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Tuesday, February 24, 2009

ADVFN World Daily Markets Bulletin - Feb 24, 2009

US Stocks at a Glance

Bargain hunters lift Wall Street after slide

NEW YORK - U.S. stocks rose on Tuesday as investors snapped up shares in beaten-down sectors, including financials, a day after Wall Street skidded to a 12-year low.

The benchmark S&P 500 index held a slight edge above its November bear market low, as JP Morgan, up 3 percent, and Citigroup, up almost 5 percent, led a rebound in financial shares.

Shares of Home Depots, up 6 percent, were a top boost to the Dow after the leading home improvement chain's quarterly operating profit topped analysts estimates.

The Dow Jones industrial average rose 73.83 points, or 1.04 percent, to 7,188.61. The Standard & Poor's 500 Index added 10.32 points, or 1.39 percent, to 753.65. The Nasdaq Composite Index climbed 23.53 points, or 1.70 percent, to 1,411.25.

JP Morgan climbed to $20.49 after Citigroup raised its first-quarter profit view on the bank. After the bell on Monday JPMorgan announced an 87 percent cut in its dividend to conserve capital and said it has been "solidly profitable" this quarter.

Bank of America rose 3.6 percent to $4.05, while Citigroup shares added 6.5 percent to $2.28. The KBW Banks index was up almost 2 percent, rebounding from multiyear lows.

Forex

Euro Pares Gains; Dollar At 13-Week High vs. Yen
Trading remains volatile Tuesday morning, following through on Monday's session, with the euro paring back overnight gains versus the dollar ahead of testimony from Federal Reserve Chairman Ben Bernanke.

U.S. stock futures are higher on some expected bargain hunting after Monday's slide. This helped to support flows into the euro from the safe-haven dollar, but those flows appear to be weakening into the morning.

Meanwhile, the dollar is up against the yen, recently hitting a fresh 13-week high Tuesday morning. It breached the Y96.0 mark, rising to Y96.02, its highest level since Nov. 25, and continues to trade near that level.

The dollar versus yen pair has mostly broken its traditional relationship with equities markets - when stocks gained, so did the dollar.

Now, the yen has started to weaken amid improving conditions in credit markets, said Benedikt Germanier, a currency strategist at UBS in Stamford, Conn., explaining the reemergence of this traditional movement Tuesday.

"Looking ahead, risks remain that investors will look to exit yen longs with improving conditions in global credit," Germanier added.

Tuesday morning in New York, the euro was at $1.2739 from $1.2714 late Monday, while the dollar was at Y96.02 from Y94.50, according to EBS. The euro was at Y122.30 from Y120.16. The U.K. pound was at $1.4497 from $1.4480, and the dollar was at CHF1.1627 from CHF1.1678 Monday.

Traders are awaiting Bernanke's testimony in Washington, scheduled to begin at 10 a.m. EST. He may speak about an inflation target for the bank, expectations for the unemployment rate, as well as recent events affecting the future of Citigroup (C) and American International Group Inc. (AIG).

U.S. data out at the same time include the February Richmond Fed Manufacturing Index and the Conference Board Consumer Confidence Index.

Overnight data out of Europe was a disappointment. The Ifo Institute's German business confidence index plunged more than expected to a record low in February, to 82.6 from 83.0 in January, indicating a deepening recession in the euro zone's largest economy. Records began in 1991.

Currency analysts continue to worry about Western Europe's exposure to its eastern neighbors. French President Nicolas Sarkozy Tuesday warned that the global financial crisis would probably worsen as banks in Eastern Europe are hit hard.

"We saw what's happening in East and Central Europe...the situation will probably worsen," Sarkozy told a press conference after meeting Italian Premier Silvio Berlusconi.

Capital is fleeing Eastern Europe, sending currencies sliding and threatening the region with deep declines in output and employment, and a deluge of debt defaults.

Canada Morning
The Canadian dollar is little changed against the U.S. dollar after the slight shift in favor of risk.  A report from TD Securities said the Canadian currency managed to negotiate a very weak set of retail sales data Monday without much damage, but remains generally range bound against its U.S. counterpart.

The U.S. dollar was at C$1.2523 from C$1.2520 late Monday and down from an intraday high at C$1.2536. A report from BMO Capital Markets forecast the U.S. dollar faces a daily trading range of C$1.2425 to C$1.2600, with resistance at C$1.2558.

Europe Shares

European Stocks Down On Financials

With sentiment taking a knock after major U.S. indexes ended at 11-year lows, European shares fell Tuesday as financials and oil producers ranked among the worst performers.

The Dow Jones Stoxx 600 index declined 1.9% to 172.01. However, the pan-European benchmark managed to hold above its 2003 low, when it hit 162.59.

This contrasted with U.S. shares on Monday, where risk aversion and the weight of a global recession drove a broad sell-off that pushed stock indexes to levels not seen in more than a decade.

Regionally, the German DAX 30 index lost 1.6% to 3,873.61, while the French CAC-40 index declined 1% to 2,701.41 and the U.K.'s FTSE 100 index gave up 0.9% to 3,816.91.

There was more gloomy news on the German economy on Tuesday. The Ifo Institute's German business sentiment index fell to 82.6 in February, down from a reading of 83.0 in January, according to news reports.

Doubts over the U.S. government's latest efforts to shore up the wider economy and the U.S. banking sector continued to weigh on oil futures. The contract dropped 4% on Monday and stayed below $39 a barrel on Tuesday.

Shares of oil producers came under pressure in Europe, including Total, down 1.5%, and Eni, down 1%.

Financials remained in the spotlight, with insurance giant American International Group (AIG) in talks with the U.S. government about securing more funds to be able to continue operating after March 2. AIG reportedly has received bids from MetLife Inc. and Axa for its American Life Insurance Co. unit.

Shares of Axa fell another 5.2% in Paris, bringing losses made over the last week to roughly 33%. Other insurers under fire in Europe included Prudential, down 7%, as well as Allianz, down 5.9%.

Banking and insurance group ING fell 17.2% in Amsterdam. Late Monday, it denied reports that it's seeking aid from the U.S. government.

Additionally, KBC dropped 7.7%, retreating following Deutsche Bank downgrading the Brussels-listed bank to sell from hold.

In technology, shares of TomTom fell another 4.7% in Amsterdam. The maker of personal satellite navigation devices reported a fourth-quarter net loss of 989 million euros on lower sales and a TeleAtlas impairment charge, announced further cost cuts and cautioned that under certain conditions it could breach its loan covenants.

TomTom had dropped Monday following results reported by rival Garmin (GRMN).  Also on the move, shares of BMW fell 6.4% in Frankfurt. Morgan Stanley lowered its rating on the luxury automaker to underweight from overweight, citing an "unattractive valuation" forecasting that BMW's balance sheet will deteriorate.

Shares of Daimler also dropped in Frankfurt, down 6%. The world's biggest truck maker, Daimler got downgraded to market perform at Bernstein.

"We already have concerns about Daimler's liquidity, truck business and appetite for restructuring. In addition, we are increasingly concerned that strategic, industrial and political pressures will push Daimler towards a deal with Opel," Bernstein said.

Meanwhile, competitor Volvo reported that truck deliveries fell 51% to 10,232 vehicles in January. Volvo's shares gave up 0.8%. A major loser was Basilea Pharmaceutica , shares of which plunged 35%.

A European Union regulatory committee delayed its decision on whether to approve Zevtera, or ceftobiprole, for the treatment of complicated skin and soft tissue infections, the company said. Basilea also filed an arbitration claim against Johnson & Johnson.

Still, other drug makers were putting in a better performance as investors took a chance to pick up shares in a sector regarded as less sensitive to economic conditions.

Shares of AstraZeneca climbed 1.3% in London, as GlaxoSmithKline added 0.5%. Staying with defensives, Vivendi saw its shares advance 3% in Paris.

Late Monday, the media and telecom conglomerate said that it has been awarded 1.9 billion euros of damages from Elektrim. Additionally, the firm's Maroc Telecom unit produced fiscal-year results that topped J.P. Morgan estimates.

Asia Markets

HK shares drop 2.9 percent in broad-based slump

Hong Kong shares slumped 2.9 percent on Tuesday, scraping a 1-month low amid fresh fears about the financial system and pushing four out of every five stocks into losses.

Bucking the downtrend, Hongkong Electric rose 3.2 percent to HK$48.50 on so-called safe haven buying. Some brokers had expected the main index to stay above 12,700 points on Tuesday, partly propped up by hopes of relief measures in Wednesday's budget speech.

But the expected stimulus steps are unlikely to elicit a strong market response. "Hong Kong is a very open economy, so no matter how much water you pump in it will all leak out," said Winson Fong, who helps oversee $2 billion at SG Asset Management.

The benchmark Hang Seng Index .HSI closed down almost 377 points at 12,798.52, after giving up all the gains made in the previous session, as relief over a reported U.S. government plan to aid Citigroup faded.

"The sell-off seems once again to have been triggered by a financial accident -- this time, the U.S. Treasury Secretary's determined attempt to snatch defeat from the jaws of victory -- and we have not been expecting markets to stabilise in a straight line," HSBC analysts wrote in a report.

Wall Street shares fell to their lowest in nearly 12 years on Monday, while Tokyo's Nikkei index flirted with its lowest level in more than a quarter of a century on questions about whether the U.S. government was doing enough to stabilise the ailing banking sector and credit markets.

Heavyweight HSBC shed another 3 percent to finish at its lowest close since October 1998, on fears its earnings could come in below a market consensus owing to a worse-than-expected performance in the United States and Hong Kong.

"This is a global bank stock sell-off and with Citi trading at $2 there's no way HSBC can stay immune to the selling pressure," said SG's Fong. A rally in the U.S. dollar and fresh jitters over Wall Street banks sent crude oil and gold prices lower, triggering sharp drops in commodity stocks.

Asia's biggest oil & gas producer, PetroChina, fell 3.7 percent to HK$5.71, while Real Gold Mining, which made its debut on Monday, slid 11 percent to HK$5.56. Mainboard turnover slipped to HK$37 billion from Monday's HK$39.6 billion.

The China Enterprises Index of top mainland firms was down 3.3 percent at 7,068.21, with China Life 2826.HK leading the losses. The world's biggest insurer by market value dropped 3.2 percent, tracking a 4.6 percent fall on the Shanghai bourse.

Manulife Financial Corp dropped more than 13 percent, even after the Canadian insurer said it did not intend to raise capital in the absence of a strategic transaction. The stock was at HK$92.70, down 12.1 percent from its dividend-adjusted Monday close of HK$105.477.

Shares in Canada's largest insurer have fallen more than 15 percent since it announced a big quarterly loss on Feb. 12 as market watchers speculated the company will have to raise capital to counter the impact from plummeting global stock markets.

Nam Tai Electronic Products Ltd more than doubled to HK$1.28 after its parent, Nam Tai Electronics Inc, offered to take the firm private at a 163.2 percent premium over the Hong Kong-listed stock's last trading price.

Oil

North Sea Oil Operations Unsustainable At Current Price, Cost - BP

BP PLC's oil and gas production business in the U.K. North Sea is unsustainable at current low oil prices and high costs, a spokeswoman for the company said Tuesday.

The company, which is one of the largest producers of oil and gas in the North Sea, needs to act to make sure it can continue investment in business, she said.

BP has opened talks with key contractors and suppliers about reducing costs. The talks are still at an early stage but BP is looking for a quick response from oil service companies, she said. "It's essential to have these contacts if we want to sustain a successful business in the North Sea ... doing nothing is not an option," she said.

The cost of developing and running oil and gas fields in the North Sea has increased 50% since 2004, but the oil price is now back at 2004 levels, she said. BP wants to see a "significant reduction" in costs, she said, without giving figures.

BP and other companies operating in the North Sea also have an ongoing dialogue with the British government about how it can encourage investment, including tax policy, she said. "It's important the government understands the current North Sea cost challenge," she said.

The spokeswoman wouldn't specify which areas of its operations might see investment cutbacks if costs don't fall. Press reports Monday said BP has frozen the pay of some managers in the U.K. and the spokeswoman said the company has no plans to recruit extra workers into its North Sea operations this year. Graduate and trainees programs will continue, she said.

Most oil firms are pressuring contractors after years of runaway cost inflation. Michel Contie, senior vice president of Northern Europe for another major North Sea oil and gas producer, Total SA (TOT), said last week he wants costs to fall by at least 20%. Small and medium-sized oil companies will struggle to survive if costs don't fall back in line with the oil price within a year, he said.

Industry lobby group Oil and Gas U.K. said earlier this month that investment in the North Sea could fall 30%, accelerating production decline in a province that is already well past its peak.

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