04 Apr, 2009 - deVere Insight – 4th April 2009

VIEWS – In this edition we feature a view on the Fixed Interest Market from HSBC and a review of Global Markets from Barings

http://www.hsbcprivatebank.com/perspective/market-views-fixed-income.html

http://www.baring-asset.com.hk/document/uk/ldnprd_001539

G 20 KICKSTARTS TRADE – (Reuters) G20 leaders have kick started stalling world trade with a substantial infusion of funds to finance export credits, but promises to agree a new Doha trade deal and battle protectionism remain vague.

A $1.1 trillion (£744 billion) deal to combat the economic downturn agreed at Thursday's G20 summit in London includes a trade finance package to fund $250 billion of trade over the next two years.  Rising world trade since World War Two has lifted millions out of poverty and supply chains in the globalised world economy mean exporters rely on imports from maybe dozens of countries.

But trade has slumped in recent months, with Japan's exports halving in February from a year earlier.  The World Trade Organisation predicts a nine percent drop globally this year, the first contraction in 25 years, reflecting both dwindling demand and the lack of credit to finance shipments.

"The new resources made available for trade finance are clearly going to have an effect.  It's an important step.  This is something quite significant," said Fredrik Erixon, director of the European Centre for International Political Economy (ECIPE), a Brussels think-tank.

EMERGING RECOVERY MAY GIVE LEGS TO MARKET RALLY – (Reuters) The start of the new quarter and growing signs that the global economy might have hit a trough are bringing a rally in stocks and other risky assets which many believe has stronger legs than before.

World equities, measured by MSCI, have risen more than 6% in the past two days, having made their best monthly gains in March since December 1999.  They are also up around 24% after hitting a 5½ year low in mid-March.

A combination of factors is behind the latest rally.  An influential survey showed this week that an index of global manufacturing activity rose to a five-month high, with the United States, Britain and the euro zone showing improvement.

The U.S. housing market, the epicentre of the credit crisis since August 2007, is stabilising, with February housing starts rising for the first time in 10 months.  UK house prices also rose for the first time since 2007 in March.

Investors are also giving a thumbs-up to action taken by the world's governments.  At their summit in London, Group of 20 leaders pledged $1 trillion to the International Monetary Fund and other institutions and also agreed to triple the war chest of the IMF to fight the worst economic crisis since the 1930s.

Moreover, central banks around the world are adopting unorthodox monetary policy measures, or quantitative easing, which are bringing investor confidence back.

"The possibility of levelling off of recessionary forces has to be taken seriously, Government actions to slash interest rates and inject liquidity at some point are going to have more of an impact," said Philip Saunders, portfolio manager and head of investment strategy at Investec Asset Management.

"For the moment we feel the balance of risk and reward favours being long risk assets at the moment.  Our strategy is to gradually acquire cheap stuff and prepared to be patient."

There are emerging signs of life in some of the risky asset market which had ground to a halt after the collapse of Lehman Brothers in September and the ensuing sell-off in world stocks.

The convertible bond market, which trades bonds which could be converted to stock often with a price trigger, is one segment that is coming back to life.

According to Brown Brothers Harriman, some $3.2 billion (£2.16 billion) convertible bonds were brought to the market in the first quarter.  None was sold since September as equity markets tumbled, hitting funds which wanted to capitalise on the difference between bond and equity prices.

"The micro-structure of the market has changed with the exodus of these funds and this allows the remaining investors get a bigger piece of the supply," BBH strategist Marc Chandler said in a note to clients.

Thomson Reuter’s data shows the amount of convertible bonds sold in the market more than doubled to $5.9 billion in the first quarter from the previous three-month period, after falling from $12.6 billion in the third quarter.  The BBH expects the convertible bond market has risen 10% over the last four months.

In other corporate bond markets, Barclays Capital expects U.S. investment grade corporate bonds to give excess return of 400-500 basis points in 2009, with a bulk of gains coming from the second quarter.

In the foreign exchange market, analysts expect sterling and the Swedish crown, which had been punished due to concerns about the banking system, could be the first ones to recover.

"What the market appears to have chosen to disregard, however, is the fact that activity growth in both the UK and Sweden may outperform on the back of very supportive relative financial conditions," Goldman Sachs said in a note to clients.

Goldman recommends buying sterling against dollar and selling the euro against sterling and the Norwegian crown.  It also recommends selling protection against Sweden defaulting via five-year credit default swaps.

Overall, investors have been excessively underweight risky assets, sitting on cash, and even a small change in their asset allocation could have a substantial positive impact on the valuation of risk assets.

Cash levels among large investors are historically high.  Reuter’s global asset allocation polls showed that in March they represented 5.7% of portfolios, a full percentage point above average levels and one of the highest reported.

However, the polls also have shown a slow but steady increase in equity holdings among leading global investment houses throughout the three months of this year.

And fund trackers EPFR Global says money market funds have just posted three consecutive weeks of outflows, showing money is leaving most conservative and risk-averse investment to seek higher returns.

"Tinder is there.  We are waiting to see what's going to spark and ignite," Saunders said.

CURRENCIES - Sterling jumped against major currencies on Friday, hitting a seven-week peak against the dollar after a higher-than-expected reading in services data.

The CIPS/Markit services PMI activity index rose to 45.5 in March from 43.2, the highest reading since September and beating economists' forecasts of 43.5.

"The survey is stronger than expected and points to a move towards stabilisation in the services sector, which is obviously good news for the economy," said Philip Shaw, chief economist at Investec.  "Taken alongside the manufacturing PMI and the Bank of England's credit conditions survey earlier this week, it supports our hope for a gentle recovery in GDP in the second half of this year."

The pound extended its gains, undeterred by the dollar's rise against other major currencies, after the U.S. jobs report showed employers slashed 663,000 jobs in March, compared with forecasts of a 650,000 drop.

Sterling rose to $1.4845, which was the highest since early February, Reuters data showed.  It was last up 0.5% at $1.4815.

The pound is on track for its biggest weekly gain against the dollar since early February, and was also seen gaining for the fourth straight day on improved risk sentiment globally and some brighter UK economic data.

Market players said sterling's moves were partly swayed by the sterling/yen cross, as the yen moved broadly lower.  The pound rose to 148.70 yen, the highest since last November.  It was up 0.9% at 148.14 yen.

The market largely ignored earlier data that showed British house prices fell 17.5% in the three months to March from a year ago, according to UK mortgage lender Halifax.  That came after a record 17.7% drop last month.

This was in contrast to a Nationwide survey on Thursday that showed UK house prices unexpectedly rose 0.9% month-on-month in March, the first rise since October 2007.

Sentiment was also boosted after G20 leaders clinched a $1.1 trillion deal on Thursday to counter the global economic crisis.

Sterling has now taken back its losses after the Bank of England adopted in March its so-called "quantitative easing" policy of buying assets to boost liquidity, as its main lending rate stands at a record 0.5%.

In contrast, the euro remains pressured by expectations that the European Central Bank (ECB) will take "non-standard" measures to boost liquidity in the banking system.

The euro initially rose on Thursday after the ECB cut interest rates by a smaller-than-expected 25 basis points to 1.25%.  But gains were tempered after ECB President Jean-Claude Trichet signalled there may be another rate cut next month as well as a decision on non-standard measures.

Trichet and other ECB policymakers said on Friday a further rate cut cannot be ruled out.

The euro was down 1% at 90.43 pence, a 1-month low.

"We continue to see sterling extremely undervalued at these levels, especially against the euro," said analysts at UBS in a note.  "The possibility of unconventional measures by the ECB will ... push euro/sterling back to fair-value range between 85 and 90 pence."

But UK finance minister Alistair Darling said on Friday unemployment was likely to rise over the next few months, underscoring the difficulties still facing Britain's economy.

COMMODITIES - Gold held steady above $900 on Friday following a slump the previous day when its safe-haven status was hit by a stock rally as the G20 agreed on steps to restore global economic growth and rebuild the financial system.

But gold could face another bout of selling later in the day on the chance that stock markets will take U.S. nonfarm payrolls data in their stride after weak related jobs data this week.

"The overall market outlook is quiet in Asia.  I think the market has discounted the news about the announcement of G20," said Louis Lok, a dealer at Bank of China in Hong Kong.

"The next focus is the U.S. announcement of the nonfarm payrolls data," and its impact on metals, stock and currency markets, Lok said.

Spot gold stood at $903.20 an ounce at 0318 GMT, almost flat from New York's notional close of $903.15.  Analysts polled by Reuters are forecasting that U.S. nonfarm payrolls shrank by 650,000 in March, nearly matching a fall of 651,000 in February.

Bank of China's Lok said even a steady day on Wall Street after the jobs data could be negative for gold after it failed to climb above $930 per ounce this week.  On Thursday, bullion dipped more than 3% to a two-week low of $893.70 as G20 leaders set out a $1.1 trillion package to help revive the global economy.

The G20 also agreed that some money for low-income countries would be raised by the IMF selling 400 tonnes of gold as previously planned.  Traders said that such a sale had been factored in and that the market could easily accommodate it and it would be conducted in a way that would not cause price fluctuations.

The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust GLD, said its holdings were unchanged at a record 1,127.44 tonnes as of April 2.  Its holdings climbed to that amount on March 29.

TOKYO - Japan's Nikkei stock average rose 0.3% on Friday, hitting a three-month closing high on increasing optimism about the U.S. economy and active foreign buying of blue-chip exporters such as Sony Corp.

The yen's retreat, which at one point saw the dollar bounce above the 100 yen mark, boosted car companies such as Honda Motor Co, which hit a six-month intraday high.

Kawasaki Kisen steamed 9.7% higher after Goldman Sachs initiated coverage with a "buy" rating and added it to its conviction list, saying Japan's shipping companies have a strong record of profitability.  Other shippers gained as well.

More data raised hopes the U.S. economic downturn is moderating, helping the benchmark Nikkei gain 1.4% on the week, its fourth consecutive positive week and the first such run since December.  This week's gains were the smallest, though.

Some market analysts remained wary, noting that key U.S. jobs data is due out later on Friday.  Analysts polled by Reuters expect the economy to have shed 650,000 jobs last month after losing 651,000 in February.

Data the previous day showed the number of U.S. workers filing new jobless claims at a 26-year high.

"It's a market of hope, and the question is whether the jobs data will pour cold water on that," said Tomomi Yamashita, a fund manager at Chibagin Asset Management.  "Given that the Nikkei is still really low compared to where it was a year ago, it's clear that it will be difficult to change this long-term trend."

On April 3 last year, the Nikkei closed at 13,389.90, meaning it has lost 35% since then.

U.S. factory orders rose in February for the first time in seven months, boosting industrial, technology, consumer discretionary and energy stocks on Wall Street on Thursday.

Hopes for an improving global economy also grew after leaders of the G20 clinched a $1.1 trillion deal on Thursday to combat the worst economic crisis since the Great Depression and said financial rules would be tightened to stop it happening again.

"I think it's pretty well confirmed that we've bottomed out," said Masayoshi Okamoto, head of trading at Jujiya Securities, who added he thought the Nikkei was likely to extend gains throughout this month and possibly into May.

"We're unlikely to see a V-shaped recovery, though, and corporate earnings results at the end of the month and into May could cap gains."

The benchmark Nikkei gained 30.06 points to 8,749.84, paring the day's gains to almost nothing but still marking its highest close since Jan. 9.  The broader Topix edged up 0.6% to 831.36.

Orders for Japanese stocks placed through 12 foreign securities houses before the start of trade showed overseas investors were net buyers for the third straight day on Friday, with some in the market saying they heard many of these investors were from Europe.

"Risk appetite among overseas investors is recovering thanks to rising share prices in the U.S. and European markets," said Yutaka Miura, a senior technical analyst at Shinko Securities.

Foreign investors have long been a key driver of the Nikkei, and volume was a heavy 2.8 billion shares on Friday, the year's second highest after Thursday.

The dollar briefly rose above the psychologically important 100 yen level for the first time in five months on Friday and the euro also climbed to its highest in more than five months against the yen, giving exporters an additional boost.

Toyota Motor Corp, the world's biggest automaker, jumped 7.3% to 3,700 yen.  Honda rose 1.7% to 2,780 yen and Nissan Motor Co gained 5.9% to 464 yen.  Carmakers have posted sharp gains over the past three days, with Toyota up 18.6%, Honda up 20% and Nissan soaring 33 percent.

Electronics giant Sony was up 3.2% at 2,395 yen and Panasonic Corp climbed 6.1% to 1,214 yen.  Canon Inc rose 2% to 3,070 yen.  Defensive shares, traditionally a haven in times of economic uncertainty, lost ground.  Pharmaceutical company Eisai shed 3.3% to 2,890 yen and toiletries maker Kao Corp fell 1.9% to 1,927 yen.

Declining shares outpaced advancing ones by 916 to 682.

HONG KONG - Hong Kong shares edged up to a three-month high on Friday, lifted by hopes for economic stabilisation in the United States and faster recovery in China but profit taking pressure following the previous session's rally slowed the main index's advance.

The blue chip index has risen more than 3% this week and more than 7% in just the first three days of April powered by a slew of encouraging economic data and co-ordinated global moves to combat the current crises.

"There is a pretty good chance this rally will continue into next week," said Linus Yip, strategist with First Shanghai Securities.  "Even after the 1,000 point surge on Thursday there has been very little profit taking pressure today and turnover is still holding strong with funds buying into this rally."

The benchmark Hang Seng Index finished 0.2% higher at 14,545.69, its highest level since January.

Other major markets in Asia also kept the rally alive on Friday after world leaders at the G20 summit in London clinched a $1.1 trillion dollar deal to combat the economic crisis.

"We are back to where we started the year.  We had the same kind of optimism towards China's stimulus package and Obama's presidency," said Ben Kwong, COO with KGI Asia.

Turnover stayed strong at HK$71.4 billion, though lower than the HK$75.22 billion clocked in Thursday's 7.4% surge, as institutional investors increased their exposure to local stocks.  But caution crept in ahead of key U.S. payrolls data later on Friday.

Shares in exchange operator Hong Kong Exchanges & Clearing bulked up 5.1%, leading gains on the blue chip index, after turnover rose to a three-month high in the previous session.

Local property stocks made a strong showing with top developer Sun Hung Kai Properties rising 1.2% and Henderson Land tacking on 4.9% after government data showed the value of home sales rose nearly 87% in March.

The China Enterprises Index of top mainland firms inched up 2.53 points to 8,574.73.

Some Chinese stocks jumped after data from March flagged the first month of expansionary activity on China's Purchasing Managers' Index since September 2008.  Coal miner China Shenhua rose 4.4% while Angang Steel steamed 5.1% higher.

Another big gainer, China Shipping Container Lines (CSCL) soared 11.3% to HK$1.78 after Goldman Sachs upgraded the stock to a buy rating, from sell, on expectations that global cargo trade will stabilise.  Goldman Sachs has a target price of HK$2 on the stock.

The brokerage house also revised its view on the container shipping sector to neutral from cautious with the decline in freight rates slowing down and amid aggressive capacity cuts by shippers in an attempt to offset weak demand.

Another container shipper Orient Overseas (International) vaulted 12.4% to HK$23.60.

Gold miner Zijin Mining slumped 6% to HK$5.37 after the price of the precious metal dropped on Thursday on renewed talk of gold sales by the International Monetary Fund.

Tobacco and food flavouring producer Huabao International Holdings sank 17.1% to HK$5.78 after the company said a major shareholder would sell HK$1.16 billion (US$149.9 million) worth of its shares at a discount to third party investors.

Towngas China jumped 15.2% after it said it would sell its interest in Pana LPG to Panriver Investments for HK$414.2 million.  The company said it was working to reduce its risk exposure to the LPG business amid unstable LPG prices, low profit margins and a low return on investment.

MOSCOW - Russia's banking sector may well avoid a second wave of the crisis, while economic growth should return in coming months, the Russian central bank head Sergei Ignatyev told a conference on Friday.

His comments contrast with those of Finance Minister Alexei Kudrin, who has said banks now face a second crisis, this time caused by a rise in bad loans rather than a liquidity shortage.

“Bad loans are a serious problem and we are paying a lot of attention to it but I do not share the views that a second wave of crisis is unavoidable," Ignatyev said.

Ignatyev also noted the rouble had stabilised after months of controlled devaluation, and the central bank had not needed to buy and roubles since February to support the currency.  Instead the central bank sold a total of around $5 billion in February and March to slow rouble appreciation down.

This year, the rouble is now unlikely to weaken beyond the 41 per basket mark set as the boundary of the central bank's trading range, he said.

"I believe the sharpest phase of the crisis is behind us.  I think that as soon as in the coming months the economy will resume growing modestly," Ignatyev said, adding the main factor behind it was stabilising oil prices.

He said he hoped inflation would be less than forecast the 13% this year which will allow the bank to cut rates.

SAO PAULO - Brazil's stocks jumped to more than five-month highs on Thursday as a move by global leaders to pump an additional $1.1 trillion into the global economy boosted global markets and the national currency.

The Bovespa index of the Sao Paulo stock exchange surged 4.19% to 43,736.45 points, after hitting its highest level since October around 44,286.02 points.

World leaders meeting at the G20 summit in London agreed to a $1.1 trillion deal on Thursday to combat the worst economic crisis since the Great Depression and said financial rules would be tightened to stop it happening again.

"The optimism in the world is due to the G20.  But soon it will all come back," said Jose Roberto Carreira at brokerage Fair Corretora, referring to the ongoing fallout from the global financial crisis.

The move boosted appetite for risk, lifting Brazil's currency, the real BRBY by nearly 2% to 2.236 reais per dollar.

Oil and metal prices also rose, on hopes that the extra money would help the world economy and thus demand for commodities, pushing Petrobras and Vale higher.  Vale surged 6.1% to 28.70 reais as copper prices rose while Petrobras gained 3.74% to 30.50 reais as crude prices rallied more than 8 percent.

Steelmakers Usiminas, CSN and Gerdau were up between 4.2 and 6.2%. 

Financial stocks also rallied on hopes that more aid to the world economy would help ease troubles in a downtrodden banking sector.

Bradesco surged 2.99% to 24.47 reais, Itaugained 4.8% to 27.30 reais and Banco do Brasil surged 2.65 to 18.23 reais.

Yield spreads on the Brazilian government's overseas bonds over comparable U.S. Treasuries, as measured by JPMorgan's EMBI+ index, narrowed sharply, reflecting higher appetite for Brazilian assets.  The index showed the country's bond spread dropped by 19 basis points to 408.

Spreads for emerging market bonds as a whole fell 25 basis points to 609.

Yields on interest rate futures contracts at the BM&F commodity and futures exchange firmed after falling sharply in recent days, but the central bank is still widely expected to ease monetary policy going forward.

MEXICO - Mexico's peso jumped on Friday and stocks rose after the central bank said it would activate a $30 billion swap line with the U.S. Federal Reserve to aid Mexican firms.

The peso currency rose 0.91% to 13.6175 per dollar and embattled cement maker Cemex, which is struggling under a debt mountain, trimmed losses.  Cemex was down 0.59% at 10.13 pesos per share after earlier falling as low as 9.98 pesos.

In a widely anticipated move, the central bank said it would activate the swap line and auction $4 billion on April 21 to aid firms struggling to obtain dollars to meet foreign currency obligations.

The decision to activate the swap comes only days after Mexico said it would request a $47 billion credit line with the International Monetary Fund to bolster its reserves position.

"This will provide a lot of liquidity," said Ramon Cordova, a trader at Base Internacional brokerage in Monterrey.  "The tendency of the peso is changing; all the estimates for the peso ending the year above 14 are wrong, everyone will be revising estimates now."

The benchmark IPC stock index rose 0.17% to 20,598, led by copper miner Grupo Mexico, which rebounded as the company said it would appeal a U.S. court decision issued on Wednesday ordering it to surrender part of its stake in Southern Copper to Asarco LLC.

But data from the Institute for Supply Management showing the U.S. services sector shrank for the sixth straight month hurt stock market sentiment as it bodes poorly for Mexican exports.

Grupo Mexico jumped 8.6% to 10.10 pesos, resuming trade a day after it was halted due to a 15% loss.

A U.S. court on Wednesday ordered the company to surrender much of its shareholding in Southern Copper and pay over $1 billion in damages, saying the company had wrongly transferred a stake in Southern Copper from its now-bankrupt Asarco unit.

Grupo Mexico said in a filing to the Mexican stock exchange Friday morning it would challenge the ruling, and UBS said the company's stock looked cheap even if it were unable to win the case.

"Under the proposed order, Grupo Mexico would still be trading at a 42% discount to the market value of its assets, which we view as high," UBS wrote.

SINGAPORE - A new $1 billion (£676 million) fund has been established by a Hong Kong-based capital raiser to invest in mining assets, banking on catching the bottom of the price cycle, focused initially on Australia and Canada.

The fund, called World Mining Investment, will open with $400 million under management by the end of April and will be fully capitalized to $1 billion by the end of November, according to WMI's chairman Didier J. Rault.  He said the initial capital came from a group of four Chinese and Chinese-American investors.

The fund will invest in mining companies, especially those in Australia and Canada, with a longer-term eye on Africa and Central Asia.  Targets will include copper and gold operations, through coal mines, diamonds, and even oil.

"We will invest in mining equities or even directly in mines.  We are looking for companies that we can control, companies in which we can hold 51% of the capital at least," Rault said.  "We think the market has bottomed out so it is a good time to launch this fund."

Rault, speaking while on holiday in Bangkok, said a number of projects had been short listed, but declined to say which he was interested in.

LENDING - Lenders expect to make credit more easily available to households and businesses in the next few months, although demand is likely to remain muted, a survey by the Bank of England showed on Thursday.

The BoE's credit conditions survey showed that lenders had tightened the availability of secured credit to households in the first three months of this year, due to risk aversion and expectations of a further fall in house prices.

However, lenders said they expected to increase the availability of loans in the second quarter, both to households and firms.

"The economic outlook was not longer expected to be a factor bearing down on credit availability," the survey said.  "Improvements in the cost and availability of funds were expected to support increased credit availability over the next three months."

The survey also showed that demand for mortgages had fallen over the last three months and that lenders expected it to decline further in the coming months.  The cost of borrowing rose significantly for households and businesses in the first three months of 2009, despite sharp cuts in interest rates and government schemes to promote lending.

"Overall spreads on secured lending to households were reported to have widened over the past three months, significantly more than expected," the survey said.  "Lenders reported a further widening of spreads on corporate lending.  They expected spreads to increase further." 

DUBAI - Dubai state-owned firms will raise almost $3 billion (Dh11.02 billion) in loans this month amid signs that lending conditions are improving.

The Dubai Electricity and Water Authority will get $2.2 billion in a multicurrency loan at an annual interest rate of 300 basis points more than the interbank offered rates to refinance existing debt, said two bankers, who declined to be identified because the negotiations are private.  The Dubai Civil Aviation Authority is likely to receive $650 million to repay $1 billion in maturing debt, the bankers said.

"Investors are keeping a very close eye to see how much the appetite is for lending money to Dubai," said Nish Popat, the Dubai-based head of fixed income at ING Investment Management.  "If they are able to roll over fully 100% then that will be looked at very positively, because the appetite to lend to the region has potentially returned."

Dubai government companies need to repay $10 billion of bonds and syndicated loans maturing in the remainder of the year, $7 billion in 2010 and $25 billion in 2011, S&P analyst Farouk Soussa said last month.  This doesn't include money owed by banks.

Dewa will get a three-year multicurrency loan including an Islamic portion which complies with the religion's ban on interest, the bankers said.  Dewa borrowed $2.2 billion last year in an Islamic loan, maturing on April 13.

Dewa's existing one-year loan, known as Ijarah, pays 30 basis points more than the London interbank offered rate.  Dubai Islamic Bank Capital Ltd, Royal Bank of Scotland Group Plc, Standard Chartered Bank and Emirates NBD PJSC are coordinating Dewa's deal.

The Dubai government will inject $350 million equity to make up for the shortfall in Dubai Civil Aviation's loan, the bankers said.  The loan expires April 15.

SOUTH AFRICA - The JSE was flat by noon while attempting to consolidate its recent big moves and waiting to get direction from the US later in the day.  By 12:04, the JSE all share index had weakened 0.29%; resources were flat, up 0.05% and platinum miners added 2.71%.  However, gold counters gave up 6.61%.

Banks were flat, down 0.05%, financials edged up 0.18% and industrials weakened 0.91%.

The rand was last bid at 9.16 to the dollar, from 9.19 when the JSE closed on Thursday.  Gold was quoted at US$902.90/oz a troy ounce from US$899.35/oz at the JSE’s last close and platinum was at US$1,157/oz from its previous close of US$1,153.50/oz.

"We are flat at the moment, but we are not doing too badly considering the big moves we have seen recently," a trader said.  "It’s a wait-and-see at the moment.  Everyone is eyeing the jobs data due out in the US later today.  But it’s looking good."

He said that the gold price had moved back and gold stocks had come under pressure, but this was not surprising as these stocks had seen some big moves recently.

"We are eyeing overseas markets, they will remain the key indicator.  We will wait and see what happens there as we see some consolidation in the market”.  “The mining houses are doing well.  Anglo American shares have been depressed and now they are flying.  Bullion is up, the platinum stocks are looking good.  Old Mutual is doing well, they are following the world market trend," he said.

TRANSPORT - Package delivery giant FedEx Corp reported a higher profit for its fiscal second quarter, meeting expectations, but announced a 20% pay cut for CEO Fred Smith and said it was suspending retirement plan contributions as the U.S. economy's outlook looks bleak.

FedEx said it has a hiring freeze in place and has cut staff levels at its FedEx Freight and FedEx Office units. 

TORONTO - Shares of BlackBerry maker Research In Motion jumped more than 20% on Friday, a day after the company surprised investors with a strong profit report and a rosy outlook for its smartphones despite a grim economy.

RIM shares rose C$13.61 to C$74.60 on the Toronto Stock Exchange shortly after the opening bell.  On the Nasdaq, the stock shot up $10.29 to $59.38.

In results that seemed to defy the global economic meltdown, RIM said retail demand was stronger than it expected after the holiday season, partly due to big promotions from phone companies.

The company's forecast also exceeded analysts' expectations.  RIM said it expects first-quarter sales of $3.3 billion to $3.5 billion, earnings per share of 88 cents to 97 cents and gross margin between 43% and 44%.It also expects to add between 3.7 million and 3.9 million subscribers.

Gross margins are currently at about 40%.

Many analysts raised their earnings estimates and stock targets to reflect the recovery in growth and margins.  For example, Caris & Company analyst Robert Cihra hiked his estimates for the year and raised his stock price target to $80 from $60.

In the fourth quarter, RIM's profit rose to $518.3 million or 90 cents a share, from $412.5 million, or 72 cents a share, a year earlier.  It added 3.9 million subscribers for a total of about 25 million subscribers.

"This quarter affirms RIM's solid fundamentals and competitive advantages, which we expect will boost RIM's global share gains versus incumbent handset vendors," RBC Capital Markets analyst Mike Abramsky said in a note.  He raised his stock price target to $80 from $75 and maintained his "outperform" rating.

Analysts had previously worried about RIM's ability to maintain momentum during the recession, a concern fed by the company's Feb. 11 profit warning.

Paradigm Capital analyst Barry Richards said that the results and forecast "should alleviate all concerns over RIM's ability to recover lost gross margins and to continue growing the business profitably."

JOHANNESBURG - A pilot fleet of electric cars are due to hit South Africa’s roads by 2010, the company which builds them said.

Optimal Energy, the company which manufactures the electric-powered ’Joule’, had received financial backing from the Department of Science and Technology and issued shares to the Industrial Development Corporation, said spokeswoman Diana Blake.

"This investment helps us to drive the industrialisation process, taking us to the next level," said Optimal Energy CEO Kobus Meiring.

"Optimal Energy is capitalising on South Africa’s technological prowess, its track record of building premium cars for the export market, the current sea of change in transport technology brought about by climate change, pollution and energy security issues, and the immense progress in battery technology," said Meiring.

After the pilot fleet is launched, the company plans to begin mass production in 2012.

Meiring said this meant the company would not be hindered by the current economic situation and there was "enormous interest" in the Joule.

"Current market conditions are slowing down the traditional manufacturers’ efforts while the market, especially for clean vehicles, is predicted to be in a strong upward swing from 2012 onwards," said Meiring.

CHINA - Acer Inc, the world's third-largest PC brand, said on Friday it expected its performance to be better this quarter than the previous, and was starting to see a longer wait for certain components.

"The second quarter will definitely be better than the first, but how much better isn't yet clear," Acer Chairman J.T. Wang told reporters, without specifying whether he was referring to shipments or profit.

"The waiting period for some components has also climbed to eight weeks from about six weeks previously, so things are not bad," Wang added, saying the longer wait applied to keyboards, printed circuit boards and some LCD screens.

Wang also said he expected to ship a million units of Acer's recently launched 10.1-inch low-cost netbook PC every month by May, in line with its previous forecast of shipping about 12-15 million netbook PCs in 2009.

The company reported recently a 17% rise in its fourth-quarter net profit as consumers snapped up its low-cost netbooks even as the global economic slowdown sapped tech spending.

Acer's comments were the latest in a string of upbeat announcements from Taiwan tech firms, with TSMC and AU Optronics starting to recall staff put on unpaid leave.

Compal Electronics, the world's second-largest contract PC maker, also said it would be increasing its workforce by about 30% by June as orders rebound.

Acer shares were down 1.26%, lagging the benchmark share index's 1.30% advance.

FRANKFURT - Shares in German automotive supplier Continental  rise 11% the second-sharpest gainer in Frankfurt's midcap index, after HSBC upgrades the stock to "neutral" from "underweight".

"Continental's share price has plummeted more than 80% since its peak in September 2008 owing to the overall industry downturn and increased refinancing risks.  But the news isn't all bad: as Q4 2008 results showed, the group's clean EBIT margin is still holding up well," the brokerage writes.

DUBAI - State-owned Qatar Airways plans to place an order for new planes in June and will add seven new destinations this year, Abu Dhabi-based newspaper The National reported on Wednesday.

The Doha-based airline will make the order during the Paris Air Show, Qatar Airway's Chief Executive Officer Akbar al-Baker told The National, without giving further details.

The airline plans to add an average of seven new routes a year over the next five years, he said.  Passenger traffic could rise by 20% to reach 14.4 million this year, he added.

Passenger growth in 2009 will be the lowest in 12 years due to the global economic downturn, he said.

KAMPALA - The World Bank approved $253 million in funding on Friday to help Uganda upgrade a crucial but pot-holed highway connecting its capital with neighbouring Kenya and much of central Africa.

The move increases the Bank's support for the Northern Corridor Transport Improvement Project (NCTIP) to $460 million.  Initial financing of $207 million for the scheme was agreed by the Bank's Executive Board in June 2004.

"These extra resources will enable Kenya to rehabilitate key sections of the northern road corridor between the Ugandan border and Nairobi," Johannes Zutt, the Bank's country director for Kenya, said in a statement.

"This road is not just important for western Kenya, but is also a vital trade link for neighbouring landlocked countries, including Uganda, Rwanda, Burundi, the eastern Democratic Republic of Congo and southern Sudan." 

LONDON - A UK gauge of services industries from airlines to insurers climbed to a six-month high in March, a sign that the recession’s grip is loosening.  An index based on a survey of about 700 service companies by the Chartered Institute of Purchasing and Supply rose to 45.5 from 43.2 in February, Markit Economics said in London on Friday.

Economists predicted 43.5, according to the median of 27 forecasts in a Bloomberg News survey. The reading stayed below 50, indicating contraction, for the eleventh month.

The report is at least the third this week to suggest that the economy may no longer be getting worse after the central bank cut interest rates to a record low and started buying bonds with newly created money.

“We’ll continue to see a contraction, but not quite at the same breakneck pace,” said Ross Walker, an economist at Royal Bank of Scotland Group in London. “We’ll need to see significant further improvement before we can be sure that policy is having the desired effect.”

UK banks may start lending more to consumers and companies in the next quarter after interest rates fell and funding loans became easier, the Bank of England said in a survey of credit conditions on Thursday. Central bank data also showed mortgage approvals rose in February to the highest level in nine months.

An index of UK manufacturing rose to 39.1 in March, the highest level in five months, and a gauge of construction increased to 30.9. The purchasing managers surveys were all still below 50, indicating contraction.

“There are suggestions that the recession is easing, that the pace of contraction is slower,” said Nick Kounis, an economist at Fortis Bank in Amsterdam. “The policy response is starting to get some traction, and the second quarter may not be as bad as the first.”

The Halifax house price report today contrasts with data yesterday from the Nationwide Building Society showing property values rose for the first time since 2007 last month. The housing market has been mired in a slump for more than a year as banks withheld mortgage finance.

“There are increasing signs that the housing market activity may have passed its worst point,” Howard Archer, an economist at IHS Global Insight in London, said in a note.

ABU DHABI - The $3 billion (Dh11 billion) raised by Abu Dhabi, part of the book-building exercise from a sovereign bond issue, is likely to ease the tight liquidity conditions currently afflicting the market, and could possibly be used to meet funding requirements in Abu Dhabi as well as other emirates.

Abu Dhabi has also announced the creation of a debt management office to handle its bond project.  Banks have reacted positively to the initial $3 billion offering.

The emirate was last week assigned an AA rating by Fitch Ratings for the inaugural bond issue, which is in line with the long-term foreign currency Issuer Default Rating (IDR) of 'AA' for Abu Dhabi.

"I have no doubt that should this bond meet the success that it deserves, the current liquidity pressure will significantly ease, hence releasing the pressure on the overall pricing.  This phenomenon will naturally have a direct and indirect impact on Dubai as well as the neighbouring regions," said Ali Afshar, senior vice-president and head of Institutional and Investment Banking Division at Al Hilal Bank in Abu Dhabi.

"It must be noted that Abu Dhabi does definitely not need to borrow $10 billion to fund their projects so in my opinion, their plan to issue these bonds during such market conditions can be interpreted as a way to ease the prevailing liquidity and pricing pressure by setting a new pricing benchmark," he added.

Abu Dhabi has not specified what the funds will be used for, but a statement by the Ministry of Finance said they would be used to support the Emirate's 2030 Economic Vision.

"One cannot help but note that a lot of money has been going to Dubai already through federal government channels.  So the current bond issuance will also help replenish some cash that was already given out to the emirate," according to Philippe Dauba-Pantanacce, senior economist for Middle East and North Africa at Standard Chartered Bank in Dubai.

"This is very interesting in the sense that this is strengthening the case of a 'one country approach' showcased recently in the various interventions from Abu Dhabi and/or the federal institutions to help Dubai.  At the end, Abu Dhabi is using its strong name to raise funds, for the benefit of the whole country," he continued.

"Abu Dhabi is starting off with $3 billion to test the appetite of the market.  There is already a healthy interest in the secondary market for the bond issue where it is trading at a premium," said the banker, who asked not to be named.

Investors have also been attracted by the coupon offer of 5.5% for the first $1.5 billion five year tranche, he said.  The second tranche of $1.5 billion has a 10-year maturity.

Last month, the Dubai government issued a $20 billion bond, half of which was snapped up by the UAE Central Bank.  Plans on raising the remaining $10 billion have not yet been disclosed.

Abu Dhabi and Qatar are leading the biggest borrowing push from the Gulf since 2006 as the global credit squeeze shows signs of easing.  Apart from Abu Dhabi, Qatar is selling $2 billion of bonds to fund companies hurt by the credit crisis.

Bahrain is also seeking to raise $500 million in Islamic bonds.  Companies and governments are returning to the capital markets as stocks, bonds and currencies from Russia to South Africa rally on mounting evidence that the worst of the global recession may be over.

The bond sales by Abu Dhabi and Qatar alone would be the most raised in any week since November 2006, according to data compiled by Bloomberg.  "This big boost in borrowing is clearly for capital injection in state-owned companies which desperately need cash," said Luis Costa, an emerging-market debt strategist at Commerzbank AG in London.  "This is an ongoing story unless we have oil shooting back to $70 a barrel.”  -

BRUSSELS - U.S. investor J.C. Flowers is interested in taking over the Luxembourg arm of crisis-hit Icelandic bank Kaupthing, Luxembourg weekly newspaper Letzebuerger Land said on Friday.  Kaupthing Bank Luxembourg was given a stay of execution of a further two months on Thursday.

The bank's creditors last month rejected a restructuring plan agreed by a group of Middle Eastern investors who had intended to buy the bank.  Kaupthing Bank Luxembourg had faced a deadline of April 8 for striking a new deal.  A court could then have ordered the liquidation of the bank.

On Thursday the commerce and business chamber Luxembourg City District Court extended the deadline for suspension of payments to June 9.

BANGKOK - Southeast Asian stocks posted healthy gains on Thursday as investors snapped up blue chips

like Singapore's CapitaLand, Malaysia's CIMB and Indonesia's Bank Rakyat as hopes for a U.S. economic recovery grew.

Singapore jumped 6% to close near a three-month high as investors piled into property shares following better-than-expected U.S. home sales data, which raised hopes the economic downturn there was moderating.

There was a big surge in the Singapore index late in the day, with developer Capital and City Developments both soaring nearly 11%.  Keppel Land jumped 8% and HongKong Land 3.5%.

Banks were also among the advancers, with the biggest, DBS, up 6.5%, UOB rising 7% and OCBC 5.2% higher.  Asian stocks in general rose on Thursday, with investors taking heart from efforts to reflate economies around the world, against the background of the Group of 20 summit in London, looking at ways to overcome the crisis.

"Risk appetite came back as continued quantitative easing and a new plan to recreate a market for banks' toxic assets encouraged bargain-hunting in the most sold-off sectors," Nicolas Michelson, an analyst at Schroders, said in a note.

In Malaysia, the Kuala Lumpur composite index built on gains from Wednesday, adding 2.4% to close at its highest since Feb. 17, while the Indonesian benchmark index added 2.6% to end at its highest since Oct. 15.  

Thai shares jumped 3%, more than reversing a 0.3% loss on Wednesday despite concerns over intensifying anti-government protests.  The Philippine index snapped a three-day fall, adding 0.8%, led by a 4% rise in top lender Metropolitan Bank & Trust Co. Vietnam rose for a second day, up 2.7% at a two-month high of 297.30.  

In Kuala Lumpur, the index was buoyed by lender CIMB, which surged 5.7%, and heavyweight palm planters such as IOI Corp, which jumped 4% as Malaysian palm oil futures hit a six-month high.

Palm planters elsewhere in the region also rose.  Thailand's United Palm Oil rose 1.1 percent, Singapore's Wilmar International added 3.5% and Indonesia's Astra Agro Lestari gained 5.8 percent.

Indonesian banking stocks extended Wednesday's gains.  The country's third largest bank, PT Bank Indonesia, added 7.7%, while top lender PT Bank Mandiri rose 6.7%.  PT Bank Danamon, the fifth largest, was up 4%.

In Bangkok, banks and energy firms were among the big gainers, with Bangkok Bank up 5.3% and top coal miner Banpu up 3.8%.  But cash-strapped national carrier Thai Airways International THAI.BK fell 2% despite forecasting a return to profit in 2009 as it implements a new business plan.

LONDON - London's FTSE 100 index closed down sharply on Friday but still ended the week up 3.4% after grim US jobs figures prompted investors to book profits from the G20 bounce.  The blue chip index, which was trading sideways until just after lunch, closed down 95.3 - or 2.3% - at 4029.2.  

Miners, which have had a good run over the past few days, dominated the fallers with Randgold Resources sliding 5.6% to £35 and Eurasian Natural Resources losing 5.2pc to 487p.

European stocks and Wall Street faltered after data showed U.S. unemployment hit 8.5% in March, its highest level since 1983, as employers slashed 663,000 jobs.

On Thursday, the UK index rallied 4.3%, lifted by hopes that pledges by G20 leaders to tackle the financial crisis would bear fruit and that a relaxation of accounting rules in the United States would ease the strain for banks.  But the weak employment data refocused investors on the fragile state of the global economy.

"These unemployment numbers are providing a bit of a reality check.  We've seen a correction after the rally this week," said Philip Gillett, sales trader at IG Markets.

Energy stocks weighed heaviest on the index as the oil price CLc1 retreated on worries on the demand outlook.  BP, Royal Dutch Shell, BG Group, Tullow Oil and Cairn Energy fell between 1.4 and 3.2 percent.

Defensive stocks such as food retailers, cigarette makers, drugmakers and utilities took a beating after the index rallied 19% from its low hit on March 9.  Tesco, Morrison Supermarkets, AstraZeneca, British American Tobacco and National Grid slipped 3.1 to 4.7%.

In the UK, house prices fell 1.9% in March, taking the three-month annual rate of decline to 17.5%, the first improvement on this measure since August 2007, according to the Halifax house price survey.

Meanwhile, the rate of contraction in Britain's service sector eased in March to its slowest for six months, though companies shed jobs at their fastest pace for over a decade, a survey showed.

Banks were mixed.  Royal Bank of Scotland jumped 8.5% ahead after the part-nationalised bank said it would cut more jobs, and promised a return to paying dividends "as soon as practicable" and a comprehensive review of remuneration.

Lloyds Banking Group, Barclays gained 3.5 and 1.2% respectively, but HSBC fell 5.3% as it closed its rights issue.  Although it is thought that the rights issue was more than 90% subscribed, investors were braced for those shares not taken up to be placed on the market on Monday.

Insurers were also mixed, with Aviva, which announced job cuts on Thursday, up 4.6%, but Standard Life fell 1.46%.  Johnson Matthey advanced 2.9% after Credit Suisse upgraded the platinum specialist to "outperform" from "neutral".

British Airways rose 6%, shedding part of earlier steep gains as investors digested weak passenger numbers for March and a cut in revenue expectations.

Thomas Cook Group added 8.4% after Citigroup upgraded the European travel and leisure sectors to "overweight".

EUROPE - European shares closed lower on Friday, with drugmakers and oils falling, after unemployment data from the United States provided further evidence of recession.

The pan-European FTSEurofirst 300 index of top shares fell 1.4% to a provisional close of 770.71 points.  The index rose 7.1% over the week, and is up more than 19% from its lifetime low of March 9.

The U.S. economy lost 663,000 jobs in March, according to government data.  The unemployment rate is now 8.5%, in line with forecasts.  But some forecasts had been as high as 750,000.

"After the euphoria of the G20, some economic reality has kicked in," said Philip Lawlor, chief portfolio strategist at Nomura, in London.  "We had a good run and some people have decided to lock profits in."

Drugmakers were among the biggest losers.  Novo Nordisk slumped 13.7% after a U.S. advisory panel failed to back its experimental diabetes drug Victoza, or liraglutide, with votes split on whether it was safe enough to come to the market due to worries over cancer.

AstraZeneca, GlaxoSmithKline, Sanofi-Aventis, Novartis and Roche were down between 2.2 and 5.4 percent.  The oil sector also retreated with crude prices CLc1 down nearly 3% at just over $51 a barrel.  BP, BG Group, Total), ENI, and Statoil were down between 2.6 and 3.8%.

Carmakers Daimler, Peugeot and Renault were among the biggest risers, up between 6.1 and 10.5%, after Credit Suisse upgraded the sector to overweight from market weight.

Across Europe, the FTSE 100 index was down 2.3%, Germany's DAX was flat and France's CAC 40 was down 1.3%.

NEW YORK - U.S. stocks should rally further next week, if investors get more signs that the economic slump is abating and earnings season does not get off to a rocky start.

Alcoa Inc will report results on Tuesday in the unofficial start of first-quarter company results.  But given that the aluminum producer is expected to post another loss, the outlook it provides will be key to investor sentiment.

In the holiday-shortened week, volume could be light, raising the specter of increased volatility as investors look to string together a fifth straight week of gains. Many market participants are likely to be out of the office next week, when Passover begins. Markets will be closed on April 10 for the observance of Good Friday.

After investors got a boost in recent weeks from economic reports suggesting that the grip of the 16-month-old recession may be easing, analysts said stocks probably would make further headway.

The benchmark S&P 500 ended on Friday up 24.5% from a 12-year low hit in early March.

The broad market's recovery from that significant low helped to propel the Dow Jones industrial average to its best 4-week advance since 1933.  On Friday, the Dow closed back above 8,000 for the first time since early February. 

For the week, the Dow advanced 3.1%, the S&P 500 rose 3.3% and the Nasdaq climbed 5%.

"I think we've still got quite a bit of room on the upside," said William Stone, PNC Wealth Management's chief investment strategist in Philadelphia. "We seem to have become medicated in March and into early April and have shrugged off some negative numbers," he said.

"The medication was that expectations on the economy got low enough that we were able to get some numbers that while ugly, are a bit better than expected," Stone added.

The highlights of next week's economic releases include Wednesday's minutes from the Federal Reserve's March 17-18 policy meeting at which it decided to pump an additional $1 trillion into the U.S. economy, partly by buying government bonds for the first time since the 1960s.

On Thursday, the government will release data on the latest weekly jobless claims and the international trade deficit for February.

Besides that, investors will keep tabs on any rhetoric out of Washington as the Obama administration works to prop up the banks and drive initiatives for economic recovery.

"The last couple of weeks, we have been seeing a few green shoots of slightly better macro data," said John Praveen, chief investment strategist at Prudential International Investments Advisers in Newark, New Jersey. The market will be looking for "follow-up on whether we are going to have an improvement in the macro data."

Also set to command attention: The U.S. Securities and Exchange Commission will meet on Wednesday to consider an updated version of the so-called uptick rule to regulate a type of trading blamed for dramatic declines in stocks. 

Indices

Exchange:                    FTSE 100 Index

Price:                           4,029.67

Today's Change:          -95.30 (-2.31%)

Prev Close:                  4,124.97

52-Wk High:                  6,377.00

52-Wk Low:                  3,460.71

Exchange:                    DJ INDUSTRIAL AVERAGE

Price:                           8,017.59

Today's Change:          +39.51 (0.50%)

Prev Close:                  7,978.08

52-Wk High:                  13,136.70

52-Wk Low:                  6,469.95

Exchange:                    NIKKEI STOCK AVERAGE 225

Price:                           8,749.84

Today's Change:          +30.06 (0.34%)

Prev Close:                  8,719.78

52-Wk High:                  14,601.30

52-Wk Low:                  6,994.90

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