24/7/08

FTSE 100 5449.90, +85.8 Dow 11632.38, +29.88

FTSE 250 9189.8, +207.20 Nasdaq 2325.88, +21.92

FTSE All Share 2783.30, +50.57 S&P 500 1282.19, +5.19

Nikkei 13603.31, +290.38 Hang Seng 23265.53, +130.98

Oil (Crude) $124.48 Gold $922.80

Base Rate 5% 10 Yr Gilt 5.006%

£/$ 1.993 Euro/Gbp 0.7855

Markets

US stocks gained yesterday as oil prices fell again and President Bush dropped a threat to veto a housing rescue bill. The House voted 272 to 152 in favour of the sweeping legislation that will offer up to $300 billion in assistance to troubled home owners. Fannie Mae and Freddie Mac would receive an emergency government lifeline under the bill, which allows the Treasury to offer the companies an unlimited line of credit over the next 18 months. The near 700 page bill must now go to the Senate, where the final passage is expected.

The Dow Jones added 29.88 points to close at 11,632.38, the S&P 500 rose 5.19 points to end at 1,282.19. The Nasdaq gained 21.92 points to finish at 2,325.88.

Fannie Mae and Freddie Mac both made strong gains following the removal of the presidential veto threat. Fannie Mae rallied 11.9% while Freddie Mac jumped 11.3%.

AT&T helped the Dow and Nasdaq to finish in positive territory. Although their figures contained signs that the weak economy is catching up to its previously steady results, the company enjoyed stronger than expected wireless growth and investors were generally pleased. Shares in company finished 3.9% higher. The results gave Apple Inc a boost as AT&T is the exclusive US network carrier for the iPhone. Apple finished 2.6% higher, making it one of the leading risers on the Nasdaq.

On the downside Boeing and Caterpillar both kept the Dow's gains in check. Boeing reported a bigger than expected drop in profit, sending shares 3.7% lower. Caterpillar tumbled 3.4% after JPMorgan downgraded the company, citing the possibility that volumes may slow further in North America and Europe.

US light crude oil for September delivery dropped $3.94 to $124.48 a barrel. COMEX gold for August delivery slid $25.70 to $922.80 an ounce. Treasury prices declined, raising the yield on the 10 year note to 4.11%.

The Nikkei climbed 290.38 points to finish at 13,603.31 this morning. The stronger dollar and a drop in oil prices sparked optimism Japanese companies' overseas sales will weather a global slowdown. Sony Corp, which gets a quarter of its sales from the US surged the most in seven weeks.

The Hang Seng is currently 130.98 points higher at 23,265.53. Cathay Pacific is at its highest level in almost seven weeks, cheered by the continued drop in oil prices. BOC Hong Kong, which said in March it wrote down HK$1.25 billion in debt securities linked to the US subprime mortgages, led financials higher.

Booming financial stocks amid takeover speculation and hopes the worst of the credit crunch may be over helped the FTSE 100 Index power ahead yesterday. With the wider market also enjoying an improvement in upbeat trading, the FTSE 100 Index closed up 85.8 points at 5449.9. Banks were the main beneficiaries thanks to rumours of possible bid interest for HBOS from Spain's BBVA.

HBOS was the blue-chip index's biggest riser, soaring nearly 17% or 44p to 305p. Rivals were not that far behind, with Royal Bank of Scotland jumping 22.25p to 221.25p and Barclays adding 37.25p to 352p. Lloyds TSB also cheered 26.5p to 346.5p. Other strong gains came in the transport sector after crude oil prices fell to $126 a barrel. Cruise ship giant Carnival cheered 102p to 1910p, while British Airways added 17p to 263.25p.

There was also a more hopeful mood in the retail sector, with Marks & Spencer up 11p at 269.75p and Next 52p higher 1064p. Elsewhere, mobile phone group Vodafone attempted to draw a line under yesterday's slump by unveiling surprise plans to buy back £1bn of its own shares. The stock dived 14% yesterday after the company reported weaker trading in the UK and Spain, as well as lower than expected sales of handset equipment. Shares were up 2% for a while today, but the stock later retreated to stand 2.4p higher at 131.4p.

GlaxoSmithKline was on the back foot after new chief executive Andrew Witty underwhelmed the City with half-year results and details of the strategic priorities facing the company. The group posted pre-tax profits of £1.84bn in the three months to June 30, 3% below last year. Shares fell 3.5p to 1220.5p, while rival AstraZeneca declined 9p to 2315p. Lower commodity prices meant a number of mining stocks joined Glaxo in the red, with FTSE 100 newcomer Ferrexpo leading the way with a drop of 12.25p to 263.25p.

Economics

UK Retail sales (Jun) 09.30 bst

The UK retail sales number has become somewhat of a wild card release. The May data registered the strongest monthly gain in spending for twenty years. Not only did this not fit with the gloomy economic backdrop, is also sat uncomfortably with the retail sector surveys and individual company trading statements. HSBC's models, based on this survey, pointed to an annual growth rate of nearer 3 percent rather than the 8 percent recorded. There are a number of theories as to why retail sales proved so strong in May. The first is that warmer than usual weather boosted sales. The second is that retailers brought forward promotions into the last week of May, rather than the usual June sales. This boosted the value of items sold in May but did not show up in the deflator because this is measured mid month when the prices are recorded for the CPI release. The CPI release for June (which may have been the selling price at the end of May) did show strong discounting of items such as footwear and clothing. The third explanation is that there were more Fridays and Saturdays in May this than usual, boosting the number of key shopping days. HSBC give some credit to the first two explanations which would suggest this index should fall back in June.

US Initial jobless claims (Week Jul 26) 13.30 bst

Last week's initial claims rose to 366,000 from 348,000, still below 390.500 average seen in June. The Labor Department continued to cite seasonal volatility, including the timing of auto factory shutdowns. Claims are seen rising to 375,000 this week. Continuing claims for the previous week may edge higher to 3.14m.

US Existing home sales (June) 15.00 bst

Pending home sales fell 4.7 percent in May, after a 7.1 percent increase in April. This leaves pending sales 2 percent higher than the cycle low in March. A decline in existing home sales is expected to 4.9m, down from 4.99m. In particular, HSBC will be watching sales in the West, where existing home sales had risen 11 percent from their lows as of May. Selling prices remain under pressure, although the year on year rate improved to -6.3 percent in May versus -8.5 percent in April.

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