16/10/07

Separately, Citigroup reported that third quarter profit dropped 57 percent from a year ago due to $3bn in write downs related to the mortgage market fallout. Citigroup also reported weaker earnings per share of 47 cents, that nonetheless topped analysts estimates.

General Motors fell 3.6 percent as investors backtracked after sending the stock sharply higher after workers ratified a new four year contract. GM revealed that the contract includes the transfer of $46bn in health care liability to the union.

Medtronic shares slumped more than 11 percent in NYSE trade. The biotech firm said it stopped distribution of the wires that connect defibrillators to patients hearts on news that the wires may have caused five deaths.

Level 3 Communications slumped 11 percent in active Nasdaq trade after its CFO said he was resigning.

Tektronic jumped over 33 percent in unusually active trade after conglomerate Danaher said it was buying the test and measurement gear maker for about $2.8bn.

Biogen Idex climbed 19 percent after the company said late Friday that it may put itself up for sale.

In economic news, The NY Empire State Index rose to 28.8 in October from 14.7 in the previous month. Economists thought it would fall to 14. The report seemed to further bets that the economy is holding up well enough that the Federal Reserve will not need to cut interest rates at its policy setting meeting later this month.

Treasury prices inched higher, lowering the yield on the 10 year note to 4.67 percent from 4.68 percent.

In currency trading, the dollar fell versus the euro and gained versus the yen.

COMEX gold for December delivery rose $$8.40 to settle at $762.20 an ounce.

The Nikkei fell 220.2 points to close at 17137.9 today as growing concern that the credit crisis may not be over, battered bank stocks such as Mitsubishi UFJ Financial Group following a weak outlook from Citigroup. Exporters like Canon Inc were also sold on worries about a slowdown in US consumer spending. Nomura Holdings was down 0.5 percent after the company said it would pull out of the US residential mortgage backed securities market and cut a quarter of its US workforce, pushing it to a big quarterly loss.

UK stocks closed 86.2 points lower at 6644.5 on Monday, with Northern Rock leading losses in the  banking sector, while Johnson Matthey bucked the trend with a surge on the back of bid talk. Northern Rock fell more than 20 percent after a cautious statement from the troubled mortgage bank said talks with suitors over its options are preliminary and analysts said prospective takeover interest from Richard Branson is unlikely to result in investors getting more than the current share price. The banking sector took 23 points off the index, with Alliance and Leicester falling 5.8 percent and Royal Bank of Scotland down 3.6 percent. Credit Suisse separately cut its target price for the stock to 180 pence from 390 pence.

SAB Miller fell 4.7 percent after it said its half year underlying beer volumes rose 11 percent, but showed a slowdown in some of its most profitable regions such as Latin America. The company also cautioned that growth in revenue was partially offset by higher input costs, such as for barley, glass and aluminium, and rising investment across its business such as a new brewery and improving beer distribution in Columbia.

Legal and General fell 4.4 percent after a JP Morgan research note said the sell off in the stock is not complete, with the group's core annuities and protection business under pressure.

Rank Group dropped 12.2 percent following a 21 percent plunge on Friday when the firm warned of a big fall in operating profit at its bingo and casino operations.

Economics
UK CPI (Sept) 09.30 bst

We expect CPI to remain at 1.8 percent in September (1.84 percent to 2 decimal places). Behind this forecast HSBC have assumed a 0.4 percent gain in food prices and their monitoring suggests petrol prices were broadly unchanged on the month in September. RPI is expected to tick down to 3.8 percent. As last year's interest rate tightening starts to drop out of the annual comparison, this should shave off roughly 125bp from RPI over the coming months.

EMU HICP Sept) 10.00 bst

The final estimates for Eurozone HICP for September is expected to remain unchanged at 2.1 percent. The predominant reason is that favourable base effects from energy fall out of the equation. PPI consumer goods inflation edged up in August, so there is a risk that some core CPI measures ( varying between 1.9 percent and 2 percent) rose as well. For 2007 and 2008, HSBC believe HICP inflation will average 2 percent, but will only fall below 2 percent in the course of Q2.

US Net long term TIC flows (Aug) 14.00 bst

Last months TIC data for July showed slower net purchases of longer dated US treasuries, corporate bonds, and equities, as credit concerns intensified at the end of the month. At the same time, foreign holdings of Treasury bills and other short term liabilities rose noticeably. August may show long term security purchases remaining below trend at USD 40bn, while short term foreign holdings increase again, boosting total flows.

US Industrial production (Sept) 14.15bst

We expect industrial production to rise 0.2 percent, keeping the capacity utilisation rate at 82.2 percent. Manufacturing output should be fairly muted at +0.2 percent as manufacturing hours worked was flat in the latest payrolls report. Areas of relative strength may include computers, printing and apparel, while declines could come from motor vehicles, wood products and rubber & plastics. Utilities output is a wild card, as temperatures remained above average in September.

US NAHB housing market index (Oct) 18.00 bst

Homebuilder optimism is very low, with the NAHB currently matching its all time low of 20 (going back to 1985). Homebuilder stocks have rebounded a bit so far this months, but the outlook for new home sales remains soft.

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