US & World Daily Markets Financial Briefing 06-03-2006

Wall Street - U.S. stocks mixed as Treasury yields surge

NEW YORK - U.S. stocks were mixed in tight ranges in morning trade Monday, after enthusiasm for AT&T's new $67 billion agreement to buy BellSouth Corp was tempered by nervousness about surging bond yields.
   
The Dow industrials last were up just 0.88 point at 11,022.
   
The S&P 500 and the Nasdaq Composite were down 0.65 point at 1,286 and down almost 3 points at 2,305.
   
The equities market in recent sessions has been trapped between the opposing
forces of investor belief that many individual stocks have fallen to attractively cheap prices and worries about energy prices and deteriorating bond prices.
    
"Structurally the market remains in decent shape," said Steve Goldman, chief market strategist at Weeden & Co.
   
"Overseas markets are up strongly and the S&P 500 is trying to rally," Goldman said. "So I hope bond yields don't get carried away and cause further risk to stock prices."
   
Intraday the FTSE 100 struck its highest level in more than four years amid heavy buying of telecom stocks.
   
New data reports were mildly supportive of equities, suggesting that the robust housing market will not suffer a severe meltdown and that factory activity was not as weak in January as had been thought.
   
An association of realtors said pending home sales declined 1.1% in January and predicted a soft landing for the housing sector.
   
The Commerce Department reported that orders for U.S.-made factory goods fell 4.5% in January; the MarketWatch forecast, based on a poll of economists, was for a larger decline.

Stocks of note
   
Shares of BellSouth shot up almost 11% to $34.84 as AT&T dropped 2.1% to
$27.40
   
On Sunday AT&T Inc. announced the long-rumored deal that would create a gigantic communications provider. BellSouth dominates local telephone service in
nine Southeastern states, while AT&T operates in 13 states.
   
Elsewhere in the telecommunications sector, Sprint Nextel Corp. was up 2.1% at $24.73.
   
Other potential takeover targets in the sector include Alltel , which was up 5.3% at $67.72, and Qwest Communications International Inc. , which rose 3.6% to
$6.82.
   
Vodafone Group plc gained 7.2% to $22.53 amid speculation it could declare a special dividend.
   
Intel Corp was 7 cents higher at $20.35. In upgrading the stock to buy from hold, Citigroup said it sees improved prospects for the company.
   
Research in Motion rose almost 14% to $81.83. Late Friday, the maker of BlackBerry devices agreed to pay NTP Inc. $612.5 million to end a long-running
patent dispute.

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Yen slides vs. rivals ahead of Bank of Japan meeting
 
NEW YORK - The yen extended losses, setting fresh one-week lows against the dollar and the euro early Monday, after Japan's prime minister urged the nation's central bank to be prudent in deciding when to tighten monetary policy.
   
Prime Minister Junichiro Koizumi said that he would like the Bank of Japan to make a "careful decision" at its policy meeting later this week. The yen struggled across the board on doubts that the Bank of Japan will end its quantitative easing policy this week.
   
"With the market increasingly clamoring for the shift in policy, a delay would leave the BoJ 'behind the curve,' which is not a bad ploy when questions over deflation remain. Furthermore, a delay until April, in the new fiscal year, would help the central bank avoid criticism that it is being too hasty in changing policy," said analysts from French bank Calyon.
   
The dollar was last up 0.9% at 117.44 yen, as the euro fell 0.2% to $1.2026.
   
The Bank of Japan's policy board will convene on Wednesday and Thursday and
will weigh recent consumer price index data pointing to a return of inflation in its review of monetary policy.
   
Bank of Japan governor Toshihiko Fukui said the central bank will carefully judge whether the core CPI has stabilized into positive territory.
   
"It's necessary to make the judgment calmly and objectively without any preconceived notions about whether the consumer price index excluding fresh food prices has stabilized at zero or above," Fukui told an Upper House budgetary committee session.
   
Expectations that the Bank of Japan will move to end its quantitative-easing monetary policy received a boost Friday after government data showed core consumer prices, excluding food, rose 0.5% in January from a year earlier, beating market expectations for a 0.4% gain.
   
The increase marks the third straight month prices that have risen, suggesting the country's seven-year long battle with deflation is coming to an end.
   
Ashraf Laidi, chief currency analyst at MG Financial Group, said he expects the Bank of Japan to opt for reducing liquidity this week from the current range of 30 trillion to 35 trillion yen range to 25 trillion to 30 trillion yen.
   
On the U.S. side, the February payrolls data, due Friday, will highlight the fairly busy calendar of economic events this week. Economists surveyed by MarketWatch say, on average, that nonfarm payrolls rose by 206,000 in February
after a 193,000 gain in January.
   
It's the final employment report before the March 27 and 28 meeting of the Federal Open Market Committee, where Federal Reserve policymakers are widely expected to raise overnight interest rates to 4.75%, up from 4.5% currently.

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The European Markets at 12.00 GMT

London - Leading shares climbed higher at midday, paced by a firm telecoms sector with continued M&A speculation in index heavyweights Vodafone and BT and AT&T's 67 bln usd acquisition of BellSouth helping power the FTSE 100 index past the 5,900 level, dealers said.
   
By 12.07 GMT, the FTSE 100 index was up 62.4 points at 5,921.4, while the broader indices were also higher, with both the FTSE 250 and Small Cap indices
hitting record highs.
   
Volume was solid with 1.4 bln shares traded in 133,366 deals.

Frankfurt - Shares were higher in midday trade, bouncing back from last week's losses, as US stock futures pointed to a recovery on Wall Street, as Linde soared on news of a friendly bid for BOC, and as ThyssenKrupp jumped on a report it may sell its automotive division, dealers said.
   
At 12.03 pm, the DAX 30 index was 18.86 points or 0.33 pct higher at 5,740.32, having moved between 5,738.93-5,768.98 so far this session.
   
The MDAX was at 8,389.36, up 35.01 points or 0.42 pct, while the TecDAX was at 743.17, up 6.62 points or 0.90 pct.

Paris - Paris shares were trading higher at midday as merger and acquisition news boosted stocks in the telecom and energy sectors, dealers said.
   
At 12.38 pm, the benchmark CAC-40 index was up 39.64 points or 0.79 pct at 5028.79. Volume was 1.63 bln eur.
   
On the Matif, March CAC-40 futures were trading 43.0 points higher at 5033.0.

Amsterdam - Share prices were higher in midday trade buoyed by higher Wall Street futures, dealers said.
   
At 12.06 pm, the AEX was up 1.15 points or 0.25 pct at 458.41, after opening at 458.30, reaching a low of 456.42 and a high of 458.68.

Milan - Share prices were higher in midday trade, led by sharp gains in Generali, which was boosted by an ambitious business plan and positive full-year results, and in its main shareholder Mediobanca, dealers said.    

At 12.20 pm, the Mibtel index rose 0.9 pct to 29,007 points and the S&P/Mib advanced 1.04 pct to 37,779, while volumes stood at 2.23 bln eur.

Madrid - Share prices were higher in thin midday trading, with news of AT&T's acquisition of BellSouth buoying telecoms such as Telefonica, while media issues like Telecinco were also firm, dealers said.
   
At 12.10 pm, the IBEX-35 index put on 38.4 to 11,794.1, after trading in a range of 11,762-11,804, on turnover of 938 mln eur.

Stockholm - Share prices remained in positive territory in midday trade, extending the morning's gains on continued bargain hunting, with telecom operators outperforming in the wake of the bid by AT&T for Bellsouth, dealers said.
   
At 12.10 pm, the OMX Stockholm index was up 0.56 pct at 324.62, while the OMX Stockholm 30 index was up 0.55 pct at 1,015.64. Turnover was 5.67 bln skr.

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Asian shares close mostly higher, Tokyo firmer led by exporters

HONG KONG - Share prices across the Asia-Pacific region ended mostly higher, with Japan's blue-chip Nikkei index rising for the first time in four days as exporters were buoyed by a stronger US dollar against the yen, dealers said.
   
The Nikkei 225 Stock Average closed up 237.82 points or 1.5 pct at 15,901.16, its high for the day.
   
The broader TOPIX index of all first-section issues gained 13.50 points or 0.8 pct at 1,626.46, off a high of 1,626.54.
   
"The yen's pullback against the dollar appeared to prompt some investors to chase bargains in the high-technology sector. This helped lift the tech-heavy
Nikkei index," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Securities.
   
Share prices in Australia finished higher despite mixed investor sentiment and little direction from overseas markets, dealers said.
   
They said the market remained in negative territory over much of the trading session while investors sought direction from local company news.
   
Publishing and Broadcasting rose after announcing it paid 900 mln usd for the right to own and operate hotel casino resorts in Macau.
   
But, dealers said, insurance stocks QBE and Promina dropped after trading ex-dividend.
   
The S&P/ASX 200 gained 5.4 points or 0.11 pct to close at 4,903.9.
   
In Hong Kong, share prices were trading almost flat on caution ahead of HSBC's 2005 results announcement due after the market close, dealers said.
   
HSBC's unit Hang Seng Bank will also announce its annual results today.
   
At 15:29 pm, the Hang Seng Index was up 21.73 points or 0.14 pct at 15,823.73.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower on a lack
of follow-through interest amid investor caution with property developers and power generators losing ground, dealers said.
   
The Shanghai A-share Index fell 4.57 points to 1,351.83 on turnover of 9.53 bln yuan and the Shenzhen A-share Index was down 0.72 point at 323.50 on turnover of 5.39 bln yuan.
   
Share prices in Seoul finished higher, ending a three-day decline, with large cap IT stocks, KEPCO and POSCO leading the advance, dealers said.
   
After a firm start, the market changed course several times as investors worried about interest rates, higher oil prices and the negative earnings outlook for major corporations.
   
But intensified program buying, amounting to 237.2 bln won, and solid gains in Tokyo boosted investor sentiment, leading the index to close near its strongest level for the day.
   
The KOSPI index closed up 15.81 points or 1.19 pct at 1,344.76.

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The Treasury market was under heavy selling pressure that pushed the yield on the benchmark 10-year note up to its strongest level since June 2004, in early action Monday.
   
Treasury prices in recent sessions have been hurt by concerns about rising rates in the U.S., Japan and the euro zone and by stiff competition from new corporate issuance. The weaker bond prices in turn have hurt the stock market.
   
The 10-year benchmark note last was down 7/32 at 98 10/32 with a yield of 4.716%, up from 4.683% in late trading Friday.
   
Crude futures last were down 48 cents at $63.19 a barrel, following news reports that OPEC won't cut production.
   
Gold futures resumed their recent climb, last trading up 40 cents at $568.40 an ounce. Overall, gold has benefited in recent weeks from uncertainties in other markets.

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