FTSE 100	4190.11, -105.09	Dow	8149.01, -226.44
FTSE 250	6272.61, -151.15	Nasdaq	1507.84, -50.5
FTSE All Share	2097.53, -52.15	S&P 500	845.14, -28.95
Nikkei	7994.05, -257.19	Hang Seng	13244.3, -89.87
Oil (Crude)	$41.44	Gold	$906.5
Base Rate	1.5%	10 Yr Gilt	3.73%
£/$	1.428	£/€	1.1099
1 month LIBOR	1.590	3 month LIBOR	2.167

 

Markets

London - The FTSE 100 is currently 34.72 points higher at 4,224.83. Banking stocks again top the risers’ board, RBS adds 9.5%, Lloyds climbs 7.9% and Barclays rises 4.8%. Hammerson and Land Securities improve after Morgan Stanley recommended that investors buy the shares.

New York - US markets slumped yesterday following weak economic data in housing and unemployment together with more dire news on earnings. Weekly jobless claims rose to 588,000 last week, while the figure for Americans drawing benefits for a week or longer rose to the highest level on record. The Commerce Department reported sales of new homes fell in December to its lowest annual pace since records began in 1963.

The Dow Jones dropped 226.44 points to close at 8,149.01, the S&P 500 fell 28.95 points to end at 845.14. The Nasdaq slid 50.50 points to finish at 1,507.84.

Energy stocks dragged on the Dow. Exxon Mobil, which reports earnings today, lost 3.1% following news that Goldman Sachs had removed the company from its Buy list. Chevron Corp dropped 4.3% after the company said its 2009 capital spending program will be unchanged from 2008.

Home builders tumbled following the weak housing data. Hovnanian Enterprises plunged 10.5% while Toll Brothers lost 7.5%. The Dow Jones home construction index as a whole lost 8%.

On the upside, 3M rose 2%, following weaker quarterly earnings that still topped estimates. However, the diversified manufacturer warned that 2009 earnings won’t meet its earlier forecast.

Banking stocks suffered in the last half hour of trade after President Obama said large bonuses paid out to Wall Street executives were "shameful" and said he would be telling executives to show restraint. There is also fears that the $825 billion economic stimulus package could still face problems after the US House of Representatives passed it late Wednesday, but every Republican who voted opposed it. The Senate begins it debate next week.

After the bell, Amazon.com reported quarterly sales and earnings that topped forecasts. Shares jumped 13% in extended trading and it may well drive the technology sector higher in today’s session.

US light crude oil for March delivery slipped $0.72 to settle at $41.44 a barrel. COMEX gold for April delivery gained $16.50 to $906.50 an ounce. Treasury prices slumped, raising the yield on the 10 year note to 2.86% from 2.66%.

Tokyo - The Nikkei fell 257.19 points to close at 7,994.05 this morning after the International Monetary Fund said Japan’s gross domestic product will shrink 2.6% this year - its biggest contraction since World War 2. In corporate news, both Toshiba and Nintendo fell more than 12% after cutting earnings targets and sales.

Hong Kong - The Hang Seng gained 89.87 points to close at 13,244.30 this morning, reversing an earlier decline as speculation that China will announce stimulus measures over the weekend overshadowed concerns a slowing global economy is eroding demand.

Economics

UK Mortgage approvals (Dec) 09.30 gmt

Mortgage approvals (for house purchase) have proved exceptionally weak for a number of months now, hovering around a level equivalent to only a third of the long term average. Some gradual improvement is expected as 2009 progresses, thanks in large part to the government guarantees that will soon be attached to newly-issued asset backed securities, as per the UK government announcement on 19 January. Overall, we look for mortgage approvals to register a fresh series low of 25k in December, and no material improvement should be expected before the government guarantee scheme commences in April.

US GDP (Q4, prelim) 13.30 gmt

GDP is expected to decline 5.6 percent annualised, the deepest quarterly decline in 26 years. Consumption is sure to decline for the second consecutive quarter, and likely to be -3 percent. The rest of the private sector components look even more dire. Business fixed investment is likely to decline 16 percent annualised, the largest drop since 1980, while residential investment is likely to drop 18 percent, making it 11 consecutive quarters of double digit percent declines. Exports look like they were crushed by around 26 percent, but because imports contracted a likely 19 percent, the net trade contribution may be around zero. Inventories are expected to have declined USD75bn, wiping off 1.5ppts from GDP growth. Government spending is assumed to rise 2 percent (federal strength to be offset by state/local weakness), but there might be some upside risk here. Meanwhile, the GDP price deflator may fall slightly, and 0.1 percent is expected.

US Employment cost index (Q4) 13.30 GMT

The employment cost index is expected to have risen 0.8 percent in Q4, slightly above the 0.7 percent growth rate for the previous three quarters. The year on year rate could slow to 2.8 percent, from 3 percent in Q3. Payroll average hourly earnings rose 1 percent in Q4, and a 0.8 percent increase in wages and salaries is expected. Medical care costs rose 0.6 percent in the CPI, a bit quicker than in the past two quarter but still fairly moderate. A 0.7 percent rise in benefits costs in Q4 is expected.

US University of Michigan confidence (Jan) 15.00 gmt

The preliminary reading in January rose to 61.9 from 60.1, the highest since September. The personal finances (both current and expected) and business conditions components all improved, while buying conditions dropped back 8 points after a 28 point rise in November. The final reading is expected to remain unchanged at 61.9. In the preliminary survey, 5 year median inflation expectations rose to 3 percent from 2.6 percent, the first increase since last June. 1 year median inflation expectations rose to 2 percent from 1.7 percent.

US Chicago PMI (Jan) 14.45 gmt

The Chicago PMI has ranged between 34 and 38 for the past three months. So far in January, the Empire Index climbed 6 points and the Philadelphia Fed rose 12 points, but the detail of each report remained quarter soft. The latest Beige Book noted lower orders and production cuts in the Chicago district, but one contract noted a further increase in demand could come from service centres where inventories remained low in December. The January Chicago PMI is expected to rose to 38, up from 35.1.

Corporate

Jessops, Britain’s biggest photographic retailer, said on Friday a major restructuring of its £57.4 million debt was required as it reported widening losses, sending its shares down over 16%. Executive Chairman David Adams said Jessops’ long-term debt was likely be re-classified as short-term debt during the course of 2009. "In order to avoid any uncertainty during the coming year we are actively engaging with our advisers and HSBC Bank Plc to put the business on a more stable footing for the future," he said. "It is highly likely that this exercise will involve a fundamental restructuring of our debt." Jessops, which extended its bank loan arrangements to the end of 2011 in September, warned that in the immediate future it expected to breach its covenants. This would mean the entire bank debt would be repayable on demand at the option of the lender. The 230-store group said it made a loss before non-recurring items and tax of £19.1 million in the year to September 30th. This compares with a loss of £9.3 million in the previous year. Sales at stores open more than a year fell 6.5% over the year but gross margin increased to 32 % from 30.8%. In the 17 weeks to Jan. 25 like-for-like sales were down 4.1%, while gross margin for the 13 weeks to December 28th was down 4.2 percentage point’s year-on-year.

The above details are provided for information only and are not intended to be construed a solicitation for the sale or purchase of any particular investment nor as specific investment advice.

 

 

Posted: January 30th, 2009 under Asset Management.
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