US & World Daily Markets Financial Briefing 04-09-2008

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US STOCKS-Dow falls 2 pct as job worries weigh on market

NEW YORK - U.S. stocks pushed further into the red on Thursday, led by a more than 2 percent slide in the Dow industrials as concerns about a sluggish labor market made investors worry about future profit growth.

The negative tone was sparked by weekly government data showing an unexpected jump in the number of people filing for jobless benefits and by a report by ADP Employer Services showing U.S. private employers slashed 33,000 jobs in August.

The economic data was all the more unnerving for investors as it came just a day before the all-important release of the government's August nonfarm payrolls report.

Market drags included shares of economic bellwethers such as Caterpillar Inc, down almost 6 percent at $63.70.

The Dow Jones industrial average .DJI was down 225.20 points, or 1.95 percent, at 11,307.68. The Standard & Poor's 500 Index .SPX was down 20.94 points, or 1.64 percent, at 1,254.04. The Nasdaq Composite Index .IXIC was down 40.40 points, or 1.73 percent, at 2,293.33.

US weekly jobless claims rise 15,000 to 444,000; cont. claims at over 4 yr high

The number of individuals filing new claims for unemployment insurance rose unexpectedly in the latest week, while the number of individuals continuing to file claims for unemployment rose to a level not seen in over four years, the Labor Department said Thursday.
   
The number of first-time claims filed in the week ending August 30 rose 15,000 to 444,000, matching the level reached during the week of August 9.  Economists polled by Thomson Reuters IFR Markets were expecting claims to fall for the fourth consecutive week to 420,000.
   
The four-week moving average for initial claims fell by 3,250 to 438,000. Economists prefer the four week moving average because it smoothes out fluctuations in weekly data.
  
Meanwhile, the number of people continuing to receive unemployment insurance in the week ending August 23 rose by 6,000 to 3.435 mln, the highest level since November 2003.  Economists were expecting continuing claims to rise to 3.425 mln. 
   
The four-week moving average for continuing unemployment claims increased by 33,250 to 3.4 mln, the highest level since November 2003.

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FOREX - Dollar steady vs euro as traders await Trichet

LONDON - The dollar was mostly flat against major currencies on Thursday as dealers digested interest rate decisions in Europe and keenly awaited a steer from European Central Bank President Jean-Claude Trichet.
      
The European Central Bank and Bank of England left rates steady at 4.25 percent and 5 percent, respectively, decisions that came as little surprise to market participants although a reasonable minority had positioned for a BoE cut.
      
The focus for investors now is very much on Trichet's press conference at 1230 GMT. They will be looking for clues on how the confluence of slowing growth, above-target inflation, sliding commodity prices and a falling euro will influence policy in the coming months.
      
The ECB is expected to issue a new set of economic projections while rejigging collateral rules. Analysts expect Trichet will hold fast to his long-held position that inflation risks will keep high the need for tight policy, even as he acknowledges that the euro zone economy is slowing.
      
"We don't expect Trichet to sound dovish despite the (recent) falling oil price and declining inflation across Europe. So the net impact will be positive for the euro," said Roberto Mialich, currency strategist at Unicredit in Milan.
      
"The risk is for mild short covering for the euro, unless Trichet sounds extremely dovish. The market is still euro negative ... but for the time being we should see some consolidation," particularly ahead of Friday's August U.S. employment report. 
      
At 1210 GMT the euro  was largely steady on the day against the dollar at $1.4475, pulling back up from $1.4384 hit the previous day for the first time since January. The dollar  was flat against the yen at 108.35
yen.
      
The dollar index was also little changed on the day at 78.11, in part kept in check by a 0.4 percent rise in oil prices, which were recovering from a roughly 9 percent fall so far this week.
      
Sterling  rose 0.4 percent to $1.7820, benefitting from a 'relief rally' after the BoE decision. The euro was down 0.5 percent at 81.23 pence.

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Banks lead Europe shares down before ECB; BP jumps

LONDON - European shares fell by midday on Thursday, as losses in banks offset stronger commodities, and investors trained their sights on a European Central Bank rate decision after the Bank of England kept rates on hold.

At 1115 GMT, the FTSEurofirst 300 index of top European shares was 0.2 percent lower at 1,179.92 points, as weaker banks offset firmer commodity and food stocks.

Banks took most points off the index. HSBC fell 1.9 percent, while UBS, Societe Generale and Commerzbank lost between 1 and 1.4 percent.

Unilever jumped 6.6 percent, the biggest gain in the index, after it announced the appointment of Nestle executive Paul Polman as its new head.

Shares in BP were the top weighted gainer, rising 3.7 percent, with BP and its Russia-connected co-owners in oil firm TNK-BP TNBPI.RTS saying they had signed a memorandum to solve a protracted corporate conflict.

As widely expected, the Bank of England kept the base rate on hold at 5 percent amid pressures to reduce inflation but at the same time stimulate growth.

The European Central Bank will announce its decision at 1145 GMT.The ECB is also likely to keep rates on hold, at 4.25 percent, but may shake up collateral rules, making it tougher for banks swapping complex, untraded and near impossible-to-value assets for ECB funds.

"We're not expecting a change on rates," said Achim Matzke, European stock indices analyst at Commerzbank. "So we don't expect it to move the market. The wording of  Trichet will be key, if he says something indicating the direction of rates in future."

Matzke added: "The banks are lower on worries about the U.S. economy. But there are some positives for certain companies, such as BP and Unilever."

Sweden's central bank raised its key interest rate by a quarter percentage point to 4.75 percent, focusing on above-target inflation rather than slowing economic growth.

Across Europe, Britain's FTSE was up 0.7 percent, while Germany's DAX fell 1 percent and France's CAC lost 0.5 percent.

Heavyweight oils and mining stocks were broadly stronger as crude CLc1 ticked 77 cents higher to $110.12 a barrel, gold bounced and copper futures rose.

Antofagasta gained 3.4 percent and Kazakhmys rose 2.6 percent, while Total rose 1.2 percent and Shell gained 1 percent.

Technology stocks weakened as investors fretted that an economic slowdown would hurt tech spending. Nokia fell 0.6 percent and STMicro lost 3.4 percent.

French bank Natixis was a standout gainer, jumping 6.7 percent as analysts bet on the success of its deeply discounted rights issue.

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Asian stock market summary

JAPAN
The Nikkei 225 Stock Average closed 1 percent lower at 12,557.66 on Thursday, with uncertainty about the direction of the global economy hanging over the market.
  
The market took its cue from directionless trading on Wall Street overnight, with some investors moving to cash in profits after the Nikkei gained more than 80 points in the previous session.
   
Investors also used caution ahead of the release of U.S. job market data on Friday, while also waiting for quarterly earnings from U.S. investment banks due out in mid-September.
 
The broader TOPIX fell 1.6 percent to 1,201.65.

SOUTH KOREA
The Korea Composite Stock Price Index closed 0.03 percent lower at 1,426.43 points, with outlook worries hitting technology issues, but Kookmin Bank rallied on hopes for a smooth transformation into a planned holding company structure.

CHINA
The benchmark Shanghai Composite Index closed slightly higher, ending a three-day run of losses, up 0.03 percent at 2,277.41, with nonferrous metal stocks rising on a technical rebound.
   
Banks continued their decline, while beverage makers outperformed on news that China Huiyuan Juice is being acquired by Coca-Cola Co at a premium of nearly 200 percent.
   
The Shanghai A-share Index was up 0.03 percent at 2,390.38, and the Shenzhen A-share Index rose 0.70 percent to 661.52. The Shanghai B-share Index rose 1.46 percent to 151.14, while the Shenzhen B-share Index fell 0.16 percent to 374.61.
   
TAIWAN
The weighted index closed down 2.62 percent at 6,412.63, in a broad sell-off as investors continued to worry that a slowing global economy will dent corporate earnings.
   
Commodity-related firms remained weak on demand concerns, while shipping stocks extended their losses after marine transport rates fell further.
   
Tourism-related counters also lost further ground as mainland Chinese tourist arrivals to Taiwan so far have been well below expectations.
   
Uni-President Enterprises, a food and beverages firm, fell the maximum daily-allowable 7 percent on worries over its earnings prospects amid a weak macro-economic environment.
 
HONG KONG
The Hang Seng index closed down 195.58 points or 0.95 pct at 20,389.48, off a low of 20,356.51 and high of 20,621.48.

INDIA
The benchmark Sensitive Index of the Bombay Stock Exchange closed down 150.76 points or a percent at 14,899.10 while the National Stock Exchange's S&P CNX Nifty fell 56.25 points or 1.25 percent to 4,447.75.

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Oil firms above $110 ahead of U.S. oil data

LONDON - Oil rose by more than a dollar on Thursday as a number of U.S. refineries remained shut because of hurricane disruption and ahead of U.S. government data expected to show falls in gasoline stocks.

U.S. crude rose 73 cents to $110.08 a barrel by 11:59 a.m., after jumping more than $1. London Brent crude rose 53 cents to $108.59.

Hurricane Gustav did not cause much physical damage to oil facilities in the U.S. Gulf region, the hub of the oil industry in the United States.

But 11 refineries in the U.S. Gulf area, representing just over 11 percent of the U.S. fuel supply, remained shut as of Wednesday due to a lack of reliable electricity supplies in the wake of Gustav. More storms were seen under way.

"There are still concerns over supply issues. A lot of the Gulf of Mexico capacity was shut down and some refineries are still closed. We don't know how long they'll remain offline," said Gerard Rigby, an analyst at Fuel First Consulting in Sydney.

Entergy, Louisiana's largest utility, said earlier this week that the worst damage was in the New Orleans-Baton Rouge area, home to some of the biggest U.S. plants, including Exxon Mobil's giant Baton Rouge facility.

Entergy said on Wednesday the full recovery of its power grid might be weeks away, while the company was restoring some power supply.

"The market will be watching for future hurricanes and it is still a risk right through to the end of this month," said Helen Henton, the head of Commodities Research at Standard Chartered.

Hurricane Ike strengthened into an extremely dangerous Category 4 hurricane in the open Atlantic on Wednesday although it posed no immediate threat to land. Tropical Storm Hanna intensified to a lesser degree as it swirled over the Bahamas toward the southeast U.S. Coast.

Oil traders were closely watching weekly U.S. government oil data due out later on Thursday. Analysts in a Reuters poll of forecast a slight 200,000-barrel increase in crude oil stocks in the week to August 29, when Gustav was approaching the U.S. Gulf.

The data was expected to a 1.4 million-barrel drawdown in gasoline stocks and a 500,000-barrel increase in distillate fuels. New York RBOB gasoline futures were rising slightly more sharply than crude.

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