US & World Daily Markets Financial Briefing 07-05-2008

Welcome to the Investors Hub World Daily Markets Bulletin; your daily e-mail guide to important Domestic, European and Global market events. Market Briefing is here to keep you informed and up-to-date on key financial developments.

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Stocks down after home sales, labor cost data

NEW YORK - The stock market traded lower Wednesday, as investors reacted to mixed economic data and waited to see if oil prices will climb further into uncharted territory.

The National Association of Realtors disappointed the market when it said pending sales of existing homes fell in March by 1 percent, more than many economists predicted.

Weak housing data hardly comes as a surprise to investors now, though, and Wall Street did get dose of good news when the Labor Department said labor costs rose at an annual rate of 2.2 percent during the first quarter. That's down from a 2.8 percent rise the previous quarter, suggesting that inflation pressures may be letting up.

But generally, inflation remains a concern given that oil prices have doubled over the past year to record levels above $122 a barrel on Tuesday. As a result, gasoline prices are surging further into record terrain, strapping debt-laden U.S. consumers with another financial burden. Kansas City Federal Reserve President Thomas Hoenig in a speech late Tuesday cited inflation as his main worry.

The stock market will be closely watching the energy market's reaction Wednesday to the government's weekly report at 10:30 a.m. EDT on U.S. fuel inventories. On the New York Mercantile Exchange, crude edged up 18 cents to $122.02 a barrel after reaching a record $122.73 on Tuesday.

The Dow Jones industrial average slipped 24.99, or 0.19 percent, to 13,995.84. Broader stock indicators were also lower. The Standard & Poor's 500 index fell 4.45, or 0.31 percent, to 1,465.47, and the Nasdaq composite index fell 0.77, or 0.03 percent, to 2,482.54.

The stock market rose moderately Tuesday despite the surge in oil prices, as bargain hunters bought up pummeled financial and housing-related stocks in the hopes of a late-2008 economic rebound.

In morning trading Wednesday, gold prices fell, while the dollar rebounded against other major global currencies. Bond prices edged higher. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 3.91 percent from 3.92 percent late Tuesday.

In corporate news, Clearwire and Sprint Nextel Corp. are planning to merge their wireless broadband units to create a new $14.55 billion wireless communications company. The new company is getting a $3.2 billion investment from Intel Corp., Google Inc., Comcast Corp., Time Warner Cable Inc. and Bright House Networks.

Clearwire rose $1.38, or 8.4 percent, to $17.84, and Sprint rose 40 cents, or 4.4 percent, to $9.59. Overseas, Japan's stock market rose 0.38 percent. By afternoon trading in Europe, Britain's FTSE index rose 0.69 percent, Germany's DAX index rose 0.98 percent, and France's CAC-40 rose 0.99 percent.

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Forex - News of consumer malaise dents euro

LONDON - News of a euro zone wide consumer malaise dented the euro, pushing it to the low $1.54 level. Euro zone retail sales fell 0.4 percent in March from February, and were down 1.6 percent year-on-year, much weaker than analysts' forecasts of a 0.3 percent rise.

The figures add to the growing belief that economic growth in the euro zone will slow markedly, eventually leading the European Central Bank to lower interest interest rates in the coming months.  "March's euro zone retail sales figures confirm that spending remains worryingly weak," said Jennifer McKeown of Capital Economics.

Against this backdrop and given that the euro has risen from levels in the mid-$1.30 level around this time last year, the euro struggled throughout Wednesday's session.

In the UK, bad news weighed on the pound. Nationwide building society said on Wednesday consumer confidence slumped to its lowest level since records started in May 2004, while a survey from accounting firm KPMG and the Recruitment and Employment Confederation said permanent staff wages rose at the slowest pace since April 2003.

The surveys follow Tuesday's purchasing manager's index on the service sector, which fell to 50.4 in April from March's 52.1, the weakest reading since March 2003.

Elsewhere, the dollar was firmer following hawkish talk from Federal Reserve members. Dallas Fed president Richard Fisher said in an interview that it would take a dramatic slowdown to justify further rate cuts, and that the dollar's rebound signals increased confidence in the Fed's determination to tackle inflation.

Analysts said there is a growing consensus that U.S. rate cuts are coming to an end, while it is still up for debate when the European Central Bank will start to lower borrowing costs, supporting the U.S. currency.

"Expectations for the U.S. economy and Fed rates are stabilising but the ECB may need to switch gears and put easing on the agenda soon," said Geoffrey Yu, currency strategist at UBS, adding that this should encourage dollar strength.

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Euroshares flat in early deals, investors mull over mixed bag of earnings

At 08:57 a.m., the DJ STOXX 50 was down 2.95 points or 0.09 percent to 3,259.25, while the DJ STOXX 600 gained 0.23 points or 0.07 percent to 326.92.

In Europe, a mixed bad of earnings results was due out across the continent, with shares in Lafarge rallying more than 5 percent after the group said first quarter sales in the first-quarter came to 4.0 billion euros, 8 percent higher than in the same period a year earlier, when sales reached 3.695 billion euros.

Staying in France, heavy engineering group Alstom added 2 percent after releasing stellar full-year results and raising its guidance.

In response to the results, Cheuvreux raised its recommendation on the stock to 'selected list' from 'outperform' and highlighted the possibility of further margin improvements in the coming years.

Meanwhile, France Telecom added 0.7 percent after the group unveiled higher-than-expected sales and gross operating profit for the first quarter, but gains were kept in check by continuing uncertainties over the group's M&A ambitions.

Turning to financials, Commerzbank added 1.29 percent, despite a cautious outlook for the year. Traders said the results the bank presented was however in-line and topping the range of forecasts.

Elsewhere among financials, Deutsche Boerse gained 1.78 percent after it released record earnings numbers last night after the close, beating analyst expectations as it said first-quarter EBITA came to 425.8 million euros.

Analysts praised the group's strong performance at its Eurex division, noting Revenue growth at its revenue-driving Eurex unit and Sal Oppenheim reiterated its 'firm buy' rating on the stock.

Dutch insurer Aegon shed 3 percent after it said its first-quarter net profit and operating income plummeted, hit by a weak U.S. dollar and difficult conditions on the world's financial markets.

In other earnings news, Finland's Nokian Tyres Oyj stormed more than 10 percent higher aftr it reported much better than hoped for first-quarter results and issued a bullish outlook statement for the rest of 2008.

"The car tyres margin came in at 34.2 percent versus the forecast of 26 percent thanks in part to an extraordinarily low tax rate of 9.5 percent," said one dealer at a leading Scandinavian Brokerage, adding this is "fantastic profitability".

Meanwhile, in Denmark, Carlsberg AS lost 4.2 percent after the brewer posted a lower-than-expected operating profit for the first quarter.

Jyske Markets analyst Jens Houe Thomsen said the group's EBIT came in around five percent below expectation at 388 million crowns, and mainly reflects the fact that Carlsberg has chosen to allocate more costs than expected in the quarter. Other groups releasing results or updates this morning included Corporate Express, Delhaize, Securitas and TUI.

Turning to the economic news, Euro zone retail sales for the month are expected to show some signs of life with economists forecasting a 0.3 percent rise after a 0.5 percent drop in the month before. Over on the other side of the Atlantic, pending home sales in March are in focus and expected to have dropped to 83.8 from 84.6 in the previous month.

And data in productivity is also expected to be disappointing, with economists forecasting preliminary productivity in the first quarter to have decreased to a 1.7 percent rate, below the 1.9 percent rate in the previous quarter.

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Asian markets end lower on worry over rising oil prices, Tokyo gains
 
The Hang Seng index closed down 2.48 percent at 25,610.21. The benchmark Shanghai Composite Index closed down 4.13 percent at 3,579.15.
  
Singapore's Straits Times closed lower by 0.6 percent at 3,228.95. The South Korean KOSPI closed 0.3 percent lower at 1,854.01
   
The Australian market finished lower after a sell off in the financial sector late in the session. The decline in the sector outweighed gains by resource stocks driven by the rally in commodity markets. The All Ordinaries index fell 0.4 percent to 5,757.80, while the S&P/ASX 200 index fell 0.6 percent to 5,668.4.
   
St George closed down 3.6 percent, adding to a 2.7 percent drop on Tuesday. National Australia Bank fell 2.9 percent to A$30.50 ahead of its first half earnings report on Friday. Commonwealth Bank lost 3.1 percent to A$41.90, ANZ shed 2.6 percent to A$22.30 and Westpac retreated 3.2 percent to A$24.79.

The Institute for Supply Management (ISM) said Monday its non-manufacturing index rose about 4 points to 52.0, topping expectations.
   
The Nikkei 225 index finished up 0.4 percent at 14,102.48. Energy and resource stocks were in focus. Japanese oil and gas field developer Inpex Holdings surged 13.2 percent to 1.28 million yen. Trading house Mitsubishi Corp. gained 6.7 percent to 3,500 yen, and Sumitomo Metal Mining advanced 4.3 percent to 1,892 yen.
   
Gains in the energy sector extended to shipyard companies that supply drilling rigs and other equipment to the sector. Mining stocks gained. BHP Billiton closed up 2 percent at A$45.29, Rio Tinto gained 2.4 percent to A$145.26 and Fortescue gained 8.8 percent to A$9.39 
       
Malaysia's KLCI rose 0.9 percent to 1,287.15 as palm oil stocks rose. Palm oil prices track the performance of crude oil prices as palm oil can be used in the production of alternative fuel such as biodiesel.

Sime Darby, the world's largest palm oil producer and the biggest stock on the bourse, climbed 1.1 percent to 9.50 ringgit and second-ranked IOI Corp advanced 2.9 percent to 7.15 ringgit.
   
Kuala Lumpur Kepong, which owns sizable oil palm estates in Indonesia and Malaysia, was up 0.6 percent at 17.10 ringgit. The Jakarta composite closed higher 0.5 percent at 2,372.37, while the Philippine composite index finished up 0.4 percent at 2,739.43.

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Oil steady near record ahead of U.S. inventory data

LONDON - Oil was steady near yesterday's record $122.73 ahead of weekly U.S. inventory statistics as the dollar's recent rally slowed and as supply concerns continued to stoke jitters.

A Goldman Sachs forecast, released yesterday, predicting oil at $200 within the next two years also lent some support.

At 3:30 pm Wednesday the U.S. Energy Information Administration is expected to report its crude inventories in the week to May 2 rose by 1.9 million barrels while refinery runs increased by 0.5 percentage points following last week's fall to 85.4 percent.

Gasoline stockpiles are expected to have dropped by 200,000 barrels ahead of the peak demand driving season, analysts predicted, while distillates, which include heating oil, are seen rising by 1.3 million barrels.

"Key today will be the release of the weekly EIA data," said Bank of Ireland analyst Paul Harris. "Should the data disappoint the market could quickly test yesterday's highs. Of particular interest will be the gasoline number in the context of the upcoming US driving season. Better-than-expected figures may prompt the belief that the market is over-extended and deliver a retracement - but this is likely to be only marginal."

At 10:04 a.m., New York-traded West Texas Intermediate crude for June delivery was up 5 cents to $121.89 a barrel, having yesterday hit a record high of $122.73 a barrel.

In London, Brent crude for June delivery was up 10 cents at $120.41, having yesterday touched an all-time record of $120.99. Tensions in key producing countries Nigeria and Iran helped oil's latest rally.

Iran said Monday it would reject any offer that violates its right to master the full nuclear fuel cycle after world powers said they had prepared a new package to end the atomic crisis.

The West fears Iran could use uranium enrichment to make atomic weapons. Iran denies it wants to do this and insists it has a right to enrich and make nuclear fuel as a signatory to the nuclear Non-Proliferation Treaty.

Meanwhile in Nigeria, rebels promised on Tuesday to halt attacks on the oil industry if the Nigerian government would allow former U.S. President Jimmy Carter to act as a mediator.

Elsewhere, the dollar's next move is likely to have an impact on the price for most commodities. Commodities tend to move counter to the dollar as they are seen as alternative assets.

Investors are waiting for more economic data from the U.S. to solidify their views on what will be the Federal Reserve's next move -- whether it would keep its key interest rates on hold for a while or continue its monetary easing. Today, the world's biggest economy's data includes first quarter productivity and costs, March housing forecast/pending home sales index and consumer credit.

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