19/11/08

FTSE 100	4208.55, +76.39	Dow	8424.75, +151.17
FTSE 250	5925.98, -51.05	Nasdaq	1483.27, +1.22
FTSE All Share	2095.23, +30.47	S&P 500	859.12, +8.37
Nikkei	8273.22, -55.19	Hang Seng	12815.8, -100.09
Oil (Crude)	$54.39	Gold	$732.70
Base Rate	3%	10 Yr Gilt
£/$	1.497	Euro/Gbp	0.841

Markets
US stocks finished higher yesterday in another choppy session that saw all three major indices swing between gains and losses. This has been a theme for some months now, with October averaging an intra day volatility of 6.7% while the average since 1962 has been just 1.5%.

Strong results from Hewlett-Packard offset concerns over further job losses at Citigroup and weak economic data. The US Producer Price Index posted its sharpest monthly decline on record in October. Tumbling energy prices and falling chain store sales were seen as the main reasons for the drop.

The Dow Jones gained 151.17 points to close at 8,424.75, the S&P 500 added 8.37 points to end at 859.12. The Nasdaq edged 1.22 points higher to finish at 1,483.27.

Hewlett-Packard surprised the market with fourth quarter figures that topped expectations. The computer maker also lifted its 2009 forecast, sending shares 14.5% higher. The news helped tech stocks including Intel Corp and Cisco Systems, after both had warned about weaker sales in the current quarter. Intel added 0.9% while Cisco rose 1.5%.

Home Depot gained 3.6% after reporting weaker quarterly sales and earnings that nonetheless topped forecasts. Although gains were limited following The National Association of Home Builders report on home builder confidence. The reading fell to its worst level since records began in 1985, to 9 out of 100.

Yahoo Inc jumped 8.7% to 11.55 after the departure of CEO Jerry Yang renewed hopes that it would clear the way for a deal with Microsoft.

Boeing Co caused the biggest drag on the Dow as analysts worried that the jet aircraft manufacturer will not meet profit estimates over the next two years. Shares declined 3.9%.

US light crude oil for December delivery fell $0.56 to settle at $54.39 a barrel. COMEX gold for December delivery slipped $9.30 to $732.70 an ounce. Treasury prices rose, lowering the yield on the 10 year note to 3.52% from 3.65%.

The Nikkei fell 55.19 points to close at 8,273.22 this morning. Financial companies led the drop on concern the nation's drop into recession will lead to an increase in bad loan costs. Mitsubishi UFJ Financial Group Inc and Sumitomo Mitsui Financial Group Inc dropped more than 6% on reports they'll sell shares to replenish capital sapped by bad loans and share losses.

The Hang Seng lost 100.09 points to close at 12,815.80 this morning. Investors were knocked by comments from billionaire Stanley Ho, who said the city may be mired in recession for two or three years and on a newspaper report that Li & Fung Ltd will cut jobs in the city.

The FTSE 100 is 71.48 points lower at 4,137.07 this morning. Wolseley loses 5.3% after announcing 2,300 job losses and the closure of 200 locations across Britain. Barclays loses 4.7% after JPMorgan cut its price target on the stock. Experian tops the risers board, jumping 10.5%, following its interim results.

Economics
UK BoE minutes (Nov) 09.30 gmt

The dire outlook for GDP that was presented in the Bank of England's November Inflation Report largely explains the 150bp rate cut, but there are questions over whether the vote was unanimous. The Inflation Report does state that "there is a range of views among the Committee on both the central projection and the balance of risks" so there is a chance that some of the members did not advocate such a bold move.

UK CBI industrial trends (Nov) 11.00 gmt

As inflationary risks have receded, the MPC has welcomed the decline in the hope that export demand will cushion the downturn in domestic activity. But the recent deterioration in global demand from the US and eurozone is likely to outweigh the increase in competitiveness arising from the fall in sterling.

US CPI (Oct) 13.30 gmt

Headline CPI is expected to fall 0.8 percent, the biggest monthly decline in over 50 years. The year on year rate could slow to 3.8 percent from 4.9 percent. Gasoline prices fell to USD 3.05/gallon from USD 3.7/gallon and the gasoline CPI is expected to fall 15 percent after seasonal adjustment. Household energy costs could fall 5 percent, down from the third straight month. Core CPI is expected to rise by a moderate 0.17 percent. There could be some upside risk to OER (HSBC estimates +0.35 percent), as energy declines may begin to narrow the gap between tenant rent and owners equivalent rent (respectively 3.8 percent and 2.4 percent year on year in September). Weakening consumer spending should put downward price pressure on categories like autos, apparel, and hotels.

US Housing starts (Oct) 13.30 gmt

With homebuilder optimism hitting an all time record low in October, new construction activity probably declined further. New home sales have continued to slow, facing increased competition from the supply of foreclosed properties on the market. As a result, the month's supply of new homes for sales (10.4 in September) has remained stubbornly high even though the total number of new homes for sale is down over 30 percent since July 2006. Housing starts and building permits are expected to fall to 760k and 750k respectively.

US FOMC minutes (28-29 October meeting) 19.00 gmt

These minutes will include updated economic projections from the FOMC as of the October meeting. By this point, the financial turmoil was intensifying, and the Fed had already seen a wide range of disappointing data on employment, retail sales, and industrial output. As a result, their midpoint estimates for Q4/Q4 GDP could be marked down to -0.1 percent for the end of this year and 1.4 percent for 2009, down from 1.3 percent and 2.4 percent projected back in June. FOMC participants will also adjust their expected peak in unemployment higher, especially after the previously forecasted target was surpassed in just a few months. The FOMC is expected to predict 6.7 percent for unemployment in 2009. Meanwhile, with oil prices already down 50 percent by the end of October, the FOMC is likely to mark down its projections for both deadline and core PCE inflation.

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