US & World Daily Markets Financial Briefing 04-10-2007

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Stocks mixed on rise in jobless claims

NEW YORK - Stocks traded mixed Thursday as Wall Street, hoping for both a stable economy and more interest rate cuts, grappled with a higher-than-expected reading jobless claims.
   
The Labor Department reported jobless claims rose 16,000 to 317,000 in the week ended Sept. 29, a bigger jump than analysts anticipated. Weaker economic data bolsters the case for further rate cuts by the Federal Reserve, which lowered rates in September for the first time in four years.
   
But the jobless claims report also precedes the department's much-anticipated September employment report on Friday, and Wall Street is crossing its fingers for a rebound. A strong job market has been an important prop for the U.S. economy, helping to offset investor concerns over a housing slump and sluggish growth.
   
August's job creation report was a major disappointment, showing a decline in payrolls when economists had forecast moderate growth. The data shocked Wall Street and sent the Dow Jones industrial average down nearly 250 points on Sept. 7. Some are optimistic that the September report could be better than expected and include revisions to August's dismal numbers.
   
The Dow Jones industrial average rose 10.00, or 0.07 percent, to 13,978.05.
   
Broader stock indicators were lower. The Standard & Poor's 500 index slipped 0.37, or 0.02 percent, to 1,539.22, and the Nasdaq composite index fell 6.33, or 0.23 percent, to 2,723.10.
   
The Dow shot up more than 190 points on Monday, and then gave back a large chunk of those gains on Tuesday and Wednesday. Wall Street appeared to be trading cautiously Thursday ahead of Friday's jobs report.
   
Bonds were little changed, with the yield on the benchmark 10-year Treasury note at 4.55 percent, the same as late Wednesday.
   
The U.S. dollar was mixed against major world currencies after the European Central Bank and Bank of England both held key interest rates steady, as expected.
   
The Russell 2000 index of smaller companies rose 1.94, or 0.23 percent, to 828.09.
   
Overseas markets were mixed. Britain's FTSE 100 gained 0.65 percent, Germany's DAX index fell 0.10 percent, and France's CAC-40 rose 0.01 percent.

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Euro steady following ECB decision to keep rates on hold

LONDON - The euro was steady following the European Central Bank's decision to keep interest rates on hold.
   
The ECB's announcement that borrowing costs will stay at 4.00 pct came as little surprise but all eyes will now turn to ECB president Jean-Claude Trichet's press conference, which is due to start at 13.30 BST.    
   
Recent euro zone data has presented a fairly mixed picture of the 13-nation single currency zone's economy. This week's PMI surveys both indicated that activity is starting to slow, but the snap estimate for the HICP measure of inflation rose above the ECB's 2.0 pct year-on-year target during September for
the first time since August 2006.
   
Aside from the mixed picture on the data front, there has also been a growing clamour of concern from euro zone politicians about the strength of their currency, which continues to hit a series of record highs against the dollar. Analysts said Trichet is unlikely to express concern about the strength of the euro at today's press conference but there could be a warning about economic prospects going forward.
       
Meanwhile the pound was firmer following the Bank of England's decision to hold fire and keep interest rates unchanged at 5.75 pct.
   
While almost all economists had forecast the Bank to keep rates on hold, money markets had priced in a reasonable chance of there being a cut, so the decision gave sterling a slight boost.
   
However Daragh Maher, senior FX strategist at Calyon said the real reaction will be delayed until the minutes to the Monetary Policy Committee meeting are released in two weeks time.
   
"If at that point there is evidence of dissenting calls for a cut, the market will quickly look for action at the November meeting to coincide with the release of the next Quarterly BoE Inflation Report," said Maher.
   
The no-change decision meant that the pound moved well-clear of its day-low of 2.0276 usd, hit following a weaker-than-expected house price survey.
   
The Halifax house price survey reported that prices fell 0.6 pct during September from August, against analyst expectations for a rise of 0.4 pct.   
   
Finally the dollar was flat ahead of this afternoon's US data. The weekly jobless claims figures are expected to show 310,000 people registered first-time claims for unemployment insurance, up from last week's four month low of 298,000.    

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Euroshares trading in good volumes midday ahead of ECB and Wall St open

LONDON - Europe's leading exchanges were trading with good volumes midday ahead of today's European Central Bank rate setting decision and with some momentum expected from US economic data.
   
At 12.11 pm, the DJ STOXX 50 gained 16.85 points or 0.44 pct to 3,884.91 with the STOXX 600 advancing 0.99 points or 0.26 pct to 384.58.
   
In Europe, all eyes are on today's rate setting decision by the European Central Bank. While most market watchers do not expect a change in interest rates, traders said the statement by president Jean Claude Trichet may provide some momentum to the market.
   
"We are waiting for the ECB now and I expect the music to return to the market in the afternoon again," one Frankfurt-based trader said."We are actually trading on quite good volumes, but there doesn't seem to be a general direction," he added.
   
Earlier the Bank of England's rate-setting Monetary Policy Committee said it decided to keep its official interest rate unchanged at 5.75 pct for the third month running.
   
In corporate news, the banking sector is in focus, with traders noting that shares in ABN Amro will be suspended in early afternoon trade today and tomorrow, with the takeover bids from Barclays and the RBS-led consortium closing today and tomorrow respectively.
   
Fortis gained 5.16 pct as its proposed acquisition of the assets of Dutch peer ABN Amro were conditionally cleared by the European Commission yesterday and with the deal edging towards a close.
   
Meanwhile, Barclays rose 2.50 pct with takeover rumours resurfacing that Bank of America is mulling a bid at 720-750 pence a share.
   
Elsewhere, steel groups were lower with Arcelor Mittal shedding 1.20 pct, as analysts fear that headwinds from a slack in US consumption might put a cap on further growth potential.
       
Cautious broker comment on the sector after Monday's US ISM data also weighs, while US peers are expected to issue bearish outlook statements as they report third quarter earnings in coming weeks. Peer Thyssenkrupp slipped 1.82 pct.
   
Shares in DnB NOR ASA gained 0.94 pct on talk of a "transformational" bid for investment bank Carnegie, but analysts played down the likelihood of a bid emerging.
   
Analysts have already suggested that Carnegie could be a potential takeover target following a trading scandal that saw the brokerage fined 50 mln skr and led to the resignation of a number of senior executives.
   
In broker action, Sanford Bernstein downgraded its stance on shares in SAP AG to 'market perform' from 'outperform' as it believes the stock's recent gains will yield a less attractive risk/reward scenario. Shares in the software manufacturer fell 0.98 pct.
   
Meanwhile, Alcatel-Lucent fell 1.77 pct as investors struggle to decide whether to buy into talk of deeper restructuring and an impending management overhaul.
       
And Deutsche Bank has cut its ratings and targets for several European companies in the paper sector, as weakness in the usd in recent weeks hurts earnings.

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Asian shares fall as investors lock in gains; Hang Seng leads decline

SINGAPORE - Stock markets across Asia fell Thursday with Hong Kong leading the decline, as investors took a break from the recent rally to lock in gains and await the US September jobs report.
   
In Hong Kong, property companies weighed on the index as investors locked in recent gains in the sector. The Hang Seng retreated from its recent record highs, shedding another 700 points, or 2.6 percent, to 26,756, with the selling acclerating in the final hour of trade.

The Hang Seng has risen more than 2,600 points since the Federal Reserve cut interest rates by half a percentage point on September 19. Property counters have led the advance after the Hong Kong Monetary Authority followed the Fed's rate cut move.
   
In Tokyo,  financial stocks rose after the Finance Ministry said foreign investors turned net buyers of Japanese stocks for the first time in four weeks, suggesting fears about the fallout from the subprime loan problem have receded.

The Nikkei closed down 0.6 percent at 17.092, while the broader Topix finished down 0.5 percent at 1,655. Technology stocks including electronics giant Sony fell after weakness in the US sector overnight.
     
The Australian S&P/ASX 200 closed down 1.4 percent at 6,566 and the All Ordinaries was down 1.3 percent at 6,579 with mining giants BHP Billition and Rio Tinto pacing the decline.
   
"This is the breather we've been waiting for," said Rick Klusman, head of institutional trading at Aequs Securities in Sydney. The market had overheated during its recent steep climb, said Najeeb Jarhom, head of research at Fraser Securities in Singapore. "It was just too fast -- and it's not healthy," he said.
       
In Seoul, the Kospi lost 0.4 percent, failing to find support in the statement released after a key summit. North Korean leader Kim Jong-Il and South Korean President Roh Moo-Hyun signed a declaration calling for peace and joint prosperity after their summit in Pyongyang.
   
Indian shares ended lower Thursday after a volatile session that saw investors booking profits on the one hand and power stocks extending gains on the other. The Bombay Stock Exchange's Sensex closed down 69.90 points or 0.39 pct at 17,777.14, while the the National Stock Exchange's S&P CNX Nifty ended 0.04 pct lower at 5,208.65.
   
Investors are also keenly awaiting the listing of state-owned power transmission company Power Grid Corp of India Ltd Friday. Elsewhere, the Singapore Straits Times was down 0.2 percent at 3,747, after trading in positive territory for much of the day.  Singapore Airlines outperformed on news of an open skies agreement with the UK. The stock was last up 50 Singapore cents or 2.6 percent at 19.50 Singapore dollars.
   
The Malaysian Kuala Lumpur Composite fell 0.03 percent to 1,366 and the Philippines composite rose 0.2 percent to 3,775.
   
The Taiwanese Taiex fell 0.9 percent to 9,613 and the Thai SET was down 0.3 percent at 847.
   
The Shanghai market was closed for a national holiday. 

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Copper falls on stock rise, dollar rebound, easing supply risks

Copper fell after touching a five-month high yesterday, as LME inventories rose for a third straight day, the dollar extended its rebound against the euro, and as the risks of extended supply outages in Peru eased.
   
Southern Copper Corp, the world's fifth-largest copper producer, is reportedly planning to meet with striking workers at its Ilo smelter and Toquepala and Cuajone mines in Peru. Peru is the world's third-biggest copper producer.
   
The strikes began on Tuesday, but some analysts said from the start that they did not expect them to last long, as the workers themselves seemed reluctant to down tools.
   
Elsewhere, copper was under pressure from a rebound in the dollar against the euro. A stronger dollar makes metals such as copper more expensive for holders of other currencies.
   
At 10.56 pm, LME copper for three-month delivery fell 60 usd to 8,240 usd a tonne, after climbing to an intra-day peak of 8,315 usd yesterday, its highest since May 4.
   
The LME said in a daily report today that copper stocks held in its warehouse rose for a third day running, this time climbing by a sturdy 700 tonnes to 131,625 tonnes.
    
Lead was down 20 usd at 3,620 usd a tonne, after having hit a fresh all-time high of 3,655 usd yesterday as inventories remain at their lowest since 1990.
    
Strong winter demand for batteries, and falling supplies from Xstrata because of a fire at its Mount Isa mine in Australia earlier this week, exacerbated an already constrained inventory. Xstrata estimated that up to
20,000 tonnes of lead could have been cut.
      
In other base metals, nickel fell 225 usd to 31,300 usd a tonne, zinc dropped 55 usd to 3,055 usd, aluminium dipped 20 usd to 2,462 usd while tin was down 375 usd at 15,825 usd.

Gold fell to a two-week low as the dollar gained further ground against the euro after European Central Bank president Jean Claude Trichet said he sees downside risks to growth in the euro area in the wake of the credit crunch.
   
Although Trichet also said the risks to medium-term inflation are on the upside, markets chose to focus on the risks to growth comment, which pushed the dollar up to 1.4089 usd against the euro from 1.4109 usd previously.
   
Gold fell as low as 720.65 usd an ounce, its weakest since Sept 19, before rebounding back to 722.43 usd by 2.46 pm. In late New York trades yesterday, the metal was quoted at 730.15 usd.
   
"A close beneath 722.00 or 720.00 usd may yet turn this attempted correction into a significant one. Of course, it is still premature to call the dice as tomorrow's payroll data could turn many a forecast into shattered crystal," said Kitco analyst Jon Nadler.
      
The gold market is entering a period of strong demand this quarter, with religious holidays in both the western world and Asia set to boost physical buying from the jewellery sector.
   
In addition, gold remains supported by safe haven buying linked to wider financial market instability and to geo-political tensions. It is also benefiting from high oil prices, which boost its appeal as an inflation hedge.
       
Elsewhere, silver was down at 13.15 usd an ounce against 13.37 usd. Platinum fell to 1,353 usd against 1,360 usd, retreating from Monday near record high of 1.391 usd, while its sister metal palladium dipped to 356 usd against 357.50 usd.

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