US & World Daily Markets Financial Briefing 20-08-2008

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US STOCKS-Futures rise on HP results, but Lehman slips

NEW YORK - U.S. stock index futures rose on Wednesday as news of a solid quarterly profit and outlook from Hewlett-Packard, the world's largest computer maker, helped investors battle fears about the credit crisis.

The HP news suggested that technology spending will hold up, particularly as demand from abroad offsets weakness in the United States.

Shares of HP, a Dow component, jumped 3 percent before the bell. A rebound in global commodity prices also positioned shares of energy, mining and other natural resource-based companies to advance in Wednesday's trading.

Another boost was an overnight recovery in Chinese stocks. U.S. stock index futures rose on Wednesday as news of a solid quarterly profit and outlook from Hewlett-Packard, the world's largest computer maker, helped investors battle fears about the credit crisis.

The HP news suggested that technology spending will hold up, particularly as demand from abroad offsets weakness in the United States.

Shares of HP, a Dow component, jumped 3 percent before the bell. A rebound in global commodity prices also positioned shares of energy, mining and other natural resource-based companies to advance in Wednesday's trading. Another boost was an overnight recovery in Chinese stocks. U.S. front-month crude was up 66 cents at $115.19 a barrel.

China's main stock index soared more than 7 percent on Wednesday due to hopes that the government would introduce a stimulus package to boost the slowing economy and aid the stock and property markets. U.S. stocks fell for a second straight session on Tuesday as credit worries hit bank shares and a report showed inflation remains a threat despite slower growth.

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Europe stocks cling to gains, boosted by miners

LONDON - European shares clung to gains in midday trade on Wednesday with help from miners and heavyweight oil stocks, though banks remained volatile. By 1037 GMT, the FTSEurofirst 300 index of top European shares was up 0.2 percent at 1,161.27 points.
      
Mining stocks and oil heavyweights were the biggest advancers as oil edged up above $115 a barrel, while copper and aluminium prices rose. 
      
The DJ Stoxx European basic resources index rallied 3.4 percent with Rio Tinto  adding 6 percent and Xstrata  gaining 4 percent. BP , Royal Dutch Shell  and Total  all added between 1.5 and 2.3 percent. Oil explorer Tullow Oil  jumped 6.7 percent after UBS raised its recommendation on the stock to "buy" from "neutral". 
      
Banks turned in a choppy session, following steep losses on Tuesday. The DJ Stoxx European banks index was down 0.7 percent in midday trade, with UBS  up 0.7 percent, Barclays  down 3.6 percent and Deutsche Bank  down 0.4 percent.
      
The banks index is down more than 30 percent since the beginning of the year and there is still no end in sight to the current crisis, according to Commerzbank strategist Markus Wallner in Frankfurt. "We remain underweight in banks. We have seen that some investors switched from commodities into banks but that only really worked for two weeks.

The credit crunch is definitely not over," Wallner said. "The banks are controlled by the credit market and the iTraxx Crossover index  is rising towards 3-year highs again," he added, noting that the iTraxx is historically negatively correlated to the banking sector.
      
The iTraxx Crossover is made up of 50 mostly "junk"-rated credits. Germany's DAX index was up 0.5 percent, UK's FTSE 100 index up 0.8 percent and France's CAC 40 up 0.6 percent.
       
Technology shares got a boost from Hewlett-Packard  results that beat estimates overnight and from a deal announced by STMicroelectronics  and Ericsson  to combine their chip and mobile applications businesses.
     
STMicro gained 1.7 percent and Ericsson rose 0.2 percent. Other gainers included Spanish builder Ferrovial  after the British competition commission said Ferrovial's BAA unit may have to sell two of its three London airports. The stock rose 0.6 percent. Earnings news lifted Telekom Austria  and SBM Offshore.

SBM Offshore clocked up 2.6 percent after the Dutch oil industry supplier beat expectations with its first-half earnings. Shares in Telekom Austria rose 2.6 percent as investors shrugged off weaker-than-expected second-quarter results and instead took solace in the group confirming its outlook.
      
Food and drug retailers were out of favour after JPMorgan lowered its stance on Sainsbury to "neutral" from "overweight" and said it preferred rival Morrison. Sainsbury lost 3.5 percent and Morrison was
down 0.8 percent.
      
In a note to clients, the broker highlighted Sainsbury's limited non-food exposure but added that the group's food trading was the weakest of the big four and it anticipated that trading would worsen. Automotive stocks were weak after Tokyo Shimbun daily reported Toyota was set to lower its 2009 global sales forecast to 9.7-9.8 million vehicles from 10.4 million. 
      
The DJ Stoxx European automotive index was down 0.8 percent, with Fiat  the biggest decliner after a change of recommendation at Merrill Lynch to "underperform" from "buy" and a steep target cut. The stock lost 6 percent.

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Asian stock market summary

JAPAN
The benchmark Nikkei 225 Stock Average ended down 0.1 percent at 12,851.69, after investors failed to find incentives following a weak U.S. session due to disappointing economic data. The broader Topix index slipped 0.2 percent to end at 1,233.37.

SOUTH KOREA
The Korea Composite Stock Price Index closed down 0.05 percent at 1,540.71, after losing as much as 1 percent earlier, supported by gains in steel-makers and chemical issues, but deepening outlook worries sent memory chip makers lower.
 
AUSTRALIA
The S&P/ASX 200 closed up 1.3 percent at 4,929.5, as resources firms advanced on higher commodity prices, though gains were capped by broader worries about company debt levels and earnings outlooks. All Ordinaries finished up 1.4 percent at 4,997.5.

CHINA
The benchmark Shanghai Composite Index, closed up 7.63 percent at 2,523.28, amid talk that the government will soon undertake measures to boost the economy and the stock market.
   
Investment bank JPMorgan said in a note that the Chinese government is considering a stimulus package of 200-400 billion yuan in tax cuts and capital and housing market stabilization measures.
   
The Shanghai A-share Index was up 7.63 percent at 2,648.75, and the Shenzhen A-share Index rose 7.21 percent to 747.58. The Shanghai B-share Index rose 7.60 percent to 162.91, and the Shenzhen B-share Index gained 4.37 percent to 390.94.
   
TAIWAN
The weighted index closed up 0.89 percent at 7,040.90, as bargain-hunters stepped in after the market's slide in the past three trading days. Investors took note of a recovery on Hong Kong and mainland China bourses following talk that China may announce a package of measures to shore up its economy and stock markets.
   
Financials staged a come-back after early weakness amid an ongoing investigation into alleged money-laundering by former president Chen Shui-bian and his family.

HONG KONG
The Hang Seng index closed up 446.89 points or 2.18 pct at 20,931.26, off a low of 20,388.79 and high of 20,971.19. Turnover was 62.33 bln hkd.

INDIA
India's main stock index, the 30-share Sensex of the Bombay Stock Exchange, closed up 134.50 points, or 0.92 percent, at 14,678.23 points and the broader 50-share S&P CNX Nifty of the National Stock Exchange closed down 1.09 percent at 4,415.75 points.

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Oil prices dip before U.S. energy data

LONDON - Oil prices eased on Wednesday, reversing earlier gains and a sharp spike the day before, as the market awaited the latest weekly government report on the health of American energy inventories.

New York's main contract, light sweet crude for September delivery, fell 13 cents to 114.40 dollars a barrel after briefly rising above 115 dollars earlier on Wednesday.

London's Brent North Sea crude for October delivery shed 14 cents to 113.13 dollars a barrel. "Later Wednesday market participants will pay close attention to the weekly US fuel inventories report" from the US government, noted Nimit Khamar, an energy analyst at the Sucden brokerage in London.

Crude prices had shot up a week ago after the U.S. Department of Energy reported US gasoline reserves surprisingly fell by as much as 6.4 million barrels in the week ended August 8.

Gasoline stocks are closely watched at this time of year as American motorists hit the highways for their summer vacations, typically pushing up demand for gasoline, which is refined from crude oil. Crude oil prices had closed up by more than one dollar on Tuesday after OPEC member Venezuela said it would ask the cartel at its September meeting to cut production if downward price pressure continues.

World oil prices are down from record highs of above 147 dollars a barrel, which were set in July, as weak economic growth is denting global demand for oil. Oil prices had fallen close to 110 dollars a barrel in early trading on Tuesday as Tropical Storm Fay missed energy production facilities in the Gulf of Mexico.

However oil prices, which broke through the 100-dollar level at the start of 2008, remain well above year-ago levels. The Organization of Petroleum Exporting Countries (OPEC), which is steered by Saudi Arabia, produces about 40 percent of the world's crude.

A leading British energy consultancy, CGES, had on Monday said that OPEC might decide to cut output next month should the price of crude fall under 100 dollars. Oil prices had begun the week by falling, also on news that the Baku-Tbilisi-Ceyhan (BTC) pipeline would soon reopen.

British energy giant BP said Wednesday that tests were underway on the BTC pipeline after repairs were completed on the fire-damaged conduit.  "We began the dynamic testing of the pipeline Wednesday. This is a test that needs to be done before full operation," company spokesman Murat Lecompte told AFP.

He could not say when full operation would resume exactly, but added that they expected to start loading oil to the ships at the port of Ceyhan on Turkey's Mediterranean coast "early next week."

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