US & World Daily Markets Financial Briefing 12-10-2007

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Stocks open modestly higher

NEW YORK - Stocks rose modestly in early trading Friday after readings on inflation and retail sales as well as reports from McDonald's Corp. and General Electric Co. indicated the economy continues to push ahead.
   
The move higher comes a day after a rally fizzled on Wall Street amid concerns about price risks and lowered expectations for the Chinese Internet company Baidu.com.
   
McDonald's pleased investors with a stronger-than-expected profit forecast and sales, while GE reported results that largely met expectations.
       
In the first hour of trading, the Dow Jones industrial average rose 10.32, or 0.07 percent, to 14,025.44.
   
Broader stock indicators also rose. The Standard & Poor's 500 index rose 1.59, or 0.10 percent, to 1,556.00. The technology-heavy Nasdaq composite index rose 12.53, or 0.45 percent, to 2,784.73.

Advancing issues outnumbered decliners by about 9 to 5 on the New York Stock Exchange, where volume came to 85.6 million shares. The Russell 2000 index of smaller companies rose 4.17, or 0.50 percent, to 839.15.
   
In afternoon trading, Britain's FTSE 100 fell 0.54 percent, Germany's DAX index fell 0.50 percent, and France's CAC-40 fell 1.12 percent.
   
Bonds fell. The yield on the benchmark 10-year Treasury note, which moves inversely to the price, rose to 4.69 percent from 4.66 percent late Thursday.
   
Light, sweet crude fell 20 cents to $82.88 per barrel in premarket electronic trading on the New York Mercantile Exchange.
       
Stocks in focus

In corporate news, McDonald's said its global same-store sales, or sales at stores open at least a year, rose a stronger-than-expected 5.9 percent in September. The nation's No. 1 hamburger chain also forecast earnings for the quarter well ahead of Wall Street expectations. McDondald's rose 50 cents to $56.76.
   
GE's third-quarter earnings rose 14 percent as its energy and transportation businesses did well. Many investors regard GE as a bellwether for the U.S. economy because of the conglomerate's array of businesses -- from finance to engines to NBC Universal. GE fell $1.08, or 2.6 percent, to $40.52.
   
Citigroup Inc., which like GE and McDonald's is one of the 30 stocks that make up the Dow industrials, said Thursday it is combining its investment banking and alternative investments businesses into a single business run by a former Morgan Stanley executive. Vikram Pandit, who has been in charge of Citi's alternative investments unit since joining the company earlier this year, will lead the new Institutional Clients Group.
   
Deutsche Bank cut its rating on Citigroup to "sell" from "buy," describing Citi's changes don't go far enough. Citi rose 5 cents to $48.37.
   
Oracle Corp., the business software maker, offered to buy BEA Systems Inc. for more than $6.66 billion on Tuesday. Oracle said it sent a letter to the software maker's board offering $17 per share, a 25 percent premium over Thursday's closing price of $13.62. BEA surged $4.43, or 32.5 percent, to $18.05, while Oracle fell 26 cents to $22.20.

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Strong US data fails to boost dollar

LONDON - A set of strong US data failed to boost the dollar, with many players simply using the brief bounce enjoyed by the currency to square positions.
   
The dollar got only the mildest boost after strong US producer price and retail sales figures suggested that growth in the world's biggest economy may not be slowing as rapidly as some had been fearing. But there was not enough momentum behind the dollar buying and and sellers soon outnumbered buyers, pushing the euro above 1.42 usd. Ahead of the data the dollar was at 1.4175 usd.
   
Retail sales rose 0.6 pct in September, double the 0.3 pct gain economists surveyed by Thomson's IFR Markets had predicted.
   
Wholesale prices rose more than twice as fast as expected in September, led by energy prices that increased at their fastest pace in 10 months, the Labor Department said today.
   
Meanwhile, the Producer Price Index, which measures inflation pressures before they reach the consumer, rose 1.1 pct in September against August, the largest gain for the index since February.
   
Economists polled by Thomson's IFR Markets were expecting a 0.5 pct increase.
   
But core prices, which exclude volatile food and energy prices, were up 0.1 pct against the previous month, less than the 0.2 expected by economists. Over the past year, core prices have risen an unadjusted 2.0 pct, while economists were predicting a 2.2 pct yearly gain.
   
Overall energy prices rose 4.1 pct in September, the fastest pace since November 2006 and a sharp turnaround from the 6.6 pct decline in prices in the prior month.

The Canadian dollar hit yet another 31-year high against the US dollar this afternoon as solid data failed to benefit its US counterpart, with market players continuing to look for excuses to sell the beleaguered US unit.
   
Peter Wadkins at Thomson IFR Markets said the euro and the Canadian dollar "have been in lock step in recent sessions", with traders looking to buy both currencies against the US dollar. "They (investors) seem determined to drive usd/cad as far (down) as they can," he said.
   
The Canadian dollar has been one of the main outperforming currencies recently, hitting a series of multi-year highs. It has benefited from a number of factors, including high oil prices and strong Canadian data, which suggest that Canadian interest rates will at least stay on hold.

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Euroshares continue lower midday, ahead of US data, M&A in focus

LONDON - Europe's leading shares continued to trade lower midday with investors cautious ahead of the release of US data later in the day and with M&A developments dominating trading floors.
   
At 12.11 pm, the Dow Jones STOXX 50 lost 25.92 points or 0.66 pct to 3,896.93 while the STOXX 600 was 3.17 points or 0.81 pct lower 387.26.
   
In Europe, M&A chatter dominated on trading floors with SAP 1.44 pct ahead as the Oracle-bid news fed further takeover speculation surrounding the German software maker.
   
Similar rumours circulated around Commerzbank which gained 3.17 pct. Dealers cited vague rumours of a possible takeover by Italian peer Intesa SanPaolo as the reason behind today's advance, but also noted that such a scenario is rather unlikely given Intesa's recent integration with SanPaolo.
   
Staying in the financial sector, MLP AG lost 2.22 pct amid rumours that a profit warning by the financial services provider is imminent.
   
And in the UK, Northern Rock climbed 3.59 pct on reports suggesting that Sir Richard Branson's Virgin is one of the contenders for the ailing mortgage bank. According to a source familiar with the matter, Virgin has been in talks with Northern Rock "for a few weeks."
   
In the insurance sector, Swiss Re fell 1.34 pct after the Daily Telegraph said the company is conducting due diligence on UK life insurer Resolution.
   
The UK's Standard Life is seeking a partner to support its bid for Resolution, the Financial Times reported.
   
Resolution has confirmed it is in discussions with several unnamed companies over a possible range of deals, including a sale of the group.
   
Meanwhile, the construction sector was under pressure after Dutch group Heijmans issued a full-year profit warning due to ongoing problems at its construction division.
   
SNS Securities noted that the profit warning "is the third warning in a year and very disappointing indeed" and added that "project delays and inefficient risk management" are the main causes.
   
Shares tumbled 17.54 pct, while France's Saint-Gobain ticked 3.03 pct lower after Credit Suisse downgraded the building materials group to 'neutral' from 'outperform,' citing its lack of exposure to emerging markets.

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Asian stocks retreat from records; BHP Billiton bucks trend

SINGAPORE  - Stock markets across Asia fell Friday with Japan, Australia, Hong Kong, China, Singapore and South Korea retreating from records as investors used Wall Street's overnight decline as an excuse to lock in gains.
   
"What goes up must come down," said Song Seng Wun, head of research at CIMB-GK in Singapore. "We have done so well and we had good GDP figures and in the US we saw signs of profit-taking, so this probably is not unexpected to see on a Friday."
   
In Japan, the Nikkei 225 closed down 127.81 points or 0.7 pct at 17,3331.17, while the broader Topix lost 18.04 points or 1.1 pct to 1,659.48. Financial and export-oriented stocks led the decline, while the shipping sector continued to rally on expectations for strong demand for cargo transportation to and from emerging economies.
    
The Nikkei index is expected to move between 17,100 and 17,700 points next week, with investors taking their cue from Wall Street, where the earnings reporting season is under way.           
     
The Australian S&P/ASX 200 closed down 23 points or 0.3 pct at 6,748.9 while the All Ordinaries also ended down 19.5 points or 0.3 pct at 6,760.1. Financials were weak but mining giants BHP Billiton and Rio Tinto held up as commodity prices rose. "It was a welcome break - we could suffer a 150 points fall and the market would still be intact," said Stuart Smith, a private client advisor at Bell Potter Securities.
   
The Hang Seng in Hong Kong fell 294.65 points or 1 pct to 28,838.37 while the Korean KOSPI ended down 32.41 points or 1.6 pct at 2,026.44.
   
The Singapore Straits Times Index fell 18.52 points or 0.5 pct to 3,857.25. The index closed at a record Thursday as investors cheered Singapore's robust economy and hoped strong data will translate into robust third-quarter earnings. "I guess some profit-taking is healthy," Song said.
   
The Shanghai Composite fell a more modest 9.97 points or 0.17 pct to 5,903.26.
   
Indian shares closed lower despite hitting a record high during the session as investors took leads from weaker world markets and locked in profits after the runaway rally this week.
   
The Bombay Stock Exchange's benchmark Sensex closed 2.10 pct or 395.03 points lower at 18,419.04. The equity market barometer had earlier hit an all-time high of 18,844.62 points on demand for the shares of India's most valuable company Reliance Industries Ltd. The National Stock Exchange's S&P CNX Nifty closed 1.75 pct lower at 5,428.25.
   
In Taiwan, the weighted index closed down 201.20 points or 2.07 pct at 9,496.47. Financial and technology heavyweights led the downturn, with investors opting to cash out after the market had repeatedly tried and failed to breach the year's trading high of 9,807 points hit on July 26.
   
Malaysian shares also closed lower as traders continued to take profits ahead of the extended weekend, with the selling of index-linked stocks pushing the key index lower. The weak performance of other Asian markets and Wall Street's retreat overnight further dampened sentiment. Many market participants have left the capital Kuala Lumpur for a long weekend to mark the end of the Muslim fasting month of Ramadan, which begins tomorrow. The Kuala Lumpur Composite Index closed down 8.36 points or 0.6 pct at 1,375.25.
   
Malaysian financial markets will be closed on Monday. Markets in the Philippines and Indonesia were closed for public holidays.

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Precious Metals Summary - London AM Fixings

Gold           748.50  USD          2.0267
               751.00  USD          overnight

Gold           369.32  STG
               369.10  STG          overnight
 
Silver         13.79   USD
               13.82   USD          overnight

Silver         680.42  pence
               679.22  pence        overnight

Platinum       1400.50 USD
               1407.00 USD          overnight

Platinum       691.02  STG
               691.50  STG          overnight

Palladium      375.50  USD
               381.00  USD          overnight

Palladium      185.27  STG
               187.25  STG          overnight

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