Thursday, November 20, 2008

Canada's Dollar Falls to Lowest in 3 Weeks as Stocks, Oil Sink

By Chris Fournier

Nov. 20 (Bloomberg) -- Canada's currency fell to the lowest in more than three weeks as global stocks declined and the outlook for commodities such as crude oil deteriorated.

``Weak equities and weak crude'' are driving the currency down today, said Firas Askari, head currency trader in Toronto at BMO Nesbitt Burns, a unit of Canada's fourth-largest bank.

Canada's dollar weakened as much as 0.4 percent to C$1.2597 per U.S. dollar, from C$1.2547 yesterday. It traded at C$1.2585 at 7:47 a.m. in Toronto. The currency reached C$1.2870 on Oct. 29. One Canadian dollar buys 79.48 U.S. cents.

The MSCI World Index of stocks in 23 developed nations fell as much as 2.2 percent to 803.37, the lowest in more than five years. Crude oil, which accounts for a tenth of Canada's export revenue, declined 2.4 percent to $52.32 a barrel.

To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

Sarkozy Fund to Raise EU6 Billion for Investments

By Francois de Beaupuy

Nov. 20 (Bloomberg) -- French President Nicolas Sarkozy said the government and a state-owned lender will raise 6 billion euros ($7.6 billion) to create a sovereign fund aimed at protecting and developing the country's ``strategic companies.''

The state will also endow the fund with 7 billion euros in minority stakes it already owns, including 15 percent in carmaker Renault SA and its holding in Air France-KLM Group. State-owned bank Caisse des Depots & Consignations will also add about 7 billion euros in assets to the fund.

The creation of the fund is aimed at implementing Sarkozy's plan, announced last month, of protecting strategic French companies from ``foreign predators'' and helping them survive the global financial crisis. The turmoil has wiped out about 45 percent of the value of the benchmark CAC 40 index, choked bank lending and left businesses struggling to find financing.

``I won't let foreign funds get bargains thanks to the current levels of the stock market,'' Sarkozy said today near Tours, central France. ``I won't let French industry move out.''

In its first purchase, the fund will invest in Daher, a family held maker of equipment for the airplane, nuclear, defense and auto industries. The fund, together with an aerospace investment group called Aerofond will put 85 million euros into Daher, its Chief Executive Officer Patrick Daher said today. The capital will help it invest 200 million euros more in the next five years to build parts for Airbus SAS, Dassault Aviation SA and other aerospace companies, he said.

Fund Assets

The French government has said it will bring its 33-percent stake in Chantiers de l'Atlantique shipyard to the fund. It won't add to the fund its majority or controlling stakes in energy companies GDF Suez SA, Areva SA and Electricite de France SA and French airport operator Aeroports de Paris, said a Sarkozy aide, who briefed reporters on condition he not be identified.

The government will also continue to manage holdings in defense companies Safran SA, Thales SA and European Aeronautic, Defence & Space Co. through Agence des Participations de l'Etat, controlled by the finance ministry, the aide said.

Caisse des Depots will include in the fund its holdings such as hotel operator Accor SA, water company Veolia Environnement SA, realtor Icade SA and construction company Eiffage SA, according to the aide. CDC's stakes in life insurer CNP Assurances SA and in French-Belgian bank Dexia SA won't go in the fund.

Fund Management

The French government will own between 34 percent and 49 percent of the fund, depending on whether institutional investors want to invest in it, the aide said. CDC will own just above 50 percent of the fund.

The fund's seven-member management board will include a chairman, two state representatives, two CDC representatives, and two independent people. It will have a strategic committee with about 20 members, including economists.

Augustin de Romanet de Beaune, who heads CDC, will lead the fund's executive board, Sarkozy said, adding that Sanofi-Aventis Chairman Jean-Francois Dehecq will head its orientation committee and Patricia Barbizet, chairman of Societe Francaise d'Investissements Immobiliers, will be head of the investment committee.

The fund won't invest in companies that are not viable, Sarkozy said, adding that it will have the independence to ensure it makes return on its investment. The structure of fund's financing will allow CDC to keep its top-notch credit rating.

`Not Forever'

The fund's ``mission matches the long-term investment strategy of Caisse des Depots,'' the lender said in an e-mailed statement.

The fund will invest in companies for about 2 to 10 years, according to the Sarkozy aide, who said it will take majority stakes in companies only in very rare cases.

``We won't keep the stakes that we purchase forever, '' Sarkozy said.

Separately, Sarkozy said he will unveil a plan in the coming weeks to invest ``massively'' in infrastructure, education, research and training. He said the auto industry may also need help.

Sarkozy said he plans to discuss today with European Commission President Jose Manuel Barroso, a European stimulus package to invest in infrastructure.

To contact the reporter on this story: Francois de Beaupuy in Montrichard, France, at fdebeaupuy@bloomberg.net.

U.K. Stocks Drop on Recession Concern; Shell, Rio Tinto Decline

By Sarah Thompson

Nov. 20 (Bloomberg) -- U.K. stocks declined for a second day, led by energy producers, on speculation the global economic slowdown will damp demand for commodities and curb profits.

Royal Dutch Shell Plc, Europe's largest oil company, and Rio Tinto Group led the retreat.

The benchmark FTSE 100 Index lost 64.42, or 1.6 percent, to 3,941.26 at 12:54 p.m. in London, extending a 4.8 percent drop yesterday. The FTSE All-Share Index decreased 1.5 percent and Ireland's ISEQ Index declined 1.8 percent.

U.S. stocks sank and benchmark indexes slid to their lowest levels since 2003 yesterday. The S&P 500 extended its 2008 retreat to 45 percent, poised for its worst year since 1931. More than $31 trillion has been erased from the value of global equities this year as the financial-market turmoil pushes countries from Europe to the U.S. and Japan into recession.

``U.K. stocks are taking their cue from the late sell-off in the U.S. It seems hopes of a gradual recovery following the action by authorities to stem the collapse of the financial system have been dashed,'' said Tim Hughes, head of sales trading at IG Index in London. ``There is a deepening perception that the recession will be aggressive and long-lasting.''

Shell lost 2.3 percent to 1,558 pence. BP Plc, Europe's second-largest oil company by market value, dropped 0.8 percent to 484 pence. Crude oil fell for a fifth day, approaching $50 a barrel, as the contracting world economy increases concerns that demand for fuels will slow.

Rio Tinto, the world's third-largest mining company, dropped 4.7 percent to 2,150 pence. BHP Billiton Ltd., the biggest, slid 4.3 percent to 788.5 pence.

Copper fell for a third day this week in Shanghai on concern supply may outpace demand as a global economic slowdown damps demand for raw materials.

Vedanta Resources Inc.'s Madras Aluminium Co. unit said it slashed its production ``temporarily'' by 60 percent because of falling aluminum prices and high raw material costs.

Production of Alumina remained unchanged, the Tamil Nadu- based company said today in a statement to the Bombay Stock Exchange, without giving more details. Vedanta, the largest copper producer in India, plunged 8.2 percent to 402 pence.

The following stocks also rose or fell in the U.K. market. Stock symbols are in parentheses:

British Land Co. (BLND LN) fell 15 pence, or 3 percent, to 491. London's largest office landlord cut the value of its stake in Canary Wharf by 40 percent as the credit crisis ensnared tenants there including Lehman Brothers Holdings Inc.

Halfords Group Plc (HFD LN) added 28 pence, or 13 percent, to 251.25. The U.K.'s largest car-part and bicycle retailer reported a 4.7 percent gain in first-half profit after keeping costs in check and selling more higher-margin auto-maintenance products.

IG Group Plc (IGG LN) slumped 38 pence, or 17 percent, to 190.25, the sharpest drop since at least 2005. The owner of the IG Index financial-market betting brand, said first-half bad-debt costs will be almost quadruple the total for all of last year because of customers' wrong-way bets on Royal Bank of Scotland Group Plc stock.

Mothercare Plc (MTC LN), Britain's largest specialist retailer of baby and toddler products, added 11.5 pence, or 4.3 percent, to 280. The retailer said first-half profit more than doubled on expansion outside the U.K. and a one-time gain, and raised its dividend by 24 percent.

Rolls-Royce Group Plc (RR/ LN) fell 3 pence, or 1.1 percent, to 264.75. The world's second-largest maker of aircraft engines said it will cut as many as 2,000 jobs worldwide next year as economies slow and programs at Boeing Co. and Airbus SAS suffer delays.

To contact the reporters on this story: Sarah Thompson in London at sthompson17@bloomberg.net.

Global Stocks, U.S. Index Futures Fall; Yen, Treasuries Rally

By Sarah Thompson

Nov. 20 (Bloomberg) -- Stocks slumped, sending the MSCI World Index to the lowest level since 2003, on concern bank losses will increase and corporate profits will crumble as the recession spreads. Treasuries and the yen rallied.

Deutsche Bank AG and ING Groep NV dropped more than 8 percent after Citigroup Inc.'s plan to buy troubled investment-fund assets fueled speculation of more bank writedowns. Copper declined for a third day and oil slid toward $50 a barrel, sending commodity producers lower. Treasuries rose, pushing two-year note yields to a record low as investors sought the safety of government bonds.

The MSCI World lost 2.1 percent to 804.17, the lowest since April 2003, at 1:58 p.m. in London. The MSCI Emerging Markets Index tumbled 5 percent, with Russia's Micex Index sliding as much as 9 percent before trading was interrupted for an hour.

``We're seeing a total collapse of trust in everything fundamental,'' said Espen Furnes, an Oslo-based fund manager at Storebrand Asset Management, which has the equivalent of $48 billion. ``There are no buyers in sight. This year will go down in history.''

European stocks and U.S. index futures extended declines after a report showed first-time claims for U.S. unemployment insurance unexpectedly rose last week to the highest level since 1992. Earlier, shares were buoyed by declines in money market rates in London, an interest rate cut in Switzerland and Prince Alwaleed bin Talal's plan to increase his stake in Citigroup.

More than $32 trillion has been erased from the value of global equities this year as the financial-market turmoil pushes countries from Europe to the U.S. and Japan into recession.

`Undermined Confidence'

Treasury Secretary Henry Paulson has abandoned a plan to use the Troubled Asset Relief Program to buy mortgage assets from banks, helping send U.S. financial shares lower and credit default risk to a record high yesterday.

``Changing the terms of the TARP as suddenly as he did undermined investor confidence,'' said Richard Schlanger, a bond fund manager in Boston at Pioneer Investments, which oversees $44 billion. ``It's a frightening situation.''

Europe's Dow Jones Stoxx 600 Index declined 3.3 percent today, while the MSCI Asia Pacific Index slid 5.2 percent. Standard & Poor's 500 Index futures lost 2.2 percent.

Declines in emerging markets surpassed developed countries on concern lower metal and near $50-a-barrel oil will cripple their economies. Stocks in Russia, the world's largest energy supplier, have plunged 73 percent this year.

Turkey's announcement that it may get a bailout of between $20 billion and $40 billion from the International Monetary Fund helped limit losses, with the ISE National 100 index falling only 4.1 percent. The lira rose against the dollar.

`Bleak Picture'

Federal Reserve policy makers lowered forecasts for U.S. economic growth and employment in 2009, saying the outlook has ``worsened significantly'' since June, according to Fed records released yesterday. The U.S. economy will contract through the middle of next year, and the unemployment rate is projected to be 7.1 percent to 7.6 percent in 2009, they said.

``The Fed painted a very bleak picture of the U.S. economy and with corporate profitability continuing to come under pressure, it's a pretty gruesome mix of negativity out there,'' said Henk Potts, a London-based fund manager at Barclays Stockbrokers, which has about $45 billion under management.

The yield on the two-year U.S. note declined to 1.043 percent, a level not seen since Fed data on the figure began in 1976. Five-year returns slid to the least since 1954.

The yen rose to 95.46 against the dollar from 95.73 late yesterday in New York as investors sold higher-yielding assets funded by loans from Japan.

The MSCI World has fallen 49 percent in 2008, headed for its worst year since records began in 1970, as writedowns and credit losses topped $966 billion in the worst financial crisis since the Great Depression.

Troubled Assets

Deutsche Bank, Germany's biggest, dropped 8.7 percent to 19.53 euros. ING, the largest Dutch financial-services provider, slipped 8.9 percent to 5.72 euros.

Citigroup tumbled 23 percent yesterday to a 13-year low on a plan to buy $17.4 billion of troubled investment-fund assets. The value of the assets it agreed to purchase from structured investment vehicles it advises fell from $21.5 billion as of Sept. 30, reflecting market declines of $1.1 billion and $3 billion in debt that matured or was sold, the bank said.

SIVs, which Citigroup invented in 1988, emerged 15 months ago as one of the first major strains in credit markets rocked by record high foreclosures on subprime mortgages.

Citigroup has posted $65.7 billion in credit-related losses, the most after Wachovia Corp., with $96.5 billion, according to data compiled by Bloomberg.

Citigroup rose 26 cents to $6.66 after Alwaleed said he was increasing his stake.

Earnings Outlook

Analysts forecast earnings for financial firms in the Stoxx 600 will drop 48 percent this year, compared with a 10 percent decline for the overall market. Profit for the industry group in the S&P 500 will tumble 70 percent, while earnings for the broader index will slip 9.5 percent, the data show.

Royal Dutch Shell Plc, Europe's largest oil company, lost 2 percent to 1,562 pence. Total SA, the region's third-largest, retreated 1.4 percent to 38.52 euros.

Crude for December delivery fell as much as $1.67, or 3.1 percent, to $51.95 a barrel in New York. Yesterday, futures touched $52.79 a barrel, the lowest since Jan. 23, 2007.

Rio Tinto Group, the world's third-largest mining company, dropped 4.2 percent to 2,163 pence. BHP Billiton Ltd., the biggest, slid 4.1 percent to 790 pence.

Copper fell as much as 3.5 percent to $3,464 a ton in London on concern supply may outpace demand as a global economic slowdown damps demand for raw materials.

Air France

Air France-KLM Group slipped 5.5 percent to 9.495 euros. Europe's biggest airline said fiscal second-quarter profit declined 49 percent because of high fuel costs and after a year- earlier gain from the sale of assets. The airline predicted operating income ``clearly in profit'' for the full year.

Asset managers tumbled after UBS AG recommended selling the shares. Aberdeen Asset Management Plc dropped 2.4 percent to 81 pence, and BlueBay Asset Management Plc tumbled 17 percent to 112 pence.

UBS initiated coverage of Aberdeen and BlueBay with ``sell'' recommendations.

Royal Ahold NV climbed 7.3 percent to 8.58 euros. The owner of Stop & Shop supermarkets in the U.S. reported third-quarter profit that beat analysts' estimates as the company lured more customers to its stores with lower prices and private-label goods.

Oriflame Cosmetics SA slid 8 percent to 206 kronor after Merrill Lynch & Co. lowered its recommendation on the seller of natural makeup in more than 50 countries to ``underperform'' from ``buy.''

``The black cloud hanging over Oriflame from the Russian crisis'' and the potential devaluation of the ruble ``will remain until more unknowns are known,'' London-based analysts including Nicolas Sochovsky wrote to clients.

To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.

Kinross, Inmet, Mercator, Oilexco, Teck: Canada Equity Preview

By John Kipphoff

Nov. 20 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading today. Stock symbols are in parentheses, and share prices are from the previous close in Toronto.

The Standard & Poor's/TSX Composite Index fell 3.9 percent to 8,490.56.

Oil and gas drilling-services companies may move after the government of Alberta said it will offer a revised royalty program to oil companies in a five-year plan aimed at encouraging the development of new drilling projects.

Precision Drilling Trust (PD-U CN) fell 12 percent to C$9.95. Trican Well Service Ltd. (TCW CN) slid 7.2 percent to C$8.40. Calfrac Well Services Ltd. (CFW CN) dropped 9.1 percent to C$11.38.

Air Canada (AC/B CN): The Supreme Court of Canada is scheduled to rule on a Canadian Transportation Agency decision that said people who are obese or disabled need not pay for an extra airplane seat when they require it to accommodate them or their attendant. The agency estimated the change would cost Air Canada C$7.3 million ($5.8 million) annually from revenue of C$8.2 billion. The shares fell 7.3 percent to C$2.15.

Kinross Gold Corp. (K CN): Canada's third-largest gold mining company agreed to buy Minera Santa Rosa SCM from Teck Cominco Ltd. (TCK/B CN) for about $250 million in cash and stock, plus a royalty, giving it ownership of the Lobo-Marte gold project in Chile. Kinross dropped 5.7 percent to C$13.94.

Mercator Minerals Ltd. (ML CN): The copper and molybdenum mining company was downgraded to ``underperform'' from ``outperform'' at RBC Capital Markets. The brokerage also cut Mercator's share-price target by 75 percent to C$1. The shares fell 24 percent to 41 cents.

Mosaid Technologies Inc. (MSD CN): The Ottawa-based semiconductor designer may report second-quarter profit of 32 cents a share before one-time items, the average of four analyst estimates compiled by Bloomberg. The shares fell 1.4 percent to C$7.10.

Oilexco Inc. (OIL CN): The producer of oil in the North Sea filed to sell $150 million in convertible bonds and as many as 20 million shares, at C$2.25 apiece. The funds will be used to pay down debt and finance exploration and project spending, the Calgary-based company said in a statement distributed by Market News. Trading in Oilexco was halted yesterday in Toronto and London, pending news. The shares fell 18 percent to C$2.49 on Nov. 18 and have dropped 81 percent this year after Oilexco reported last month delays in obtaining financing.

Teck Cominco Ltd. (TCK/B CN): Canada's biggest diversified mining company began a plan to reduce debt, including suspending dividends for 2009, selling a mine and stakes in projects to Kinross Gold and Inmet Mining Corp. (IMN CN), and cutting planned capital expenditures.

Excluding the Fort Hills oil-sands project, development spending will be reduced to about $250 million for 2009, Vancouver-based Teck said today. Teck fell 15 percent to C$5.22. Inmet dropped 14 percent to C$16.58.

To contact the reporters on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.

Citigroup, GE, Suntech Power, Verifone: U.S. Equity Preview

By Whitney Kisling and Elizabeth Campbell

Nov. 20 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading today. Stock symbols are in parentheses, and share prices are as of 7:45 a.m. in New York, unless otherwise specified.

Citigroup Inc. (C US) gained 3.9 percent to $6.65. Saudi billionaire Prince Alwaleed bin Talal plans to increase his stake in the company back to 5 percent, saying the shares are ``dramatically undervalued,'' after the fourth-largest bank by market value lost 23 percent yesterday.

Cyberonics Inc. (CYBX US): The maker of a nerve-stimulating device to treat epilepsy boosted its sales forecast, saying it expects revenue of as much as $140 million in fiscal 2009. The stock dropped 8 percent to $10.10 in regular trading yesterday.

General Electric Co. (GE US) rose 0.6 percent to $14.53. The 106-year-old economic bellwether that's lost 61 percent of its value this year is seeking funds from China Investment Corp., Government of Singapore Investment Corp. and at least two other sovereign-wealth funds. The power company has cut its 2008 profit target twice and raised an additional $3 billion in last month's sale of preferred shares to investor Warren Buffett.

Gymboree Corp. (GYMB US) rose 6.1 percent to $17.49 in trading after the official close of exchanges yesterday. The children's-clothing maker said it earned $1.06 a share in the third quarter. That beat the average estimate of $1.03 from analysts in a Bloomberg survey.

Intuit Inc. (INTU US) gained 1 percent to $20.75 in trading after the official close of exchanges yesterday. The world's biggest maker of tax-preparation software posted a loss, excluding some items of 9 cents a share, less than the 10-cent loss a year earlier, and better than the average analyst estimate of 12 cents.

Limited Brands Inc. (LTD US) fell 3 cents to $7.55 in trading after the official close of exchanges yesterday. The owner of Victoria's Secret shops and the Bath & Body Works chain said its full-year forecast would be lower than it originally projected as cash-strapped consumers buy less lingerie, pajamas and lotion.

PetSmart Inc. (PETM US) rose 11 percent to $14.80 in trading after the official close of exchanges yesterday. The largest U.S. pet-store chain reported third-quarter profit of 28 cents a share. That's 2 cents higher than the average analyst's estimate, according to a Bloomberg survey.

Royal Bank of Scotland Group Plc American depositary receipts (RBS US) jumped 17 percent to $14.26. The U.K. bank waiting to take up the country's biggest bailout may receive backing from investors on its plan to raise 20 billion pounds. Shareholders are scheduled to vote at a meeting today on whether to approve a plan to sell 15 billion pounds of common stock to existing investors underwritten by the U.K.

Suntech Power Holdings Co. ADRs (STP US) fell 18 percent to $7.30. China's largest maker of solar-power modules posted third- quarter profit of 33 cents a share, missing the average analyst estimate of 42 cents. It also forecast fourth-quarter revenue below estimates. Slower economic growth may force the company to limit further expansion or push prices down faster than planned, analysts said.

VeriFone Holdings Inc. (PAY US) fell 14 percent to $5.30. The largest maker of electronic-payment equipment said fourth- quarter profit, before some items, was 18 cents to 20 cents a share, missing its previous forecast of 33 to 36 cents a share. The share were lowered to ``neutral'' from ``overweight'' at JPMorgan Chase & Co.

To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net; Elizabeth Campbell in New York at ecampbell11@bloomberg.net

U.S. Stock Futures Fall, Led by Shares of Commodity Producers

By Michael Patterson and Eric Martin

Nov. 20 (Bloomberg) -- U.S. stock futures dropped after first-time jobless claims climbed to the highest level since 1992 and falling commodities dragged down raw-materials companies, heightening concern the recession will worsen.

Chevron Corp., the second-biggest U.S. oil company, slid 1 percent and Schlumberger Ltd. retreated 1.9 percent as crude declined for a fifth day in New York. Freeport-McMoRan Copper & Gold Inc., the world's largest publicly traded copper producer, decreased 1.2 percent as the metal sank to a three-year low. General Motors Corp. lost 10 percent on speculation time is running out for Congress to save the biggest U.S. automaker.

Futures on the S&P 500 expiring in December declined 1.7 percent to 799.1 at 8:34 a.m. in New York. Dow Jones Industrial Average futures lost 1.4 percent to 7,915 and Nasdaq-100 Index futures decreased 1.4 percent to 1,076.75. Europe's Dow Jones Stoxx 600 Index dropped 3.1 percent, while the MSCI Asia Pacific Index retreated 5.2 percent.

``There is a quite understandable concern about the slowdown in the economy and the fact that we are going to be seeing deflation in most countries by the second quarter of next year,'' Andrew Milligan, the Edinburgh-based head of global strategy at Standard Life Investments, which oversees more than $150 billion, said in an interview on Bloomberg Television.

S&P 500 futures pared a decline of as much as 2.2 percent after Saudi Prince Alwaleed bin Talal announced plans to increase his stake in Citigroup Inc., boosting the bank's shares by 3.9 percent. A drop in three-month interbank lending rates in dollars and the Swiss central bank's reduction of its benchmark interest rate by 1 percentage point also spurred a rally from the lows of the day.

Economy Watch

The S&P 500 and Dow average slid to their lowest levels since March 2003 yesterday after the government said consumer prices excluding food and fuel costs fell for the first time since 1982 last month. The report highlighted the risk that deflation may exacerbate the economic slump by making debts harder to pay off and lenders reluctant to extend credit.

Reports today may show an index of U.S. leading economic indicators fell and manufacturing in the Philadelphia region shrank. Signs of a deepening recession may intensify pressure on President-elect Barack Obama and Democrats in Congress to pass another economic stimulus package.

Treasury two-year note yields fell to a record low, thirty- year yields dropped to the lowest level since regular sales started in 1977 and five-year rates slid to the least since 1954. The Federal Reserve will probably cut interest rates to zero percent over the next two months to staunch deflation, JPMorgan Chase & Co. wrote in a note to investors yesterday.

`Frightening Situation'

Chevron dropped 79 cents to $69.82 and Schlumberger, the world's largest oilfield-services provider, declined 91 cents to $46.39 in Germany.

Crude oil dropped as much as 3.1 percent to $51.95 a barrel as the slumping world economy increased concern that demand for fuels will slow. U.S. fuel use during the past four weeks averaged 19.1 million barrels a day, down 7 percent from a year ago, an Energy Department report showed yesterday.

Freeport Drops

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Eric Martin in New York at emartin21@bloomberg.net.

Financials and commodities lead Europe shares lower

* FTSEurofirst 300 falls 3.4 percent

* Financials, commodities lead index to 5-1/2 year low

* Ahold, RBS lead risers

By Brian Gorman

LONDON, Nov 20 (Reuters) - European stocks fell to the their lowest level since March 2003 early on Thursday, adding to the previous session's selloff, as banks and commodities continued their slide on worries of a deep global slowdown.

At 1006 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was down 3.4 percent at 784.21 points, having fallen as low as 782.67.

The benchmark index has fallen more than 48 percent this year.

"There's no volume. No one wants to buy. People will take opportunities to sell," said Justin Urquhart Stewart, director at Seven Investment Management.

"No one wants to float a boat -- they will wait for the tide to turn. What will make it turn? We have to get the bad news completely out the way. That may come when there are more realistic valuations of properties in the United States."

European banks remained under pressure after Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) faced a crisis of confidence on Wednesday as investors questioned the survival prospects of the U.S. banking giant, and its shares tumbled 23 percent to a 13-year low.

"Having seen Lehmans and Merrill Lynch fall by the wayside this year, the sight of another major such as Citigroup struggling will prove a bitter pill to swallow," said Chris Hossain, senior sales manager at ODL Securities.

Dexia (DEXI.BR: Quote, Profile, Research, Stock Buzz), Fortis (FOR.BR: Quote, Profile, Research, Stock Buzz), Barclays (BARC.L: Quote, Profile, Research, Stock Buzz), Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz), Banco Santander (SAN.MC: Quote, Profile, Research, Stock Buzz) and UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) fell between 5.9 and 9 percent.

But BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz) was outperforming, down 0.3 percent, after announcing late on Wednesday that it is not considering any capital increase other than that already scheduled to finance the acquisition of Fortis Bank, which will be subscribed by the Belgian and Luxembourg states

Insurers continued to fall, with their equities portfolios hurt by the slide in the stockmarket.

Axa (AXAF.PA: Quote, Profile, Research, Stock Buzz), Aviva (AV.L: Quote, Profile, Research, Stock Buzz), Prudential (PRU.L: Quote, Profile, Research, Stock Buzz), Swiss Life (SLHN.VX: Quote, Profile, Research, Stock Buzz) and Zurich Financial (ZURN.VX: Quote, Profile, Research, Stock Buzz) fell between 5.1 and 8.9 percent.

All 38 industry groups in the FTSEurofirst 300 index were lower.

But Royal Bank of Scotland was the second-biggest gainer on the FTSEurofirst 300 with a 5.7-percent rise ahead of a shareholder meeting to approve a fundraising plan.

"It's the RBS vote today and there's a bit of conjecture in-line with the Lloyds yes vote that shareholders will seek to approve capital raising backed by HM Treasury," said a trader.

"It's positive sentiment ahead of the vote and the market expects a good outcome."

AHOLD RISES

Dutch supermarket group Ahold (AHLN.AS: Quote, Profile, Research, Stock Buzz) was one of the few gainers, up 6.1 percent, after it reported an 11 percent rise in core quarterly profit, beating estimates, and reiterated its full-year operating margin target.

Energy networks operator National Grid (NG.L: Quote, Profile, Research, Stock Buzz) rose 0.8 percent after posting a 4 percent increase in half-year profits. The company forecast full year results in line with its expectations and said the outlook for 2008/9 was positive. Air France-KLM AIRF.PA fell 8 percent after posting a 44 percent drop in operating profit in the second quarter and cutting its full-year profit forecast.

Oil prices CLc1, which saw their lowest close in 22 months on Wednesday, fell further, down nearly 2 percent to less than $53 a barrel.

Total (TOTF.PA: Quote, Profile, Research, Stock Buzz), ENI (ENI.MI: Quote, Profile, Research, Stock Buzz), BP (BP.L: Quote, Profile, Research, Stock Buzz) and Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz) fell between 1.5 and 2.6 percent.

Likewise, base metal prices fell, though gold was higher. Antofagasta (ANTO.L: Quote, Profile, Research, Stock Buzz), BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz), Eurasian Natural Resources Corp. (ENRC.L: Quote, Profile, Research, Stock Buzz), Kazakhmys (KAZ.L: Quote, Profile, Research, Stock Buzz), Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz), Vedanta Resources (VED.L: Quote, Profile, Research, Stock Buzz), Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz) fell between 2.2 and 8.7 percent. French carmaker PSA Peugeot Citroen (PEUP.PA: Quote, Profile, Research, Stock Buzz) was down 2.5 percent after unveiling plans to cut 2,700 jobs and saying that due to the financial crisis and the sector's turmoil, car sale volumes in main European markets would drop by at least 10 percent in 2009 and 17 percent in the fourth quarter.

Across Europe, the FTSE 100 .FTSE index was down 1.4 percent, Germany's DAX .GDAXI was 2.1 percent lower and France's CAC 40 .FCHI was down 2.6 percent.

UK retail sales data provided further evidence of economic slowdown. Sales fell 0.1 percent in October, said the Office for National Statistics. But this was less of a fall than analysts had forecast.

The ONS added that the September figure was revised to show a fall of 0.5 percent, compared with the previously stated 0.4 percent. (Additional reporting by Atul Prakash and Nicholas Vinocur; Editing by Hans Peters)

Nikkei loss biggest in month, economy fear bites

* Nikkei sheds 6.9 pct, biggest one-day loss since Oct 22

* Lowest close since Oct 28, when hit 26-yr intraday low

* Market players say could test October lows

* Strong yen hits exporters, especially high-tech shares

* Banks battered by fears about Citigroup, earnings (Adds stocks, details)

By Elaine Lies

TOKYO, Nov 20 (Reuters) - Japan's Nikkei average fell 6.9 percent on Thursday for its biggest one-day loss in a month as exporters such as Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz) were nailed by a stronger yen and fears that a worsening global economy will hit earnings. Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz) fell to its lowest level in more than five years and other large banks tumbled as well after shares in Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) plunged 23 percent to a 13-year low as investors questioned prospects for survival of the U.S. banking giant. [ID:nN19311307]

Concern that the deteriorating global economy is biting into Japan's export-dependent economy intensified after the nation's exports logged their biggest annual decline in seven years in October, pushing the trade balance into deficit. [ID:nT254579]

Investors were also concerned about demand from the United States after consumer prices in the world's biggest economy fell at the sharpest rate on record in October. [ID:nN18276780]

The benchmark Nikkei .N225 shed 570.18 points to 7,703.04 its lowest close since Oct. 28 -- the day it touched a 26-year intraday low of 6,994.90. It was its biggest one-day percentage loss since Oct. 22. The Nikkei has lost 9 percent this week and 10 percent this month.

Market players said the Nikkei could well test its October lows should Wall Street remain vulnerable and the dollar continue to tumble. The U.S. currency lost nearly one yen on Thursday and was fetching around 95.17 yen . "Up until now the big worry was only financial firms, but now there are also the automakers, meaning there are several layers of problems," said Yutaka Miura, a senior technical analyst at Shinko Securities.

"We have to consider that it might break below the October low, especially if U.S. stocks keep on falling and the dollar falls towards 90 yen again." Citigroup was facing a crisis of confidence on Wednesday on concerns that mounting losses from credit cards, mortgages and toxic debt could overwhelm its efforts to slash costs and add deposits. Its shares closed down $1.96 at $6.40 and have fallen 33 percent this week.

"Shares in all the U.S. financials are really low, which gives me a bad feeling and makes me wonder what might lie ahead," said Takashi Ushio, head of the investment strategy division at Marusan Securities.

"Citigroup shares closed at the $6 level. That's the kind of level at which almost anything could happen."

BANKS BATTERED

Major banks fell, with some market players saying Citigroup worries were weighing while others said they were hit by woes much closer to home.

Mitsubishi UFJ Financial Group posted a 61 decline in second-quarter profit on Tuesday and stuck to its recently lowered full-year forecast, hit by a recession at home and losses on its extensive stock portfolio. [ID:nT305164]

Sumitomo Mitsui Financial Group (8316.T: Quote, Profile, Research, Stock Buzz), Japan's No.3 bank, said on Wednesday it will raise at least $2.9 billion in an issue of preferred securities, becoming the latest Japanese bank to bolster its capital base amid the financial crisis. [ID:nT328098]

Mitsubishi UFJ lost 6.1 percent to 480 yen after touching its lowest point since early 2003. Sumitomo Mitsui Financial Group shed 10.4 percent to 281,500 yen, at once point hitting its lowest since mid-2003.

Mizuho Financial Group (8411.T: Quote, Profile, Research, Stock Buzz) lost 6.3 percent to 199,200 yen, a three-week low.

Amid the growing gloom, some of the biggest worry centred on U.S. automakers such as General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) as prospects for an auto bailout dimmed. [ID:nN19320198]

"A failure by GM or any of the Big Three would hit U.S. consumption and drag its economy down still more," said Marusan's Ushio.

Isuzu Motors (7202.T: Quote, Profile, Research, Stock Buzz) tumbled 16.9 percent to 123 yen and Honda Motor Corp (7267.T: Quote, Profile, Research, Stock Buzz) fell 6.8 percent to 1,906 yen.

Hit especially hard were high-tech exporters such as Kyocera Corp (6971.T: Quote, Profile, Research, Stock Buzz), which slipped 8.5 percent to 4,520 yen, and TDK Corp (6762.T: Quote, Profile, Research, Stock Buzz), which fell 12.1 percent to 2,750 yen.

Canon fell 7 percent to 2,610 yen, Panasonic Corp (6752.T: Quote, Profile, Research, Stock Buzz) lost 7.7 percent to 1,350 yen and Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) fell 6.4 percent to 1,826 yen.

Trade picked up slightly, with some 2.11 billion shares changing hands on the Tokyo exchange's first section, the same as last week's daily average.

Declining shares outnumbered advancing ones by about 12 to 1. (Editing by Michael Watson)

FTSE slides as demand worries knock commodities

* FTSE 100 down 1.8 percent

* Energy, miners hit hard by falling commodity prices

* Financials pressured as crisis continues to weigh

* Retailers gain ahead of sales data

(For more on the financial crisis, click on [nCRISIS])

By Simon Falush

LONDON, Nov 20 (Reuters) - Britain's top share index fell 1.8 percent early on Thursday as a raft of weak data led to a rout in Asian and U.S. stocks, undermining already shaky confidence, with commodity stocks hit by a slide in raw material prices.

By 0900 GMT the FTSE 100 .FTSE had fallen 68.94 points to 3,938.17, after falling 4.8 percent on Wednesday.

In the U.S., the Federal Reserve slashed its growth forecasts and consumer prices fell at a record pace last month while Japan's October exports fell at their fastest pace in seven years.

The gloomy news heightened fears that demand for energy and commodities would slump, sending crude CLc1 down for a fifth consecutive session to below $53 and hammering already dented metals, battering heavyweight oil and mining stocks.

BP (BP.L: Quote, Profile, Research, Stock Buzz), Royal Dutch Shell, (RDSa.L: Quote, Profile, Research, Stock Buzz) and Cairn Energy (CNE.L: Quote, Profile, Research, Stock Buzz) fell between 0.4 and 6.1 percent while miners Lonmin (LMI.L: Quote, Profile, Research, Stock Buzz) Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz) and Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz) lost between 0.8 and 1.8 percent.

"We have contracting economic growth, falling corporate profits, and increasing unemployment which is filtering through to every part of the economy," said Henk Potts, investment manager at Barclays Stockbrokers.

"This is a very difficult environment for cyclical stocks, and its putting a lot of pressure on financial, mining and energy stocks."

Highlighting the strong headwinds that the UK economy is facing and the fact that unemployment is set to rise rapidly, Rolls Royce RRL.L slipped 2.9 percent after it said it will cut about 4 percent of its workforce next year. [ID:nLK223203]

Banks were mixed, with Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) up 2.8 percent, recovering some of the hefty losses from the previous session, and HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) up 0.2 percent.

Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) fell 6.4 percent, with shareholder discontent over the bank's controversial fundraising plan continuing to dent the stock, while Lloyds TSB slid 1.7 percent.

UK data at 0930 GMT will give more guidance on the extent to which the economy has slid into recession.

Next (NXT.L: Quote, Profile, Research, Stock Buzz), Marks & Spencer (MKS.L: Quote, Profile, Research, Stock Buzz) and Kingfisher (KGF.L: Quote, Profile, Research, Stock Buzz) gained 2 to 4.1 percent ahead of UK retail sales data for October. This is expected to show a 0.9 percent contraction, while public sector debt data will also be watched.

Other financial stocks were also heavy losers with falling equity prices contributing to an 8.8 percent fall for Schroders (SDR.L: Quote, Profile, Research, Stock Buzz). Prudential (PRU.L: Quote, Profile, Research, Stock Buzz) slid 8.5 percent while Legal & General (LGEN.L: Quote, Profile, Research, Stock Buzz) fell 4.9 percent.

(Reporting by Simon Falush; editing by John Stonestreet)

Euro hits 1-week low versus yen

By Naomi Tajitsu

LONDON (Reuters) - The euro hit a one-week low against the yen and the dollar on Thursday after a dim economic outlook from the Federal Reserve underlined dire global conditions, sparking fresh demand for lower-yielding currencies.

The yen rallied across the board, as a near 3 percent drop in European shares kept demand high to drop carry trades where the low-yielding Japanese currency was used to buy assets in higher-yielding ones, such as the euro and the Australian and New Zealand dollars.

Stock markets suffered around the world, with the U.S. S&P 500 index dropping to its lowest since early 2003 .SPX. Some analysts said moves in the yen have been tracking the stock index very closely, and that a further S&P fall toward a six-year low would push the Japanese currency higher.

"People are starting to give up on the hope that the economy is going to recover," said David Woo, head of currency research at Barclays Capital in London.

"Further losses in the S&P will lead to more yen gains."

By 0909 GMT, the euro had fallen 0.7 percent to 119.22 yen, hovering near a one-week low of 118.59 yen hit according to Reuters data earlier in the day.

It slipped 0.2 percent to $1.2495 having fallen as low as $1.2472 earlier in the day to hit its weakest in a week.

GRIM OUTLOOK

The single European currency was pressured by a 2.55 percent fall in regional shares, which approached a 5-1/2 year low due to falls in commodity shares as U.S. crude oil prices hit their lowest level in nearly two years.

High-yielding currencies like the Australian and New Zealand dollars in particular took a beating, with the Aussie falling roughly 2 percent against the dollar and the yen.

The New Zealand currency slipped more than 1 percent to $0.5432, its lowest level since early 2003, and tumbled 1.3 percent against the yen..

Investors shunned risk after minutes released on Wednesday from the Fed's October policy meet showed the central bank sees U.S. growth contracting in the second half of the year and the first half of 2009, even after a 50 basis point interest rate cut to 1.0 percent.

This kept prospects high that U.S. rates could fall even further as the Fed tries to minimize the impact of the recession.

The latest casualties of the severe downturn are U.S. automakers, who are begging for a government bailout as they face the possibility of bankruptcy.

Major central banks have been slashing rates aggressively in an attempt to boost their economies during an extreme slowdown. Figures this month show that Japan, and the euro zone fell into a recession in the third quarter.

(Reporting by Naomi Tajitsu; editing by Chris Pizzey)

Regulators warn of volatility ahead of MSCI rebalancing

HONG KONG, Nov 20 (Reuters) - Market regulators in Hong Kong warned investors on Thursday of possible increases in trading activities and the risk of unusual price movements next week during the rebalancing of the MSCI Barra indices.

"The SFC and HKEx are aware of possible increases in trading activities and unusual price movements around the market close during index rebalancing events, period ends and expiration of derivatives contracts," The Securities and Futures Commission and bourse operator, Hong Kong Exchanges and Clearing (0388.HK: Quote, Profile, Research, Stock Buzz), said in a statement.

"Exchange participants and investors should be mindful of these market events when making investment decisions."

Changes to the MSCI indices are expected to take effect at the close of November 25, 2008.

The MSCI rebalancing in the quarter before last triggered a sharp increase in the daily turnover and unexpected movements in share prices during the 10-minute closing auction on May 30.

The movement, which caught most investors by surprise, sparked protests from certain quarters over the suitability of a closing auction session in the local market. (Reporting by Parvathy Ullatil; Editing by Anne Marie Roantree)

Financials need at least $1 trillion: analyst

(Reuters) - The U.S. financial system still needs at least $1 trillion to $1.2 trillion of tangible common equity to restore confidence and improve liquidity in the credit markets, Friedman Billings Ramsey analyst Paul Miller said.

Eight financial companies -- Citigroup Inc, Morgan Stanley, Goldman Sachs Group Inc, Wells Fargo & Co, JPMorgan Chase & Co, American International Group Inc, Bank of America Corp and GE Financial -- are in greatest need of capital, he said.

"Debt or TARP capital is not true capital. Long-term debt financing is not the solution. Only injections of true tangible common equity will solve the current crisis," he said in a note dated November 19.

Currently, the U.S. financial system has $37 trillion of debt outstanding, he noted.

Combined, these eight companies have roughly $12.2 trillion of assets and only $406 billion of tangible common capital, or just 3.4 percent, the analyst said in his note to clients.

Miller said these institutions need somewhere between $1 trillion and $1.2trillion of capital to put their balance sheets back on solid ground and begin to extend credit again, given their dependence on short-term funding and the illiquid nature of their asset bases.

Since the summer of 2007, Wall Street has been hammered by a sharp pullback in debt markets, which began with mortgage woes and escalated into a credit crisis, slowing economic activity around the world.

RECAPITALIZATION NEEDS

The bulk of the capital will have to come from the U.S. government, Miller said. The government needs to take the initial steps to begin the process, and private capital and earnings can finish the job.

"The quicker the government acts, the sooner the financial system can work through its current problems and begin to supply credit again to the economy," he said.

The U.S. government must declare a bank-dividend holiday and convert the TARP funding into pure tangible common equity to get the credit markets functioning.

Also, the government should support a centralized CDS clearinghouse that backstops all transactions and eliminates the cross-default problem, the analyst said.

Top U.S. financial regulators said on Friday they were working on developing a centralized clearinghouse for credit default swaps, the exotic instruments that have exacerbated the financial crisis of recent months.

The weakened economy and global credit crisis had pushed the U.S. government into bailing out companies including insurer AIG, investment bank Bear Stearns, and mortgage companies Fannie Mae and Freddie Mac.

Regulators have also shown a willingness this year to intervene when banks appeared to struggle. They pushed Wachovia Corp into finding a buyer and arranged for JPMorgan to buy Washington Mutual Inc's banking assets after worried customers began to yank deposits.

Miller, however, said it could take three to five years for the financial system to fix itself completely, with adequate capital and appropriately priced interest rate and credit risk.

(Reporting by Neha Singh in Bangalore; Editing by Vinu Pilakkott)

Global stocks at 5-1/2 year lows

By Carolyn Cohn

LONDON (Reuters) - World stocks dropped to 5-1/2 year lows and oil hit 22-month troughs as investors reacted to dire Federal Reserve warnings on the economy and fears about the viability of major U.S. auto makers and bank giant Citigroup.

Federal Reserve officials slashed economic growth forecasts through 2009, with the lower range of the Fed's central tendencies forecasting the U.S. economy could shrink by 0.2 percent.

At least one among household names General Motors Corp, Ford Motor Co and Chrysler LLC is at risk of bankruptcy if a last-minute bail-out plan fails.

The plight of U.S. automakers highlighted the increasing damage which the world's financial crisis is inflicting on the real economy.

The MSCI world equity index fell 2.3 percent to 197.90, its lowest since May 2003, driven lower in Asia after data showing Japan's exports to Asia fell for the first time in six years.

European shares also approached their lowest since June 2003, with the FTSEurofirst 300 index of leading European shares dropping 3 percent, following losses of 5 percent or more on Wall Street.

European banks remained under pressure after Citigroup Inc faced a crisis of confidence on Wednesday as investors questioned the survival prospects of the U.S. banking giant.

"Having seen Lehman and Merrill Lynch fall by the wayside this year, the sight of another major such as Citigroup struggling will prove a bitter pill to swallow," said Chris Hossain, senior sales manager at ODL Securities.

Oil fell by more than $1 a barrel to 22-month lows at $52.49, as the slumping global economy hit demand.

The two-year U.S. Treasury yield hit a record low of 1.06 percent on expectations of a 50 basis point U.S. rate cut to 0.50 percent next month.

Euro zone government bond futures rose more than half a point to their highest since March 2006 at 120.36.

The dollar dropped 0.77 percent to 95.20 against the safe-haven yen, but edged up against the euro to $1.2504.

Emerging markets suffered from falling commodity prices and global demand.

The MSCI emerging equities index dropped 4.55 percent to 467.32. Russian stocks on the MICEX exchange fell 7.5 percent before trading was suspended for an hour.

(Additional reporting by Simon Falush and Atul Prakash; Editing by Toby Chopra)

Worries Over Global Recession, Credit Markets Remain Bearish, Yen Rises

Daily Forex Fundamentals | Written by Finotec Group | Nov 20 08 08:35 GMT |

Risk aversion kept the yen and the dollar firm on Thursday as global recession worries and credit jitters fuelled by uncertainty over the struggling U.S. auto industry led investors to cut risky assets. Yen-buying gained steam in the afternoon as a slide in the Nikkei share average accelerated, with Japan's benchmark index tumbling 6.9 percent.

Equities are regarded as a barometer of investor risk appetite and their declines can trigger unwinding of carry trades, which involve selling low-yielding currencies like the yen to invest in higher-yielding currencies and assets.

Nowadays when the Nikkei fell more than 400 points, yen-buying accelerated, with recent weak U.S. economic data, uncertainties about rescue measures for U.S. automakers and worries about a further fall in the Dow, demand for the Japanese currency will likely increase further on risk aversion.

U.S. and European stocks fell to their lowest levels in 5-½ years on Wednesday as prospects faded for a Washington bailout of the auto industry and data showed U.S. consumer prices dropped at a record pace in October. The dollar may be vulnerable against the yen due to deepening concerns about U.S. corporate earnings and expectations the Federal Reserve will cut interest rates from the already low 1 percent at a meeting next month. But the dollar was seen as likely to be supported against other currencies due to general risk aversion triggered by falling stocks and growing uncertainty over whether U.S. automakers, including General Motors, will win emergency government loans. The top three U.S. carmakers have warned that bankruptcy for one or more of them would lead to massive job cuts.

Market players expect the Bank of Japan to mull more steps to soothe frazzled money markets at a two-day policy meeting that ends on Friday. But the central bank is expected to keep interest rates steady at 0.30 percent. Analysts said the outcome of the BOJ meeting may not offer much incentive to the market as the focus is more on moves by the Fed and central banks in Europe. Minutes on Wednesday from the Fed's meeting last month added to the bleak global economic view, as the central bank said U.S. economic data in the run-up to the December meeting would show significant weakness and could well mean that another rate cut may be needed.

Economic Calendar

Time (GMT)	E Event	Currency	Period	Previous	Previous	Significance
13:30	Wholesale Sales m/m	CAD	Sep	-1.5%		**
13:30	Unemployment Claims	USD	Weekly	516.0K		**
09:30	Retail Sales m/m	GBP	Oct	-0.4%	-0.8%	****
09:30	Public Sector Net Borrowing	GBP	Oct	8.1B		**
07:15	Trade Balance	CHF	Oct	1.44B
07:00	PPI m/m	EUR	Oct	0.3%	-0.5%	**
00:00	Treasury Sec Paulson Speaks	USD				**

Finotec Group Inc.
http://www.finotec.com/

Disclaimer: FINOTEC Tradings Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.

Major Market Movers: Global Recession

Daily Forex Fundamentals | Written by Crown Forex | Nov 20 08 08:40 GMT |

Fear is back, the US indices lost ground yesterday after the minutes of the last FOMC meeting, where the feds decided to slash only 50 basis points letting down traders as they expected more fearless reductions. According to the minutes some fed members believe that deeper cuts
will seize the United States from dipping in deflation.

'Economic conditions deteriorated in recent months' that what the statement added yesterday, the intensification of the prolonged Credit Crisis especially after Lehman Brothers collapsed managed to cripple the growth severely to the extent that the United States the largest economy in the world is now teetering on the brink of a deep recession.

They also added that inflationary are likely to 'diminish materially', its true according the consumer prices reading which was released earlier yesterday, prices fell 1.0% on the month, taking the yearly prices down to 3.7%. The steep weakness the United States along with the falling commodity prices played a major role in taking consumer prices down near to the comfort levels.

Revisions

According to the current mess and the effect of the ongoing Credit Crisis the feds decided to revise their GDP expectations, output in the upcoming year got revised down to -0.2% to 1.1% from the previous estimate 2.0%-2.8%.

No spending, after the second quarter of this year a steep downturn in the spending levels took place, the huge labor cuts that took place in the second half of the year had resulted in eating away the left over confidence between the US citizens as now they don't see any light at the end of the tunnel. This hesitation in spending took the GDP reading in the third quarter down to -0.3% where now we foresee a deeper contraction which would extend till mid of 2009.

The falling earnings for companies' bedsides to the deteriorating demand had pushed those companies to terminate more jobs just to cut down their expenses, also the dark outlook for those companies had pushed the feds to revise jobless rates, the unemployment rate was revised higher to 7.1% to 7.6% from the previous estimate which stood at 6.5%-7.3%.

Indices Tsunami

After the minutes and the growth revisions along with the comments added, the US indices continued its free fall, the Dow Jones Industrial Average lost 5.07% or 427.47 points to close at 7997.28 levels, also the S&P 500 fell 6.12% or 52.54 points to close at 806.58 levels reaching to a total fall of 39.71% since the beginning of the year, the fall in the S&P is the worst since 1931; the NASDAQ vanished 6.53% or 96.85% closing at 1386.42 levels.

Future indices continued yesterday's plunge, the Dow Jones Industrial Average fell 120 points since the early morning, in this journey the S&P lost 14.10 points to trade at 798.40 levels and the NASDAQ also declined 20.00 points to trade at 1072.50 levels.

The fear hovering around all markets had pushed the Asian stocks to fall, as now participants' fears a deep global recession; the Japanese Nikkei Index fell 6.89 percent or 570.18 points reaching to 7703.04 levels affected by the exporting sector stocks which are now heading down south affected by the strength the Japanese Yen is gaining as investors tends to drop the high yielding assets. Also the Hong Kong's Hang Seng Index fell 5.98 percent reaching or 766.10 points reaching to 12052.88 levels.

Waiting Fundamentals

The retrieved fears in financial markets could create a muddle in today's trading, participants expect the worse, no brighter lights no more optimism…

We started our fundamentals journey earlier today with the German Producer Prices Index reading, prices in German the leading European economy did not ease as what markets expected. The monthly prices eased only to a flat reading coming worse than expectations of a fall of 0.7%, also the yearly rose to 7.8% above markets projections in October.

The second stop will be in the Royal lands, we are waiting to see the Retails Sales reading for the month of October, the down turn in the royal territory crippled the growth in sales, expectations stands at a fall of 0.9% on the month in October along with the yearly prices which might ease down to a rise of 1.4% from the previous 1.8%.

According to estimates the public finances deficit might turn out to be a surplus today, yet those reading might be arguable because October was the month where the government approved on the bailout plan which means that they needed to issue guilt's just to gather up finances for this bailout plan. Governmental spending increased in the second half of the year especially after the downturn in the growth started to become obvious; along with this reading the Public Sector Net Borrowing deficit had narrowed to 0.4 billion according to the median estimate from the previous huge deficit standing at 8.1 billion.

Moving to the US continent, we are waiting for the weekly jobless claims with expectations that claims narrowed slightly down to 505 thousand from last weeks reading 516 thousand, along with the continuing claims which will reach higher to 3900 thousand from the previous 3897 thousand. The deterioration in the employment sector and the continuous termination from various sectors in the economy will continue to weigh upon those reading as more citizens are filling for claims just to keep going with those misfortune times.

In a different report the federal reserve bank of Philadelphia will release out their monthly report, to clarify how did the manufacturer resumed their work, according to estimates the reading will continue hovering in the negative levels a small improvement to -35 levels in November might be seen coming better than the previous fall 37.5, yet they might a possibility of more deteriorations dipping down south further more.

Deep recession with some signals to deflation is hovering around the United States along various leading economies in the world, nothing will ease this tension; policy makers have to mitigate their infrastructure just to climb back on the ladder of achievements.

Crown Forex

disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

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