US & World Daily Markets Financial Briefing 01-07-2008

Interbank FX's (IBFX) "no dealing desk" provides Forex traders with tight spreads, transparent pricing and instant order execution. Click here

U.S. stocks remain broadly lower, but pare losses on surprise rise in ISM index

NEW YORK - U.S. stocks were lower Tuesday, but bounced off earlier lows after data showing a surprise expansion in the manufacturing sector in June. The Dow industrials was down 46 points at 11,304, with 19 of 30 components trading lower, after being down as much as 116.75 points earlier in the session.
   
Just prior to the release of the Institute of Supply Management's manufacturing index, the Dow was around 11,274. The Nasdaq Composite fell 12 points to 2,281 and the S&P 500 Index was 6 points lower at 1,274 vs. pre-data levels of around 2,277 and 1,271, respectively.
  
The ISM's U.S. manufacturing index rose to 50.2 in June, the highest level seen since January, and well above the median estimate of economists surveyed by IFR Markets of 48.7. Readings above 50 indicate expansion, while readings below indicate contraction.
   
Separately, the U.S. Commerce Department said U.S. construction spending fell 0.4% in May vs. economist expectations of a 0.5% decline.

Home construction fell again in May to its lowest level in more than six years, while business construction rose to another all time high, the Commerce Department said today.

Total US construction spending fell 0.4 pct in May, nearly matching the 0.5 pct decline economists polled by Thomson Reuters IFR Markets had expected. Construction in April was upwardly revised to a 0.1 pct decline. The overall drop was due to another decline in private construction, which fell 0.7 pct in May after holding steady in the previous month.

Housing continued its steady contraction, as private residential construction fell 1.6 pct to its lowest level since January 2002. Private residential construction spending has now fallen for 14 consecutive months. Over the last 12 months, private residential construction has fallen 27.3 pct.

However, construction spending by businesses rose 0.2 pct in May to its highest level on record. Private non-residential construction spending rose 16.6 pct over the last 12 months. The non-residential construction report for May included continuing strength in sectors such as lodging, power, communications and manufacturing.

Public construction spending rose 0.4 pct in May to a record high level. Construction spending by state and local governments rose 0.6 pct in May, but federal construction spending fell 1.7 pct in the month.

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.

Forex - Pound survives economic gloom to come back from day lows

LONDON - The pound survived a welter of grim economic news from just about every sector of the economy to come back from day lows Early on the pound took a knock after the latest house price survey from Nationwide Building Society showed a worrying a drop, indicating that the property market will weigh heavily on the overall economy.

According to Nationwide building society, house prices were down 0.9 percent on the month in June for a 6.3 percent annual fall. The drop was the eighth in a row.

To make matters worse, the Chartered Institute of Purchasing and Supply's purchasing managers' index showed that the manufacturing sector is already on a downturn. The headline index fell to 45.8 in June from a downwardly revised 49.5 in May. A reading below 50 indicates activity is contracting. That was below the consensus forecast of 49.8 and the weakest since the end of 2001, when activity was hit after the September 11 terrorist attacks on the United States.

Analysts said the numbers will boost expectations that the economy is slowing fast enough to bring inflation under control without the Bank of England having to raise interest rates.

In line with a further scaling back in UK rate hike expectations, the pound edged lower. In contrast, the euro was well bid amid predictions that the European Central Bank will put up rates on Thursday by a quarter point, to 4.25 percent. Yesterday's news that inflation in the 15-nation area hit a record high, continued to help the euro although today's data took the edge off the currency's gains.

The Purchasing managers' indices for the euro zone manufacturing sector suggested that the economic slowdown in the region is now spreading to France, after already hitting Spain and Italy.

Meanwhile, activity in Germany continues to hold up well. The manufacturing PMI for the euro zone as a whole was revised up to 49.2 from the provisional estimate of 49.1, but was still at its lowest level since May 2005 and down sharply from the May reading of 50.6.

With the index below the key 50 level, the survey suggests that manufacturing activity is now contracting. The Spanish manufacturing PMI dropped to 40.6 in June, the lowest in the history of the survey, from 43.8 in May. The euro shrugged off a brief dip  following some dovish comments by German finance minister Peer Steinbrueck.

Steinbrueck warned the European Central Bank needed to carefully consider the full impact an interest rate hike would have, noting that while it might dampen inflation it would also have other economic effects.

Later today attention will shift to the U.S., where the Institute of Supply Management's manufacturing survey is expected to fall to 48.7 from 49.6, although analysts said against the back-drop of major events later in the week it is unlikely to have much impact.

Click here to perform accurate conversions on any major global currency.

Euroshares open down on flat Dow; telecoms gain on upgrades

At 9:42 a.m., the DJ STOXX 50 was down 28.04 points or 0.96 percent at 2,878.06 and the DJ STOXX 600 was down 4.12 points or 1.42 percent at 285.22. France Telecom added anther 2.73 percent as investors continued to cheer the group's decision to drop its bid for TeliaSonera and focused instead on the group's strong fundamentals and cheap valuation.

Merrill Lynch upgraded the shares to 'buy' from 'neutral' and Goldman Sachs resumed coverage with a 'buy' rating. Deutsche Telekom added 2.36 percent. JP Morgan upgraded the shares to 'overweight' from 'neutral', saying shares have underperformed and prospects look good for the sector in the second half of 2008.

Broker bullishness on the prospects for the sector also lifted Telefonica 0.06 percent and Telecom Italia 0.86 percent. But Deutsche Bank dropped 5.56 percent as talk the group will issue a profit warning re-emerged. The group has reportedly denied the rumours.

Elsewhere, Fortis shares fell 2.66 percent, with Dutch shareholders association VEB calling for the group to hold an EGM to explain to shareholders the developments leading up to its accelerated solvency plan last week, Dutch newspaper Het Financieele Dagblad reported on Tuesday.

The news comes after the group's CEO told De Telegraaf the plans were initiated to help weather a further sharp downturn in the U.S. economy. Dexia SA. chief executive Axel Miller said the Franco-Belgian bancassurer has no need to do so at the moment. In an interview with Belgian financial daily De Tijd, Miller said there is also currently no need to adjust its dividend.

The CEO said speculation the bank will follow Fortis' lead with a capital hike is "misplaced". Last week, Dexia said it would provide a $5 billion committed, unsecured loan to subsidiary Financial Security Assurance Inc's financial products segment.

UBS AG shares slumped 5.5 percent after it said four board of directors have resigned as the bank announced a series corporate governance reforms that include separating the roles and duties of the board and executive management.

Axa fell 3.79 percent. SG Secs cut its target for the group by 7 percent to 20 euros. Socgen shares fell 2.82 percent, ING fell 2.72 percent and Deutsche Boerse was 1.9 percent lower. Building materials groups were also lower. Analysts believe the sector will remain under pressure in the face of the global economic downturn.

Saint-Gobain shares fell 2.67 percent after Credit Suisse cut its target for the French group to 45 euros from 55 euros. Lafarge fell 2.39 percent after the broker cut its target to 85 euros from 95. Holcim was 1.57 percent lower as its target was cut to 75 Swiss francs from 90 francs and CRH was 1.52 percent lower after its target was lowered to 22 euros from 28 euros.

Diageo dropped 3.84 percent and Pernod Ricard fell 3.45 percent after a profit warning from peer Fortune Brands overnight. Cazenove analysts said the update from the U.S peer further increases the likelihood Diageo will have to reduce its guidance for organic EBIT growth for 2009.

Open a free $50k practice account with FOREX.com to receive your complementary Currency Trading for Dummies: Getting Started Edition eBook.  This nuts and bolts guide gives you a step-by-step action plan for understanding and trading the Forex market. Get started now!

TOKYO - Leading Japanese shares closed lower on Tuesday after investors cashed in early gains, dropping their interest after the yen strengthened against the dollar and other Asian equity markets lost ground.
   
The Nikkei 225 Stock Average finished the day down 18.18 points or 0.1 percent at 13,463.20, extending its fall into a ninth consecutive day. The closing index was off a low of 13,448.35. The broader Topix shed 0.03 of a point to 1,320.07. 

SYDNEY, July 1 - Australian shares fell 1.5 percent on Tuesday, nearing a fresh 2008 closing low, as nagging credit concerns sparked selling in the top banks, while energy firms fell after oil prices retreated from a record peak.
   
Market watchers said investors' appetite for equities appeared to be waning as sky-high oil prices continue to dampen the outlook for company profits and global growth, and amid persistent worries about credit market losses.
   
The benchmark S&P/ASX 200 index fell 76.4 points to 5,138.9, based on the latest available data, its lowest close since March 20 and taking total losses in the past three sessions to 3.2 percent.
   
The index is now just 1 percent above its 2008 closing low seen on March 18 and has fallen 18.9 percent since the start of the year after rising 11.8 percent in 2007.
  
New Zealand's benchmark NZX-50 index fell 0.6 percent, or 19.34 points, to 3,175.27. The most heavily weighted stock, Telecom Corp of New Zealand

Today, the benchmark 30-share Sensex ended 3.71 percent or 499.92 points lower at 12,961.68 points while the broader 50-share S&P CNX Nifty ended 3.56 percent down at 3,896.75 points.

SINGAPORE - Singapore shares closed sharply lower on Tuesday as oil prices continued to trade above $140 a barrel, stoking fears about spiraling inflation and its adverse impact on an already slowing global economy. The benchmark Straits Times Index lost 40.75 points or 1.4 percent to 2,906.79.

Singapore Telecom fell 1.4 percent to S$3.57, Singapore Airlines slipped 0.7 percent to S$14.60 and Singapore Exchange declined 1.9 percent to S$6.78.

Interbank FX's (IBFX) "no dealing desk" business model and proprietary technology seek to provide Forex traders with tight spreads, transparent pricing and instant order execution. Our library of free trading tools and award-winning customer service support are helping our customers compete in the largest financial market in the world.Click here

Oil prices rise above $141/bbl after OPEC comments

Oil prices jumped beyond $141 dollars a barrel on Tuesday after the president of OPEC said there was uncertainty surrounding future investment in facilities to boost crude output.

New York's main oil contract, light sweet crude for August delivery, was up $1.85 at $141.85 a barrel at 10:08 a.m.

Brent North Sea oil for August delivery climbed $2.15 dollars to $141.98 a barrel. On Monday, crude futures had struck record high levels close to $144, as the U.S. currency remained weak against the euro, traders said.

Brent soared to an all-time high of $143.91 and New York crude to a historic peak of $143.67. On Tuesday the president of OPEC, Chakib Khelil, said the oil producer cartel had concerns about future demand, which led to uncertainty about investment in capacity to increase production.

"The concern we have is about the security of demand," Khelil, who is also Algeria's energy minister, told an energy conference in Madrid.

He told the World Petroleum Congress that there were "big uncertainties" about making huge investments in infrastructure to increase output from members of the Organization of Petroleum Exporting Countries, which pump about 40 percent of world oil.

Global oil prices have doubled in the past year and have risen by almost 50 percent since the start of 2008, when they breached $100 for the first time, triggering fears over inflation and slower economic growth.

Consumer countries blame record prices on tight supplies amid strong demand and unrest in producer countries such as Iran, Iraq and Nigeria. In particular, they accuse OPEC of not producing enough crude. The 13-nation cartel, however, insists that the weak U.S. currency is at fault, as it drives up demand for dollar-denominated oil from foreign buyers.

MetaTrader 4 software with the Security and Stability of a Large FCM. Tighter Spreads, Higher Interest, and Straight Through Processing to the Banks. Click here