US & World Daily Markets Financial Briefing 06-09-2007

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Stocks open higher after data

NEW YORK - Stocks rose in early trading Thursday as investors regained some confidence in the economy after reports showed a rebound in worker productivity, fewer jobless claims and robust August retail sales.
   
Last week, for the first time in seven weeks, claims for unemployment benefits dropped, the Labor Department said. It also reported that worker productivity jumped to an annual growth rate of 2.6 percent in the April to June quarter, much better than expected.
   
The snapshots boded well for Friday's August employment report, the week's most anticipated piece of economic data. If Americans have jobs, they can usually keep paying their mortgages and spending money.
   
Investors have been alert for any sign that recent financial market turmoil has hurt consumer spending, which makes up two-thirds of the U.S. economy. Most retailers Thursday reported robust August same-store sales, a key performance gauge, but investors appeared unconvinced that the strong spending of the back-to-school season would last into the coming months.
   
In early trading, the Dow Jones industrial average rose 26.09, or 0.20 percent, to 13,331.56. Broader stock indicators were also higher. The Standard & Poor's 500 index was up 2.67, or 0.18 percent, at 1,474.96, and the Nasdaq composite index rose 6.14, or 0.24 percent, to 2,612.09.
   
Bonds slipped, lifting the yield on the benchmark 10-year Treasury note to 4.48 percent from 4.47 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices jumped.
   
Investors continue to place bets on the direction of interest rates. The Federal Reserve's Beige Book, issued Wednesday, gave some investors pause who were banking on a cut in the benchmark federal funds rate: The report suggested that while problems in the credit markets have exacerbated a housing market slump, the turmoil hasn't damaged the broader economy. Stocks fell sharply, taking the Dow Jones industrials down more than 140 points.
   
Among the retailers to report August results on Thursday, Wal-Mart Stores Inc. said same-store sales, which measure business at stores open at least one year, rose 3.1 percent. Analysts polled by Thomson Financial had forecast a more modest 1.5 percent increase.
   
Tony department store chain Saks Inc., teen apparel retailer Pacific Sunwear of California Inc. and children's clothier The Children's Place Retail Stores Inc. were among those that topped analyst projections.
   
In other corporate news, troubled mortgage lender Countrywide Financial Corp. said late Wednesday it will cut another 900 jobs nationwide after eliminating about 500 positions last month. The nation's largest mortgage lender by volume employs about 60,000 people.
   
The Russell 2000 index of smaller companies rose 3.79, or 0.48 percent, to 794.25. Overseas, Britain's FTSE 100 rose 0.41 percent, Germany's DAX index rose 0.24 percent, and France's CAC-40 rose 0.47 percent.

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Dollar benefits from sturdy jobless data, ECB comments

LONDON - The dollar recovered from day lows against the euro after surprisingly resilient US jobs data and some dovish comments from the European Central Bank.
   
Following the ECB's decision to leave euro zone interest rates unchanged at 4.00 pct, President Jean-Claude Trichet said the central bank is no longer signalling "strong vigilance" on inflation risks.
   
The phrase is understood by markets as a sign that interest rates will be hiked at the next ECB meeting, and its absence may diminish expectations for higher euro zone rates.
      
The dollar gained against the euro as the market digested the ECB's comments. The US currency was also benefiting from US jobless and productivity data, which came in relatively strong.
   
Investors are scrutinising US data for signs that market turbulence is spilling over into the wider economy. A spate of weak data, in conjunction with the turmoil itself, has fuelled speculation that the Federal Reserve Bank will cut interest rates on Sept 18.
   
Data today showed first time claims for unemployment insurance in the US fell 19,000 to 318,000 in the week to Sept 1, compared with economists' expectations for a smaller fall to 328,000.
   
Furthermore, US non-farm business productivity in the second quarter was revised up to a 2.6 pct annual growth rate from the originally reported 1.8 pct.
   
Ashraf Laidi at CMC Markets noted the dollar is pushing higher after the falling jobless claims data, but said the decline "doesn't take away from the recent rising trend, nor alleviates concerns of seeing an increase in the unemployment rate to 4.7 pct in tomorrow's non-farm payrolls".
   
The pound was caught up in these developments, weakening despite relatively hawkish comments from the Bank of England.
   
The BoE left interest rates unchanged at 5.75 pct today, as expected, but in an accompanying statement -- a rarity with unchanged rate verdicts -- it underscored that it will not use monetary policy simply to counteract financial market turmoil.

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Euroshares down midday, BoE & ECB leave rates unchanged

LONDON - Europe's leading exchanges were lower in midday trading as both the ECB and the BoE left interest rates unchanged and following a 90 bln eur tender bid by the ECB earlier this morning.
   
At 12.55 pm, the Dow Jones STOXX 50 fell 15.26 points or 0.41 pct to 3,725.56 as the STOXX 600 dropped 1.90 points or 0.51 pct to 370.76.
   
Infineon gained 4.07 pct after Dresdner Kleinwort raised its stance on the stock to 'buy' from 'reduce' and lifted its price target to 18 eur per share from 10 saying that it expects the chip-maker's wireless semiconductor business to help drive a turnaround at the company and challenge Texas Instruments.
   
Positive read-across also came from Apple Inc, which slashed the price for its iPhone by 200 usd. Nokia added 2.02 pct as traders noted the price cut could indicate that there were some problems with the iPhone.
   
Elsewhere, ABN Amro reviewed the European Semi-Conductor sector this morning, and said it believes the introduction of new iPods will be positive for ASML Holdings NV, as it should boost demand for flash memory. Shares in ASML gained 1.52 pct.
   
And SAP spiraled 1.58 pct higher with traders pointing to a conference held with Citigroup in New York last night.  "I would agree the comments (by chief executive Henning Kagerman) helped the stock this morning," one London-based trader said.
   
Meanwhile, miners were charging ahead amid ongoing expectations for consolidation in the sector. The latest speculation centred on BHP Billiton -- up 1.48 pct -- teaming up with Brazil's CVRD in a joint bid for the world's third largest miner, Rio Tinto. The companies declined to comment on the rumour and many market players were sceptical.
   
Elsewhere, Anglo American and Rio Tinto were upgraded by Sanford Bernstein to 'market perform' from 'underperform' and to 'outperform' from 'market perform' respectively. Anglo added 1.24 pct and Rio moved up 2.95 pct.
   
Integrated oil companies and oil services groups also put in solid gains as crude remained at elevated levels and as BG Group said it found more oil in the Santos Basin, offshore Brazil. Shares in the UK group gained 2.73 pct.
   
Other significant gainers included Technip --up 2.21 pct-- and Tullow Oil, which added 2.13 pct, while Shell climbed 0.77 pct and SBM Offshore, which hiked 0.98 pct higher.
   
In earnings news, Swiss insurer Baloise was 1.24 pct off as investors used consensus-beating first-half results to take profits on the stock following its recent M&A-fuelled run-up.
   
Enel SpA added 0.54 pct after the energy group released a positive set of first-half results and confirmed its dividend policy.
       
In terms of broker action, the automotive sector was in focus as Citigroup upgraded Fiat to 'buy' from 'hold' but downgraded Volkswagen to 'sell' from 'hold' as part of a review of the European auto sector. Fiat shares fell 0.25 pct,, while VW shed 0.42 pct.
   
Novartis was marginally higher, up 0.08 pct, after broker UBS started coverage on the Swiss pharmaceutical group with a 'buy' rating and an 82 sfr price target, saying it is in its top pick in the sector.
   
The upbeat broker's note helped mitigate the negative impact of a US district court ruling denying the Swiss group's motion for a preliminary injunction against Teva's generic tablets of genital herpes drug Famvir.

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Asian markets end higher despite weak start pressured by Wall Street

SINGAPORE - Stock markets across Asia ended mostly higher Thursday despite a shaky start
brought on by weaker-than-expected US housing  data and a fresh spike in short-term interest rates.
   
In Tokyo, banks were lower with Nomura Holdings down 29 yen or 1.5 cpt to 1,917. Mitsubishi UFJ Financial Group  dropped 10,000 yen or 1 pct to 1.08 mln yen.The Nikkei 225 Stock Average closed up 98.55 points or 0.6 pct at 16,257.00, after falling to as low as  15,840.05. The broader TOPIX index dropped 0.1 pct.
   
In Singapore, the Straits Times Index ended up 0.6 pct at 3,466.06. For the second day now, the calculation for the benchmark index was marred by a technical glitch in early trading hours.
   
In Sydney early Thursday, the Reserve Bank of Australia moved to broaden the type of securities it accepts,  announcing the move as part of repurchase agreements designed to take pressure
off the bank bill market. The S&P/ASX 200 was down 0.2 pct at 6,251.0, while the All Ordinaries was down 0.1 pct.
   
Meanwhile, the Hang Seng fell 0.1 pct after a media report suggested that a scheme allowing mainland investors to invest  directly in Hong Kong stocks will be launched in one or two months, later than originally expected.
   
The Philippines Composite was down 0.5 pct and the Malaysian Kuala Lumpur Composite closed up 0.07 pct.
   
In Taiwan, the Taiex was up 103.23 points or 1.16 pct at the day's high of 9,017.08. The cement sector was up  4.47 pct on expectations of continued strong demand from China, transport rallied 3.87 pct, electronics advanced  1.10 pct and financials rose 0.93 pct.
   
The Shanghai Composite was up 1.56 pct with steelmakers in focus on expectations of a restructuring of the  sector.
   
Indian shares closed higher after heavy buying in energy, auto and banking shares, aided by bullish trends seen in Asian and other European markets. The Bombay Stock Exchange's benchmark Sensex rose 1.10 pct, or 170.16 points, to 15,616.31, while the National Stock Exchange's S&P CNX Nifty climbed 0.96 pct, to 4,518.60 points.  In the BSE 30, 28 shares gained and 2 fell. In the broader market, 1,682 shares advanced, 1,019 shares retreated and 72 were unchanged.

In Jakarta, the composite index closed up 0.3 pct.

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Copper steady, other metals down, as weaker equities dampen sentiment

LONDON - Copper was steady early afternoon, and the other metals softer, as poor sentiment tempered the effects of price-positive supply and demand fundamentals. Zinc touched a 17-month low as rising inventories of the metal spooked investors.
   
The downtrend in the London stock market, which turned lower after a firm start, and an expected weaker opening on Wall Street are weighing on sentiment, analysts said.
   
Waning investor confidence has knocked base metals prices recently. Declining share prices have fuelled fears the recent sub-prime mortgage crisis in the US could spill over into the wider economy, dampening growth and consequently demand for industrial metals.
   
"The only certainty in the metals markets at the moment is uncertainty. For the most part, they will continue to take their cue from what is happening elsewhere -- chiefly the fluctuations in the Dow and other markets," said Martin Hayes, an analyst at BaseMetals.com.
   
At 1.20 pm, copper for three-month delivery was trading at 7,190 usd against 7,170 usd at the close yesterday. The red metal continues to take some support, however, from supply fears linked to strike action in Africa and Latin America.
   
A major consignment of Zambian copper destined for export is still stuck in transit following a three-week strike by employees of the Tanzania-Zambia Railways.
   
Some 1,400 striking workers had refused to return to work, forcing management officials to drive cargo trains carrying copper to the port of Dar-Es-Salaam in Tanzania, analysts said.
   
Zambia is one of the world's top copper producers, possessing 15 pct of global copper reserves.
   
Zinc meanwhile has been heavily traded, with the metal dipping to its lowest level since April 2006. Zinc stood at 2,805 usd per tonne against 2,820 usd yesterday, its lowest close in over a year, and earlier touched an intraday low of 2,777 usd.
   
Inventories of the metal, which is chiefly used in galvanising and the production of alloys, have risen by 3,650 tonnes since Monday and now stand at 68,650 tonnes. Supply is also seen as plentiful going forward.
   
Lead prices eased to 2,895 usd from 2,924 usd, and remained well off the key psychological level of 3,000 usd per tonne. Aluminium dipped to 2,432 usd against 2,445 usd, and tin edged down to 14,600 usd from 14,650 usd.
    
Nickel meanwhile slipped to 26,947 usd against 27,305 usd.

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