09/12/08

FTSE 100	4300.06, +250.69	Dow	8934.18, +298.76
FTSE 250	5948.77, +263.24	Nasdaq	1571.74, +62.43
FTSE All Share	2133.24, +119.50	S&P 500	909.7, +33.63
Nikkei	8395.87, +66.82	Hang Seng	14753.22, -291.65
Oil (Crude)	$43.71	Gold	$769.30
Base Rate	2%	10 Yr Gilt	3.54%
£/$	1.474	Euro/Gbp	0.871

Markets

stocks started the week in a positive fashion following comments from Barack Obama over the weekend about a bigger economic stimulus package. He told NBC that the plan needs to be big enough to actually help the economy, even if this means expanding the deficit in the short term. He also outlined a plan to create 2.5 million jobs by 2011 through repairing roads, modernising schools and making public buildings more energy efficient. Furthermore, investors were buoyed by news that the White House is near to finalising a deal to help car manufacturers.

The Dow Jones gained 298.76 points to close at 8,934.18, the S&P 500 added 33.63 points to end at 909.70. The Nasdaq climbed 62.43 points to finish at 1,571.74.

Reports suggest that the "Big Three" car manufacturers can expect a loan package of between $15 and $17 billion from Congress and the White House. Although this is just half the $34 billion they asked for last week, it should be enough to tide over the companies until at least the end of the first quarter. It is hoped that by this point Obama's new administration will have had time to come up with a longer term solution. As a result, General Motors surged 20.8% higher, while Ford Motor Co rallied 24%.

Dow Chemical gained 7% following news that it would cut 5,000 jobs, which equates to 11% of its workforce. The company also said it will close 20 plants and sell several businesses to cut back amid the recession.

In contrast, 3M lost 4% after announcing over the weekend that it would axe 1,800 jobs worldwide. It also cut its 2008 profit outlook and also said 2009 results would fall short of estimates.

Anheuser-Busch also announced job losses, with 1,400 set to go by the end of the year.

After the close, FedEx sank 8% after saying that 2009 earnings won't meet forecasts due to the slowing economy.

US light crude oil for January delivery rose $2.90 to settle at $43.71 a barrel. COMEX gold for February delivery jumped $17.10 to settle at $769.30 an ounce. Treasury prices fell, raising the yield on the 10 year note to 2.74% from 2.70% late Friday.

The Nikkei gained 66.82 points to close at 8,395.87 this morning. Commodity producers rose on hopes that global stimulus packages will help increase demand. This overshadowed news that Japan's GDP contracted at an annual 1.8% pace in the three months ending September 30th. This is more than four times the number reported last month and twice what economists had estimated.

The Hang Seng dropped 291.65 points to end at 14,753.22 as investors worried that government support measures will fail to prop up the city's economy. Henderson Land Development Co dropped 4.6% while Hong Kong & China Gas Co slipped 4.4%.

Housing data from the Royal Institution of Chartered Surveyors disappointed, with sales falling to a record low and prices falling sharply. Meanwhile, the climate for retailers continued to worsen with retail sales falling at their sharpest pace in more than three years, according to the British Retail Consortium. British Airways tops the fallers, down 4.1%, following a dour report from industry body IATA.

Economics
UK Rics house prices (Nov) 00.01 gmt

Credit is still being rationed. For a given salary, the size of mortgage loans offered is falling. In HSBC's view, this is the main factor driving house prices down at present. They expect this survey to continue to point to significant price declines.

UK Trade balance (Oct) 09.30 gmt

Interest rate cuts may not be having a significant influence on the provision of credit but, by depressing the value of sterling, the hope is that export demand and import substitution will still stimulate demand. The trade balance is slowly improving from a deficit of GBP 4.8bn in July to GBP3.8bn in October but the pace of improvement may slow from here.

UK Industrial production (Oct) 09.30 gmt

The manufacturing PMI pointed to another sizeable contraction in production during October, so we expect a 1 percent monthly fall here, which would be the eighth consecutive monthly decline.

UK DCLG house prices (Oct) 09.30 gmt

The DCLG house price index is the last of the house prices indices to be released for a given month, so tends not to be a significant for the markets as the Nationwide or Halifax surveys. House prices on this measure are holding up significantly better than implied by the other indicators. This is because this index is value weighted and so is more heavily influenced by sales in London and larger properties where the price declines have so far been smaller than elsewhere.

US IBD/TIPP optimism (Dec) 15.00 gmt

November's 9.7 point rise to 50.8 was the biggest one month increase in the IBD/TIPP index since the series started in 2001. Leading up to the survey, gasoline prices were falling, stock prices had recovered somewhat in late October and the election cycle was in full swing. The improvement in confidence now looks out of place after recent declines in other indicators like Michigan sentiment and ABC consumer comfort. Although gasoline prices have fallen further, economic activity and employment conditions continue to weaken and equity markets are down from a month ago. Last month’s rise in optimism is expected to be reversed and the IBD/TIPP index is expected to fall to 40.

US Pending home sales (Oct) 15.00 gmt

The latest Beige Book indicated that home sales declined in most areas, with mixed activity in the Boston, Atlanta and Minneapolis districts. Other districts noted relatively stronger demand for lower and middle priced homes. The National Association of Realtors previously noted that 45 percent of October existing home sales were distressed sales (either in foreclosure, or at prices below the outstanding mortgage amount). The surge in mortgage purchase applications in late November occurred too late to impact this reading, although it points to an improvement in future months (if sustained). October Pending Home sales are expected to fall by 3 percent.

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 name of Rickerbys LLP (OC328675) registered in England and Wales, registered office Ellenborough House, Wellington Street, Cheltenham GL50 1YD. A list of the Members of Rickerbys LLP will be provided on request or can be inspected at this address. Aventus is a trade mark and the “A” logo is a registered trade mark of Rickerbys LLP. Rickerbys LLP is regulated by the Solicitors Regulation Authority. Authorised and regulated by the Financial Services Authority.