, rising as high as 2.0624 usd after strong mortgage lending data from the Bank of England dampened the chances of an early interest rate cut.
   
The figures showed mortgage lending growth unexpectedly surged to 9.8 bln stg in September, its highest level since February and way above forecasts for a sizeable slowdown to 8.2 bln stg.
   
Although mortgage approvals -- a gauge of future demand -- slowed to their lowest level in over two years to give further evidence of a slowdown in the housing market, the strong lending figures are likely to dissuade rate-setters from a rate cut as early as next month.
   
"The accompanying borrowing data came in firmer than expected, supporting the notion that while the next move in UK rates will be down, the BoE will maintain their current cautious holding pattern at next month's meeting," said Richard McGuire at RBC Capital Markets.

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Euroshares rise midday as US markets seen higher; miners, financials gain

LONDON - Europe's leading exchanges gained ground again in midday deals as rising commodity prices boosted energy, mining and metals stocks, with expectations the US Federal Reserve will cut interest rates later this week further underpinning gains.
  
At 11.41 am, the Dow Jones STOXX 50 Index was up 29.92 points, or 0.78 pct, to 3,873.74 while the DJ STOXX 600 Index rose 2.90 points, or 0.76 pct, to 386.86.
   
By sector, oil and gas, mining and metals stocks led the gainers, boosted by firm commodity prices and merger activity. At the weekend, London-listed Xstrata bid 3 bln aud for nickel miner Jubilee Mines. Xstrata was up 1.7 pct.
   
JP Morgan lifted its price targets across the sector following a quarterly review of metals pricing. The broker also upgraded its stance on Boliden to 'overweight' from 'neutral' but downgraded Antofagasta to 'underweight' from 'neutral. Boliden shares took on 1.68 pct. Antofagasta was up 2.12 pct, though, as investors focussed on high prices, instead.
  
Banks and auto makers were other areas of strength. Renault shares were up 3.7 pct, extending prior session gains and topping the percentage gainers on the Euro STOXX 50, an index which tracks blue-chip performance in 12 countries using the euro.
  
The French car maker benefited from a rebound at Nissan Motor, its Japanese affiliate in which it holds a 44.3 pct stake. Nissan posted a 5.3 pct gain in first-half operating profit on brisk sales in the US and emerging markets and on a weak yen.
  
Volkswagen shares rose 2.2 pct, helped by a price target upgrade to 163 eur from 140 eur out of broker Cheuvreux. Traders also note Goldman Sachs upped its price target to 240 eur per share from 185.
   
Financials gained amid ongoing equity market strength and ahead of a hoped-for Federal Reserve cut. BBVA added 2.15 pct. Unicredit added 1.25 pct.
   
UBS shares rose 0.6 pct after the bank confirmed its earlier guidance for a third quarter net loss of 600-800 mln sfr earlier, quashing speculation in the weekend press it may face further sub-prime related writedowns. The bank releases its quarterly results tomorrow. Shares added 0.56 pct.
  
Royal bank of Scotland, though, slipped 0.2 pct as Citigroup resumed coverage on the UK banking group with a 'sell' rating and 450 pence price target. Previously, the broker had a 'buy' stance and an 800 pence target. And Northern Rock fell 1.99 pct as traders fear any takeover will be a long time coming.
   
In earnings news, shares in TNT fell 1.3 pct after the mail and package delivery group posted third-quarter results that fell short of analyst expectations. The company, however, reiterated its full-year outlook and said it will start its previously announced 500 mln eur share buyback by the middle of November.
  
Publicis was down 3.06 pct after the advertising group reported third-quarter sales that were in line with, but at the lower end of a range of analyst expectations, and talked down its full-year organic growth guidance to "over 4 pct" from a 4-5 pct range previously.
   
But Havas surprised the market with the unscheduled release of third- quarter sales of 368 mln eur for the quarter, representing organic growth of 9.3 pct on the same period last year. "The figures are clearly above expectations," said analysts at Natixis Securities. "This represents the best performance in the industry in the third quarter."  Shares added 4.06 pct.
   
And USG People stormed 8.44 pct higher after it surprised the market by issuing solid quarterly numbers and a reiterated outlook statement.      

J Sainsbury supermarkets group fell 2.03 pct amid vague talk that the Delta Two bid for the chain is set to fail.

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Asian shares rally with Wall Street as rate cut hopes grow

SINGAPORE - Stock markets across Asia rallied Monday, as Wall Street's strong showing Friday and hopes for another US rate cut this week sent benchmarks in Hong Kong, India, South Korea, Malaysia and Indonesia to fresh records.
   
"People are now more optimistic that the worst of the credit crisis is over," said Francis Lun, general manager at Fulbright Securities in Hong Kong.
   
Asian markets have strongly outperformed the US and European benchmarks this year as investors sought refuge from the subprime and credit market crises, leading some analysts to worry that a bubble is forming.

The Hang Seng ended up 3.9 pct at 31,586.90, while Korea's KOSPI gained 1.7 pct to 2,062.92.

Also in Hong Kong, Bank of Communications Co Ltd (BoComm) rose to a record high after HSBC Holdings confirmed that it has raised its stake in China's fifth-largest bank by assets to 19.15 pct from 18.6 pct. BoComm was up 10.56 pct at 14.24 hkd, off a new all-time high of 14.90 hkd, while HSBC was up almost 3 pct at 149.90 hkd.

In Tokyo, Nissan Motor closed up 14.2 pct at 1,283 yen after the company said first-half operating profit rose 5.3 pct from a year earlier on brisk sales in the US and emerging markets and on a weak yen. Financials were also higher, with Resona Holdings adding 10.3 pct to 192,000 yen. The Nikkei 225 ended up 1.2 pct at 16,698.08 and the TOPIX was up 2.1 pct at 1,606.49.
   
In Mumbai, shares rose nearly 4 pct on continued heavy fund buying and on strong earnings reports, pushing the BSE Sensex to an all-time closing high of 19,977.67.

The Bombay Stock Exchange's benchmark Sensex rose 3.82 pct or 734.50 points to close at a record 19,977.67 points, after hitting an all time intra-day high of 20,024.87 points. The National Stock Exchange's S&P CNX Nifty gained 3.57 pct to 5,905.90 points.
   
On the BSE, 23 shares gained and 7 fell. In the broader market, 1,581 shares advanced, 1,199 declined and 61 were unchanged.
   
The sentiment was upbeat globally in anticipation of the US Federal Reserve lowering interest rates this week, to prevent a downtrend in the world's largest economy. Banking shares rose on expectations of a rate cut when the Indian central bank -- The Reserve Bank of India -- meets tomorrow.
   
In Sydney, the S&P/ASX 200 finished up 1.4 pct at 6,792.1 and the All Ordinaries gained 1.4 pct to 6,808.2. A 3 bln aud bid by London-listed Xstrata for nickel miner Jubilee Mines led to talk of further consolidation in the sector, propelling mid-cap miners higher. Xstrata has offered 23.00 aud cash for Jubilee, representing a 35 pct premium to the nickel miner's closing price on Friday. Jubilee Mines ended up 39.3 pct at 22.82 aud.
       
In China, The Shanghai Composite closed up 2.8 pct at 5,748, buoyed by renewed strength in the yuan. The Shanghai Composite has gained 114 pct so far this year, while the DJ CBN 600 has added 163 pct. The Jakarta Composite is up about 48 pct, the KOSPI is up 44 pct and the Sensex is up 44 pct.
   
By comparison, the Dow Jones Industrial Average is up just 11 pct, the S&P 500 up 8.3 pct and the Nasdaq composite up 16 pct.
   
Elsewhere, the Kuala Lumpur Composite was up 1 pct at 1,411.62, Taiwan's TAIEX rose 1.9 pct to 9,809.88 and the Singapore Straits Times Index was up 1.3 pct at 3,819.78. The Jakarta index closed up 1.6 pct at 2,667.53.
   
The Philippine market was closed for a public holiday.

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Copper nears 8,000 usd as dollar plunges; gold, oil spike

LONDON - Copper surged towards 8,000 usd as the dollar plunged to a new record lows against the euro, making metals like copper cheaper for holders of other currencies, and as oil and gold prices rallied to new
highs.
   
The metal was also underpinned a strong demand outlook following recent data showing top consumer China almost doubled its imports in the first nine months of 2007.
   
At 10.23 am, LME copper for 3 month delivery was up 165 usd a tonne at 7,930 usd, overlooking news that striking workers at Southern Copper Corp in Peru reached a wage agreement with the company at the weekend.
   
The workers had ended their strike in early October to allow for government mediation. Souther Copper Corp, run by Grupo Mexico, is one of the world's largest copper producers.
   
BaseMetals.com analyst William Adams said the consolidation the market went through after LME week seems to have passed, with the metals now "well placed to press ahead with the rallies that started in August and September".
   
He added expectations the Federal Reserve will cut interest rates Wednesday are no doubt underpinning metals as they weigh heavily on the dollar, take oil to record levels, gold to multi-year highs and boost equity markets.
   
As such, metals have also managed to overlook inventory increases on the LME today. Daily data showed copper stocks rose by another 3,325 tonnes to a six month high of 157,500 tonnes
   
However on the Shanghai stock exchange, data out Friday showed stocks fell for the first time in 3 weeks, dropping by nearly 7,000 tonnes amid strong Chinese consumption.
   
Elsewhere, nickel was up 300 usd to 31,950 usd, still underpinned by news out Friday that China's largest stainless steel producers will implements a second consecutive round of price increases in November.
   
"We believe the production cuts taken (by stainless steel producers) during this past summer have helped rebalance the market," said analysts at Bank of America. About 70 pct of nickel demand comes from the stainless steel industry.
   
Elsewhere, tin was up 300 usd at 16,600 usd a tonne, aluminium edged up 23 usd to 2,536 usd, lead climbed 107 usd to 3,707 usd, while zinc was up 65 usd at 2,930 usd.

Gold prices were higher in early afternoon trade, having earlier rallied to their second 28-year high this session, as the combination of a weaker dollar and record oil prices fuelled buying.
   
With a further cut in interest rates at this week's Federal Reserve meeting on Wednesday now largely seen as inevitable, traders are betting on the dollar continuing to flounder against the major currencies, increasing the attractiveness of gold as an alternative investment.
   
At 2.03 pm, spot gold was up at 787.98 usd an ounce against 784.20 usd in late New York trade Friday. Earlier the metal hit 793.98, its highest level since January 1980, when the metal hit an all-time peak of 850 usd an ounce.
   
Elsewhere, platinum hit a new record peak on ongoing supply-side disruptions in key producers, strong demand, dollar weakness and rising oil prices. A spate of production shutdowns linked to industrial accidents and strikes have led to a reduction in output expectations for the year in major producer South Africa. 
   
Platinum touched 1,467 usd an ounce, its highest level ever, before receding to 1,453 usd against 1,455 usd in late New York trade Friday.
   
Among other precious metals, palladium edged down slightly to 369 usd an ounce against 372 usd, while silver was up at 14.32 usd an ounce against 14.20 usd.

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