Nikkei increases 2.1% on relief over Fed's AIG Rescue

TOKYO: The Nikkei share average rose 2.1 percent on Wednesday, rebounding from a steep fall the previous day as investors took heart from the news that troubled U.S. insurer American International Group would avoid the same fate as Lehman Brothers.

Financial shares such as top lender Mitsubishi UFJ Financial Group rose on easing concern about AIG. The U.S. Federal Reserve said it would provide an $85 billion bridge loan to AIG and take nearly 80 percent in the company in a dramatic about-face as victims of the financial crisis kept piling up.

The benchmark Nikkei average ended the morning up 241.06 points at 11,850.78. The broader Topix gained 1.3 percent to 1,131.97.

Read more!

Gold Spurts - Rs.195/Ten Gram on Higher Global Cues

MUMBAI: Gold prices spurted by Rs 195 per ten grams to end at Rs 11,610 on the bullion market here today on fresh demand from stockists in view of festival season on the back of positive global cues and a weak trend in equity market.

Gold prices climbed more than two per cent in London after Lehman Brothers filed for bankruptcy protection, which spurred buying of gold as a safe haven from risk and knocking the dollar to a two-month low against the Yen.

However, the precious metals retreated from highs as oil prices slipped and selling of gold held by exchange-traded funds dented investor confidence.

Spot gold was quoted at USD 772.90/774.10 an ounce, up by USD 9.45 from Friday's nominal close in New York, but off session high of USD 784.90.

Gold and silver prices in Singapore jumped more than two per cent, with bullion gaining for a second day as Lehman Brothers' bankruptcy and anxiety over the stability of US financial markets spurred a rush toward safety.

Gold rose two per cent or USD 14.85 an ounce to USD 778.30 from Friday's close in New York.

Weak equity market also boosted gold prices, as some of the investors shifted their funds in gold as a safe-haven investment, a dealer said.

In the domestic market, standard gold (99.5 purity) rose by Rs 195 per ten grams to end at Rs 11,610 from Rs 11,415 and pure gold (99.9 purity) also shot up to Rs 11,680 from Rs 11,480.

However, silver ready (.999 fineness) dropped by Rs 75 per kilo to Rs 19,045 from Rs 19,120.

Read more!

Sensex loses 238 pts on rupee jolt, Lehman loss

MUMBAI: Indian equities continued their slide on Wednesday at a faster rate, as bad news poured in from world markets. European stocks weakened after the European Commission expressed doubts over the region’s economic growth and a possibility of further doom in the banking sector. Leading US investment bank Lehman Brothers Holdings reported a third quarter net loss of $3.9 billion — the biggest in its 158-year history. It now plans to sell a majority stake in its asset-management unit, spin off commercial real-estate holdings and cut dividend in an effort to shore up capital.

Back home, the rupee hit a 2-year low, breaching the psychological 45-mark to the dollar in the process, spelling further bad news for the economy as a whole.

Metal and oil & gas stocks were the worst performers, as the 30-share Sensex fell 238.15 points on Wednesday to close at 14,662.61. All the BSE sectoral indices ended in the negative with the metal index plunging over 5%. Analysts opine that the commodity cycle is in a downturn phase and consequently the companies are likely to face a pressure on earnings. The S&P CNX Nifty slipped 68.45 points to close at 4400.25. The BSE mid and small-cap lost over 60 points each to close at 5,708.93 and 6,903.42, respectively.

The slide in the rupee, however, failed to energise IT shares, with the BSE IT index closing marginally below its previous close. Dealers say worsening financial conditions in the US would impact the revenue of IT companies, hurting their growth. “The balance of payments dynamics and US dollar strength will cause the rupee to weaken. We expect the rupee to weaken against the dollar to 46-47 by December 2008, but it will likely pull back to 45 by March 2009,” said Macquarie Research in a note to its clients. “Be prepared for more aggressive intervention by RBI in the forex market. Also, the government is likely to ease restrictions on capital inflows in order to check the pace of the rupee’s depreciation,” the noted added.

On the global front, OPEC in Vienna decided to reduce supplies by 500,000 barrels a day. Consequently, crude oil for October rose as much as $1.56 to $104.82 a barrel on the New York Mercantile Exchange (NYMEX). The last trading price at the exchange was $101.67 a barrel on Wednesday. “Domestic market has factored in the receding oil prices. If they fall below $90 a barrel, there could be a rally in the indices, but it won’t be a sustained one. In the near term, the range would continue to be between 4,400 and 4,700,” said India Infoline head-research Amar Ambani.

Market breadth continued to be weak with retreating stocks outnumbering gainers nearly two for one. Total turnover in markets was close to Rs 70,000 crore, a rise of Rs 10,000 crore over the previous close. However, the improvement in volumes is of little cheer as foreign funds continue to dump stocks. As per provisional data, they net sold Rs 1,037 crore shares on Wednesday. Domestic institutions cushioned the sales to some extent, with net purchases of Rs 492 crore.

Markets across the Asia-Pacific ended on a mixed note. China’s Shanghai Composite index advanced 0.2% and South Korea’s KOSPI Composite index gained 0.7%, while Japan’s Nikkei 225 index ended down 0.4% and Hong Kong’s Hang Seng index lost 2.4%.

Read more!