US & World Daily Markets Financial Briefing 03-09-2008

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NEW YORK - U.S. stocks briefly rose in choppy trade on Wednesday on a government report that showed a rise in factory orders, but the market quickly resumed its slide.

A recovery in shares of energy companies, including Exxon Mobil and natural resource companies also added to the brief bounce.

Concerns that the global economy may be slowing and threatening the profit outlook soon held sway and drove indexes back into the red.

The Dow Jones industrial average was down 29.47 points, or 0.26 percent, at 11,487.45. The Standard & Poor's 500 Index was down 3.16 points, or 0.25 percent, at 1,274.42. The Nasdaq Composite Index was down 5.85 points, or 0.25 percent, at 2,343.39.

US July factory orders up 1.3 pct, ex-transportation up 1.0 pct

WASHINGTON - US factory orders in July rose faster than expected due to a surge in orders for civil aircraft and non-durable goods, the Commerce Department reported today.

New factory orders rose 1.3%, more than the 0.8% gain expected by economists polled by Thomson Reuters IFR Markets. Factory orders have risen for five consecutive months.

Orders excluding transportation equipment rose 1.0%, less than the 1.5% gain expected. New orders excluding defense rose 2.0% in July.

Durables orders rose 1.3% in July, matching the preliminary number Commerce reported last week and following a 1.4% gain in June. Orders for transportation equipment rose 3.2%, the largest increase since February and the bulk of the overall increase.

Within transportation, orders for non-defense aircraft and parts rose 28.1%, and orders for defense aircraft and parts rose 7.8%.

A key indicator of business confidence, orders for non-defense capital goods excluding aircraft, rose 2.5% in July after a 1.6% gain in June. Economists use orders of non-defense, ex-aircraft capital goods as a proxy for business capital spending and a sign of the health of the economy.

Outside of transportation, orders for primary metals rose 2.4% and machinery orders rose 4.1%. Orders for computers and electronic products fell 1.4%, and electrical equipment and appliances fell 5.9%.

Orders for non-durable goods rose 1.2%, due largely to a 2.2% increase in food products orders and an increases of nearly 1% for petroleum and chemical orders. Petroleum prices frequently drive non-durable goods orders, and oil prices remained high but began falling in July.

The Commerce Department also revised the factory orders for June up to a 2.1% gain overall from the 1.7% gain originally reported. Commerce also revised orders excluding transportation up, to a 2.7% increase from 2.3%.

In the first seven months of 2008, factory orders are up 6.1% compared to last year, and are up 9.2% excluding transportation. Factory shipments for the month rose 3.0% and inventories rose 0.8%. Unfilled orders rose 0.7%.

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FOREX - Dollar rises to highest vs euro since January

NEW YORK - The U.S. dollar on Wednesday surged to its highest against the euro since January, extending its recent bull run on growing expectations the American economy would outperform that of Europe. The dollar briefly added to gains versus the euro after a government report showed U.S. factory orders rose more than expected in July.

Eurozone data on Wednesday underscored a weakening euro zone economy. Retail sales in July fell and data confirmed that the euro zone economy shrank in the second quarter, its first quarter-on-quarter decline since the data series began in 1995.

"A good number," said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, New Jersey, referring to U.S. factory orders data. "All in all, it will provide the dollar with longer term support. Not an immediately reactive number for the market but it fills in the picture of a moderately recovering U.S. economy."

In early New York trading, the euro  fell 0.3 percent to $1.4474, after hitting a low of $1.4386 in intraday trading, its lowest since Jan. 22. The dollar index, which tracks its performance against six major currencies, rose 0.1 percent to 78.137, after jumping to an 11-month high of 78.651.

The dollar  was flat against the yen at 108.69 yen. Sterling fell as low as $1.7669, crashing more than a full cent to its lowest since April 2006, before recovering slightly after figures showing an improvement in the UK services sector. The pound last traded down 0.1 percent at $1.7807.

A further drop in crude-oil prices, which have tumbled this week after Hurricane Gustav left energy facilities in the Gulf of Mexico mostly unscathed, also benefited the U.S. currency. Oil prices last traded down 1.5 percent at $108.11 a barrel

Analysts said investors were increasingly getting on board with the greenback as a safer place to allocate cash compared with other currencies whose countries were further behind in terms of economic readjustment in the wake of the global credit crunch.

"We're seeing a continuation of the trend where sentiment on the rest of the world is deteriorating while sentiment in the U.S. is improving albeit from a very low base, and the dollar is outperforming as a result," RBC head of FX strategy Adam Cole said in London. On the U.S. economic front, the Federal Reserve is slated to release its Beige Book on regional economic conditions at 2 p.m. Eastern time.

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Banks, miners lead Europe stocks down; Vodafone hit

LONDON - European shares fell on Wednesday, led by banks and mining stocks as investors fretted about economic growth, with Vodafone a prominent loser on a brokerage downgrade.

At 0858 GMT, the FTSEurofirst 300 index of top European shares was down 0.75 percent at 1,191.09 points. The benchmark is now down 21 percent this year, battered by a credit crisis that has hit bank stocks especially hard.

Deutsche Bank, HBOS, Credit Agricole GAGR.PA, and Barclays were down between 1 and 4 percent with Barclays also hit by a RBS downgrade to "sell" from "hold".

Hedge fund Ospraie Management, 20 percent owned by Lehman Brothers, announced on Tuesday it would close its flagship fund after it plunged in August on energy and mining-related losses.

"Financials are unlikely to do well today following the collapse of the commodity fund and weakness in the U.S.," said Heino Ruland, equity strategist at FrankfurtFinanz.

French bank Natixis was more than 4 percent lower at 5.82 euros after French newspaper Les Echos reported that the bank could set its rights issue price at below 3 euros a share.

In the mining sector, Kazakhmys, Antofagasta, BHP Billiton and Mondi were off by 1-2 percent, tracking falls in copper futures and gold.

Vodafone fell 3 percent after Credit Suisse downgraded the group to "neutral" from "outperform" with a price target cut to 160 pence from 180 pence.

Across Europe, Britain's FTSE fell 1.2 percent, Germany's DAX fell 0.7 percent and France's CAC lost 1 percent.

A survey showed that the euro zone's service sector shrank in August, the job market faltered and price pressures eased compared with July.

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Asian stock market summary

JAPAN
The benchmark Nikkei 225 Stock Average ended 0.6 percent higher at 12,689.59 on Wednesday, recovering from a 5-month low on the previous day after oil prices declined. Investors continued to track Japanese political developments after the sudden resignation of Prime Minister Yasuo Fukuda on Monday night.
   
The broader Topix index was up 0.7 percent to 1,220.55.
  
SOUTH KOREA
The Korea Composite Stock Price Index closed 1.4 percent higher at 1,426.89 after its steep fall on the week led by tech firms, while some conglomerate shares that had tumbled on liquidity concerns also made a recovery.

AUSTRALIA
The benchmark S&P/ASX 200 index fell 56 points at 5,060.0, hit by hefty losses for resource stocks on weaker oil and metals prices, though banks extended the previous day's gains.
       
CHINA
The benchmark Shanghai Composite Index ended down 1.2 percent at 2,276.67, the lowest in 20 months, after a sell-off in coal firms, while airlines outperformed on a sharp drop in crude oil prices. Banks extended their losses and base metal and precious metal stocks were under pressure due to weak
commodity prices.
  
The Shanghai A-share Index was down 1.2 percent at 2,389.75, while the Shenzhen A-share Index fell 1.3 percent to 656.90.
   
The Shanghai B-share Index rose 0.1 percent to 148.97, while the Shenzhen B-share Index dipped 0.8 percent to 375.23.

TAIWAN
The weighted index closed down 1.71 percent at 6,584.93, marking the weakest finish since Aug. 29, 2006, as sharp falls in commodity prices sparked worries about slowing global growth and the Taiwan dollar's weakness aggravated fears of capital-flight from the island.

HONG KONG
The benchmark Hang Seng Index closed down 457.40 points at 20,585.06.

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Copper, aluminium ease on dollar, demand worry

LONDON -  Copper and aluminium futures eased on Wednesday on a stronger dollar and weaker oil prices, whilst rising metal inventories added to concerns about demand.
   
"It is pretty much in the hands of the dollar and oil, providing a cue for direction in the absence of consumer demand," said Robin Bhar, analyst at Calyon, the corporate banking arm of Credit Agricole S.A. 
   
"The fundamentals are still reasonably ok but probably won't reassert themselves until industrial activity picks up again at some stage over the next few weeks," he said.
   
London Metal Exchange three-month copper  -- often seen as a key gauge of real economic activity -- fell as low as $7,211 a tonne. At 1021 GMT it was trading at $7,274 from $7,270 at the close on Tuesday.  Bhar said that if prices fall below the $7,000 support level they could drop all the way to $6,500.
   
Stocks of copper, used in construction and power cables, rose 725 tonnes to 180,525, the highest since January and a 30-percent gain on a year ago. Rising inventories and options activity are also impacting prices.
   
"A lot of short-term price weakness may well be tied into pre-positioning and positioning due to the option expiries," said Bhar. Aluminium  -- used mainly in transport, packaging and construction -- fell to $2,678 a tonne, from $2,695, and is close to six-month lows.
   
Inventories in LME warehouses jumped 2,650 tonnes to 1.17 million, the highest since April 2004. The dollar added pressure on prices. The dollar rose to its highest level against the euro in almost eight months on Wednesday after weak euro zone retail sales figures and data confirming slowing growth.
   
A firm U.S. currency makes dollar-priced metals more expensive for holders of other currencies. Tin  pared earlier gains to climb to $19,250 from Tuesday's last quote of $19,150/19,200. The metal rose as much as 3.4 percent to $19,800 boosted by concern about demand weakness and stock levels close to three-year lows.
   
Zinc, lead and nickel were all little changed. LME zinc , mainly used to galvanise steel, traded at at $1,765 from $1,775 per tonne, lead  $1,920 from $1,909, and nickel  $19,500 from $19,450.

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