US & World Daily Markets Financial Briefing 27-06-2008

Previously featured on ABC News BusinessNow, B-TV, in BusinessWeek, Popular Mechanics and local news papers. Click here for the free StocksJournal analyst's report.

US May consumer spending up 0.8 pct; personal income up 1.9 pct

In early deals on Wall Street, the DJIA was 9.9 points higher at 11,463.30, with the broader S&P 500 index ahead 5.75 points at 1,288.90, and the Nasdaq composite index up 2.44 points at 2,323.81.

After a volatile opening half hour, U.S. blue chips managed to recouped a small part of Thursday's 350 point plunge as some pleasing U.S. economic data and position-squaring ahead of the weekend helped offset the impact of the spiraling cost of crude oil.

The Commerce Department said U.S. personal spending rose 0.8 percent in May, as taxpayers started receiving their stimulus checks, higher than the 0.7 percent economists predicted.

May U.S. personal incomes also rose, up 1.9 percent, significantly more than anticipated. But with oil prices jumping to record highs again today, pushing above $142 a barrel as the US dollar weakened further, the New York recovery still looked frail.

US consumer spending doubled in May as personal income jumped in part because of billions dollars of government checks from the economic stimulus package were mailed last month, the Commerce Department said today.

Personal consumption expenditures rose 0.8% in May after rising an upwardly 0.4% in the prior month. That's the largest gain since September 2005. Economists polled by Thomson Reuters IFR Markets expected consumption to rise 0.7%.

The increase in spending came as personal income rose 1.9%, more than quadruple the 0.4% gain economists polled by Thomson Reuters IFR Markets had expected.

After adjusting for inflation, real consumer spending rose 0.4% following a 0.2% gain in both March and April. Disposable income, which excludes taxes, rose 5.7% in May, the largest single month gain since May 1975. After tax and adjusted for inflation, real disposable income rose 5.3%, the largest gain since April 1975.

Much of the gain was due to stimulus package payments.  The government sent $48.1 billion in payments in May after mailing $1.9 billion in April. It is expected to send out a total of about $106.7 billion by mid-July.

Meanwhile, consumers saved a massive 5.0% in the month, compared with the usual half a penny of very dollar.  "It might seems strange to say that American consumers are hunkering down after posting the largest gain in personal spending in six months, but that's apparently what happened in May and will likely happen in the months ahead," said Sal Guatieri of BMO Captial Markets.

Private employers paid their workers $15.9 billion in May, while government wage and salary disbursements rose $3.7 billion. Inflation, measured by the Core Personal Consumption Expenditure price index, excluding food and energy, rose 0.1 pct. For the year, the core PCE price index rose 2.1% as expected.

Subscribers benefit from features such as: advanced search and reading functionality.
Click here for all the action.

Forex - U.S. dollar remains weak as surging oil prices exacerbate inflation woes

LONDON - The U.S. dollar remained weak as oil prices continued to spike higher, exacerbating fears over the dangerous combination of spiralling inflation and a slowing economy.

The dollar has been firmly under pressure since Wednesday's statement accompanying the Federal Reserve's decision to leave rates unchanged failed to deliver the tough talk on inflation that many had been looking for. "The market clearly does not believe that the Fed is willing or able to raise interest rates," said Neil Mellor at the Bank of New York Mellon.

The dollar's falls since the Fed statement have taken the currency close to technical levels which, if breached, could see the euro surge back up towards the $1.59 mark, possibly even towards $1.60, he noted. Weakness in the U.S. dollar has almost become a "self-fulfilling prophecy", Mellor believes. A scaling back of U.S. rate expectations has pushed the dollar lower, encouraging gains in the oil price and in turn exacerbating worries over inflation and the outlook for the U.S. economy.

Moreover, the dollar could be be set to "lose ground rapidly" next week in the event of a combination of negative factors for the currency, namely a rate hike in the euro zone, further weak U.S. data and poor liquidity ahead of the July 4 holiday in the U.S.

Elsewhere, risk aversion continued to benefit the yen and the Swiss franc as safe haven currencies, while the Swiss currency gained additional benefit from news that the Russian central bank is considering increasing the proportion of Swiss francs in its reserve portfolio.

At the same time, sharp rises in the oil price boosted commodity currencies, with the Australian dollar pushing back up towards 24-year highs against its U.S. counterpart and the Canadian dollar edging back towards parity.

Falls in the pound meanwhile in the wake of an unexpected downgrade to UK first quarter GDP proved very shortlived, as the ongoing U.S. dollar weakness theme helped the UK currency to bounce back.

Figures released on Friday by the Office for National Statistics showed quarterly GDP growth in the first three months of 2008 was revised lower to 0.3 percent from the previous estimate of 0.4 percent. This was the weakest rate of growth since the first quarter of 2005, caused predominantly by a slowing services sector, where growth fell to its lowest level for more than a decade.

For stock market quotes, company information, stock charts, historical quarterly reports and historical annual reports, click here

Euroshares open lower after Wall Street slump; banks slide, oils gainsf

At 8:55 a.m., the DJ STOXX 50 was down 35.06 points, or 1.21 percent, at 2,853.82 and the DJ STOXX 600 was down 4.06 points, or 1.41 percent, at 284.42.

Back in Europe, the banking sector continued Thursday's decline as economic fears and concerns over possible further write-downs in the U.S. continued to weigh.

An article in the UK's Telegraph relayed a warning from Barclays research department that its clients are "to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall 'below zero'".

The DJ STOXX EUR Banks lost 1.89 percent, with Barclays 1.9 percent lower, Deutsche Bank down 1.5 percent, Unicredit easing 2.4 percent, BNP Paribas sliding 1.1 percent, and UBS losing 1.7 percent.

Fortis bucked the sector trend, however, to top the DJ STOXX 50 risers, up 3.6 percent as investors bought back into the stock on weakness following Thursday's 19 percent drop when the Belgo-Dutch bancassurance group announced an 8 billion euro recapitalisation package.

Fortis said last night that it has completed a scheduled 1.5 billion euro capital hike, placing 150 million new shares at a price of 10.0 euros each. Also in demand were oil & gas heavyweights on the back of oil price strength, with the DJ STOXX EUR Oil & Gas sector up 0.86 percent, with Total up 1.8 percent, Repsol YPF 0.7 percent ahead, BP 2.2 percent firmer, Cairn Energy jumping 6.4 percent, and ENI adding 1.2 percent.

Several index plays were also helped by a JP Morgan review of the European integrated oils sector, in which the broker raised its earnings estimates by 17 percent and price targets by 7 percent on average across the sector.

The broker said BP remains the most attractive of its top picks, while it also upgraded StatoilHydro to 'overweight' from 'neutral'. Cairn, meanwhile, was upgraded to 'outperform' from 'in-line' at Cazenove. Sticking with commodities, steel producer ArcelorMittal outperformed, sliding just 0.2 percent after announcing it is raising flat carbon steel prices in Europe for new bookings with delivery scheduled for September, and signalling further price hikes going forward amid a tight supply.

Returning to the downside, Carrefour added to Thursday's heavy 8.8 percent loss as more brokers downgraded the stock Friday after the supermarket giant last night lowered its guidance for full year operating profit from continuing activities.

The company is predicting an increase in line with the rise in sales, no longer forecasting that growth will outstrip the gain in sales.Deutsche Bank downgraded Carrefour to 'hold' from 'buy' and lowered its target to 45 euros, while Natixis Securities cut its recommendation to 'reduce' from 'accumulate' and lowered its target to 37 euros from 49.

Carrefour shares lost a further 7.3 percent Friday morning. Nestle also suffered at the hands of a broker downgrade, falling 0.3 percent after SG Securities downgraded its advice to 'sell' from 'buy' and cut its price target by 25 percent to 427 Swiss francs.

Nokia dropped 2.9 percent after Credit Suisse downgraded its stance to 'neutral' from 'outperform'. The broker told clients it has reduced its EPS estimates for Nokia by 12 percent to 1.59 euros for 2008 and by 21 percent to 1.50 euros for 2009, leading it to also cut its fair value to 18.5 euros from 30.0 previously.

Although the stock is cheap, the broker said, it does not see significant upside potential. Among M&A moves, EADS shares dipped 2.0 percent lower following a report that Lagardere has reduced its stake in the aerospace and defence group to less than 10 percent, according to Le Figaro. Arnaud Lagardere yesterday told the group's top management that he still intends to exit from the EADS stake completely, but not at the current share price.

Finally, also in France, shares in Clarins remained suspended at the company's request, with La Tribune's website reporting this morning that the Courtin-Clarins family, who own 64.9 percent of Clarins, want to buy the minority shareholders' stake in the cosmetics group in order to delist it from the stock exchange.

The operation would cost Clarins up to 641 million euros, including a premium of 15-20 percent above the latest share price, the website said, without citing a source.

Fast-loading, feature-rich and highly customizable interfaces for reading and posting messages. click here

Asian stocks tumble on oil price, credit market woes

In the region, the Taiwan market was among the hardest hit. Taiwan's weighted index declined 3.4 percent to 7,548.76 after a jump in oil prices and local monetary tightening moves.

Besides an interest rate hike of 12.50 basis points, the Taiwan central bank announced Thursday hikes in reserve ratios on bank deposits, its first such tightening measure in two decades. The measures were part of efforts to fight inflation.

In Shanghai, the benchmark index tumbled 5.3 percent to 2,748.83, led by airlines and oil refiners. Hong Kong's Hang Seng index was 1.8 percent lower at 22,042.35. The Nikkei 225 index lost 2 percent to 13,544.36, and the Topix index was down 1.8 percent at 1,320.68. In Seoul, the Kospi was down 1.9 percent at 1,684.45.

The Australian benchmarks closed off their lows as bargain hunters stepped in. The S&P/ASX 200 was down 1.3 percent at 5,237 and the All Ordinaries down 1.3 percent at 5,349.4. "The market picked up from its early lows on expectations that Wall Street will trade higher tonight. I think there was general realisation that the reaction overnight to warnings on General Motors and Citigroup was a little too severe," said Michael Heffernan, a private client advisor at Reynolds & Co.

Overnight, the market worried about fresh signs of trouble in the financial, high-tech and automotive industries. Negative analyst comments sent shares of General Motors Corp. to their lowest point in more than three decades

Citigroup Inc. stock fell sharply after an analyst gave it a "sell" rating and warned investors to expect less from the brokerage sector in an uneasy economy. Disappointing forecasts from technology bellwethers Oracle Corp. and BlackBerry maker Research In Motion Ltd. further soured investor mood and made the tech sector one of the steepest decliners.

Commonwealth Bank was down 1.0 percent at A$40.50, National Australia Bank off 4.9 percent at A$26.70 and ANZ lost 0.3 percent to A$18.95. Westpac fell 3.3 percent to A$20.69 and its takeover target St. George fell 1.4 percent to A$28.50.

Exporters headed south in Tokyo on a firmer yen. Sony lost 4.4 percent to 4,840 yen, Toyota Motor fell 1.9 percent to 5,070 yen, Honda Motor shed 2.7 percent to 3,650 yen, construction machinery maker Komatsu was down 3.2 percent at 3,010 yen, and video game console maker Nintendo shed 3 percent to 61,000 yen.

The construction sector slumped in Taiwan as higher borrowing costs are seen reducing demand for property. Kuo Yang Construction declined NT$1.60 to 21.90 and Kindom Construction fell NT$1.15 to 15.75. Both were limit-down 7 percent.

Elsewhere in the region, Singapore's Straits Times index ended down 0.8 percent at 2,955.91, the Philippine Composite was down 2.2 percent at 2,466.28, the Jakarta index was down 0.8 percent at 2,332.12 and Malaysia's KLCI was down 1.1 percent at 1,190.54.

The most traded market in the world; 24 hr market platform with the latest news, prices and charts gives you the knowledge to invest in this exciting and fast moving market.
Click here

Oil prices strike record highs above $142

LONDON - Oil prices jumped to record high levels above $142 a barrel on Friday, as the US currency weakened further and stock markets tumbled at the end of a volatile trading week for investors. New York light sweet crude struck a historic peak of $142.26 a barrel and Brent North Sea crude reached an all-time high of $142.13 in electronic deals.

"Crude oil futures made fresh record highs, with higher oil prices fuelling inflationary fears and thus hurting stock markets, which in turn triggered a further rally in commodities as investors seek better returns," Sucden analyst Michael Davies said in London.

Prices "continued to be buoyed by the dollar, as the greenback continues its free fall decent this week," he added. OPEC's president on Thursday predicted that oil prices could reach 170 dollars this year owing to a weak dollar and geopolitical unrest.

Crude futures crossed $140 for the first time on Thursday following the price forecast made by OPEC's chief, Algerian Energy Minister Chakib Khelil, in an interview with television news channel France 24. After achieving new peaks on Friday, New York's main oil futures contract, light sweet crude for August, was trading at $141.40, up $1.76 from Thursday's close.

Brent North Sea crude for August delivery stood at $141.06 a barrel, a rise of $1.23. The cost of oil has doubled in a year, with consumers blaming the surge on insufficient output from the Organization of Petroleum Exporting Countries.

However OPEC, which produces 40 percent of the world's oil, argues that speculators are responsible for pushing up crude in reaction to a falling dollar and tensions in oil-producing countries, such as Iran, Iraq and Nigeria.

A weak US currency makes oil priced in dollars cheaper for foreign buyers, thus pushing up demand for the commodity. In a volatile trading week, crude prices had closed down 3.50 dollars on Wednesday after official data revealed an unexpected rise in stockpiles in the United States, the world's biggest energy consumer.

The US Department of Energy said that stockpiles of crude had risen for the first time in six weeks, by 800,000 barrels, in the week to June 20. Analysts had expected a drop of 1.1 million barrels. Oil prices had rallied at the start of the week after major energy producers ruled out further output despite consumer fears the world faces a tight supply situation.

Saudi Arabias King Abdullah announced last Sunday that his country had increased output to 9.7 million barrels a day as he opened a summit on the soaring international price of crude in the Saudi city of Jeddah involving producers and consumers.

However the market had already expected the formal announcement after the kingdom's London embassy released a statement last week that outlined a plan to increase output by 200,000 barrels a day. Prices also shot higher on Monday after militants blew up a pipeline in Nigeria over the weekend, traders said.

Militants had attacked a key Chevron oil supply pipeline in the latest operation targeting Nigeria's oil industry.

The US oil giant was forced to shut down activities after the attack in the volatile Niger Delta, halting output by 120,000 barrels per day.

The Anglo-Dutch oil sector Shell has also said it cannot promise to deliver 225,000 barrels per day for June and July following an unprecedented raid on its offshore Bonga oilfield. Unrest in the Niger Delta has cut total oil production in one of Africa's biggest producers by a quarter over the past two years.

The latest streaming prices and news on major commodities from precious metals to crude oil, so you can keep up-to date and never miss a trading opportunity again.
Click here

Investors Hub Services