3/08/07

Stocks struggled for most of Thursday's session, as upbeat earnings barely offset worries that tighter credit standards were impacting the financial sector. Subprime concerns resurfaced after mortgage lender Accredited Home Lenders Holding revealed in a SEC filing that it was not certain it would continue to operate because of adverse conditions of the subprime mortgage market. Shares of the company fell nearly 38 percent on the news. Adding to those woes was a report by Newsday that American Home Mortgage Investment Corp will close its doors today, just two days after the mortgage lender said it was considering liquidating its assets.

A weaker than expected reading on June factory orders and a surprisingly low weekly jobless claims reading briefly jolted stocks, but ultimately had little impact as Wall Street braced itself for the big economic reading of the week, today's employment report for July. US employers are expected to have added 135,000 jobs last month, up from June.

Oil prices remained near record highs reached earlier this week as US light crude for September delivery rose 40 cents to $76.93 a barrel on NYMEX.

Treasury prices climbed, lowering the yield on the 10 year note at 4.77 percent from 4.79 percent late Wednesday.

The dollar fell versus the euro and gained against the yen.

COMEX gold for December gained 70 cents to $676.60 an ounce.

The Nikkei average ended almost flat today as cellphone makers rose following Nokia's upbeat earnings results. But bank shares extended gains on renewed concerns about the fallout from the US subprime loan problems after news that American Home Mortgage Investment Corp plans to close most operations on Friday, becoming one of the biggest casualties of the US housing downturn.

The FTSE100 rose 49.7 points on Thursday, closing at 6300.3 after hitting its lowest level since March in the last session. The BoE and ECB kept interest rates on hold and a raft of upbeat earnings helped lift global equities by soothing credit market fears. Banks bounced into the lead, adding 19 points to the index after suffering steep losses the previous day when global stock markets tumbled as worsening credit market fears sent investors currying to safer assets.

Barclays said it was still confident on its offer for ABN AMRO but acknowledged that much would depend on its share price in the next two months. The bank rose 1.3 percent after it reported a 12 percent rise in pretax profit and said it planned to start a £2.4bn share buyback programme on August 6.

Standard Chartered added 2.3 percent after Singapore state owned investment holding Temasek said it had raised its stake in the bank to 14 percent from 13 percent.

British Airways climbed 4.5 percent leading the FTSE100 after ABN AMRO upgraded its rating on the stock to hold from sell and after its US and UK price fixing fines were announced in line with expectations and smaller than some media had reported they could be.

Unilever held on to strong gains throughout the session, up 4.3 percent after the company raised its 2007 sales forecast after a strong second quarter. It also said it planned to speed up its recovery by selling off slower growth businesses and making most cost savings.

Vodafone jumped 4.1 percent, as European telecom shares were lifted by France Telecom posting slightly better than expected half year profits, and by robust second quarter sales and profits from Nokia.

Mitchells and Butlers fell 4.7 percent after saying it would delay plans to spin off £4.5bn worth of property until recent turbulence on the debt markets dies down.

Economics
UK PMI Services (Jul) 0930 BST

Analysts expect this survey to drift down slightly on the back of weaker activity in the real estate sector. Note that this survey doesn't cover distribution which is where analysts expect previous increases in interest rates to really dent sentiment.

US Non-farm Payrolls (Jul) 1330 BST/0830 EDT

Analysts expect July non farm payrolls to rise 110,000. Initial jobless claims remain low at around 310,000. However, the "jobs balance" from the Conference Board's report has declined for the past three months through June. Recent jobs gains have been concentrated in four main sectors: education, health services, food services and government. These categories together accounted for 76% of the payroll growth in the first half of the year. Although these sectors should stay solid, we could see offsetting job losses in areas like construction, manufacturing and temporary help. Analysts look for the unemployment rate to rise to 4.6% from 4.5%, assuming labour force participation is steady. Average hourly earnings may rise 0.3%, with the yearly rate slowing to 3.8% from 3.9%.

US ISM Non-manufacturing (Jul) 1500 BST/1000 EDT

Service sector activity has been robust, with ISM non-manufacturing averaging 58.8 over for the past three months. The latest Beige Book noted strong gains by consulting, advertising, health care, scientific and technical and telecommunication firms. Last month's ISM non-manufacturing rose 60.7, yet the new orders slipped from 57.4 to 56.9. The overall activity and new orders series tend to track each other over time, and we expect this month's headline index to slip to 58.

The details published in this e-mail are intended for information only and should not be construed as advice under the Financial Services and Markets Act 2000. Aventus Capital Management will not accept responsibility for any actions taken (or not taken) on the basis of information published in this e-mail.

Aventus Capital Management is a trading style, "Aventus" is a trade mark and the Aventus logo is a registered trade mark of Rickerbys Solicitors. Rickerbys is regulated by the Solicitors Regulation Authority. Authorised and regulated by the Financial Services Authority.