US & World Daily Markets Financial Briefing 02-02-2006

U.S. stocks fall on productivity data, earnings

NEW YORK - U.S. stocks lost ground Thursday as disappointing data on
labor productivity and weak earnings out of Tyco International offset strong January sales results from retailers.
   

The Dow Jones Industrial Average fell 16 points to 10,938. The Nasdaq Composite Index was down 5 points at 2,303 while the S&P 500 Index dipped 2 points to 1,279.   

On the broader market for equities, decliners outpaced advancers by 17 to 12 on the New York Stock Exchange, and by 14 to 11 on the Nasdaq.

   
By sector, airlines, gold stocks and networkers posted the most significant gains. Oil services, energy and computer software stocks were under pressure.
       

Productivity of the American workplace fell at an annualized rate of 0.6% in the fourth quarter, the first decline since the first quarter of 2001, the Labor Department estimated. Unit labor costs, a key measure of inflationary pressures, rose 3.5% annualized, the most in a year.
   

On a more positive note, first-time seasonally adjusted claims for state unemployment benefits fell by 11,000 to 273,000 in the week ending January 28, the Labor Department said.
   
   

After the data, long-term Treasurys were little changed as the fall in fourth-quarter productivity mostly neutralized the impact of the rise in labor costs. The benchmark 10-year note was up 1/32 at 99 17/32, with its yield at 4.57%.

Retail round-up
   

A number of retailers kicked off the year with strong sales as consumers jammed shopping centres to redeem gift cards and take advantage of winter sales.
   

Shares in Wal-Mart Stores Inc. tacked on 4 cents to $46.18 after the world's largest retailer put in its best monthly sales performance during its entire fiscal year.
   

The Bentonville, Ark-based company said sales at stores open at least a year, known as same-store sales, climbed 4.7%, in line with the company's own forecast.
   

Rival Target Corp. posted a better-than-expected 5.2% jump in same-store sales for January. The stock saw early gains fade to trade down 35 cents at $54.39.
   

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Starbucks Corp saw its shares shoot up as much as 8.6% to an all-time high of $34.07 after the ubiquitous coffee chain lifted its profit outlook on the back of forecast-beating first-quarter results. The company also posted a 10% jump in same-store sales for January.
   

Other retailers turning in a strong January performance include The Gap Inc, Costco Wholesale Corp, Aeropostale Inc. and Pier 1 Imports.
   

There were a handful of disappointments. Gymboree Corp, Stage Stores Inc. and New York & Co were all trading lower.
   

Fresh batch of earnings
   

Tyco International Ltd. shares fell 4.2% to $25 after the company posted a 22% drop in first-quarter net income, with revenue rising only a modest 1.1%.

The Bermuda-based company, with interests in fire and security products, health care and engineered products and services, also offered a profit outlook that came in shy of analyst expectations.
   

Elsewhere, shares in Comcast Corp. fell 1.8% to $27.40 after the largest U.S. cable operator posted a 69% decline in its quarterly earnings, in part because of increased expenses. A $5 billion addition to its existing stock repurchase program may put a floor on declines.
   

In other news, General Motors Corp. said it plans to spend $15 billion over the next five years to implement innovative technologies that reduce day-to-day expenses while improving the automaker's speed and flexibility in getting new vehicles to the market. The stock was down 1.7% at $24.08.

Forex

Dollar higher after ECB leaves rates unchanged

       
NEW YORK - The dollar remained higher against the euro and yen early
Thursday, after the European Central Bank left its key rate unchanged at 2.25%.
   

The dollar last traded 0.6% higher at 118.56 yen as the euro fell 0.02% to $1.2057.
   

The ECB's decision to leave rates unchanged was widely anticipated and in keeping with its conservative monetary policy.
   

Financial market players expect the Frankfurt-based central bank will wait until March to follow up on the quarter-point rate hike made in December.
   
   
Many recent economic reports have shown a recovery in the euro-zone economy. However, there have been some disappointments, including a surprise dip in retail sales in Germany during December and stagnation in French business confidence.
   

The Bank of Japan has a zero lending rate, although there is speculation that recent strong Japanese data reports could convince the central bank to lift rates this year.
   

The dollar also drew support from news from the Labor Department that during the fourth quarter unit labor costs - a key gauge of inflationary pressures - rose 3.5% annualized the most in a year.
   
Indications of rising inflation could help convince the Fed to keep lifting rates, and make the rates differential even more attractive.
   

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The European Markets at 12.00 GMT

LONDON - Leading shares were lower midday following the release of quarterly numbers from several FTSE 100 heavyweights, with dealers expecting the cautious conditions to continue into this afternoon ahead of key releases from the US.
   

At noon, the FTSE 100 was down 13.2 points at 5,788.4, while the broader indices were mixed.

   
FRANKFURT - Shares were slightly lower in midday trade as Henkel and
Deutsche Bank fell on profit-taking after releasing earnings figures that received a mixed response, though the TecDAX got a boost as Solarworld soared after stating it is to buy Shell's Crystalline Solar Activities, dealers said.
   

At 12.12 pm, the DAX 30 index was 6.40 points or 0.11 pct lower at 5,720.13, having moved between 5,705.15-5,760.63 so far this session. The MDAX was at 8,149.07, down 15.41 points or 0.19 pct, while the TecDAX was at 701.05, up 10.45 points or 1.51 pct.

   
PARIS - Share prices were lower in morning trading, retreating from an early advance that pushed the CAC-40 benchmark above the psychological threshold of 4,500 points, as investors consolidated gains while awaiting the next wave of corporate results, dealers said.
   

At 12.30 pm, the CAC-40 index was down 17.94 points or 0.4 pct at 4,981.45, on volume of just over 2 bln eur.

   
BRUSSELS - Shares moved higher in midmorning trade, with mobile telecoms group Mobistar in pole position after a number of rating upgrades on the stock, dealers said.
   

At 11.18 am, the Bel-20 index was up 6.03 points or 0.16 pct at 3,778.61.

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MILAN - Share prices were lower at midday, amid caution ahead of the
ECB's monetary policy meeting, with oils leading the way and Unicredito hit by news Poland has given it a deadline to sell its BHP unit, dealers said.
   

At 12.35 pm, the Mibtel index fell 0.32 pct to 27,928 points and the S&P/Mib was down 0.43 pct at 36,809. Volumes stood at 1.62 bln eur.

   
MADRID - Share prices were slightly lower in moderate midday trade in profit-taking led by SCH, with Repsol YPF also under pressure, while Sacyr Vallehermoso gained after an upbeat presentation on its property arm, and Prisa benefited from a UBS upgrade, dealers said.
   

At 12.26 pm, the IBEX-35 index was down 15.3 points at 11,205.8, after trading in a range of 11,179-11,253, on turnover of 1.693 bln eur.

   
ZURICH - Share prices were little changed midmorning as investors awaited fresh direction from Wall Street, dealers said.
   
At 11.16 am, the SMI was up 4.37 points at 7,840.54, and the SPI was up 6.44 at 5,955.22.

   
STOCKHOLM - Share prices remained in slightly positive territory in midday trade, off just a touch from earlier levels, with Atlas Copco higher and Holmen lower ahead of their respective fourth quarter results, dealers said.
   

At 12.10 pm, the OMX Stockholm index was up 0.15 at 310.22, while the OMX Stockholm 30 index was up 0.20 pct at 970.80.

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Asian shares close mixed; Tokyo hits record high on firmer US dollar

       
HONG KONG - Share prices across the Asia-Pacific region closed mixed, with Japan at a five-year high as export-oriented stocks surged ahead due to the US dollar's rise to a seven-week high against the yen.
   

The Nikkei 225 Stock Average closed up 230.46 points or 1.4 pct at
16,710.55, its high for the day. It was the highest finish since Sept 1, 2000 when it ended at 16,739.78.
   

The broader TOPIX index of all first-section shares closed up 16.78 points or 1.0 pct at 1,711.02, off a high of 1,719.17.
    
   

Share prices in Australia closed sharply lower after posting fresh intra-day record levels, with investors cutting portfolio holdings of resource and banking stocks in late selling, dealers said.
   

They said index-leading resources stocks BHP Billiton and Rio fell despite copper reaching record price levels in overnight trading.
   

Rio Tinto announced a record net profit of 5.215 bln usd after the market close.
   

Dealers said the banking sector reversed early gains following a large fall in building approvals data for December, adding to evidence that the Australian housing market is slowing. That is expected to hit bank earnings.
   

The S&P/ASX 200 fell 51.6 points or 1.04 pct to close at the low of 4,905.1, falling from yesterday's record close of 4,956.7.
   

Share prices in Hong Kong were down as profit-taking in some blue chips and H shares outweighed the impact of Wall Street's gains overnight.
   

Commodity stocks fell sharply, while large-cap Hutchison Whampoa lost ground on concerns that the listing of its Italian 3G unit may be delayed further.
   

The Hang Seng Index was down 56.70 points or 0.36 pct at 15,685.60, off a low of 15,666.94 and high of 15,775.65. Turnover was at 19.03 bln hkd.

Large-cap stocks which succumbed to profit-taking included Hutchison
Whampoa, losing 0.55 hkd or 0.71 pct at 77.25.
    

Banking stocks were mostly lower at the end of the morning session, with HSBC gaining 0.50 hkd or 0.39 pct at 129.20, Hang Seng Bank down 0.30 hkd or 0.29 pct at 103.20, Bank of East Asia down 0.10 hkd or 0.42 pct at 23.95 and BOC Hong Kong down 0.05 hkd or 0.32 pct at 15.40.
   

Most local banks have kept their rates steady despite the US rate hike, with the exception of BOC Hong Kong which raised its rates by 0.25 pct.

   
Share prices in Seoul closed flat as foreign investors turned net sellers for the first time since Jan 18, erasing early gains from a three-year high for service sector output and positive external leads, dealers said.
   

Service sector output climbed 6.5 pct year-on-year in December, accelerating from the 5.9 pct rise in November, helped by solid output growth in the telecom and financial sectors as well as for restaurants and hotels, the National Statistical Office said.
    
The KOSPI index closed down 1.53 points or 0.11 pct at 1,374.44, after moving between 1,389.55 and 1,357.71.
   

   
New Zealand share prices closed 1.26 pct higher after market leader Telecom surged despite posting a first half loss, dealers said.
   

They said Telecom writedowns had been previously announced and the market focused on gains in mobile and broadband connections.
   

Telecom reported a 466 mln nzd loss after slashing the valuation of its troubled Australian offshoot AAPT. Telecom rose 0.16 nzd to 5.82.
   
The benchmark NZSX-50 gross index rose 42.78 points to 3,407.71 on turnover worth 92.2 mln nzd.

SAN FRANCISCO - March crude fell 51 cents to $66.05 a barrel in New York, after touching a one-week low of $65.95. A climb in last week's U.S. crude and gasoline inventories weighed on prices, but ongoing concerns over Iran's nuclear program limited the decline.
The International Atomic Energy Agency is set to decide Thursday "whether it hands its problems with Iran's nuclear program over to the UN Security Council for possible action," said Tim Evans, an analyst at IFR Markets.
March natural gas fell 28.3 cents to $8.44 per million British thermal units, its lowest since Jan. 27 ahead of an U.S. update on supplies.
Global Insight expects a decline of 91 billion cubic fet.
Gold futures climbed in morning trading, driven by continued strong physical and investment demand. The front-month contract was up $3.30 at $577.20 an ounce.