US & World Daily Markets Financial Briefing 11-05-2007

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Stocks higher after inflation report

NEW YORK - Wall Street resumed its advance Friday as investors interpreted a government report of milder inflation as a signal that the Federal Reserve might consider cutting interest rates later this year.
   
Investors were encouraged after the Labor Department's producer price index -- which measures the rate of inflation experienced by manufacturers when purchase goods -- suggested inflation is moderating. This raised hopes on Wall Street that central bankers won't need to raise interest rates to keep the economy in check, and might even lean toward lowering them.
   
In the first hour of trading, the Dow Jones industrial average rose 44.86, or 0.34 percent, to 13,259.99. The blue chip index has hit 21 record closes since the start of the year and 43 since the beginning of October, its latest coming Wednesday.
   
Broader stock indicators also advanced. The Standard & Poor's 500 index was up 5.15, or 0.35 percent, at 1,496.62, and the Nasdaq composite index rose 6.22, or 0.25 percent, to 2,539.96.
   
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.62 percent from 4.64 percent late Thursday. The dollar was mixed against other major currencies, while gold prices rose.
   
The Labor Department reported its producer price index rose to 0.7 percent in April. This met Wall Street expectations, and was lower than the March reading of 1.0 percent. The core PPI, which excludes food and energy, was unchanged for the second month in a row.
   
Meanwhile, the Commerce Department said retail sales unexpectedly fell in April, indicating weakness in the economy at the start of the second quarter. Sales decreased 0.2 percent last month, after rising an upwardly revised 1.0 percent in March, according to the report. Originally, March sales were reported
up 0.7 percent.
   
The Russell 2000 index of smaller companies was up 2.70, or 0.33 percent, to 821.33.
  
In afternoon trading, Britain's FTSE 100 was up 0.16 percent, Germany's DAX index was down 0.54 percent, and France's CAC-40 was down 0.57 percent.

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Source - Thomson Financial News

Dollar steady ahead of US data

LONDON  - The dollar is steady ahead of this afternoon's US data at the end of a week in which there were no major surprises from the world's leading central banks.
   
US retail sales and producer price data will be in focus this afternoon, with the pound/dollar cross likely to be in the spotlight following yesterday's decision by the Bank of England to only increase its key repo rate by a quarter point to 5.50 pct. The pound fell as some sections of the market had expected a bigger increase.
   
The retail sales news will be particularly interesting after poor trading updates yesterday from individual US retailers, such as Wal-Mart Stores, JC Penney and Federated Department Stores.
   
"We saw a run of bad numbers from the US retailers yesterday, so assuming this is reflected in today's readings, the pound may end up finding its floor against the dollar in the not too distant future," said David Jones, chief markets analyst at CMC Markets.
   
Analysts polled by Thomson Financial News expect retail sales to have risen 0.3 pct in April after rising 0.7 pct in the prior month, while sales excluding autos are seen rising 0.4 pct in the month, after having risen 0.8 pct.
   
The producer price data will also be important given the US Federal Reserve's concerns over pipeline inflationary pressures.
  
The dollar has also been supported by comments from US President George Bush and US Treasury Secretary Henry Paulson. The latter said that a strong dollar was in his nation's interest, while Bush issued a statement that said he would attempt to lower trade barriers to attract foreign investment.
   
Elsewhere, the yen remained firm on fears that carry trades will be unwound in the wake of sharp falls on US and Asian stock exchanges overnight.

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FTSE 100 risers

Standard Chartered 1,612 up 69  Bid speculation; Lehman Brothers upgrade to 'overweight'

Rio Tinto 3,660 up 121   Speculation BHP Billiton mulling a bid for Rio

Northern Rock 1,097 up 42   Takeover rumours; bullish comment from Cazenove

Yell Group 507-1/2 up 10-1/2   Private equity bid speculation

Reuters 610-1/4 up 9-1/4   Thomson education ops sale ups Reuters takeover possibility

Xstrata 2,774 up 69    Sector consolidation hopes

FTSE 100 fallers

Next 2,396 down 31  Downgraded to 'hold' vs 'outperform' by Seymour Pierce

Hammerson 1,656 down 17   Profit-taking following bid speculation

Hanson 1,022-1/2 down 3   Cut to 'hold' vs 'buy' by Citigroup

Frankfurt - At 3.11 pm, the DAX lost 34.68 points, or 0.47 pct, to 7,380.65 as the MDAX retreated 50.53 points or 0.47 pct to 10,663.93. Meanwhile, the TecDAX fell 9.98 points, or 1.16, pct to 850.25.
   
DAX futures were higher, up 30.00 points, or 0.41 pct, to 7,407.50, and bund futures were 0.24 points, or 0.21 pct, higher at 114.00.
   
MAN AG, Deutsche Postbank and SAP were all trading ex-dividend. MAN AG lost 3.63 eur, or 3.49, pct to 100.25, after paying out 2 eur a share to regular and preferred shareholders. Deutsche Postbank fell 1.25 eur, or 1.81 pct, to 67.86, having paid out 1.25 eur a share, and SAP was 0.58 eur, or 1.66 pct, lower at 34.32, after distributing 0.46 eur a share.
   
Continental fell 1.60 eur, or 1.54 pct, to 102.30, followed by Henkel, which declined 1.73 eur or 1.49 pct to 114.39.
   
Shares in ThyssenKrupp retreated 0.61 eur, or 1.47 pct, to 40.76 as WestLB lowered its stance on the stock to 'hold' from 'add' and with solid second-quarter results failing to impress investors, traders said.
   
Altana climbed 0.08 eur, or 0.42 pct, higher to 19.26, and Hypo Real Estate gained 0.08 eur, or 0.15 pct to 52.81. Over on the MDAX, KarstadtQuelle lost 1.10 eur, or 3.97 pct, to 26.59.
   
Zurich - At 14.00, the Swiss Market Index was 65.49 points lower at 9300.65, while the Swiss Performance Index followed it down 57.08 points at 7548.06. The SMI remained in negative territory, with the exception of some selected financials, as investors await this afternoon's US inflation and retail sales
data, a trader here said.
   
Most of the SMI's shares were losing ground in a reversal of yesterday's slight recovery, with only three gainers: Synthes, UBS and Swiss Re. UBS was last up 0.20 sfr at 76.4, while reinsurer Swiss Re was the market's biggest gainer, rising 0.30 sfr to 113.5. Rival insurer Swiss Life dropped 4 sfr to 313, while Baloise was down 1.89 pct, or 2.40 sfr, at 124.4.
   
In more financials, banking heavyweight Credit Suiss continued to lose ground, dropping 1.40 pct at 91.05, with smaller rival Julius Baer sliding 2.54 pct to 82.45 sfr. Swiss reinsurer Zurich Financial, which had seen a slight rise the day before, fell 3.25 sfr to 372.75.
  
Major losers also included luxury goods stocks, with Swatch down 1.39 pct, or 1 sfr, at 70.85 and Richemont off 1.45 pct, or 1.10 sfr, at 74.5. Both stocks managed to regain some ground after earlier heavy losses.
  

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Asian shares close mostly lower on Wall St drop

HONG KONG - Shares across the Asia-Pacific region closed mostly lower following a fall on Wall Street overnight after the release of weak retail sales data. Chinese shares retreated on fears the government will introduce further measures to dampen the economy and share markets.
   
Tokyo shares closed lower on renewed fears about the outlook for the US economy, after the release overnight of figures showing weak sales by major retailers created pessimism about consumer spending there.
   
Japanese players, especially speculators and foreign investors, sold actively to avoid the risk of a market plunge after the release later today of the latest US wholesale price data.
   
The blue-chip Nikkei 225 Stock Average closed 183.24 points or 1.03 pct lower at 17,553.72, off a low of 17,455.28. Over the week, the index gained 0.9 pct. The TOPIX index of all first-section issues was down 13.90 points or 0.8 pct at 1,723.09, off a low of 1,711.20.
   
Share prices slid in the morning session in reaction to the falls on Wall Street overnight, but they had recouped some of their losses by the close.      

Australian shares finished down as investors followed the overnight sell-off on US share markets, which arose after data showed a record 2.3 pct fall in department store sales in April.
   
US-focused companies fell on the negative offshore data, while the major bank and mining stocks were also hit. The S&P/ASX 200 closed down 58.1 points or 0.91 pct at 6,297.4, retreating from yesterday's record finish of 6,355.5. Over the trading week, the benchmark index shed 7.5 points or 0.12 pct.
   
Hong Kong shares had fallen sharply in afternoon trade following the tumble on Wall Street. Local stocks also fell on expectations that China is poised to announce further credit-tightening measures to rein in its economy and markets. At 3.30 pm the Hang Seng Index had fallen 279.51 points or 1.35 pct to
20,466.76.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower on credit-tightening worries and profit-taking, with financial and metal stocks under pressure. The Shanghai A-share Index ended down 30.99 points or 0.73 pct at 4,218.73 and the Shenzhen A-share Index was down 8.72 points or 0.74 pct at 1,162.56.
   
Seoul shares bucked the regional trend to close higher, with retail investors emerging as active buyers, pushing the main index above 1,600 points to a new record.
  
The KOSPI index closed up 3.88 points or 0.24 pct at a record 1,603.56. The low for the day was 1,582.76 and the high was 1,604.63. It ended the week with a gain of 35.82 points or 2.3 pct. Shipbuilders, carmakers and steelmakers led the advance.

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Oil hold onto gains after IEA warns global oil market is tightening

LONDON - Oil held onto earlier gains as the market remained underpinned by a warning from the International Energy Agency (IEA) that the global market is tightening and that growth in product supply might not meet peak demand in June.
   
The agency, an advisor to 26 industrialised nations, called on OPEC to raise output and said supplies would need to rise significantly to meet the forecast 1.6 mln bpd jump in June product demand.
   
It added that while it believes refining output should improve by July and August, the increased activity will eat into global crude oil stocks over this period unless OPEC ups output.
   
At 2.29 pm, London Brent crude for June delivery was up 78 cents at 66.57 usd per barrel. Meanwhile, New York crude for June delivery was up 33 cents at 62.15 usd a barrel.
   
Commenting on the IEA report, Barclays Capital analysts said: "With demand projected to grow robustly, estimates for non-OPEC supply growth trimmed back, OECD inventories on a downwards trend and OPEC production stagnant, the overall picture we draw... is one that is very supportive indeed for higher prices".
   
Oil prices have drawn support in recent weeks from worries over product supply, specifically US gasoline supply, which has fallen well below average levels just as the country heads into the peak demand summer season.
   
Also, while US crude supply is still adequate, prices have been boosted this week by news of further supply disruptions in Africa.
   
France's Total said yesterday two workers were killed in a fire that has halted production at its Nkossa platform, located 50 km off the south-west coastline of Congo.
   
Meanwhile, in Nigeria, militants fighting for a greater share of the country's oil wealth have blown up three oil pipelines operated by ENI this week and kidnapped four US oil workers.

At 11.31 am, LME copper for three-month delivery had fallen to 7,740 usd per tonne against 8,180 usd at the close yesterday.  zinc dipped to 3,955 usd against 4,030 usd at the close yesterday, aluminium fell to 2,817 from 2,862 usd, and nickel slipped to 49,700 against 49,950 usd.

Lead meanwhile eased to 2,031 usd from 2,050 usd, while tin rose modestly to 13,800 usd against 13,700 usd.

At 2.50 pm, spot gold was quoted at 668.45 usd per ounce against 666.45 usd seen in late New York trade yesterday.  Among other precious metals, platinum rose to 1,323 against 1,312 usd yesterday, while palladium inched up to 361 usd an ounce against 360 usd last night. Silver rose to 13.13 usd against 13.02 usd.

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