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Tuesday, February 17, 2009

Market news, Financial news - Feb 17, 2009

Rupee at two-week low as shares falter

MUMBAI (Reuters) - The rupee fell to its lowest in more than two weeks on Tuesday on expectations foreigners would dump more local shares, while a stronger dollar overseas also dampened sentiment.

At 10:15 a.m., the partially convertible rupee was at 49.08/09 per dollar, its lowest since Feb. 2, and 0.5 percent weaker than its Monday's close of 48.84/85.

"There are no inflows into stocks, the supply is also lower due the U.S. holiday yesterday," a senior dealer at a private bank said. "The emerging market currencies are also weaker."

Financial markets and banks in the United States were closed on Monday for the Presidents Day holiday.

Indian shares fell 2 percent early, extending losses after falling 3.4 percent on Monday in its biggest slide in two weeks, with a drop across world markets and a budget that had little to help industry hurting sentiment.

Foreign fund withdrawals from stocks this year have already reached around $965 million. In 2008, outflows of more than $13 billion had pushed the rupee down 19.1 percent.

Traders also tracked the dollar's performance against overseas currencies for direction. The dollar index, a gauge of the U.S. unit's performance against majors, was up more than 1 percent.

The euro fell to its lowest in more than two months against the dollar and tumbled against the yen on Tuesday, pressured by concerns about recession in eastern Europe and the knock-on effect on European banks.

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Nikkei falls to almost 3-mth low, exporters sold

TOKYO (Reuters) - Japan's Nikkei stock average fell 0.8 percent on Tuesday, hitting its lowest point in almost three months, with exporters such as Panasonic Corp slipping as the yen clawed slightly higher against the dollar. Chip-related shares that advanced last week, such as Advantest Corp, extended losses, but their slide was countered by continued gains for general contractors such as Obayashi Corp after a brokerage upgrade.

Honda Motor Co gained on solid demand for its Insight hybrid.

But most investors were focused on restructuring plans that General Motors Corp and Chrysler LLC are required to submit by Tuesday showing how they can be made viable after receiving $13.4 billion in emergency aid.

"Basically, everyone wants to see how this goes, with a failure to meet the deadline likely to lead to selling," said Yumi Nishimura, deputy general manager at the investment advisory section at Daiwa Securities SMBC.

"Although the possibility certainly exists that they may end up filing for bankruptcy, the market has not factored this in."

Though the Nikkei largely brushed off Monday data showing the Japanese economy's worst quarterly contraction in 35 years, sentiment is likely to remain subdued, market players said.

"There's no question that the environment remains quite grim, and this dark situation will be with us for a while," said Hiroichi Nishi, general manager at the equity division of Nikko Cordial Securities.

The benchmark Nikkei shed 64.02 points to 7,686.01 after earlier falling as far as 7,654.65, its lowest since November 21, 2008. The broader Topix shed 1.2 percent to 760.63.

The dollar edged down against the yen to 91.72 , pressuring exporters. Investors dislike a stronger yen as it eats into exporter profits when repatriated.

Canon Inc lost 2.1 percent to 2,365 yen and Panasonic shed 1.6 percent to 1,076 yen. Sony Corp fell 1.4 percent to 1,677 yen.

Advantest fell 2.4 percent to 1,319 yen and Tokyo Electron 2 percent to 3,410 yen. Kyocera Corp edged 0.4 percent lower to 5,740 yen.

But Honda climbed 0.7 percent to 2,215 yen after Japan's No.2 automaker said orders for the new Insight -- its first real attempt at selling gas-sipping hybrid cars in big volumes -- have exceeded 10,000 units since it unveiled the car earlier this month.

A Honda spokeswoman said the car's low price and fuel efficiency helped contribute to the solid demand.

Obayashi rose 3.9 percent to 428 yen and Shimizu Corp climbed 2.1 percent to 382 yen, extending gains made on Monday after Nomura Securities upgraded them to "buy" from "neutral."

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India fiscal deficit worrying, to review rating - S&P's

MUMBAI (Reuters) - Standard and Poor's plans to review India's domestic debt rating after the government's interim budget on Monday forecast increased borrowing and a higher fiscal deficit, a senior official at the rating agency said.

Rising outstanding federal debt and a worsening fiscal deficit outlook are worrying factors, Takahira Ogawa, a credit analyst at Standard & Poor's in Singapore told Reuters in a telephone interview.

"The federal debt as a percentage of GDP and the rising fiscal deficit are two significant factors which are constraining ratings and that is something which also may pull them lower," he said, after the budget was presented.

Acting Finance Minister Pranab Mukherjee said the fiscal deficit for the fiscal year ending March would be 6 percent, compared with a budgeted estimate of 2.5 percent. It expects 2009/10 fiscal deficit at 5.5 percent.

Standard and Poor's rates Asia's third-biggest economy's local currency rating at "BBB - minus", or the lowest investment-grade level, with a stable outlook.

Fitch has a similar rating but with a negative outlook while Moody's pegs it at one notch lower at speculative grade.

"We will review the ratings after the fresh announcement but there is no specific timeline for that," Ogawa said.

India's fiscal deficit is one of the highest in the world and two stimulus packages announced in recent months to shore up sagging growth have put pressure on finances while tax collections have slowed sharply.

Fitch said last week the government's total outstanding debt would reach 77.9 percent of GDP this year and said these levels were "outliers" among sovereign countries rated at the BBB level.

"While we understand the need for the government to take fiscal steps to boost the economy, India needs to take significant and widespread reforms to move towards fiscal discipline in the medium term for ratings to improve," Ogawa said.

(For comprehensive coverage of the interim budget please click http://in.reuters.com/news/globalcoverage/budget2009)

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