Overnight Market Commentary

sg.biz.yahoo.com Monday January 20, 4:54 AM

                     Latest     Change   %Change    %12/31

New York DJ Indus 8586.74 -111.13 -1.28 +2.94 Jan 17 Nasdaq 1376.19 -47.56 -3.34 +3.05 Jan 17 NYSE Comp 5108.51 -56.83 -1.10 +2.17 Jan 17 S&P 500 901.78 -12.82 -1.40 +2.50 Jan 17 Russell 2000 388.10 -6.78 -1.72 +1.31 Jan 17 Wilshire 5000 8530.32 -120.65 -1.39 +2.24 Jan 17 Toronto TSX 300 6755.92 -71.10 -1.04 +2.14 Jan 17 London FTSE 100 3820.60 -61.20 -1.58 -3.04 Jan 17 FTSE 250 4321.70 -27.80 -0.64 +0.06 Jan 17 Frankfurt Xetra DAX 2918.82 -135.29 -4.43 +0.91 Jan 17 Paris CAC40 3056.93 -85.66 -2.73 -0.23 Jan 17 Tokyo Nikkei 225 8690.25 +81.08 +0.94 +1.30 Jan 17 Nikkei 300 168.39 +0.57 +0.34 +1.78 Jan 17 Hong Kong Hang Seng 9614.59 -128.64 -1.32 +3.15 Jan 17

NEW YORK STOCKS:

Stung by downbeat economic reports, a poor showing by two key technology stocks and geopolitical concerns, U.S. stocks staged a retreat Friday.

The Dow Jones Industrial Average shed 111.13, or 1.28%, to close at 8586.74. The Nasdaq Composite Index dropped 47.55, or 3.34%, to end at 1376.20. And the Standard & Poor's 500-stock index fell 12.82, or 1.4%, to 901.78.

ADVERTISEMENT The decline in stock prices came on the heels of economic-data releases that showed an unexpected decline in industrial production in December and waning consumer confidence. Add to that worries over the Iraq situation and a lackluster showing by tech bellwethers and Dow components International Business Machines and Microsoft - IBM fell 5.5% and Microsoft lost 7% - and the end result wasn't pretty.

For the week, the Dow industrials lost 2.26%, while the Nasdaq index shed 4.94%. Both indexes, though, are still up for the year.

"After the first two weeks of the year, I was full of confidence. Quite frankly, this week has hurt not only my confidence, but also the confidence of many investors," said Hugh Johnson, chief investment strategist at First Albany. "The message is fairly clear: Investors are now not so sure that the economy is going to strengthen in 2003."

On the New York Stock Exchange, there were 1,103 issues advancing, 2,143 declining and 158 unchanged.

NYSE volume totaled 1,346,306,020 shares, compared with 1,476,120,850 Thursday.

The NYSE Composite Index was 5108.51, down 56.83. The average price per share fell 26 cents.

NEW YORK PRECIOUS METALS:

Comex gold futures eased slightly Friday on light long liquidation and week-end profit taking - but nevertheless ended the session with the highest end-of-week close in the contract's history and near six-year highs on the spot market.

The most-active Feb contract settled at US$356.80 per ounce, down US$1.30 on the day.

Extended U.S. dollar weakness relative to other currencies, equity market wobbles and taut geopolitical tensions contributed to gold's recent sturdiness and the scaling of the six-year highs of US$359 scored Thursday.

Also helping prices has been a recent reluctance of dealers to establish short positions in the metal amid the current uncertain times and particularly ahead of the approaching U.S. long weekend.

However, some profit taking by speculators and banks was noted Friday to trim Feb gold's recent gains - although prices remained above the US$355 level throughout.

Spot gold followed a similar path, ending the week around US$356.50 which is the highest end-of-week close since February 1997.

Dealers said gold prices are set to remain prone to spurts higher on any further geopolitical shocks as long as the dollar remains on its southerly path and uncertainty shrouds the global economic outlook.

However, according to the latest Commitments of Traders Report, the speculative community is currently hosting historically high net-long exposure to the market (of over 63,500 contracts), so some players are concerned that the funds' appetite for further buying may be waning.

"There's always alarm bells ringing when (fund) net length gets to historic levels and that usually precedes a reversal in price movement," said a floor dealer with a precious metals refiner.

"The only problem now is that is makes good sense to be long and would be dangerous to go short, so most people don't really know what to do except to keep going with the flow - and the flow is higher," he added.

Beyond the US$360 level the next key areas of resistance are deemed to be at US$363, US$365 and US$370.

Mar silver was 2.5 cents lower at US$4.81 in accord with gold's tone, after having tread water in a US$4.785-4.840 range through the day.

Resistance for Mar is seen at the 10-day moving average around the top end of the intraday range at US$4.835 initially and then at the US$4.85 level. Support is expected around US$4.77, US$4.75 and the 30-day moving average around US$4.745.

Nymex Apr platinum was US$4.70 higher at US$619 after light fund buying amid thin conditions pushed prices to fresh contract highs and register the highest week-end close on the spot market since April 2001.

Dealers said a promising demand and uncertain supply outlook will continue to steer prices higher over the coming weeks, although some light long liquidation is expected to appear into the strength.

Mar palladium crept higher in platinum's slipstream and settled at four- day highs of US$258, but is not expected to extend those gains over the coming days given palladium's less stellar demand forecasts.

Settlements: London PM Gold Fix: US$357.00, Vs US$352.30 Thursday PM Fix U.S. spot gold 1345 ET: US$356.47, down US$0.78; Range US$355.20-358.60 Feb gold (RGCG03) US$356.80, down US$1.30; Range: US$355.30-358.70 Mar silver (RSIH03) US$4.810, down US$0.025; Range: US$4.785-4.840 Apr platinum (RPLJ03) US$619.00, up US$4.70; Range: US$617.00-621.00 Mar palladium (RPAH03) US$258.00, up US$7.50; Range US$255.00-260.00

NYMEX:

Worries about a possible war with Iraq lifted U.S. crude oil futures to US$34 Friday for the first time since November 2000.

Profit taking pushed prices down through most of the session. But with growing talk of a U.S. attack on Iraq, traders concluded it was too risky to short crude futures ahead of the long weekend, analysts said.

"In general, we know that things are moving forward on the war front," said Tom Bentz, an analyst at brokerage house BNP Paribas Futures in New York, alluding to a massive U.S. troop buildup in the Persian Gulf. "That will continue to lend support" to the market.

On the New York Mercantile Exchange, nearby February crude climbed to a high of US$34.00 a barrel, the highest for a front-month contract since November 2000, before settling at US$33.91, up 25 cents. The contract had fallen as low as US$32.90 earlier in the session.

Heating oil and gasoline futures also recovered from earlier losses. February heating oil closed up 19 points at 89.86 cents a gallon after falling as low as 87.40 cents. February gasoline futures edged up 35 points to close at 91.11 cents a gallon, well off its intraday low of 88.00 cents a gallon.

On London's International Petroleum Exchange, Brent and gasoil futures ended in negative territory.

March North Sea Brent futures slipped 4 cents to close at US$30.54 a barrel. February gasoil futures dropped US$5 to settle at US$256.75 a metric ton.

Comments by U.S. Secretary of State Colin Powell heightened worries that the U.S. is edging close to an invasion of Iraq, Bentz said.

Powell was quoted by Germany's Sueddeutsche Zeitung newspaper as saying that "we believe a persuasive case will be there at the end of the month that Iraq is not cooperating" with U.N. weapons inspectors.

U.N. weapons inspectors are scheduled to report to the Security Council on Jan. 27 on Iraq's weapons of mass destruction program and Iraq's cooperation with the inspection.

Chief weapons inspector Hans Blix said Thursday that Iraq must cooperate more fully with inspectors to avoid war. The comment helped lift crude oil prices.

Iraq has declared itself free of weapons of mass destruction.

But U.N. officials say the declaration contains many gaps, while U.S. officials contend it is false.

U.N. inspectors reported finding 12 empty chemical warheads outside Baghdad on Thursday, a discovery some analysts say could provide the U.S. with a justification to launch an attack against Iraq.

The recent developments make war with Iraq increasingly inevitable, said analyst Peter Beutel of Cameron Hanover in Connecticut.

"Yesterday's discovery of empty missile shells is being discussed as the possible 'smoking gun' that will lead to war," Beutel said. "If it is not, something else almost certainly will."

Concerns about a possible war with Iraq come at a time when Venezuelan oil output remains crippled by a prolonged strike in the Latin American country.

Despite attempts by the embattled government of President Hugo Chavez to restore oil operations and optimistic predictions by other government officials, analysts believe it would take months for Venezuelan production and exports to return to normal.

"Even if there is a quick compromise or resolution of the crisis, a lot of the fields are fairly mature and it's going to be difficult to restart those wells," said Antoine Halff, an analyst at the Paris-based International Energy Agency. "How is Venezuela going to afford it? That problem isn't going to go away, it's going to get worse probably."

Fear that both Venezuelan and Iraqi oil supplies could remain curtailed at a time when U.S. crude oil inventories are at historically low levels is likely to keep prices high in the near term, Bentz of BNP Paribas said.