US & World Daily Markets Financial Briefing 04-10-2006

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Stocks rise despite economic data

NEW YORK - Wall Street advanced Wednesday, taking the Dow Jones industrials further into record high territory, despite more evidence of a slowing economy.
   
Stocks rose after the Institute for Supply Management said growth in the nation's service sector slowed in September from August, reflecting managers' concerns about the economy, interest rates and security issues. And a Commerce Department report that factory orders were weak again in August also left traders undeterred.
   
Wall Street has been torn between concerns that the economy is slowing too much and anticipation that economic data like Wednesday's reports will persuade the Federal Reserve to keep interest rates steady, or even lower them.
   
Investors were waiting for more clues about the economy in a speech by Federal Reserve Chairman Ben Bernanke, who is scheduled to speak on savings before the Economics Club of Washington.
   
On Tuesday, the Dow set new closing and trading highs, wiping records that had stood since Jan. 14, 2000. In midmorning trading Wednesday, the Dow rose 38.50, or 0.33 percent, to 11,766.48, a new high.
   
Broader stock indicators also rose. The Standard & Poor's 500 index was up 2.22, or 0.17 percent, at 1,336.33 and the Nasdaq composite index rose 9.88, or 0.44 percent, at 2,253.53. The Russell 2000 index of smaller companies was up 1.47, or 0.20 percent, at 719.82.
   
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.57 percent from 4.62 percent late Tuesday. The dollar was down against other major currencies, while gold prices were down.
   
Light sweet crude was quoted up 28 cents at $58.96 a barrel on the New York Mercantile exchange.

Stocks in focus
   
Wal-Mart Stores Inc. fell $1.15, or 2.33 percent, to $48.30 after saying its September sales at stores open at least a year, a closely watched measure of retail performance known as same-store sales, rose 1.3 percent, not 1.8 percent as the company had forecast. The world's largest retailer, which plans to release September sales figures Thursday, said it miscalculated when it issued its projection.
   
Biotechnology company ImClone Systems Inc. rose $1.90, or 6.99 percent, to $20.07 after saying an unidentified international pharmaceutical company was willing to make an all-stock offer of $36 per share for the company. Imclone also criticized financier Carl Icahn for rejecting the bid and advised shareholders to rebuff his efforts to wrest control of the company.
   
XM Satellite Radio Holdings Inc. fell 39 cents, or 3.1 percent, to $12.19, after saying it added more than 285,000 subscribers to its satellite radio service, boosting its total base to more than 7.2 million subscribers.
   
Automakers received Wall Street's attention after Bear Stearns cut its rating on Ford Motor Co. to "Peer Perform" from "Outperform" and upgraded rival General Motors Corp. to "Peer Perform" from "Underperform." Ford was up 6 cents at $8.29, while GM, part of the Dow, was up 48 cents at $33.89.
   
Declining issues barely outnumbered advancers on the New York Stock Exchange, where volume came to 190.2 million shares, compared with 315.40 million traded at the same point Tuesday.

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Dollar boosted further by lower oil prices; mkt awaits Bernanke speech

LONDON - The dollar continued to rise against major currencies as lower oil prices boosted hopes that the US economy may not slow as much as previously feared.
   
Oil prices have stabilised well below the 59 usd per barrel mark, having earlier touched their lowest levels since the end of last year, on indications of solid levels of supply going into the northern hemisphere winter.
   
"The greenback continues to be boosted by hopes that the continued fall in energy prices will moderate any US economic downturn and allow the economy to drift back toward trend growth rates rather than tumble into recession", said Jamie Coleman at Thomson IFR Markets
   
Solid US auto sales yesterday also suggest this may be the case, which just leaves the housing market as the main area of weakness, he added.
   
This afternoon, meanwhile, attention will turn to the latest ISM survey on US services sector activity, followed by a speech by Federal Reserve chairman Ben Bernanke.
   
Elsewhere, the euro and the pound remained little changed ahead of interest rate decisions by the European Central Bank and the Bank of England tomorrow.
   
The ECB is fully expected to raise interest rates by a further quarter point to 3.25 pct, with all attention centring on ECB president Jean-Claude Trichet's accompanying press conference to see whether he retains his hawkish stance despite lower inflationary pressures.
   
The Bank of England meanwhile is expected to keep rates unchanged at 4.75 pct. The vote is forecast to be a close one, though, and market participants are fully expecting a hike in November.
   
Earlier today, the latest UK PMI services sector survey showed activity growing above expectations in September, though falls in the prices elements in the index pointed to easing inflation.
   
The equivalent survey on the euro zone came in slightly below expectations, but still pointed to very healthy levels of activity, analysts said.

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The European Markets at 11.30 GMT

London - Leading shares were stronger at midday, just below the session peak with Wall Street expected to extend yesterday's record closing levels today and as renewed M&A talk surrounding Corus Group, Brambles and Barclays offset weakness in oil, mining and utility issues, according to dealers.
   
At 12.20 pm, the FTSE 100 index was 27.2 points firmer at 5,964.3, just below the day's peak of 5,967.2, having hit an early low of 5,921.5.

Frankfurt - German shares were higher late morning, drifting around the 6,000 level helped by a dip in the price of oil and new record closing on Wall Street last night, with Infineon pacing gainers following positive broker comment. At 11.31 am, the DAX 30 index was up 16.17 points or 0.27 pct at 6,008.91, having moved between a high of 6,020.04 and a low of 5,995.41.

Paris - Share prices were higher in midday trading, lifted by the optimism spurred by the new record set on the DJIA index in New York last night, helped by further oil price declines and hopes that the US economy will avoid a sharp slowdown. At 12.52 pm, the CAC-40 index was up 27.27 points or 0.5 pct at 5,247.06, on volume of 2.1 bln euro.

Amsterdam - Share prices were up in midday trade with investors taking heart from yesterday's record high US close. At 12.13 pm, the AEX was up 2.73 points or 0.57 pct to 484.38, after opening at 482.65 and reaching a high of 485.35.

Madrid - Share prices were higher, following Wall Street's record highs amid easing oil prices, with Gamesa, Ferrovial and Iberia leading the gainers. At 12.30 pm, the IBEX-35 index gained 88.5 points to 12,949.2, after trading in a range of 12,866-12,955, on turnover of 1.9 bln eur.

Milan - Share prices were slightly higher at midday led by BPM ahead of Popolare Italiana's decision today on alliances. At 12.06 pm, the Mibtel index rose 0.25 pct to 29,395 points and the S&P/Mib added 0.28 pct to 38,505.
   
Stockholm - Shares remained in slightly positive territory in midday trade, down a touch from morning levels as bargain hunting eased, with SAS off earlier highs but still leading the market higher on news that a threatened strike by its Swedish cabin crew union has been called off. At 12.10 pm, the OMX Stockholm index was up 0.28 pct at 333.54 points, while the OMX Stockholm 30 index was up 0.30 pct at 1,037.29.

Helsinki -  Helsinki shares were slightly lower in early afternoon trade, with Stora Enso falling after unveiling plans to close two of the four mills it had under scrutiny. At 1.51 pm, the OMX Helsinki 25 was 0.18 pct lower at 4,765.58 and the OMX Helsinki was down 0.25 pct to 8,764.98 on 316 mln eur turnover.

Zurich - Share prices moved higher in late morning trade tracking overnight gains on Wall Street, after the DJIA set a new all-time closing high last night. At 11.45 am, the Swiss Market Index was 47.97 points higher at 8,438.19, while the Swiss Performance Index was up 33.8 points at 6,572.63.

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Asian shares close lower as NKorea worries, commodity falls offset Wall St

HONG KONG - Share prices across the Asia-Pacific region closed mostly lower as concerns over North Korea's threat to conduct a nuclear test and weak commodity stocks outweighed a positive lead from Wall Street.
       
Japanese stocks were weighed down by the North Korea concerns, with foreign minister Taro Aso saying yesterday that any North Korean nuclear test will be "a threat to peace" and that it will "gravely affect Northeast Asia, including Japan."
    
Commodity stocks such as steel and metal companies as well as oil refiners were hit by a continued decline in crude oil prices, which according to some local analysts has raised concerns about the outlook for global demand.
 
The blue-chip Nikkei 225 Stock Average closed down 159.54 points or 0.98 pct at 16,082.55.
    
Despite today's downturn, analysts remain bullish about the Japanese market's future prospects amid prevailing optimism over the Japanese economy and US equities.
    
"The Dow hit a record and the Tankan survey has confirmed the gradual recovery of Japanese companies. Given such conditions, there's no reason to sell," said Hideyuki Suzuki, a strategist at SBI Securities.
    
Australian shares also closed lower as investors dumped mining and energy stocks after metal and oil prices fell further overnight.
    
But the positive Wall Street lead helped limit the losses, while the Reserve Bank of Australia's decision to maintain official interest rates at 6.00 pct reduced selling in the financial sector.
    
The S&P/ASX 200 lost 41.6 points or 0.80 pct at the day's low of 5,142.7, while the All Ordinaries Index shed 39.7 points to close at 5,101.5.
    
Heavy selling in leading resource stocks BHP Billiton and Rio Tinto weighed on the wider market, with BHP Billiton dropping 4.59 pct  and Rio Tinto falling 2.84 pct.
    
Meanwhile, in South Korea share prices closed sharply lower on program selling after North Korea threatened to carry out its first nuclear test, with the long holiday weekend also keeping investors out of the market. The Korean financial markets will be closed on Thursday and Friday.
    
The KOSPI index closed down 22.22 points or 1.62 pct at 1,352.00.
        
In Hong Kong, stocks saw some see-saw movement as Wall Street-inspired early gains gave way to US data caution, before reversing direction again in late trade on the back of China Mobile's gains. The Hang Seng Index closed up 22.68 points at 17,629.21.
       
Taiwan stocks also reversed opening gains as concerns over North Korea's nuclear test plans and caution ahead of a string of local holidays weighed on the market. The weighted index closed down 81.90 points or 1.18 pct at the day's low of 6,874.98.
     
Elsewhere, Philippine stocks closed lower for the third consecutive day as investors continued to worry about the possible economic impact of last week's Typhoon Xangsane. The composite index fell 1.41 pct to 2,486.82 points.
     
In other markets, Singapore's Straits Times Index was little changed at 2,595.10 points in late trade.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Gold recovers from 22 usd plunge but outlook still shaky

LONDON - Gold prices recovered slightly from falls of nearly 22 usd yesterday, as the market found brief support from physical players and from a slight up-tick in oil, but analysts warned the outlook for the metal remains shaky near term.
   
At 1.46 pm, spot gold, which earlier hit a high of 580.60 usd, was quoted at 577.90 usd, up from 576.40 usd at the time of the COMEX market close in New York yesterday. Other precious metals were mixed.
   
Spot silver fell to 10.90 usd against 10.93 usd, platinum was down at 1,102.50 usd against 1,118.00 usd, while palladium edged up to 300.50 usd against 300.00 usd.
   
Gold prices dived yesterday as North Korea's announcement of a planned nuclear bomb test failed to spark safe haven buying, with the precious metal taking its lead instead from the plunge in oil below the key 60 usd level.
   
Physical buying has prompted a slight recovery in gold today, and the precious metal has also found limited support from oil's bounce off 7-month low points.
      
Lower oil prices reduce gold's appeal as a hedge against inflation. Also, according to Weisser, weakness in oil is benefiting the dollar because it has a positive impact on the US current account deficit.
   
Gold usually moves counter to the US dollar as it is seen as an alternate investment to the US currency. Also, a stronger dollar usually makes gold more expensive for holders of other currencies.

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