US & World Daily Markets Financial Briefing 01-06-2007

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Stocks Rise Amid Strong Jobs Growth

NEW YORK - Stocks rose in early trading Friday as investors found reason for optimism from stronger-than-expected job creation in May and signs of easing inflation.
   
Wall Street was pleased to see that nonfarm payrolls rose by 157,000 last month, a bigger increase than in April and more than analysts anticipated. The unemployment rate held steady at 4.5 percent, as expected, according to the Labor Department report.
   
Investors have been trying to glean from recent economic data any clues about the future of the economy and the direction of interest rates. The market hopes a slowing economy will prompt the Federal Reserve to eventually lower rates, but at the same time it wants growth to bounce back later this year -- and it views a steady job market as a key component to recovery.
   
And assuaging some fears about inflation was the Commerce Department's report Friday of a slight decrease in the year-over-year core index of personal consumption expenditures, which strips out energy and food prices. The year-over-year core PCE registered at 2.0 percent in April, down from 2.1 percent and within the Fed's comfort zone of 1 to 2 percent.
   
In the first hour of trading, the Dow Jones industrial average rose 43.64, or 0.32 percent, to 13,671.28.
   
Broader stock indicators also gained. The Standard & Poor's 500 index rose 7.19, or 0.47 percent, to 1,537.81, and the Nasdaq composite index rose 17.14, or 0.66 percent, to 2,621.66.

The Russell 2000 index of smaller companies rose 7.59, or 0.89 percent, to 854.73. In afternoon trading, Britain's FTSE 100 rose 0.37 percent, Germany's DAX index rose 1.27 percent, and France's CAC-40 rose 0.71 percent.
   
Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.93 percent from 4.89 percent late Thursday. The dollar gained against other major currencies after the upbeat employment data, while gold prices rose. Light, sweet crude rose 37 cents to $64.38 per barrel on the New York Mercantile Exchange.
   
Later Friday morning, the market will be parsing the Institute for Supply Management's May survey of its members, who comprise purchasing executives at manufacturers across the country. Perhaps the most eagerly awaited component of the index will be the prices manufacturers paid for raw materials last month -- in minutes of its May 9 meeting released Wednesday, the Fed reiterated the concerns about inflation that have so far deterred it from cutting rates.
   
In other economic data due Friday, major automakers will release their sales figures for May; the National Association of Realtors reports on pending home sales for April; the University of Michigan releases its May consumer sentiment index; and the Kansas City Fed releases its regional manufacturing index.
   
Technology stocks were among the biggest gainers Friday, as was the case Thursday. Fiscal first-quarter profits at Dell Inc. topped Wall Street's estimates late Thursday and the company said it would cut 10 percent of its work force during the next two years in a bid to lower costs. Dell rose 78 cents, or 2.9 percent, to $27.68.
   
Dow Jones & Co. jumped $7.99, or 15 percent, to $61.30 after the family that has long controlled the publishing company said it would meet with media mogul Rupert Murdoch to discuss his interest in buying the parent of the Wall Street Journal. The Bancrofts had initially rebuffed an offer from Murdoch's News Corp.
   
News Corp. rose 35 cents to $23.98.
   
In other takeover news, CKX Inc. confirmed late Thursday that it received a buyout offer from its chairman and chief executive, Robert F.X. Sillerman, that values the publicly listed operator of Elvis Presley's Graceland estate at $1.33 billion. CKX surged $4.17, or 39.2 percent, to $14.92.
   
Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where volume came to 135.7 million shares.

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Dollar slightly firmer after non-farm payroll figures

LONDON - The dollar was firmer after the non-farm payroll data came in slightly stronger than expected. The US economy added 157,000 jobs in May, higher than the 138,000 jobs economists had expected from the survey of employer payrolls. However the number of jobs added in April and March were revised down by 10,000 meaning the rise was not as strong as the headline figure initially suggests.
   
The dollar spiked higher when the figures were released, before falling sharply back once the market fully absorbed the numbers, and then steadied at a level slightly firmer then just before the release.
     
"There was an initial spike as people saw the headline figure but the dollar quickly fell back after they realised it hasn't really changed anything," said Daragh Maher, currency strategist at Calyon. "The payroll number is pretty much in with the average we have seen over the past 10 months so doesn't give the market much more direction," he added.
   
US personal consumption data for April also failed to give much direction, with consumer spending rising 0.5 pct in May but personal income falling by 0.1 pct.
   
Inflation measured by the personal consumption expenditure price index rose 0.3 pct and excluding food and energy was up 0.1 pct. Both those numbers were 0.1 pct points lower than expectations and should ease the Federal Reserve's inflation concerns.
   
Markets are now awaiting the release of May's ISM manufacturing survey and the University of Michigan's final consumer sentiment index at 3.00 pm for further direction. The ISM index is expected to fall back slightly to 54.0 from 54.7 in April, while the Michigan index is expected to be unchanged from the initial reading of 88.7.
   
Elsewhere, the euro was steady against other currencies aside from the dollar, showing little reaction to this morning's manufacturing sector survey, which came in slightly lower than expected.
   
The Euro zone manufacturing PMI survey fell to 55.0 from April's 55.4, showing the lowest growth level in 15 months, sources said.
   
The consensus expectation was for a slight rise to 55.5. A figure above 50 indicates expansion. The pricing component of the survey also showed a slight slowdown.
   
Meanwhile, the pound gained some support after manufacturing PMI data for the UK beat expectations with a rise to 54.9, from April's revised 54.1, sources said.
   
The strong reading, which included indications that manufacturers are passing on previous price gains to consumers, will add to speculation of a further hike in interest rates by the Bank of England in the near term.

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Euroshares up amid M&A chatter, ahead of higher Wall Street opening

LONDON - Europe's leading exchanges continued on a higher note midday with continued M&A chatter and rumours dominating the market and broker recommendations edging stocks higher, ahead of an expected higher opening on Wall Street. At 12.12 pm, the STOXX 50 was up 14.6 points at 3947.76 and the STOXX 600 was 1.63 points higher at 398.7.
   
SAP stock led blue-chips higher, adding 3 pct after rumours emerged that the the chief executive of Oracle, Larry Ellison, may have secretly bought as much as a 12.4 pct stake in the German business software company in preparation for a possible takeover.
       
Metro was the second-fastest gainer on the German market, adding 2.93 pct, after Bernstein lifted the target to 68 eur from 62 eur and with investors continuing to speculate on a sale of some of its real estate assets, driving the stock further past the important technical mark of 60 eur.
   
Meanwhile, ThyssenKrupp gained ground, after rumours emerged of a bid for the German construction company.
   
Media peer group ProSiebenSat.1 gained some 2.14 pct at midday, on more substantiated hopes by investors after Telegraaf Media Group confirmed that it is to acquire a minority stake in the German broadcaster.
   
Peer Seat-Pagine Gialle continued to top the sector stocks, up 2.75 pct,  after it received an upgrade from Goldman Sachs to 'buy' from 'neutral', following news the Italian publisher of telephone directories' venture capital shareholders have given Lehman Brothers a mandate to explore strategic options to enhance the value of their stake.
    
Goldman Sachs said it believes that refinancing, which it sees as one potential option, could trigger additional cash returns, while any sale of the stake could result in a tender offer for Seat Pagine.
   
Meanwhile, Russian mining giant Norilsk Nickel spiraled 4.7 pct higher following rumours of interest from aluminium producer Rusal. According to a source close to the matter, cited by Interfax, "Rusal has been seeking the go-ahead from Russian authorities regarding the possibility of buying metal market assets. Norilsk Nickel is their priority."
       
Iberdrola topped the gainer board -- up 5.01 pct -- on ongoing hopes it will be part of the next wave of sector consolidation speculation after Suez core shareholder and deputy chairman Albert Frere said he has taken a stake of over 5 pct in the Basque utility.
   
EON -- which issued ambitious targets yesterday -- added a further 1.01 pct as JP Morgan and Exane BNP Paribas lifted their price targets for the German utility.
   
EDF -- which is also expected to take part in any sector consolidation -- added 4.03 pct following a comment by a spokesman for Gaz de France that the two companies could cooperate as energy markets are liberalised from July 1.
     
Banca Italease SpA, an Italian leasing and factoring company, resumed trading this morning in Milan and fell some 10.39 pct. It said earlier that the potential counter-party risk, related to over-the-counter derivatives with its clients, has risen to 400 mln eur from 225 mln, net of an 8.3 mln provision, at the end of 2006.

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Asian shares close mostly higher; China A-shares fall in volatile trade

HONG KONG - Shares across the Asia-Pacific region closed mostly higher, encouraged by a rise on Nasdaq overnight, but China A-shares fell in volatile trade which sent them lower in the afternoon after many regional markets had closed, dealers said.
   
Tokyo shares closed higher, the benchmark index having topped 18,000 points for the first time in three months after investors were encouraged by the technology-dominated Nasdaq's rally overnight, with the softer yen boosting the stocks of exporters, dealers said.
   
The blue chip Nikkei 225 Stock Average closed 83.13 points or 0.47 pct higher at 17,958.88, after reaching the day's peak of 18,017.73. The index surpassed 18,000 points for the first time since Feb 27. Over the week, the index rose 2.73 pct.
   
The TOPIX index of all first-section issues advanced 12.20 points or 0.69 pct to 1,767.88, off a high of 1,773.87. Over the week, the index gained 3.05 pct.
       
Australian shares ended higher as investor sentiment was supported by an easing of fears that the fall in Chinese markets two days ago would lead to a global route.
   
They said resource stocks were again bought after the lift in base metal prices on overnight trading in London.
   
The S&P/ASX 200 ended up 20.0 points or 0.32 pct at 6,333.5, off a high of 6,352.5 and a low of 6,313.8. The index remains below its record finish of 6,369.0 set on May 21. Over the trading week the key index rose 80.7 points or 1.29 pct.
   
Hong Kong shares were volatile in afternoon trade in response to see-saw trading in mainland China. The Hang Seng Index had risen in morning trade on follow-through interest in blue chips and some mainland stocks after yesterday's strong rebound, but struggled to hold its gains in the afternoon. At 3.35 pm the Hang Seng Index was up 39.75 points or 0.19 pct at 20,674.22.
   
In mainland China, A-shares in Shanghai and Shenzhen closed sharply lower in volatile trade as fears set in late in the afternoon that the government is planning further measures to cool the market on top of the stamp duty hike announced midweek.
   
The late decline wiped out morning gains and brought the composite index below 4,000 points at one stage, with swings of over 200 points in the trading range, although the index managed to close the day just above 4,000.
   
The rumored measures include a capital gains tax. A government tax official denied there were such plans to impose a tax, and some analysts, including Citigroup, have said it is unlikely.
   
The Shanghai A-share Index was down 112.89 points or 2.62 pct at 4,197.08 and the Shenzhen A-share Index was down 61.55 points or 4.95 pct at 1,181.44.
   
Seoul shares closed at record levels led by Samsung Electronics' nearly 4 pct gain, but off their highs on quick profit-taking by retail investors.
      
The KOSPI index closed up 15.33 points or 0.9 pct at 1,716.24, off a high of 1,745.39 and a low of 1,707.75. The benchmark index gained 71.68 points for the week.

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Copper extends gains amid falling global inventories

LONDON - Copper extended yesterday's gains, rising above 7,500 usd per tonne amid worries over falling global inventories, while a recovery in Chinese equities also supported the metal.
   
Data in Asia showed copper inventories in warehouses monitored by the Shanghai Futures Exchange fell by 3,773 tonnes or 4 pct last week to 95,254 tonnes.
   
Meanwhile, the LME said in a daily report copper inventories held in its warehouses fell by 1,475 tonnes to 127,450 tonnes. LME stocks are down around 40 pct since the start of February.
   
At 2.22 am, LME copper for three-month delivery was up at 7,440 usd per tonne against yesterday's close of 7,380 usd. Earlier, the metal hit a day high of 7,528 usd a tonne.
   
Sucden analyst Michael Davies said stockpiles aside, copper is also benefiting from the continued rebound in Chinese equities, which fell by over 6 pct on Wednesday.
   
This fall was sparked by news that Chinese authorities would triple the stamp duty on Chinese equity market transactions in an attempt to cool the booming economy.
   
China is the world's largest copper consumer and markets worry about moves by the country to cool economic growth. However, the rebound in Chinese equities since the move has eased these worries.
   
Elsewhere, lead was up at 2,360 usd a tonne against 2,331 usd, after hitting an all-time high of 2,380 usd earlier this session.
   
The price of the metal continues to be propelled by supply fears from the Magellan mine in Australia, where exports will be delayed for another month. According to media reports, Magellen mines 3 pct of the world's lead.
   
In other metals, zinc was up at 3,715 usd a tonne against 3,695 usd, nickel was up at 47,400 usd against 46,000 usd, aluminium was up at 2,805 usd against 2,790 usd while tin was down 14,050 usd against 14,100 usd.

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