14/09/07

McDonald's rose to an all-time high after saying on Wednesday that it was raising its dividend and the cash it expects to return to shareholders. Investors said other cash-rich companies may follow the fast-food chain's lead at a time when takeover deals are difficult to consummate. Federal Reserve policy-makers are widely expected to cut interest rates at a meeting next Tuesday. Investors and economists are divided over how much the central bank will reduce borrowing costs to keep economic growth from slowing.

The Nikkei ended up 1.9% at 16127.42 as weaker yen helps exporters rise and higher crude prices overnight push up oil shares. Toyota Motor up 2.4% at Y6,530. Nippon Oil up 1.3% at Y1,026 whilst banks rally after BOJ said it has joined the Islamic Financial Services Board as observer.

In Hong Kong, markets gained with the Hang Seng ending the day higher by just over 360 points to end at 24,898.11, tapping record highs thanks to continued demand for China-related stocks. 

In London the FTSE 100 is lower by around 70 points dragged down as Northern Rock news weighs heavily.  Northern Rock has issued a profit warning and was offered an emergency loan from the BoE, the first British casualty of the credit crisis that has hit global markets.  In early trading Northern Rock shares fell almost 22% and said it now expected underlying 2007 pretax profit of £500 to £540m, compared with analysts' current consensus of £647m.

Economics
US Current account balance (Q2) 13.30 BST  

The current account deficit is expected to narrow to USD191bn, assuming net income receipts (+USD10bn) are about unchanged along with slightly smaller unilateral transfers (-USD25bn) out of the US.  

US Retail sales (Aug) 13.30 bst 

Retail sales should be helped by better than expected auto sales, as unit sales rose to 16.2m from 15.5m. Total retail sales are expected to have risen 0.3 percent, while ex auto sales are seen to be flat. Ex auto and gasoline sales should be better at +0.3 percent. Gasoline prices at the pump fell 6 percent and gasoline station sales are expected to fall by 2 percent. Building material and furniture sales could also decline, while reports from clothing retailers have been fairly positive.  

US Industrial production (Aug) 14.15bst 

Industrial production is seen rising 0.3 percent. Manufacturing production rose 0.6 percent in July, but a smaller increase of 0.3 percent is expected. The trend in manufacturing hours worked has picked up a bit since the end of lat year but still looks fairly subdued, averaging about +0.1 percent last month. Implied manufacturing productivity growth in July was strong at +0.6 percent, but this may just be a temporary pickup unless further strength is seen. The capacity utilization rate could rise to 82.1 percent, from 81.9 percent.

US University of Michigan confidence (Sept, prelim) 15.00 bst

The ABC/Washington survey has shown only limited improvement since plunging to -20 in mid August. The September Michigan sentiment is seen edging down to 83, from 83.4. In the final survey for August, 1-year median inflation expectations fell to 3.2 percent while 5 year inflation expectations dropped to 2.9 percent.

US Business inventories (Jul) 15.00 bst

Manufacturing inventories rose 0.2 percent. Total business inventories are seen rising 0.3 percent, assuming a 0.4 percent increase for wholesale and retail inventories.

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