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

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U.S. stocks lower; global markets drop

NEW YORK - Stocks were mostly lower in early trading Tuesday after hawkish comments by Federal Reserve Chairman Ben Bernanke sparked a selloff Monday. That decline reverberated globally, sending most international markets lower.
   
Wall Street's modest decline followed a nearly 200 point drop in the Dow Jones industrial average Monday after Bernanke spooked investors by saying that the central bank will remain vigilant in fighting inflation. Investors have been hoping the Fed would stop increasing short-term interest rates after 16 hikes. The nation's benchmark rate now stand at 5 percent.
   
Monday's drop was felt around the globe: Stocks in most Asian markets fell sharply, with Tokyo's Nikkei 225 index down 1.81 percent, while India's benchmark index fell 2.5 percent and Australian stocks fell 1.6 percent. The major European indexes were all lower in afternoon trading, with Ireland's benchmark index down 3.41 percent.
   
In the first hour of trading, the Dow Jones industrial average fell 4.56, or 0.04 percent, to 11,044.16.
   
Broader stock indicators were mixed. The Standard & Poor's 500 index added 0.34, or 0.03 percent, to 1,265.63, and the Nasdaq composite index fell 5.62, or 0.26 percent, to 2,164.
   
Bonds fell, with the yield on the 10-year Treasury note rising to 4.05 percent from 5.02 percent late Monday. The U.S. dollar was up against other major currencies in European trading while gold prices were lower.
   
Crude oil futures drooped. A barrel of light crude was quoted at $71.70, down 90 cents, in electronic trading on the New York Mercantile Exchange.
   
Federated Department Stores Inc. rose 28 cents to $72.16 after it said its audit committee has decided to restate the statement of cash flows for the year ended Jan. 28 after communications with the Securities and Exchange Commission staff. The retailer, which owns department stores, said in a filing with the SEC that it would reclassify proceeds from sales of credit card receivables.
   
Hewlett-Packard Co. fell 30 cents to $31.29 despite the company's announcement that it reached a favorable tax settlement with the U.S. government that will cause it to restate second-quarter profits upward by $443 million. The settlement also prompted the company to boost its full-year outlook.
   
IBM Corp. rose 26 cents to $79.32 said it would triple its investments in India to $6 billion over the next three years. Chairman and Chief Executive Sam Palmisano said the investment will be used to build service delivery centers in Bangalore, India's technology hub, and create telecommunications research and innovation center for IBM's telecom clients around the world.
   
The Russell 2000 index of smaller companies fell 3.65, or 0.51 percent, to 710.27.

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London - UK blue chips stayed weak, off lows at midday, battling to cling on to the 5,700 level, with Wall Street seen bouncing after yesterday's hefty slide, as sharp falls by heavyweight miners offset takeover benefit gains by BAA, dealers said.
   
At 12.03 pm, the FTSE 100 index was 64.2 points weaker at 5,697.9, holding off an early low of 5,689.9.
   
The broader FTSE indices all remained under pressure, notably the FTSE 250 index which shed 149.0 points at 9,202.9.

Frankfurt - Shares were lower in midday trade after a slump on Wall Street overnight on the back of inflation concerns and the possibility of further interest rate hikes there, though they were off earlier lows as US stock futures pointed to a US recovery this afternoon, dealers said.
   
At 11.45 am, the DAX 30 index was 48.70 points or 0.87 pct lower at 5,572.49, having moved between 5,546.31 and 5,590.83 so far this session.

Paris - Shares were sharply lower midsession following Wall Street's plunge yesterday on raised expectations of further US interest rate hikes amid high oil prices, dealers said.
   
At 12.53 pm, the main CAC- 40 index was 71.31 points or 1.45 pct lower at 4,844.73, off a morning low of 4,830.25.

Amsterdam - Shares were down at midday, in line with other European markets following yesterday's heavy losses on Wall Street, dealers said.
   
At 12.15 pm, the AEX was 4.21 points or 0.97 pct lower at 432.00 after opening at 436.21.

Brussels - Shares were trading lower at midday, with the Bel 20 down 44.65 points or 0.23 pct at 3,595.70.
 
Madrid - Share prices were lower in active midday trading, but off session lows as US futures turned higher, with Telefonica outperforming its blue chip peers, while Ferrovial slid on news of its BAA acquisition, dealers said.
   
At 12.48 pm, the IBEX-35 index was down 81.8 points at 11,204.7, after trading in a range of 11,125-11,216, on turnover of 1.197 bln eur.

Milan - Milan shares were lower midday as comments on inflation by the Federal Reserve chairman suggested that US interest rates may keep rising, while utility companies, led by Enel, outperformed on their defensive qualities, dealers said.
   
At 12.28 pm, the Mibtel index fell 1 pct to 27,734 points and the S&P/Mib was off 0.89 pct at 36,138, while volumes stood at 2.52 bln eur.

Zurich - Swiss shares continued broadly lower midday weighed down by fear of further rate steps in the US following Fed chairman Ben Bernanke's comments that the central bank will have to continue to battle inflation, dealers said.
   
At 12.48 pm the SMI was down 70.94 points at 7,594.14, and the SPI down 60.71 points at 5914.61.

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Asian shares close mostly lower on Wall St, inflation fears

HONG KONG - Share prices across the Asia-Pacific region closed mostly lower following the slump on Wall Street overnight in response to inflation fears, dealers said.
   
Tokyo share prices ended the day down sharply due to renewed worries over the impact of higher US interest rates on the global economy, dealers said.
   
Wall Street dropped overnight after US Federal Reserve Board chairman Ben Bernanke noted that while rising energy costs have helped slow the pace of US economic growth, core inflation is near the central bank's tolerance level and could warrant a further tightening of interest rates.
   
His remarks sparked a fresh wave of selling in Asia-Pacific markets, as investors fretted anew that higher rates could slow the US economy, hurting export-dependent Asian countries.
   
"Bernanke's remarks sparked fears that the US economy could be exposed to the risk of stagflation," Tokai Tokyo Research Center chief strategist Hiroyuki Nakai said.
   
"If that happens, it will pose a significant downside risk to the global economy," he added.
   
The Nikkei 225 Stock Average closed down 283.45 points or 1.8 pct at 15,384.86.
   
The TOPIX index of all first-section issues fell 27.62 points or 1.7 pct to 1,567.30.
   
Australian shares also followed Wall Street's lead with share prices finishing sharply lower, dealers said.
   
They said there was widespread selling across major banking and resource stocks and of Australian industrial companies with significant exposure to the US economy.

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The S&P/ASX 200 slumped 83.9 points or 1.64 pct to close at 5,036.1, retreating from the May 11 record close of 5,364.5.
   
Hong Kong shares were lower in afternoon trade with property stocks particularly hard hit in response to Wall Street.
   
At 3.30 pm the Hang Seng Index was down 80.19 points or 0.50 pct at 15,936.04.
   
Dealers said there was some bottom-fishing to provide support to the market but investors remained cautious ahead of the US Fed meeting later this month.
   
In China, A-shares in Shanghai and Shenzhen closed lower on liquidity concerns amid news the Bank of China is planning to shortly issue A-shares, dealers said.
   
The Shanghai A-share Index fell 5.55 points, or 0.31 pct, to 1,764.85 on turnover of 32.01 bln yuan and the Shenzhen A-share Index was down 1.95 points at 447.89 on turnover of 179.97 bln yuan.
   
The South Korean markets were closed for a holiday.
   
In Taiwan, share prices bucked the trend, closing mixed as bargain-hunting emerged toward the end of trade, halting the decline fueled earlier by Wall Street and lingering political concerns surrounding President Chen Shui-bian, dealers said.
   
But they said the upswing was technical in nature, and lower trading turnover reflected investor caution, particularly over opposition calls for Chen to step down and Bernanke's message on inflation.
   
The Taiwan weighted index closed up 15.00 points, or 0.22 pct, at 6,730.27, off a low of 6,621.17 and a high of 6,738.78.

Asian Bourse Round-Up

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