03/09/07

FTSE 100	6303.3, +91.3	Dow	13357.7, +119
FTSE 250	11309.2, +209.7	Nasdaq	2596.36, +31.06
FTSE All Share	3260.48, +48.9	S&P 500	1474, +16.35
Nikkei	16524.9, -44.2	Hang Seng	23808.7, -175.4
Oil (Brent)	$72.87	Gold	$673.15
Base Rate	5.75%	10 Yr Gilt	5.028%
£/$	2.0185	Euro/Gbp	0.6755

 

Markets
US stocks jumped on Friday, ahead of a long weekend, after Ben Bernanke pledged the central bank will keep financial markets stable and the Bush Administration offered help to consumers hurt by the subprime mortgage crisis. The DJIA added 119.01 points to close at 13357.74, the S&P500 added 16.35 points to 1473.99 and the Nasdaq added 31.06 points to 2596.36.

Encouraging comments from Bernanke and President Bush seemed to soothe markets, calming worries about the turmoil in the credit and mortgage markets. President Bush introduced a number of initiatives to help homeowners hurt by the subprime mortgage crisis avoid defaulting on their loans. In his speech, Bernanke said that the housing downturn has been sharp and has been responsible for reducing the annual rate of US economic growth over the past year and a half. Bernanke talked about how this has impacted the mortgage market, particularly the fate of subprime borrowers who borrowed during the housing boom and are now struggling to hold on to their homes as rates have risen. He also discussed how this effect has spread out to other kinds of loans and contributed to tighter credit markets. Bernanke also acknowledged how this has impacted financial markets, which have struggled all summer amid investor worries about these issues. He said that the economic picture was more uncertain going forwards and that the Fed would continue to monitor it and adjust policy as needed. The acknowledgement was a relief to investors who were spooked earlier in the week by the release of the minutes from the Aug 7 Fed policy meeting, in which the bankers appeared to not fully acknowledge or take seriously the market turmoil. However, Bernanke fell short of telling consumers and stock investors what they were perhaps hoping to hear, namely that the Federal Reserve will cut the fed funds rate at its next policy meeting on Sept 18.

All markets are closed today for the Labor Day national holiday. Tomorrow starts off a big week for economic news ending with Friday's August jobs report. On Tuesday, the Institute for Supply Management's manufacturing index for August is expected to have fallen to 53 in the month from 53.8 in July. Wednesday: July Pending home sales and the Fed's Beige Book look at the economy are both due during the session. Thursday brings The Institute for Supply Management's service index for August is expected to have fallen to 54.5 from 55.8 in July. Friday brings The August jobs report, which is expected to show that unemployment held steady at 4.6 percent, and that employers added 120,000 jobs to their payrolls after adding 92,000 jobs in July.

In corporate news, Dell reported quarterly earnings and revenue late Thursday that rose from a year ago and topped forecasts.

Accredited Home Lenders added $2.74 to close at $9.05 after proposed buyout partner Lone Star Funds said it was prepared to buy the troubled mortgage lender after all, but at a lower price. Lone Star's proposed buyout offer has been in jeopardy amid the recent market turmoil.

Treasury prices slipped, raising the yield on the 10 year note to 4.53 percent from 4.5 percent.

In currency trading, the dollar closed slightly higher versus the euro and eased versus the yen.

US light crude oil for October delivery rose 68 cents to settle at $74.04 a barrel on NYMEX.

COMEX gold for December delivery rose $8 to settle at $681.90 an ounce.

Japanese stocks slid as investors wary of credit woes sold some financial stocks following Fridays rises, while an unexpected drop in capital spending data put a lid on the overall market. But losses were curbed as Nippon Steel Corp rose on a news report about its higher dividends and shipping stocks sailed higher after the Baltic Exchange's Dry Freight Index hit a fresh record high. Fujitsu ended higher after the company won a multimillion dollar order from Flag Telecom, the undersea cable arm of India's Reliance Communications Ltd. The Nikkei closed 44.16 points lower at 16524.93.

The FTSE100 rose 91.3 points to 6303.3 on Friday, lifted by US President George W Bush's plans to tackle the subprime mortgage crisis, which has plagued financial markets for the past two months. Bush unveiled plans for the government to help some struggling subprime mortgage borrowers avoid foreclosure, but said it is not the government's job to bail out speculators.

Commodity stocks led the FTSE's advance, adding nearly 30 points to the index, as higher metal prices boosted miners and US crude prices edged towards $74 a barrel.

Banks were the other strong sector, with HBOS, RBS, HSBC, Northern Rock, Standard Chartered, Alliance & Leicester and Lloyds TSB all up. Barclays added 2.7 percent. A source close to the matter said the bank turned to the BoE as the lender of last rescuer for the second time this month after a technical breakdown in the UK clearing system. Barclays declined to confirm it had used the central bank's borrowing facility, but said late Thursday it saw no liquidity issues in the UK market and was itself "flush with liquidity".

Economics
EMU PMI Manufacturing (Aug, final) 09.00 bst

The flash manufacturing PMI eased to 54.2 (-0.5 points), with all subcomponents easing on the month. The manufacturing PMI has been trending down since the middle of last year, a sign that the industry is in a more mature phase. Current output PMI readings still speak in favour of a rebound in the quarterly IP rate, while the yearly expansion is likely to settle around 3 percent.

UK PMI Manufacturing (Aug) 09.30 bst

This survey was conducted between the 13th and the 24th of August, so will pick up some of the volatility is asset prices. However, it isn’t clear how much this may have affected manufacturers. The CBI survey, which polled during an earlier period of August, suggested manufacturers business sentiment improved in August, but the prices charged component retreated. Some of the same developments in the PMI survey are expected, which should be broadly neutral in terms of market implications.

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