US & World Daily Markets Financial Briefing 03-11-2006

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Stocks rise on employment report

NEW YORK - Stocks rose in early trading Friday after the Labor Department said the unemployment rate fell to 4.4 percent, a five-year low, easing concerns that the economy is slowing too quickly. Bonds fell on the news, driving yields sharply higher.
   
For more than week, investors have been nervous about the strength of the economy following a stream of disappointing data. While Wall Street wants growth to cool so the threat of inflation will dissipate and the Federal Reserve can cut interest rates, a precipitous slowdown could slice into consumer spending and corporate profits.
   
In the first hour of trading, the Dow Jones industrial average rose 9.12, or 0.08 percent, to 12,027.66 after its first five-day decline since June 2005. Positive earnings news and falling oil prices haven't been enough to ease Wall Street's uneasiness over the economy.
   
Broader stock indicators were also higher Friday. The Standard & Poor's 500 index was up 1.32, or 0.10 percent, to 1,368.66, and the Nasdaq composite index advanced 0.27, or 0.01 percent, to 2,334.29. The Russell 2000 index of smaller companies was up 3.33, or 0.44 percent, to 753.46.

The economic data sent bonds falling sharply; the yield on the benchmark 10-year Treasury note rose to 4.68 percent from 4.60 percent late Thursday. The dollar was mixed against other major currencies, while gold prices fell.

Stocks in focus

In corporate news, Medco was up $1.34, or 2.6 percent, to $52.74 after reporting an increase in generic drug prescriptions boosted profits. The company also raised its 2007 forecast.
   
Whole Foods, however, warned Wall Street that the coming year will be one of transition and that sales gains will likely moderate. Whole Foods was down $1.99, or 20 percent, at $48.13.
   
Electronic Arts Inc. jumped $5.95, or 11.2 percent, to $58.95 after the video game maker's fiscal second-quarter profit proved to be better than Wall Street expected and the company raised its forecast for the year.

Oracle Inc. kept to its acquisitive ways by announcing after Thursday's close it's buying Stellent for $440 million, or $13.50 a share, a 27 percent premium to its closing price.
   
Red Hat shares dropped another 2.6 percent in Germany, continuing to see pressure from the Microsoft-Novell partnership announced Thursday.

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Dollar surges after surprise drop in US unemployment

LONDON - The dollar spiked higher after the unexpected news that the unemployment rate in the US fell to a five-year low in October.
   
The Labor Department reported that the unemployment rate fell for the third consecutive month to 4.4 pct from 4.6 pct. That's the lowest since May 2001.
   
The main reason behind the fall in the unemployment rate were further upward revisions to job creation in previous months.
   
Though only 92,000 new jobs created in October, fewer than the 125,000 new jobs economists had expected, the number of new jobs created in August and September was revised up by a combined total of 139,000.
   
Non-farm payrolls in September now totaled 148,000, 97,000 more than the earlier estimate of 51,0000. In August, non-farm payrolls now total 230,0000, a 42,000 increase from the earlier estimate of 188,000.
   
Meanwhile, the department showed average hourly wages rose 0.4 pct in October, slightly more than the 0.3 pct increase economists had expected. Average hourly earnings have risen 3.9 pct in the past year.
   
Analysts said the combination of falling unemployment and higher earnings has diminished expectations that the US Federal Reserve will cut borrowing costs any time soon and pushed the euro down to below 1.27 usd from 1.2771 usd before the data's release and the dollar rise 1 yen to over 118 yen.
   
The Fed kept its key funds rate unchanged at 5.25 pct for the second meeting running last month following 17 consecutive quarter point increases.
    
Meanwhile, the pound rose after this morning's strong PMI services survey, with the index rising to a six-month high of 59.3 in October from an unrevised 57.0 in September, beating predictions of a dip to 56.7.
   
The strong numbers will give the Bank of England further reason to raise interest rates next week, despite the detail of the survey showing a significant drop in pricing pressures.
   
The euro itself remains relatively well=supported after European Central Bank president Jean-Claude Trichet gave firm hints yesterday that euro zone interest rates will rise again in December.

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The European Markets at 12.30 GMT

London - Leading shares slipped back to breakeven at midday as investors cautiously awaited key non-farm payrolls data from the US, with Wall Street futures little changed ahead of the report, while the UK's Gallaher was among the top risers on vague takeover talk. At 11.55 am, the FTSE 100 index was 1.9 points firmer at 6,147.4, but off a low of 6,143.8, while the broader indices were also negative.

Frankfurt - German shares recovered from initial losses in quiet early afternoon trade ahead of today's closely-watched US non-farm payroll data, boosted by a strong showing from heavily-traded Commerzbank following a reassuring earnings update. At 1.00 pm, the DAX 30 was 17.6 points, or 0.28 pct, higher at 6,240.88, while the MDAX was up 10 points, or 0.11 pct, at 8,684.18. The TECDAX was down 1.86 points, or 0.27 pct, at 682.12.
   
Paris - Share prices were a little higher in thin, choppy late morning trade as the market awaited publication of key US jobs data later today, with the only notable movement from Publicis, which fell sharply after weak sales. At 11.00 am the CAC-40 index was  up 7.04 at 5,317.11. Volume was 780 mln eur.

Milan - Share prices were slightly higher at midsession, as gains in energy-related stocks offset losses in the financial sector. At 12.47 pm, the Mibtel index was up 0.18 pct at 30,505 points and the S&P/Mib rose 0.19 pct to 39,658.

Madrid - Share prices were off highs midday ahead of key US jobs data, with constructors and Altadis the main outperformers. At 12.40 pm, the IBEX-35 index was up 50.7 points at 13,770.0, on turnover of 2.4 bln eur.

Zurich - Share prices were slightly higher in thin pre-weekend trade with support coming from late Wall Street gains and temporary employment group Adecco's better-than-forecast third quarter numbers. At 11.05 am, the Swiss Market Index was 21.58 points higher at 8,667.30, and the Swiss Performance Index up 15.97 points to 6,772.24.

Brussels - Shares were flat late morning as investors remained cautious ahead of next week's set of corporate earnings reports. At 11.23 am, the Bel 20 was 1.10 points or 0.03 pct higher at 4138.77.

Amsterdam - Share prices were up midday on higher US futures, and further boosted by strong oils. At 1.01 pm, the AEX index was up 0.58 pct or 2.83 points at 486.87, after opening at a low of 484.63 and reaching a high of 487.55.

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Asian shares close mostly higher as earnings reports offset Wall St fall

HONG KONG - Shares across the Asia-Pacific region closed mostly higher as local earnings reports outweighed a fall on Wall Street overnight and with the Tokyo market closed for a holiday.
   
Australian shares closed at fresh record highs after the country's largest bank, National Australia Bank, reported its highest ever full-year earnings, which gave market sentiment a big lift. The NAB result helped offset concerns following an overnight sell-off on Wall Street.
   
The S&P/ASX 200 rose 22.6 points or 0.42 pct to close at a record 5,432.0, surpassing Wednesday's record close of 5,416.4 while setting a fresh intraday high of 5,432.5. The key index gained 73.5 points or 1.37 pct over the week.
   
Hong Kong shares were steady in afternoon trade with some mild profit-taking after the benchmark index hit fresh record highs yesterday. At 3.25 pm the Hang Seng Index was up 7.88 points or 0.04 pct at 18,722.63.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on sustained fund inflows with banks and property developers gaining ground in particular.
   
The Shanghai A-share Index added 15.81 points or 0.81 pct to 1,960.84 and the Shenzhen A-share Index was up 2.38 points or 0.51 pct at 467.60.
   
Seoul shares ended slightly higher in thin trade, with many investors sidelined after Wall Street's weakness and ahead of the weekend.
   
The main board index advanced for a fourth straight session but the upside was heavily capped as foreign investors continued to reduce their positions in major IT stocks.
   
The KOSPI index closed up 0.15 points or 0.01 pct at 1,383.88, off a high of 1,385.39 and a low of 1,379.26. The index ended the week with a gain of 14.69 points.
   
Taipei shares closed higher, with Wall Street's decline outweighed by solid October sales figures reported by some local firms and on expectations of foreign capital inflows due to a strengthening Taiwan dollar.
   
Asset-backed stocks received a boost from a media report that a Hong Kong investor has bought four sites in northern Taiwan. The weighted index closed up 83.51 points or 1.18 pct at 7,161.61, gaining 74.87 points or 1.06 pct for the week.

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Oil prices just above 58 usd in London late morning in weaker trend

LONDON - World oil prices rose slightly today, to just above 58 usd per barrel, at the end of a week in which they have tumbled from above 60 usd owing to easing supply concerns.
   
New York's main contract, light sweet crude for delivery in December, rose 5 cents to $57.93 a barrel. It had closed down almost a dollar yesterday.   

In London, North Sea Brent crude for December delivery gained 20 cents to 58.07 usd per barrel in electronic trading after shedding more than 1 usd yesterday.
   
Oil prices are being dampened by signs of slower economic growth in the United States, the world's biggest consumer of energy, and forecasts of a warmer northern hemisphere winter which should dampen demand for heating fuel.
   
Analysts said the expected decline in demand comes amid a rise in US crude oil stockpiles, which should put further downward pressure on prices.
    
Crude futures are under pressure also from doubts over the OPEC cartel's promised production cuts.
   
The Organisation of the Petroleum Exporting Countries agreed last month to cut actual production to 26.3 mln bpd from 27.5 mln bpd currently, as of Nov 1.   

OPEC was spurred into action to combat a steep fall in oil prices, which are well off all-time highs above 78 usd per barrel reached in July and August.
   
Meanwhile in OPEC member Nigeria, which is also Africa's biggest producer of crude, security forces stepped up efforts today to secure the release of two foreign oil workers abducted from an oil supply vessel.
   
The oil workers -- an American and a Briton -- working for Norwegian oil services firm Petroleum Geo-Services (PGS) were kidnapped yesterday in southern Bayeslsa State and taken to an unknown location.

Gold futures, which lately have got a boost from dollar weakness, rose $1.40 to $629.20 an ounce.

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