US & World Daily Markets Financial Briefing 02-08-2006

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Stocks are mixed in early trading

NEW YORK - U.S stocks are mixed in early trading after recent declines, with overseas market strength helping to keep U.S. markets above water. Continued strength in energy prices may be a headwind, however.
   
In the opening minutes, the Dow Jones industrials gained 14.32 points to 11,140.05, the S&P 500 dropped .19 of a point to 1,270.73, and the Nasdaq was unchanged at 2,061.99.
   
U.S. markets on Tuesday concluded on a downbeat note, as unexpectedly strong factories orders and core inflation renewed U.S. interest-rate jitters. The Dow industrials fell nearly 60 points, the S&P 500 dropped 5 points and the Nasdaq Composite lost 29 points.
   
Weekly energy supplies data is due out at 10:30 a.m. EDT, with expectations
that gasoline inventories fell.
  
Stocks in focus

Time Warner swung to a second-quarter profit of $1 billion, or 24 cents a share, with revenue up 1.1 percent to $10.71 billion. Adjusted operating income before depreciation and amortization rose 7 percent to $2.7 billion, it said. Analysts polled by Thomson First Call had predicted earnings of 19 cents a share on revenue of $10.96 billion. Cable and networks segment led the revenue growth, the media giant said.
   
Time Warner said its 2006 adjusted operating income before depreciation and amortization, which now includes the impact of the Adelphia acquisition, will rise by a low double-digit amount. It also confirmed it's giving AOL software and e-mail free to broadband users.
   
Procter & Gamble also is due to report results, and after the close, Starbucks will report its results.
   
Elsewhere, Ford Motor Co. has reportedly hired a former Goldman Sachs top M&A banker to evaluate arms including Jaguar and consider alliances, The Wall Street Journal reported.
   
General Motors after the close on Tuesday revised its second-quarter results, widening its loss by $200 million to reflect a change in the estimated tax provision relating to its pending sale of a majority interest in its GMAC financing unit. It is scrambling to close the sale of 51 percent stake in GMAC before federal regulators shut the door on key components of the deal.
   
Philips Electronics rallied nearly 4 percent in Amsterdam after it reportedly agreed to sell its semiconductor making unit to Kohlberg Kravis Robert and Silver Lake Partners, the same newspaper reported.
   
Credit Suisse Group more than doubled its second-quarter profit, but the company's shares slid in Switzerland after only meeting consensus forecasts.

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Dollar weak as market shrugs off yesterday's strong US data

LONDON - The dollar was weak against major currencies as firm US data yesterday was considered insufficient to edge US rate-setters in favour of raising interest rates on August 8.
   
Stronger-than-expected US core PCE inflation data and the monthly ISM survey on manufacturing activity allowed a brief dollar rally, which later petered out as the data did not materially change the interest rate outlook.
   
Sellers then moved back in and the dollar fell to 26-day lows against the euro, which has since settled above the 1.28 usd mark.
   
"The underlying message from recent price action is that strong data that do not durably alter the likely path of monetary policy produce dollar rallies that fail," said Steve Pearson at HBOS.
   
Meanwhile, the yen rebounded against the dollar after Bank of Japan board member Atsushi Mizuno said a further hike in Japanese interest rates this year cannot be ruled out, warning that negative real interest rates could provoke large economic swings.
   
Mizuno's comments offset remarks made yesterday by incoming US Treasury Secretary Henry Paulson reiterating the previous strong dollar policy, which had earlier put the yen under pressure. Paulson's comments were interpreted as suggesting that the US may not be in such a hurry to pressure China to allow the yuan to appreciate.
   
Elsewhere, the Australian dollar was off earlier highs after the Reserve Bank of Australia raised interest rates by 25 basis points to 6.0 pct, their highest level in six years.
   
The market is now awaiting an expected interest rate hike by the European Central Bank tomorrow, as well as this week's Bank of England rate-setting meeting and Friday's key US monthly jobs data.

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The European Markets at 11.30 GMT

London - UK blue chips extended gains at midday, led higher by Cadbury Schweppes on the back of the confectioner's forecast-beating numbers, and ahead of an expected upbeat start to trading on Wall Street, dealers said.
   
At 11.56 am, the FTSE 100 index climbed 33.4 points at 5,914.2, just shy of late morning highs of 5,915.2, while the broader indices also remained positive.
   
Frankfurt - Shares were higher in midday trade, bouncing back from yesterday's sharp losses, as solid second quarter reports from BMW, Henkel and Altana boosted sentiment, dealers said.
   
At 11.47 am, the DAX 30 index was flirting with today's session high, up 50.26 points or 0.90 pct at 5,647.00, having moved between 5,620.79 and 5,650.65 so far this session.

Paris - Share prices were firmly higher in midday trade as a reassuring set of in-line results, notably from Danone, prompted a rebound after sharp losses yesterday, dealers said.
   
At 11.15 am the CAC-40 index was up 44.09 or 0.89 pct at 4,992.32.

Amsterdam - Shares were up in early afternoon trade as investors looked to higher US futures indicating a positive Wall Street opening, while Getronics continued to plummet on very badly received second quarters results, dealers said.
   
At 1.13 pm, the AEX was up 3.75 points or 0.84 pct to 453.72, after opening at 451.87 and reaching a high of 454.23.

Madrid - Share prices were higher midday in line with Europe in light trade ahead of an expected positive opening on Wall Street, with blue chips, defensives and selected constructors outperforming, dealers said.
   
At 12.20 pm, the IBEX-35 index was up 105.6 points at 11.817.2, after trading in a range of 11,752-11,817, on turnover of about 864 mln eur.   

Milan - Share prices were higher at midday, rebounding after two days of weakness, with pipes supplier Tenaris leading the advance following results at Maverick Tube, with which it is due to merge, dealers said.
   
At 12.58 pm, the Mibtel index was up 0.64 pct to 28,076 points and the S&P/Mib added 0.77 pct to 36,572, while turnover was 961 mln eur.

Stockholm - Shares were slightly higher in midday trade on bargain hunting as the market shrugged off higher oil prices and focused on buying opportunities following recent falls particularly among banking stocks, brokers said.
   
At 12.10 pm the OMX Stockholm index was up 0.57 pct at 303.33, and the OMX Stockholm 30 was up 0.68 pct at 932.04. Turnover was 4.213 bln skr.

Helsinki - Helsinki shares were slightly higher in quiet early afternoon trade, mirroring other European exchanges, with Outokumpu sharply higher on bargain-hunting, dealers said. At 1.08 pm, the OMX Helsinki 25 was 0.39 pct higher at 2,466.75 and the OMX Helsinki was up 0.21 pct at 8,560.20 on volume of 193 mln eur.

Zurich - Share prices were lower in morning trade, led by Credit Suisse and Clariant following disappointing quarterly results, traders said. At 11.12 am, the Swiss Market Index was 49.25 points lower at 7,892.58, and the Swiss Performance Index down 33.49 points at 6,141.66.

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Asian shares close mixed on earnings reports, rate concerns

HONG KONG - Shares across the Asia-Pacific region closed mixed, with Japanese shares up on positive earnings reports but investors still concerned about the direction of interest rates, dealers said.
   
Tokyo shares finished slightly higher as investors took heart from some upbeat June quarter results from a number of companies, dealers said.
   
At the same time they were reluctant to buy aggressively ahead of the release of US jobs data on Friday and next Tuesday's Federal Open Market Committee meeting.
   
The Nikkei 225 Stock Average closed up 23.38 points or 0.15 pct at 15,464.29, after moving between 15,287.81 and 15,466.07.
   
The TOPIX index of all first-section issues rose 2.64 points or 0.2 pct to 1,569.65. The index moved between 1,553.24 and 1,569.68.
   
Australian shares ended lower after the widely expected interest rate hike of 25 basis points to 6.00 pct by the Reserve Bank of Australia, dealers said.
  
The latest RBA monetary tightening followed a similar move on May 3 and dealers said investor concerns about rates are likely to limit any market gains, as another 25 basis point increase remains a possibility by the end of the year.
   
They said most major banking stocks were sold following the rate increase and resources stocks had mixed fortunes.
   
The S&P/ASX 200 lost 49.8 points or 1.00 pct to close at 4,931.5. The benchmark indicator closed off the day's low of 4,919.5 with the high at 4,970.6.
   
Hong Kong shares were higher in afternoon trade as investors picked up property stocks which underperformed recently due to interest rate worries, dealers said.
   
They said that while the odds for a rate hike at next week's US Federal Reserve policy meeting remain 50-50 following mixed economic data, investors are still hopeful that rates will peak soon.
   
At 3:32 pm the Hang Seng index was up 96.73 points or 0.57 pct at 17,008.10.
   
In China, A-shares in Shanghai and Shenzhen closed mixed amid lingering caution, reflected in the thin turnover, with metals companies and infrastructure stocks weighed down, dealers said.
   
The Shanghai A-share Index rose 0.29 points or 0.02 pct to 1,682.76 and the Shenzhen A-share Index was down 2.35 points or 0.56 pct at 415.88.
   
Seoul shares closed higher, supported by heavy program buying and retail investor support, with strong gains in large cap IT stocks and car makers, dealers said.
   
The market changed course several times but gained momentum in late trade to close at its high for the day, they added, and recovering much of losses posted in the previous session.
   
The KOSPI index closed up 7.75 points or 0.60 pct at the day's high of 1,295.11, after falling as low as 1,277.31.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Oil extends gains on concerns over US hurricanes, Middle East fighting

Oil prices extended their gains as hopes for an early ceasefire in Lebanon faded while concern grew that tropical storm Chris could develop into a hurricane as it approaches the oil-rich US Gulf Coast.
   
US inventory data to be released this afternoon is expected to show a huge draw in fuel stocks, while traders remain worried about Iran's rejection of UN demands that it halt enrichment work or face sanctions.
   
At 12.50 pm, September-dated Brent contracts were up 88 cents at 76.77 usd, after gaining 74 cents and closing at 75.89 usd yesterday. Meanwhile, August-dated US light crude futures were up 72 cents at 75.60 usd.
   
Kevin Norrish at Barclays Capital said: "Oil prices have moved back above the 76-dollar level for Brent crude, which is trading at a 1 usd premium due to Nigerian production losses and field maintenance in the North Sea restricting supplies of low sulphur crude in Europe."
   
The current level of Nigerian output is estimated at 2.6 mln bpd, but London analysts say it is has been reduced by around 675,000 bpd, or 26 pct, by militant attacks and a pipeline leak.
   
Bank of Ireland analyst Paul Harris said the deteriorating situation in the Middle East, unrest in Iraq and disquiet over the Iranian nuclear standoff were providing a geopolitical backdrop to the market.
   
"However, the key driver of the continuing upward move were more centred upon supply issues," he said.
   
The market is expecting US inventory data, scheduled for release at 3.30 pm, will show a draw of over 1.5 mln barrels in gasoline stocks as US drivers continue to fill their tanks despite near record pump prices. Crude stocks are set to fall by some 700,000 barrels.
   
Oil prices struck record highs above 78 usd last month on concerns the conflict between Israel and Hezbollah militants in Lebanon could widen to include oil producers Syria or Iran - both backers of Hezbollah.
   
A call earlier this week by Syrian President Bashar-al-Assad for his troops to "raise readiness" proved a chilling omen for traders worried about supplies from a region that produces more than a third of the world's oil.

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