US & World Daily Markets Financial Briefing 14-12-2006

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Stocks little changed in early trading

NEW YORK - U.S. stocks were little changed Thursday as investors mulled a decision on oil production and also looked to earnings from Bear Stearns and Adobe Systems.
   
In the retail sector, Costco Wholesale reported profit slightly ahead of market expectations.
   
In the opening minutes, the Dow Jones industrials were up .64 of a point to 12,318.14, the S&P 500 edged up .01 of a point to 1,413.22, and the Nasdaq gained 3.34 points to 2,435.75.
   
U.S. stocks ended slightly higher Thursday, as rising crude prices tempered a positive market reaction to stronger-than-expected November retail-sales data. The Dow industrials closed up 1.92 points at 12,317.50 after hitting another all-time high of 12,368 during the session.
   
Investors are paying close attention to a meeting of the Organization of the Petroleum Exporting Countries. OPEC ministers agreed Thursday to leave oil production unchanged for now but set the stage for a possible cutback of half a million barrels a day in February. Oil rose above 62 a barrel in response.
   
Also due out Thursday is data on import and export prices for November, as well as weekly U.S. jobless-claims data. Analysts polled by MarketWatch are forecasting no change to import prices following a 2 percent fall in October.
   
Stocks in focus

Costco Wholesale Corp. reported first-quarter profit of $236.9 million, or 51 cents a share, up from $215.8 million, or 45 cents, in the year-earlier period. Analysts had been expecting earnings of 50 cents a share. The firm also said it will increase the exercise price on certain employee options following its internal inquiry.
   
Bear Stearns Cos. is expected to post fourth-quarter per-share income of $3.36.
   
Adobe Systems Inc. is expected to report earnings per share for the fourth quarter of 33 cents.
   
After Wednesday's closing bell, Chordiant Software forecast a fourth-quarter loss of $8.4 million, and a loss of $7.1 million excluding stock-based compensation, on revenue of $21.7 million. Analysts were looking for revenue of $27 million.
   
Zimmer Holdings also late Wednesday forecast first-quarter sales of $928 million to $930 million, below Wall Street's outlook for sales of $940 million. The shortfall comes in part from the loss of a distribution contract.
   
In broker news, J.P. Morgan upgraded Peabody Energy Corp. to neutral from underweight, saying the coal company is well protected against lower prices in 2007 after aggressively selling most of its planned production for the year.
   
Merrill Lynch upgraded real estate trust First Potomac to buy from neutral, citing valuation and the belief that the negative sentiment swirling around the stock will dissipate as additional leasing success is achieved.
   
In deal news, Swiss food group Nestle said that it has agreed to acquire the medical nutrition business of Novartis for $2.5 billion.

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Dollar in tight range as euro finds fresh support

LONDON - The dollar was stuck in a tight range against the euro, with Asian central banks said to be buying the European currency each time it dips.
   
The dollar found limited support from a stronger-than-expected jobless claims report and gains were fast eroded.
   
The pound got a fillip from higher-than-expected UK retail sales figures for November, which capped a strong week for UK data.
   
The data helped allay fears that consumer spending in the run-up to the Christmas period might prove a damp squib and shortened further the odds of a February rate hike in the UK.
     
In data out today, the Office for National Statistics said retail sales, on a seasonally adjusted basis, rose by 0.3 pct in November from the previous month, against expectations of no change. Analysts had expected a softer report following disappointing surveys from the likes of the British Retail Consortium and the Confederation of British Industry.
   
November sales account for around 8 pct of total annual sales, second only to December's 13 pct. The statistics office added that sales growth in October was revised up to show a 1.0 pct rise from the previous estimate of 0.9 pct.
   
Separately, markets shrugged off the expected quarter-point rate hike in Switzerland to bid the Swiss franc lower. The Swiss franc is currently at its lowest level against the euro for more than six years.
   
There was some disappointment with the hike as there had been rumours of a larger hike, said Henrik Gulberg at CALYON said.
   
He believes a further rate hike in March is highly probable but that the outlook is less certain beyond that.

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The European Markets at 13.30 GMT

London - Leading shares remained firmer midday, but off highs, after a bullish trading update by HBOS helped  lift the banking sector. By 11.50 am, the FTSE 100 index was up 11.2 points at 6,203.7, having been 36.2 points higher at 6,228.7. The broader  indices were also positive. Volume was low, with 856.7 mln shares changing hands in 146,097 deals.

Frankfurt - German shares were higher in midday trade with the DAX-30 index continuing to chart into 5-year record  levels but off intraday highs as shares were led by Deutsche Boerse and Lufthansa. At 12.43 pm, the DAX 30 index was up  11.26 points or 0.17 pct at 6,532.03, after moving between a low of 6,527.08 and a  high of 6,552.25 this session. The MDAX was 29.0 points or 0.32 pct higher at 9,192.79, while the TecDAX advanced 2.67  points or 0.37 pct to 721.61.

Paris - Share prices were higher midday, but off earlier peaks as the index fell back after hitting a level not  seen since June 2001, awaiting fresh encouragement from Wall Street. At 11.00 am the CAC-40 index was up 21.23 or 0.39 pct  at 5,497.08 after hitting 5,513.65 early in the session. Volume  was 1.4 bln euro.

Amsterdam - Shares in Amsterdam were up around midday, lifted by heavyweight financials, while Wessanen rose after  the sale of two subsidiaries. At 12.33 pm, the AEX rose 0.59 pct or 2.87 points to 491.66, after opening at 49.73 and  reaching an earlier high of 492.42. Government bonds traded broadly lower while the euro stood at 1.3191 usd versus 1.3235 usd late yesterday.

Milan - Share prices were flat at midday, with investors focusing on Tenaris amid speculation of a minority buyout.  At 12.34 pm, the Mibtel was up 0.03 pct at 31,578 points and the S&P/Mib fell 0.03 pct to 41,092.

Madrid - Share prices were lower in midday trade amid profit-taking as dealers pulled back from record highs, with  Sogecable leading gains and Antena 3 down. At 12.50 pm, the IBEX-35 index was down 18.08 points at 14,309.5, after  trading in a range of 14,287-14,390, on volume of 2.0 bln eur.

Zurich - Share prices were higher in midday trade reflecting a higher Wall Street and led by gains in heavyweight Nestle  on the back of its takeover of Novartis' medical nutrition business. Today's 25 basis-point rate hike by the SNB was  largely priced in and therefore had little effect on trading, they said. At 12.35 pm, the Swiss Market Index was 45.90 points higher at 8,724.44, and the Swiss Performance Index was 32.32 points  stronger at 6,862.24.

Stockholm - Shares were slightly lower in midday trade, pressured by caution ahead of the outcome of the OPEC meeting  in Nigeria today, and by slightly negative Nasdaq futures. At 12.35 pm the OMX Stockholm index was down 0.42 pct at 363.70,  and the OMX Stockholm 30 down 0.59 pct at 1,122.04.  Turnover was 10.077 bln skr.

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Asian shares close higher on currencies, takeover activity

HONG KONG - Shares across the Asia-Pacific region closed higher on currency movements and takeover activity.
   
Tokyo shares closed higher, with the benchmark index at its highest level in seven months, after a weaker yen lifted stocks of exporters, and expectations diminished that the Bank of Japan will increase interest rates this year, dealers said.
   
Analysts are forecasting that the Bank's latest quarterly Tankan survey will show business sentiment is improving and this gave support to stocks of companies sensitive to domestic demand, they added. Economists polled by XFN-Asia predict, on average, that the Tankan's headline index of sentiment among big manufacturers will have risen to 25 this month from 24 in September.
   
The blue-chip Nikkei 225 Stock Average closed 136.27 points or 0.82 pct higher at 16,829.20, its high for the day and its highest closing level since May 11. The broader TOPIX index of all first-section issues climbed 12.66 points or 0.77 pct to 1,651.85, also its high for the day.
   
Australian shares closed at fresh record highs with investors buoyed by the consortium buy-out of flag carrier Qantas Airways, dealers said.
   
The Macquarie Bank-led consortium, known as Airline Partners Australia (APA), made an improved offer of 5.60 aud a share today from the initial offer of 5.50 aud rejected by Qantas on Wednesday and the airline's board recommended the higher offer.
   
The S&P/ASX 200 rose 84.9 points or 1.55 pct to a record close of 5,573.1, beating the previous record of 5,491.6 set on Nov 7. The key index closed at the day's high and well above the low of 5,496.1.
   
Hong Kong shares had rebounded strongly by afternoon trade after yesterday's sharp fall, with some China stocks boosted by continuing speculation that mainland authorities will allow the yuan to appreciate further.
   
The Chinese currency came into renewed focus as a high-level US delegation led by Treasury Secretary Henry Paulson began talks with mainland officials on trade-related issues. At 3.22 pm the Hang Seng Index had risen 220.52 points or 1.18 pct to 18,938.71
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher, supported by the rising yuan and follow-through interest in auto makers and machinery manufacturers. The Shanghai A-share Index jumped 26.83 points or 1.15 pct to 2,364.38 and the Shenzhen A-share Index was up 7.54 points or 1.43 pct at 535.55.
   
Seoul shares closed sharply higher, sending the index near 1,420 points, backed by foreign investors' strong interest in both spots and futures. Initial trade was weak due to worries over triple witching today but the market gained momentum toward the close as program buying kicked off, contrary to expectations of massive program selling, they noted. Program buying amounted to 334.5 bln won.     

The KOSPI index closed up 35.10 points or 2.54 pct at today's high of 1,418.38. The low for the day was 1,376.87.

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Copper edges up as mkt recovers from heavy falls; oil prices soar

LONDON - Copper edged up as the market recovered after falling some 2 pct yesterday amid yet another gain in LME inventories and concerns over global growth, but analysts warned the market looks weak as it heads into the year end.
   
At 12.33 pm, LME copper for three-month delivery was up at 6,795.00 usd a tonne from 6,715.00 usd at the close yesterday.
      
Copper prices fell yesterday after LME stocks rose by 4,600 tonnes and after the World Bank said a slowdown in global economic growth is underway, led by the US. The bank added that a cooling US housing market could intensify the downturn.
   
The LME said in its daily report today that copper stocks in its warehouses have risen by another 1,675 tonnes. Stockpiles are now more than 40 pct above levels seen in mid-October.
     
Chile's Codelco, the world's largest copper producer, is currently negotiating a new labour contract with workers at its Norte division, as the old one expires on Dec 31.
   
Although the market is unsure as to the progress of those negotiations, it looks like another potential strike, at Xstrata PLC's Altonorte smelter, might be averted.
   
Xstrata is due to present its new contract offer to workers today, and Bhar of UBS noted that a company source has said the miner is confident its new offer will be accepted.
   
Elsewhere, lead edged up to 1,650.00 usd a tonne from 1,640.00 usd. The metal fell nearly 5 pct yesterday as funds sold after the 10 and 30-day moving averages were breached.
   
Zinc rose to 4,370.00 usd against 4,275.00 usd, after it lost nearly 2 pct yesterday even as the International Lead and Zinc Study Group said the metal was in a deficit of 320,000 tonnes for the January to October period.
   
In other metals, LME tin for three-month delivery fell to 10,925.00 usd a tonne from 10,950.00 usd yesterday, nickel climbed to 34,400.00 usd from 33,250.00 usd while aluminium bounced up to 2,857.50 usd from 2,800.00 usd.

Oil edged up after OPEC agreed to leave oil production unchanged for now but set the stage for a cutback of half a million barrels a day in February next year.
   
At 2.53 am in London, front-month Brent North Sea crude contracts for January delivery, which expire later today, were up 73 cents at 62.06 usd a barrel, after slipping 19 cents to settle at 61.33 usd a barrel yesterday.
   
Meanwhile, front-month New York light sweet crude contracts for January delivery rose 67 cents to 62.03 usd a barrel, after climbing 35 cents to settle at 61.37 usd a barrel yesterday.

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