18/11/08

The Dow Jones dropped 223.73 points to close at 8,273.58, the S&P 500 fell 22.54 points to end at 850.75. The Nasdaq lost 34.8 points to finish at 1,482.05.

Citigroup stole many of the headlines after Chief Executive Vikram Pandit said the bank will cut 52,000 jobs over the next year. This is twice the target announced by the New York based bank last month. A surge in loan losses and a shrinking economy has already caused the bank to cut 23,000 jobs in the last year, on the day shares finished 6.6% lower. Elsewhere, Bank of America Corp declined 8.5% while Goldman Sachs Group Inc slid 6.4%.

Congress is this week debating whether the auto industry should receive further aid, on top of the $25 billion General Motors, Ford Motor Co and Chrysler have already received. The money would potentially come from the $700 billion bank bailout fund, but the Bush Administration is opposed to this and Barack Obama says although aid for the sector is needed, it has to be designed as a long term strategy, not a blank cheque. GM gained 5.6% making it one of just three risers on the Dow, while Ford fell 4.4%.

Alcoa Inc, the US's largest aluminium producer, tumbled 11% after UBS AG cut its recommendation on the stock to "neutral" from "buy". Analysts at the company said they believe there is "uncertainty" in the aluminium market.

US light crude oil for December delivery eased $2.05 to settle at $54.95 a barrel. COMEX gold for December delivery slid $0.50 to $737.40 an ounce. Treasury prices rose, lowering the yield on the 10 year note to 3.67% from 3.72%.

The Nikkei lost 194.17 points to close at 8,328.41 this morning. Developers and insurance companies led the drop with on concern the slowing economy will reduce property demand and push up securities losses on company balance sheets.

The Hang Seng plummeted 613.64 points to end at 12,915.89 this morning. Bank and property developers were the biggest weight on the indexes as the global economic recession prompted job cuts and lower demand for real estate.

The FTSE 100 is currently 68.47 points lower at 4,063.69 this morning. Lonmin tops the fallers board, down 7%, after posting a 19% rise in annual underlying earnings per share. However, lower metal prices and comments from the CEO saying they expect a challenging market and sees no recovery in metal prices until 2010 caused the stock to drop. Xstrata, which is Lonmin's biggest shareholder is down 5.9%. Wolseley is off 4.2% after saying it will cut 2,300 jobs following a slump in construction. On a limited upside, ICAP gains 2.7% after predicting that it will beat estimates for its full year results, even though it fell short of the 6 monthly consensus.

Economics
UK CPI (Oct) 09.30 gmt

This release will show all measures of UK inflation begin their descent. Petrol prices fell 6.7 percent on the month in October and the BRC shop price index suggests food prices also fell. CPI is likely to have fallen to 4.6 percent in October and is likely to be below 1 percent by this time next year. RPI will fall even more quickly as falling house prices and interest rate cuts drag down mortgage interest repayments. RPI is expected to have fallen to 4.5 percent in October. Further interest rate cuts alone will be enough to push RPI into negative territory by this time next year and Southern and Scottish Electric have hinted about the possibility of gas and electricity price cuts early next year.

US PPI (Oct) 13.30 gmt

Headline PPI is expected to fall 2.6 percent on the month, taking the year on year rate to 5.4 percent from 6.1 percent. The energy PPI should collapse sharply, with crude oil prices down 33 percent and gasoline prices down 20 percent in October. Finished food prices could fall 0.5 percent, following declines in crude and intermediate foods in August and September. The majority of new model year passenger cars and light trucks are introduced into the PPI in October, which can often have a big impact on the core PPI. The autos PPIs could be adjusted, if model enhancements are not fully matched by higher sticker prices. Weak retail sales in October may also mean softer prices for a broader range of consumer goods. Core PPI is expected to fall 0.2 percent, taking the annual rate to 3.8 percent from 4 percent.

US Net long term TIC flows (Sept) 19.00 gmt

Foreigners were net sellers of corporate and agency bonds in both July and August. This is partly being offset by net sales of foreign stocks and bonds by US residents, while Treasury bond purchases have remained steady (average USD33bn over the past three months). This has resulted in total net long term TIC flows staying positive, but at a slower pace from earlier this year. A USD20bn inflow in September is expected.

US NAHB housing market index (Nov) 18.00 gmt

The NAHB index of homebuilder sentiment fell 4 points to 14 in October, reaching a new record low going back to the survey's start in 1985. Present sales and prospective buyer traffic both declined but the biggest drop was in the future sales index, falling 9 points to 19. Although it is possible that this series could rebound (homebuilder stocks rose in early November but have dropped back recently), falling mortgage purchase applications suggest that activity continues to weaken. The NAHB index is expected to stay at 14.