22/11/07

In economic news, the Mortgage Bankers Association reported a 3.6 percent drop in applications last week. Separately 47 out of the 50 states saw a drop in existing home sales in the third quarter, according to the National Association of Realtors report.

The October index of Leading Economic Indicators fell 0.5 percent, after rising 0.1 percent in the previous month, suggesting that the economic slowdown could accelerate in the months ahead. Economists thought LEI would fall 0.3 percent. The November consumer sentiment from the University of Michigan showed a rise to 76.1 from an initial reading of 75, but was down from last months 80.9. Economists thought it would hold steady, on average. The number of American filing for new claims for unemployment fell last week by 11,000 as expected.

US light crude for January delivery fell $1.03 to $97 a barrel on NYMEX, after having hit a record high of $99.23 overnight. Oil prices were volatile after the release of the weekly oil inventories report, which showed a surprise drop in crude supplies.

COMEX gold for December delivery rose $6.90 to $793.30 an ounce.

The dollar fell versus the euro and the yen.

Treasury prices rose, sending yields lower, as investors sought safety in bonds. The benchmark 10 year note fell below 4 percent for the first time in two years.

In company news, Freddie Mac shares continued to slide after plunging nearly 27 percent Tuesday. The company reported a steep quarterly loss Tuesday and a $1.2bn writedown in credit losses. Fellow mortgage lenders Countrywide Financial and Washington Mutual also slipped, while Fannie Mae rose after sliding through the morning. Big banks slumped, including Merrill Lynch, Lehman Brothers and Morgan Stanley.

Intel was one of many chip stocks falling, including Advanced Micro Devices and Micron Technology. Micron fell for a second session after a Morgan Stanley analyst initiated coverage of the company Tuesday with an "underweight" rating, AP report.

On the upside, GM, which recovered from a steep morning selloff after reports said that GMAC, its struggling former finance unit, is taking steps to keep its mortgage unit alive.

The Nikkei 225 today gained on short covering of recent decliners such as trading houses, as the dollar rebounded against the yen. But the TOPIX index ended lower, dragged down by insurance shares fell on concerns over their subprime mortgage exposure. Trading was choppy throughout the day, as declines on Wall Street weighed but then traders bought back trading houses including Mitsui & Co and Marubeni in the afternoon. The market also failed to find firm direction ahead of a three day weekend in Japan, as well as the Thanksgiving holiday weekend in the US. The Nikkei rose 51.11 points to close at 14888.77 and the TOPIX index fell 1.34 points to close at 1437.38.

Katokichi soared 17 percent after Japan Tobacco and instant noodle maker Nissin Food products said they will jointly buy the frozen food producer in a deal exceeding Y100bn, hoping to create the leader in the Japan frozen food industry. Chugai Pharmaceutical rose 5.2 percent to Y1819 after the drug makers 50 percent owner Roche filed an application for FDA approval for a rheumatoid arthritis medication it developed. Insurance shares took a hit with Aioi Insurance losing 11 percent at Y544 and Mitsui Sumitomo Insurance shedding 7.3 percent at Y1,118. Kuritomo, the TSE's biggest loser on the day, nosedived 28 percent to Y204 because of local media reports it fabricated data on the strength of steel pipes used in highway bridge construction.

UK stocks fell 2.5 percent on Wednesday, led by banks and miners, as concerns over the credit market and its impact on the wider economy dampened sentiment though buoyant oil prices lifted energy stocks. The FTSE100 closed 155.6 points lower at 6070.9, to hit its lowest closing level since August 17 after snapping a three day losing run on Tuesday with a 1.7 percent gain.

Banks were the biggest losers, taking 40 points off the index, with the slide from Northern Rock continuing. The bank fell 12.6 percent after it said it had received more rescue proposals, but warned that one of them contemplated an offer well below Tuesdays closing price. Fears over further credit related losses and funding needs pulled other banking stocks lower, with Barclays down 5.1 percent, RBS falling 3.7 percent, HBOS losing 3.8 percent and HSBC (ex-dividend) losing 3.2 percent.

Paragon fell nearly 30 percent, adding to 39 percent losses on Tuesday. Credit Suisse said in a note that Paragon could be a target for Bradford and Bingley, which fell 2.6 percent.

The yen rose to its highest against the dollar in more than two years, triggering concerns that speculators were reducing risky positions funded by low yielding currencies such as the yen.

Miners were also weak, as metal prices fell and fears over global demand took hold. BHP Billiton, Rio Tinto, Anglo American, Xstrata and Vedanta Resources were down between 3.9 and 5.1 percent. Kazakhmys fell 6.5 percent after it said it expected this year's financial performance to reflect an expected slump in production due to mine flooding earlier this year.

Oil stocks rose as crude prices passed $99 a barrel before retreating.

Daily Mail and General Trust fell 8.9 percent after it announced year results broadly in line with expectations. UBS analysts said a "luke warm outlook" means consensus forecasts for the coming year are unlikely to change.

Cable and Wireless, Carnival, Sainsbury and Vodafone all fell after going ex dividend

Economics
UK Total business investment (Q3, prelim)