Forex Investment

LONDON (Thomson Financial) - The euro remained near its new all-time high against the yen and close to its record against the dollar despite the US currency’s rally today.

The European single currency recorded its new yen high of 162.53 yen on expectations strong growth would lead to further interest rate rises for the 13-nation single currency euro zone.

Carry trades, where money is borrowed in countries with low interest rates like Japan to be invested in higher-yielding economies, have grown increasingly popular as the BoJ has taken a cautious approach in raising interest rates.

The euro has also been firm against the dollar and is not far off another attempt at the 1.3666 usd high achieved in December 2004 despite today’s dollar recovery.

Currency players have driven the euro higher in recent months on growing expectations of further interest rate rises by the European Central Bank, with most economists forecasting a quarter point hike to 4.00 pct in June. Meanwhile, the US Federal Reserve is widely expected to start cutting its key Fed funds rate from the current 5.25 pct some time this year because of soft economic data.

The narrowing of this yield differential makes the euro more attractive.

“The European market focus remains focused on the relative outlook for growth, inflation and interest rates in the US and Europe, as the key to unlocking the door between comparative performance between US and European bonds, and the euro and the dollar,” said Steve Barrow, currency strategist at Bear Stearns.

“Right now the market perception of growth is looking less clear-cut in the US, while the European outlook goes from strength to strength,” he added.

Elsewhere, the dollar’s recovery pushed the pound way below 2 usd despite rumours the UK’s biggest bank HSBC is having to buy up to 5 bln stg in dollars in order to meet its dividend commitments and another firm housing market survey from the Nationwide, the UK’s largest building society.

The market is now fully pricing in another interest rate hike from the Bank of England next month to 5.50 pct after CPI inflation jumped to a 15-year high of 3.1 pct in March and the UK economy continues to grow above its long-run average.

Steve Pearson, currency strategist at HBOS, noted that since 1982, the pound has spent little time trading at a rate higher than 2 usd. In fact, he said these previous episodes show the pound at or above 2 usd for only 10 days.

London 1620 GMT London 1139 GMT

US dollar

yen 119.48 up from 119.30

sfr 1.2083 up from 1.2080

Euro

usd 1.3593 down from 1.3598

yen 162.47 up from 162.45

sfr 1.6428 down from 1.6432

stg 0.6830 up from 0.6822

Sterling

usd 1.9902 down from 1.9931

yen 237.85 down from 237.91

sfr 2.4051 down from 2.4077

Australian dollar

usd 0.8256 down from 0.8296

stg 0.4148 down from 0.4161

yen 98.69 down from 99.03

pan.pylas@thomson.com

pp/slm

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Computer makers and telecom issues lead a rebound from an early sell off, pushing the Nasdaq to positive ground and most averages back to even.

At 11:15 a.m. ET, the Nasdaq is up 0.7%. The S&P 500 is up 0.1% while the Dow and NYSE composite were even.

Asian exchanges showed upbeat trading. In Asia, China’s Shanghai composite rose 1.1% while the smaller Hang Seng index gained 2%. Tokyo’s Nikkei 225 added 0.9%. European stocks rose sharply in early trade, then tapered off as concerns regarding European exposure to U.S. credit markets overtook optimism of a Fed rate cut in the U.S. London’s benchmark FTSE 100 settled to a 0.5% gain late in the session.

Sigma Designs () gapped up on massive volume, gaining 5.90 to 44.53. The media chipset maker reported after Wednesday’s close its Q2 EPS topped views by 37%. Sales grew in triple digits for a 6th straight quarter. The move launched the stock well into new highs, and left the stock 25% above the 35.82 buy point on a recent pullback to its 10-week moving average line.

Celgene () spiked up 1.71 to 63.51. The cancer therapy developer continues to hammer home triple digit EPS growth and high double-digit sales growth, but the stock is late stage.

Intuitive Surgical () ticked up 3.39 to 218.97. The stock is in the fifth week of what could be a cup-shaped base.

Research In Motion () notched up 1.75 to 83.57 on solid volume. The maker of Blackberry handheld devices was toying with new highs, 7% above the 78.76 buy point on a pullback to the 10-week moving average line.

Downside stocks included Aluminum Corp. of China (), which slipped 2.35 to 65.02. The move gave back a small portion of gains earned in the back and forth trading surrounding many China-based stocks this week. Shares remained 23% above the 52.72 buy point on a recent pullback to its 10-week moving average.

10:15 a.m. ET Update: Stocks Open Lower, But Fighting Back

By Ed Carson

Stocks sold off at the open but quickly pared losses.

At 10:06 a.m ET, the Nasdaq was up 0.2% after falling 0.8% in the early going. Meanwhile, the S&P 500 and Dow are down 0.4%.

On Wednesday, the Nasdaq jumped 2.5% as volume edged up 1% vs. the prior day. That qualified as a follow-through day on Day 10 of the Nasdaq’s rally.

Past studies show that major market advances need a follow-through day. But they sometimes fail. When they do, they typically suffer some heavy-volume selling early on. That’s what happened to the Dow’s follow-through earlier this month.

Mortgage woes continued to hit many companies.

H&R Block () fell sharply after releasing weak results and saying it may have to shut its Option One mortgage unit. H&R is in talks to revise its deal with private equity firm Cerebus, but that may fall through. H&R’s CEO said the mortgage market may be the worst since the 1930s.

Freddie Mac () declined after the gov’t-sponsored mortgage finance giant set aside $320 mil for credit losses. Democrats want to expand the size and scope of Freddie and its sister firm Fannie Mae (), but the Bush administration and the Fed worry that they’re too big already. Both were down about 3%.

Countrywide Fin’l () continued to slide. Credit Suisse was the latest analyst to slash price targets, saying the No. 1 U.S. home lender will post a loss this year.

Hovnanian () rose modestly. The home builder’s CEO said the U.S. is in danger of falling into recession and called on the Fed to cut rates.

Vimpel Communications () rose to a new high after the Russian wireless operator said Q2 net rose 84% as revenue swelled 54%. Shares rose 3%.

Rival Mobile Telesystems () also climbed.

Tiffany () rose after upscale jewelry retailer reported strong results.

But most retailers were generally weak.

Wal-Mart () fell after Merrill Lynch tagged a “sell” rating on the world’s largest retailer, citing a weak back-to-school season.

Sears Holding () beat profit views, but sales fell and gross margins missed targets.

Coldwater Creek () tumbled 22% after the women’s apparel chain missed views and cut guidance. Rival Chico’s () also sold off after its results.

On the upside, Taser Int’l () rose after a Merriman Curhan Ford analyst upgraded the stun-gun maker, saying it faces no real competition and has a lot of room to increase its sales.

9:15 a.m. ET Update: Futures Point To Lower Open

By Vincent Mao

Stock futures pointed to a weaker open Thursday. The Nasdaq is -6 points vs. fair value, the S&P 500 -10 and the Dow -72.

In economic news, the economy grew 4% in the second-quarter, up from a prior estimate of 3.4%. But that was a tad below estimates of 4.1%.

Jobless claims rose for a 5th straight week to 334,000, the highest since mid-April. That fits the picture that financial market woes are affecting the real economy, making rate cuts more likely.

Fed Chairman Ben Bernanke will be speaking in Jackson Hole, Wyo. Friday.

Due to volatility in the credit markets, Lehman Bros () lowered earnings estimates for several of its investment bank peers, including Merrill Lynch (), Goldman Sachs () and Bear Stearns (). “We believe that third-quarter earnings will be significantly impacted by the dislocation in the credit and asset-backed/mortgage markets, only partially offset by strength in currencies, rates and commodities as well as decent equities comparisons and favorable investment banking conditions at least through July,” Lehman said.

Ciena () fell 3% in pre-market trading. The maker of network communications equipment swung to a profit in its fiscal third quarter.

Enso International () dropped 2% in the preopen. The provider of drilling services expects flat Q3 revenue, down from a prior forecast of 3% growth. But the company raised its buyback program by $500 million and declared a quarterly dividend of 2.5 cents a share.

Heico () late Wednesday said fiscal Q3 earnings hiked up 33% to 40 cents a share, 3 cents above views. The aircraft components maker guided full-year earnings between $1.40 and $1.43 a share vs. views of $1.41. Sales are pegged at $490 million to $493 million.

Sigma Designs () surged 14% in the premarket. Late Wednesday, the chipmaker reported second-quarter profit of 48 cents a share, up 433% from a year ago, easily beating views.

BEIJING (XFN-ASIA) - China’s central bank said it will promote gradual reform of the yuan in 2007, while aiming to keep the currency “basically stable.”

In a statement ahead of a speech to be delivered by central bank governor Zhou Xiaochuan, the bank said it will also study the use of over-the-counter yuan derivatives.

In 2005, China freed the yuan from its long-standing peg to the dollar in favor of a trade-weighted basket of currencies, but some critics say the Chinese currency still is not appreciating fast enough.

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An international scramble for the Arctic’s oil and gas resources accelerated yesterday when Canada responded to Russia’s recent sovereignty claims with a plan to build two military bases in the region.

On a trip to the far north, the prime minister, Stephen Harper, said: “Canada’s new government understands that the first principle of Arctic sovereignty is: use it or lose it. Today’s announcements tell the world that Canada has a real, growing, long-term presence in the Arctic.”

An army training centre for 100 troops is to be built in Resolute Bay, and a deep-water port will be built on Baffin Island, to bolster Canada’s claim to ownership.

The move comes a week after a Russian sub planted a flag on the Arctic seabed. Moscow claims rights to half the Arctic. The US, Norway and Denmark also have claims.

A US state department official, speaking last week, signalled that Washington will not stand by in the face of what it sees as a Russian land-grab, though America’s position is complicated by its failure so far to sign the treaty of the seas.

As Canada was making its move, Danish scientists were preparing to head for the Arctic tomorrow as part of their bid for a share of the region’s wealth. A US coast guard icebreaker was heading to the Arctic to map the seafloor north of Alaska.

Although the US and Canada enjoy good relations, the American ambassador to Canada, David Wilkins, has expressed annoyance with the prime minister’s claims in the past.

No country owns the Arctic Ocean and north pole, but there are international laws governing its use. Under one UN convention, each country with a coast has sole exploitation rights in a limited “exclusive economic zone”, beyond which mineral resources are controlled by the International Seabed Authority. However, upon ratification of the UN convention, each country was given a 10-year period within which to make claims to extend its zone. Norway (ratified in 1996), Russia (1997), Canada (2003), and Denmark (2004) have all launched claims that certain Arctic sectors should belong to their territories.

The UN’s ruling on these submissions will determine who gets the right to extract the Arctic’s huge reserves of oil and gas, estimated at 10bn tonnes.

Arguments over the Arctic were until recently academic because of the depth of the ice, but global warming has seen some of it melt, making drilling feasible. The US geological survey estimates that 25% of the world’s undiscovered oil and gas could be located under the polar cap.

Speaking in the shelter of a hut in Resolute Bay, Nunavut, Mr Harper said: “Protecting national sovereignty, the integrity of our borders, is the first and foremost responsibility of a national government, a responsibility which has too often been neglected.”

Last month, he announced that six to eight navy patrol ships will be built to guard the Northwest Passage sea route in the Arctic, which the US insists does not belong to Canada.

Russian researchers claim the Lomonosov ridge, a 1,240-mile underwater mountain range. Denmark, which owns Greenland, is claiming the same landmass, saying the Lomonosov ridge is an extension of its territory.

“The preliminary investigations done so far are very promising,” Helge Sander, Denmark’s minister of science, technology and innovation, told Denmark’s TV2 on Thursday. “There are things suggesting that Denmark could be given the north pole.”

Christian Marcussen, of the Geological Survey of Denmark and Greenland, said: “We will be collecting data for a possible demand.”

The US’s position is complicated because the Senate has refused since the 1990s to ratify the 1982 UN convention on the law of the sea, mainly because Republican senators refused to recognise the right of the United Nations to broker it.

Under the convention, countries are entitled to control any waters above landmasses which extend from their continental shelf, the basis of the Russian and Danish claims to the Lomonosov ridge. If the US operated on the same principle, it would be able to claim half of the Arctic.

There is a sense of alarm in the US administration at the possibility of a missed opportunity, and President George Bush in May broke ranks with Republican senators in support of ratification. New hearings in the Senate foreign relations committee will be held in the autumn.

ATHENS (Thomson Financial) - Greece’s January to February merchandise trade deficit rose 20.5 pct to 5.799 bln eur from 4.814 bln eur in the same period a year earlier, according to provisional data from the National Statistical Service (NSS) of Greece.

First two month imports, excluding services, were up 18.1 pct year-on-year to 8.534 bln eur, from 7.227 bln eur in 2005.

Exports, also excluding services, were up 13.3 pct year-on-year to 2.734 bln eur, from 2.412 bln eur in January 2005.

Source: Euro2day.gr NewsWire

nick.skrekas@thomson.com

ns/cmr

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Copyright AFX News Limited 2007. All rights reserved.

The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.