International
Market News: Markets in Europe rise on Tuesday; Alibaba more than doubles value in Hong Kong; Euro hits new high against US dollar; Gold at 28-year high
By Finfacts Team
Nov 6, 2007, 08:51

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As expected, Wall Street was dominated on Monday by the weekend fallout at Citigroup from the subprime crisis and fears over the uncertainty about the level of continued exposure to mortgage securities at financial firms.

The Dow Jones Industrial Average fell 51.70 points, or 0.38%, to 13543.40. However, the index had been down as much as 148.19 points in late afternoon trading following rumours that investment bank Goldman Sachs was planning to announce subprime-related losses. The market however recovered when business television channel CNBC broadcast a denial by Goldman.

Financial stocks still took a battering with Goldman Sachs and Citi both closing down  4.9% and Morgan Stanley shares fell 5.6%.

Shares in the Chinese online e-commerce/web service Alibaba more than doubled on their debut in Hong Kong.

The sale of 17% of its shares raised €1.030bn at a sale price of HK13.5 dollars per share.

At the end of the morning session they had risen to HK$35.75, giving Alibaba a market value of £11.2bn.

The initial sale price valued Alibaba at 106 times its forecast 2007 earnings, which was a significant premium to most other firms including internet stocks.

EBay trades at 24 times earnings and Google has a price/earnings ratio of 46.

Two years ago, Yahoo! invested $1bn in Alibaba for a 39% stake.

In Tokyo, the Nikkei 255 closed slightly down following a gloomy report on the outlook for Japan's economy.

In Hong Kong, the Hang Seng Index rose 1.76% while in Shanghai, the CSI 300 index fell 0.80%.

Benchmarks rose in India, Korea and Australia.  Key benchmarks  - Asia

Following sharp falls In Europe on Monday, markets in Europe are up Tuesday morning. In Dublin, the ISEQ index has risen 0.49%.

German car manufacturer BMW announced today that third-quarter profit rose 78%, boosted by new versions of the X5 SUV and the Mini in addition to a tax credit.

Net income increased to €803m or €1.22 a share from €452m or 69 cents, BMW said today in a statement. Sales rose 19% to €13.8bn.

BMW launched the US-built X5 and the Mini at the end of 2006 and is increasing production to meet demand for the new vehicles.

National benchmarks -  Europe

Irish Share Prices

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.4520 and at £0.6955.

The dollar fell to a record low against the euro expectations that finance firm woes will result in the US Federal Reserve cutting interest rates for a third time this year.

Fed Governor Randall Kroszner remarked on Monday that conditions for subprime-mortgage borrowers may get worse.

The currency fell to an all-time low of $1.4531 against the euro.

The US dollar's year-to-date decline against the following currencies are:. -21.9% Brazilian real; -20% Canadian dollar; -9.7% Euro; -4.1% Japanese yen.

For live currency updates, check the right-hand column of the Finfacts home page. 

Commodities

Crude oil for December delivery is trading on the New York Mercantile Exchange (Nymex) at $95.08 a barrel - up $1.10 overnight. In London, Brent is trading on the International Commodities Exchange at $91.50, up $1.01.

Gold spot price

The spot price of gold is at $814.10 per ounce up $7.00 overnight.

Credit Suisse warning Monday that supply and demand factors “could trigger a quantum upward change in the gold price”.

David Davis, a research analyst at the bank said:  “Our studies indicate that the dynamics surrounding the gold supply and demand have begun to change inexorably towards a diminishing supply of gold and increasing investment demand, which will ultimately impact the gold price.”

The prediction is based on the assumption that “long term global gold production will begin to decline as the diminishing number of new reserves fail to compensate for dying mines”.

Mark O'Byrne, Director of Gold and Silver Investments Ireland, commented on Monday:  

Gold's trend remains up and the path of least resistance is to the upside. In the short term gold remains slightly overbought but the massive gold short positions are exposed to losses in the billions and the shorts will likely take opportunities to close their short positions on any dip in the gold price which will be supportive of gold. The 5 week moving average is at $774 and this should provide strong support and be used to buy on the dips.

Bloomberg reports that sixteen of 28 traders, investors and analysts surveyed from Sydney to Chicago on Nov. 1 and Nov. 2 advised buying gold. Seven said to sell, and five were neutral. A majority of analysts surveyed Oct. 25 and Oct. 26 anticipated last week's gain. The survey has accurately forecast the direction of prices in 114 of 184 weeks, or 62 percent.

John Dizard writing in the FT today ('Treading the foothills of a gold bull market' ) outlined why he believes that we remain in the early stages of the gold bull market with a long way to go yet. Primarily this is because the mass of investors have yet to partake in the gold bull market and because the Fed is going to have to reinflate further which will be bearish for the dollar and as gold remains an important monetary instrument it will be bullish for gold. "So, even at about $800 an ounce, the real gold bull market has not begun."

Despite gold reaching new record 28 year highs above $800 the sentiment towards gold remains lukewarm at best. Most of the UK, Irish and international financial press and media barely covered or ignored this significant development at the weekend. This, and the fact that the investment public remain unaware of the gold price and the merits of investing in gold are classic contrarian indicators which show that gold remains in the early stages of its bull market. When gold is covered as headline news in newspapers on a daily basis and articles appear regularly about the merits of investing in gold and how to invest in gold, then it will be the later stages of the bull market and an indicator that it may be time to sell.

When stockbrokers start telling their clients and the wider investment public to buy the gold ETFs, it will be time to sell. When there are gold and commodities supplements alongside property supplements in major newspapers it will be the time to sell. When the topic du jour on the dinner party circuit is "how great my gold investments are performing," it will definitely be time to sell. 

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