US & World Daily Markets Financial Briefing 16-06-2006

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Stocks are down in early trading

NEW YORK - Stocks are down in early trading following the biggest two-day run since November 2004, as a Federal Reserve member said official data could be underplaying inflation.
   
The software sector was in focus after Microsoft Corp. Chairman Bill Gates said he'd step back from day-to-day duties, Oracle Corp. lifted its earnings outlook and Adobe Systems Inc. cut its profit forecast.
   
In the opening minutes, the Dow Jones industrials dropped 4.09 points to 11,011.10, the Nasdaq Composite Index remained unchanged at 2,144.15, and the S&P 500 dipped .27 of a point to 1,255.89.
   
Both the Nasdaq Composite Index, up 58 points, and the S&P 500, up 26 points, logged their best one-day point gain since March 2003 on Thursday, with the Dow industrials improving 198 points.
   
Federal Reserve Chairman Ben Bernanke on Thursday acknowledged once again that energy and commodity prices could account for some of the recent pickup in core inflation and measures of longer-term inflation expectations.
   
St. Louis Federal Reserve Bank President William Poole picked up the energy theme on Friday, warning in a speech at a Korean banking conference that rising gasoline and oil prices may be adding to inflation pressures in a way not detected by the current data.
   
"Statistical studies to detect pass-through from recent energy price increases have failed to show significant effects in U.S. price data but stories about widespread pass-through are becoming increasingly common.

We may - and I emphasize 'may' because my purpose is to make a general point and not to conduct a full analysis of the current situation - face more inflation pressure than currently shows up in formal data," Poole said.
   
Microsoft's Gates late Thursday unveiled plans for a two-year transition from his day-to-day role to spend more time on his global health and education work at the Bill and Melinda Gates Foundation.
   
Chief Technical Officer Ray Ozzie will immediately take on Gates' title of chief software architect. After 2008, Gates will act as an adviser on key development projects, while staying on as chairman.
   
Analysts from Friedman Billings Ramsey said the news may result in a slight negative impact in the near term but kept an outperform on the computer software giant.

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Oracle rallied 5 percent in Frankfurt after the database maker raised its fiscal fourth-quarter sales forecast to 25 percent, from a previous range of 13 percent to 17 percent. Oracle also raised its earnings forecast.
   
Oracle rivals SAP AG and Business Objects SA advanced in European trade.      Adobe Systems dropped 5 percent in Frankfurt after the maker of Photoshop and Acrobat software cut its financial outlook for the year and said its fiscal second-quarter profit fell 18 percent on charges related to its purchase of Macromedia Inc.
   
Outside of the software industry, KB Home lowered its profit outlook for the year on a decline in new-home demand and a rise in new- and existing-home supplies. It reported a 14 percent profit improvement in the May 31-ending quarter, above consensus analyst forecasts.
   
PepsiCo Inc. was upgraded to buy from neutral at UBS, which said it believes the market is entering a period where defensive stocks, such as PepsiCo, will be valued more highly.
   
Cruise operator Carnival Corp. is the only S&P 500 component due to report results on Friday. Its London-listed shares weakened ahead of the figures.

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The European Markets at 12.00 BST

London - Share prices were off highs at midday, calmer after the futures and options expiries midmorning, with Wall Street expected to be flat after yesterday's strong gains and volatile under the influence of 'triple-witching' expiries today, dealers said.
   
At 11.58 am, the FTSE 100 index was 51.7 points higher at 5,671.0 after briefly breaching the 5,700 mark in early deals.

Frankfurt - Shares were higher in midday trade, extending yesterday's sharp gains, after Wall Street posted solid gains overnight and as Asian markets rose this morning, but trading is quiet as many market participants have taken a long weekend after yesterday's public holiday, dealers said.
   
At 12.06 pm, the DAX 30 index was 33.63 points or 0.62 pct higher at 5455.85, having moved between 5,437.40 and 5,507.60 so far this session. The MDAX was at 7,515.23, up 37.55 points or 0.50 pct while the TecDAX was at 630.56, up 9.50 points or 1.53 pct. The DAX futures contract was at 5,454.00, down 20.50 points or 0.37 pct, while bund futures were at 116.53, up 0.23.

Paris - Shares were higher in midsession trade, building on yesterday's rally as market sentiment was boosted by overnight gains on Wall Street, which brought more investors back into the market in search of bargains, dealers said
   
At 12.58 pm, the main CAC-40 index was 42.46 points or 0.90 pct higher at 4,767.04, on heavy volume of 3.02 bln eur. 33 shares were up and 7 down. Shares in Aeroports de Paris were at 46.20, up 5.00 pct from the IPO price of 44 eur since opening at 11 am this morning. 

Amsterdam - Shares were higher off their highs at midday as US futures pointed to a lower opening on Wall Street today, dealers said.
   
At 12.37 pm, the AEX was up 2.52 points or 0.59 pct to 426.25, after opening at 429.14 and reaching an earlier high of 429.65. Government bonds traded mixed, while the euro traded at 1.2664 usd versus 1.2604 usd late yesterday.
   
Philips led blue chips gainers, adding 2.56 pct to 23.21 eur, while ING rose 1.50 pct to 29.69 eur and SBM Offshore put on 0.82 pct to 19.64 eur.

Milan - Share prices were flat at midday, paring morning gains on concern about inflation after Federal Reserve Chairman Ben Bernanke said energy prices are likely to remain high and the central bank has to remain vigilant, dealers said.
   
At 12.34 pm, the Mibtel index was up 0.04 pct at 27,134 points, off a high of 27,431, and the S&P/Mib rose 0.14 pct to 35,572.
   
Investors' focus is on Autostrade ahead of its board meeting today, which is scheduled to clear a merger with Abertis. The stock was up 1.36 pct at 21.67.

Madrid - Share prices were off session highs in volatile trading ahead of today's futures expiries, with Repsol YPF firm while main banks pared gains and Telefonica continued to underperform, dealers said.
   
At 12.00 noon, the IBEX-35 index was up 55.0 points at 11,091.3, after trading in a range of 11,063-11,176 on decent volume of 3.268 bln eur.
    
Repsol YPF was up 0.29 at 21.01. Telefonica shed 0.07 to 12.72.

Athens - Shares were still up in late afternoon trade, led by blue chips, with sentiment helped by advancing European markets and rising commodity prices, brokers said.
   
At 2.20 pm, the ASE general index was up 1.9 pct at 3,620 with advancers outnumbering decliners 167 to 80. The blue chip index was up 2.1 pct to 1,991.8. Mid caps were up 1.9 pct at 3,945.6 and small caps were 0.9 pct higher at 683.4.
   
Shares in Piraeus Bank were up 5.3 pct to 19.26 eur on news that it acquired a 2 pct stake in the Bank of Cyprus.

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Asian share prices close sharply higher on Wall St's rise

HONG KONG - Share prices across the Asia-Pacific region closed sharply higher as confidence returned to markets following Wall Street's strong performance overnight.
   
Tokyo share prices ended higher as investors cheered Wall Street's rally, helping the benchmark Nikkei index recoup losses during the week, Japanese dealers said.
   
The recovery in offshore markets following the recent sell-off also saw foreign selling in the Japanese market ease considerably, with foreign investors net buyers for a second straight day.
   
The Nikkei 225 Stock Average closed up 408.58 points or 2.82 pct at 14,879.34, off an intra-session high of 14,976.67. For the week, the Nikkei had gained 0.87 pct.
   
The broader TOPIX index of all first-section issues was up 48.73 points or 3.28 pct at 1,534.71, off a high of 1,539.08. The broader index surged 2.4 pct for the week.
   
Australian shares also ended sharply higher as investor sentiment continued to climb following the overnight rise on Wall Street, dealers said.
   
They said resource stocks were in demand as base and precious metal prices rose overnight and this helped the overall market higher.
   
The S&P/ASX 200 jumped 99.3 points or 2.04 pct to close at 4,969.0. The benchmark indicator closed off the day's high of 4,976.6, and above the low of 4,903.5.
   
Hong Kong shares were higher in afternoon trade, buoyed not only by Wall Street but news of a gas discovery off the coast of China.
   
Metals and oil stocks extended yesterday's gains following a strong rise in commodity prices overnight and CNOOC Ltd and Hutchison Whampoa were in focus after news that CNOOC's parent and Hutchison's unit Husky Energy made a
significant deep water gas discovery China, dealers said.
   
At 3.28 pm the Hang Seng Index was trading at 15,811.95, up 376.87 points or 2.44 pct.
   
In mainland China, A-shares in Shanghai and Shenzhen finished higher, jumping on bargain hunting after the market's recent correction, with heavyweight petrochemical producers and banks leading the gainers, dealers said.
   
The Shanghai A-share Index added 42.54 points or 2.64 pct to 1,654.77 on turnover of 18.65 bln yuan and the Shenzhen A-share Index was up 10.10 points or 2.44 pct at 423.41 on turnover of 11.97 bln yuan.
   
Seoul share prices closed sharply higher, posting the largest percentage gain since October 2004, with investors coming around to the view that the market had hit bottom, dealers said.
   
After a firm start, sparked by Wall Street's rise, the market accelerated its gains to close above 1,260 points as foreign investor activity in futures triggered massive program buying.
   
Investors were also cheered by the sharp upturn in Tokyo shares.
   
Gains were solid across the board, with large cap IT, financial and steel firms in the spotlight.
   
The KOSPI index closed up 42.79 points or 3.51 pct at 1,262.19, after moving between 1,264.87 and 1,245.81.

Asian Bourse Round-Up

For a full list of closing figures, click here 

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LONDON - Gold prices surged, further extending yesterdays gains, as the precious metal continued to benefit from the broad-based recovery in commodity prices and a weaker dollar.
   
At 11.51 in London, spot gold was quoted at 583.10-583.80 usd, with silver at 10.31-10.41 usd; platinum at 1,155.00-1,161.00 usd and palladium at 301.50 307.501 usd.
   
Analysts said investors were buying gold again after the sharp sell off earlier this week thanks to the recovery in equity markets, a weaker dollar and strong oil prices.
   
"Dollar related buying has been the main theme this morning," said analyst James Moore of TheBullionDesk.com. Gold earlier touched a high of 584.80 usd after rebounding yesterday to 566.20 usd in late New York trade.
   
On the charts, gold is expected to find support at around 550 usd, but Moore said "the metal still remains at risk of further probes lower as nervous investors switch their money between currencies, commodities and treasuries".
   
Gold touched a 3-month low of 543 usd on Wednesday, as increasing hopes of a US rate hike later this month sucked investment out of the precious metals markets.
   
It started regaining lost ground by the close Wednesday and continued higher yesterday as equities recovered, with Wall Street posting its best performance in over a year.
   
Analysts at the Sucden brokerage said the outlook for commodity markets remains unclear.
   
"The market ... is stuck between two thoughts. One point of view is this fall is part of a longer-term bearish move and yesterday's move higher was a correction.
   
"The other point of view is that the recent selling from the all-time highs is a correction of the longer term bull move and that we will see new highs soon again," said Sucden's Michael Davies.

Oil prices steady in early afternoon trade

LONDON - World oil prices stabilized in early afternoon trade amid a broad recovery for commodities as economic concerns subsided over the threat of rising inflation, analysts said.
   
New York's main contract, light sweet crude for delivery in July, added 20 cents to 69.70 usd per barrel.
   
In London, Brent North Sea crude for August delivery slid five cents to 68.40 usd per barrel in electronic trading. The July contract expired Thursday at the close.
   
Crude futures have rebounded by almost 1 usd since Wednesday, erasing much of the losses sustained during the previous eight days.
   
Most global commodities have suffered heavy losses over the past month, prompted by fears that central banks may hike interest rates to combat rising inflation, thereby crimping growth and demand.
   
However, traders seized this week on news of sharp oil demand growth in the United States and China -- respectively the first and second-biggest crude consumers in the world.
   
The US and China together consumed 27.6 mln barrels per day of crude oil in 2005, accounting for one third of total global demand, British energy giant BP had said in an annual review published Wednesday.
   
And the world's appetite for energy is set to increase in 2006, according to data issued by the International Energy Agency (IEA).
   
The IEA predicted Tuesday that global oil demand growth this year would stand at 1.5 pct or 1.24 mln barrels per day.

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