US & World Daily Markets Financial Briefing 14-11-2006

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Stocks up in early trading

NEW YORK  - Stocks rose Tuesday with the retail sector and producer price data in focus. In the opening minutes, the Dow Jones industrials gained 23.85 points to 12,155.73, the S&P 500 rose 1.35 points to 1,385.77, and the Nasdaq gained 1.05 points to 2,407.43.
   
On Monday, an upgrade for Intel Corp. and a comment from a Federal Reserve official that the economy was growing "forcefully" led to gains in U.S. markets, with the Nasdaq Composite growing 16.6 points. The Dow industrials rose 23.5 points and the S&P 500 rose 3.5 points.
   
Three of America's top retailers - Wal-Mart Stores, Target and Home Depot -- reported earnings. And on the data front, inflation at the wholesale level plunged at a record pace in October.
   
There also was a busy session for economic releases overseas. The Japanese economy grew at a stronger-than-forecast 0.5 percent rate during the third quarter, while euro-zone growth grew at the same rate on a quarterly basis after the German, French and Italian economies all slowed from the second quarter.
       
December-dated crude-oil futures were 14 cents higher at $58.74 a barrel.
   
Stocks in focus

Dick's Sporting Goods late Monday agreed to buy Golf Galaxy for $225 million, or $18.82 a share.
   
Timberland Co. is exploring a plan to sell itself, The Wall Street Journal reported Tuesday, citing people familiar with the matter. The company, which is valued at nearly $2 billion, has hired Goldman Sachs to sound potential buyers for the company, the report said.
   
NYSE specialist Van Der Moolen gave back much of Monday's gains in Amsterdam stock market trading after swinging to a $45-million loss in the third quarter.
   
Vodafone Group swung to a $9.7 billion loss on writing down the value of its Italian and German operations, but shares rose in London after its adjusted earnings were stronger than analysts had forecast.

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Dollar drops as US producer price inflation slumps

LONDON - The dollar fell as US data showed producer price inflation unexpectedly slumped sharply in October.
   
US headline PPI fell by a massive 1.6 pct in October, marking the biggest fall in five years and much sharper than the 0.5 pct decline analysts had expected. The core PPI rate meanwhile, which strips out energy and food prices, also fell by 0.9 pct, the largest decline in over 13 years and well below the modest 0.1 pct rise expected by analysts.
   
The figures suggest that Thursday's key CPI inflation will also come in below expectations, dampening the Federal Reserve's fears over rising inflationary pressures and increasing the chances of a US rate cut early next year.
   
"A huge drop in core PPI has got the market thinking that the Fed is done (with raising interest rates)", said Jamie Coleman at Thomson IFR Markets.
   
On top of that, US retail sales figures also weighed on the dollar.  Although the data showed sales fell by 0.2 pct in October, slightly less than expected, sharp downward revisions to September to give a decline of 0.8 pct mean retail sales may weigh on US GDP, analysts said.
   
For the euro the news helped offset earlier data showing weaker-than-expected euro zone GDP growth during the third quarter, as well as a disappointing ZEW survey of German economic expectations which fell to a 13-year low in October.
   
The pound, meanwhile, rose back above the 1.90 level against the dollar, reversing earlier falls which had taken it to eight-day lows against the currency following below-forecast UK inflation data this morning.
   
Against the euro, however, the UK currency continued to trade at one-month lows as the data -- which showed the key annual CPI rate stayed at 2.4 pct in October against expectations for a rise to 2.6 pct -- diminished market expectations that the Bank of England will raise the cost of borrowing again next year.
   
The key event in the UK, however, will come tomorrow when the Bank of England presents its latest forecasts for growth and inflation in its quarterly inflation report.

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London - Leading shares were weaker midday, reversing earlier gains and trading at session lows, with talk of a profit warning weighing down BSkyB shares, and Wall Street set to open flat on caution ahead of economic data.
   
At 11.42 am, the FTSE 100 index lost 1.6 points to sink to session lows of 6,182.6, while the wider market remained positive.
   
Frankfurt - Shares were lower in midday trade after the German ZEW economic expectations index hit a new 13-year low, raising fresh doubts about the recovery of the euro zone's largest economy.
   
At 12.40 pm, the DAX 30 index was 8.24 points or 0.13 pct lower at 6,385.49, having moved between 6,377.41 and 6,409.73 so far this session.

Paris - Paris shares were lower on profit taking midday, with the CAC-40 index having reached a five and a half year high and flirted with the 5,500 mark yesterday. At 12.01 pm, the CAC-40 index was down 12.90 points or 0.23 pct at 5,477.66.

Milan - Share prices were flat at midday in cautious trade after the release of a weaker-than-expected ZEW reading, while Fastweb and Alitalia outperformed among the blue-chips. At 11.27 am, the Mibtel was down 0.10 pct at 31,187 points and the S&P/Mib fell 0.14 pct to 40,535.

Madrid - Share prices were lower in volatile midday trade, with Telefonica ahead on bullish sentiment after the group upped its full-year sales growth target after solid nine-months results. At 12.15 pm, the IBEX-35 index was down 19.3 points to 14,072.8, after trading in a range of 14,061.2-14,145.9 on turnover of 1.4 bln eur.

Stockholm - Shares remained in slightly positive territory in quiet midday trade, but off morning levels as bargain hunting eased. At 12.15 pm, the OMX Stockholm index was up 0.04 pct at 356.75 points, while the OMX Stockholm 30 index was down 0.02 pct at 1,106.39.

Swiss -  Share prices were little changed in thin late morning trade with the positive impact of overnight gains on Wall Street offset by continuing weakness in heavyweight Novartis.
   
Bucking the trend, though, was Clariant, as investors welcomed the underperforming chemical group's wide-ranging restructuring measures, including substantial lay-offs and new targets, they said. At 11.15 am, the Swiss Market Index was down 1.55 points at 8,750.55, and the Swiss Performance Index up 2.28 points at 6846.87.

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Asian shares close higher, Tokyo up on positive GDP data

HONG KONG - Shares across the Asia-Pacific region closed higher, with Tokyo stocks bouncing back as positive GDP data eased concerns about the Japanese economy.
   
Tokyo shares finished higher, rising for the first time in five days, after the announcement that GDP grew more quickly than expected in the third quarter.
   
The blue-chip Nikkei 225 Stock Average closed 267.06 points or 1.67 pct higher at 16,289.55, off a high of 16,318.05. The broader TOPIX index of all first-section issues closed 27.66 points or 1.76 pct higher at 1,596.42, off a high of 1,601.20.
   
GDP rose in the third quarter by 0.5 pct in real terms from the second, or at an annual rate of 2.0 pct, as stronger exports more than offset weakness in domestic consumption, the government said.
   
Toshihiko Matsuno, a senior strategist at SMBC Friend Securities, said: "The Japanese economy is again back on a trend in which exports drive the economy, as the data showed a slowdown in capex."
   
Australian shares closed higher as a stronger close on Wall Street helped to break the run of losses in the market since record highs were reached last Tuesday.
   
The S&P/ASX 200 rose 17.2 points or 0.32 pct to close at 5,435.6, regaining ground on the previous Tuesday's record close of 5,491.6. The benchmark index closed below the day's high of 5,449.9 and above the low of 5,417.8.
   
Hong Kong shares were weaker in afternoon trade after index heavyweight HSBC fell on concern over its North American operations and pared the gains by Chinese financials. At 3.23 pm the Hang Seng Index was down 59.00 points or 0.31 pct at 18,809.54.
   
In mainland China, A-shares in Shanghai and Shenzhen shrugged off early weakness and closed sharply higher on bargain-hunting, with telecom listings and banks gaining ground.
   
The Shanghai A-share Index rose 25.81 points or 1.32 pct to 1,984.72 and the Shenzhen A-share Index was up 4.78 points or 1.07 pct at 452.12.
   
Seoul shares closed higher as foreign investors bought into major IT stocks amid easing concerns about the won, with sentiment boosted by sharp gains in US technology stocks following an analyst upgrade of the chip sector.
   
The KOSPI index closed up 10.68 points or 0.76 pct at 1,407.37, after trading between 1,407.54 and 1,400.74.
   
The won ended at 937.10 against the dollar, quickly retreating from the six-month high of 927 seen yesterday.

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Gold steadies as oil recovers, Copper edges up

LONDON - Gold prices steadied, having come under selling pressure earlier in Asia, as the precious metal benefited from a weaker dollar and from slightly firmer oil prices.
   
At 12.02 pm, spot gold, which earlier touched an intra-day low of 622.70 usd, was quoted at 624.50 usd, little changed from 624.65 usd at the time of the COMEX market close in New York on yesterday.
   
Other precious metals were higher. Spot silver was up at 12.86 usd an ounce against 12.46 usd, platinum rose to 1,175.50 usd against 1,163.00 usd, while palladium edged up to 324.50 usd against 324.00 usd.
   
Prices for gold came under pressure yesterday as base metals prices weakened further, weighing on gold, while weak oil and a slightly firmer dollar did little to help sentiment.
   
Gold often moves counter to the US dollar as it is seen as an alternative investment to the US currency. Meanwhile lower oil prices reduce gold's appeal as a hedge against oil induced inflation.
   
Although it has been benefiting recently from strong physical demand and from speculation China will buy gold when it diversifies its estimated 1 trln usd in reserves, some analysts are now questioning its positive outlook.
   
Gold touched a 2 month high of around 636 usd last Friday and finished up on the week last week, as the dollar hit multi-month lows following comments from China that it will diversify its estimated 1 trln usd in reserves.
 
At 1.45 pm, LME copper for three-month delivery rose to 6,965.00 usd a tonne against 6,935.00 usd at the close yesterday. Other base metals were also up.
   
Zinc rose to 4,265.00 usd against 4,245.00 usd, aluminium edged up to 2,732.50 usd against 2,714.00 usd, nickel rose to 30,200.00 usd against 29,900.00 usd while tin climbed to 9,975.00 against 9,925.00 usd.
   
Lead bucked the trend, however, falling to 1,530.00 usd against 1,570.00 usd.
   
Copper closed slightly higher yesterday but failed to breach the key 7,000 usd a tonne level, and analysts said the fact that it has failed to breach that level again today is worrying.
    
The LME said today stocks monitored in its warehouses rose by another 625 tonnes to 151,925 tonnes. The rise was slightly less than the thousand tonne rises seen over the past few days.
  
Overall stocks have increased by 42,325 tonnes or 39 pct from a recent low of 109,600 tonnes, however, and some analysts speculate supply may exceed demand next year.

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