04/10/07

FTSE 100	6535.2, +34.8	Dow	13968, -79.3
FTSE 250	11360.2, +128.8	Nasdaq	2729.43, -17.68
FTSE All Share	3360.12, +20.58	S&P 500	1539.6, -7.05
Nikkei	17092.5, -107.4	Hang Seng	27172.3, -307.6
Oil (Brent)	$76.91	Gold	$725.70
Base Rate	5.75%	10 Yr Gilt	5.014%
£/$	2.0285	Euro/Gbp	0.6952

Markets

US stocks fell on Wednesday, as investors retreated after the recent run up and ahead of the September jobs report due on Friday. The DJIA closed 79.3 points lower at 13968, the S&P500 closed 7.05 points lower at 1539.6 and the Nasdaq lost 17.68 points to close at 2729.43. Stocks drifted lower throughout the morning as investors mulled mostly in line reading on the services sector of the economy, and private sector employment, ahead of Fridays jobs report. But in the afternoon, stock losses accelerated, with technology, commodity and material stocks leading the pull back.

In economic news, The Institute for Supply Managements report on the services sector of the economy fell to 54.8 in September from 55.8 in August, versus forecasts for a drop to 55 in the month.

In company news, Bear Stearns said it was cutting 310 jobs and combining two of its mortgage businesses, due to the ongoing problems in the home loan industry.

Casino stocks lumped after a Morgan Stanley note said September gaming revenue was weak in the Macau region of China. Wynn Casinos and Las Vegas, both of which have exposure to the region, slumped in unusually active trading.

Oil prices were volatile after a mixed weekly oil inventories report. US light crude for November delivery fell 11 cents to $79.94 a barrel on NYMEX.

COMEX gold for December delivery fell 60 cents to settle at $735.70 an ounce.

Treasury prices slipped, lifting the yield on the 10 year note to 4.56 percent from 4.53 percent late Monday.

In currency trading, the dollar fell versus the euro and was slightly higher versus the yen.

In Japan, the Nikkei average fell 107.40 points to close at 17092.49 today, dragged down by high tech shares such as Kyocera Corp after a negative report on Intel Corp. Seven & I Holdings dropped more than 3 percent on news that it will likely miss its first half profit target. But the market received some support as banks as Mitsubishi UFJ Financial Group continued their rally on the notion the worst is over for US suprime loan problems.

The FTSE100 closed 34.8 points higher at 655.2 as Wednesday, spurred by a strong show from banks as Northern Rock leapt on hopes of two rescue bids, while miners also supported the index. Northern Rock climbed 12 percent after sources said advisers to the company were in talks with JC Flowers over a possible bid and US firm Cerberus was also interested. Also helping the banking sector, Deutsche Bank and Credit Suisse said they see big opportunities when the global credit crunch starts to recede. Alliance and Leicester rose more than 7 percent, while HSBC added 2.6 percent after a strong performance in its Hong Kong listed shares. Old Mutual gained 4.7 percent after the company said it planned to buy back shares to a total value of around £350m.

Oil shares weighed on the index after traders cited market talk that BP was preparing a profit warning. Shares in the company fell 0.5 percent and Royal Dutch Shell lost 1.3 percent

Economics

UK Bank of England rate announcement (Oct) 12.00bst

The full details of HSBC's current UK economic and interest rate outlook can be seen in their recent research "UK Economics: A Rock and a hard place" (published 21 Sept 2007. They don’t think that the Bank of England will wish to pre-emptively cut rates in reaction to the current turmoil. Instead, it will wait for signs of the macro impact. The Governor will want to maintain a stand against moral hazard and will also be concerned about criticism that his decision making is being forced by the Chancellor. This has serious implications for credibility. In addition, the 2005 period is likely to linger in some minds: one cut in interest rates reignited the housing market and consumer spending. HSBC don’t expect a cut in interest rates until Feb 2008.

EMU ECM rate announcement (Oct) 12.45 bst

Uncertainty is the theme of the day, and it will dominate ECB head Trichet's tone during the pres conference, which follows the ECB's rate decision, where rate are seen on hold at 4 percent. Eurozone money markets are still tight, with the 3 month rate hitting 4.8 percent. Risks to the ECB's economic core scenario of continued robust growth are to the downside. However, cost pressures in the form of food costs and elevated price expectations are an inflation risk, and hence the ECB cannot afford a dovish bias at this juncture. The key words "still on the accomodative side", "money and credit growth vigorous", "monitor very closely" are likely to stay in the statement. There is little to be gained for the ECB from changing key words at this meeting.

US Initial jobless claims (week 29 Sept) 13.30 bst

Initial jobless claims dropped to just 298,000 last week, with the four week average falling to 311,500. Initial claims are expected to be 310,000 for this week.

US Factory orders (Aug) 15.00 bst

August durable goods orders fell 4.9 percent. Assuming a 0.4 percent rise in nondurable goods orders, total factory orders are estimated to have fallen 2.4 percent.

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