US & World Daily Markets Financial Briefing 19-03-2007

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Dow, Nasdaq advance in early trading

NEW YORK - Stocks opened higher Monday as Wall Street looked to rising stocks overseas and a falling yen as it tried to bounce back from a losing week.
   
The advance came ahead of a report on home sales as well as a reading on manufacturing in the Midwest. The economic data arrive before the start Tuesday of the Federal Reserve's two-day meeting on interest rates.
   
While few expect the Fed will adjust short-term interest rates, investors will be looking for any change in the central bank's posture that could hint at where rates are headed in the coming months.
   
In the first hour of trading, the Dow Jones industrial average rose 79.87, or 0.66 percent, to 12,190.28.
   
Broader stock indicators also moved sharply higher. The Standard & Poor's 500 index rose 9.97, or 0.72 percent, to 1,396.92, and the Nasdaq composite index rose 15.58, or 0.66 percent, to 2,388.24. The Russell 2000 index of smaller companies rose 6.26, or 0.80 percent, to 785.03.
   
In afternoon trading, Britain's FTSE 100 rose 0.52 percent, Germany's DAX index added 1.04 percent, and France's CAC-40 rose 0.89 percent.
   
Bonds fell as stocks made gains. The yield on the benchmark 10-year Treasury note rose to 4.57 percent from 4.55 percent late Friday. The dollar wax mixed against other major currencies, while gold prices fell. The dollar rose to 117.34 yen from 116.73 yen late Friday.
   
Economic data will again loom large on Wall Street in the coming week as investors try to determine whether the economy can pull off a so-called soft landing or whether areas of weakness such as the housing sector are poised to drag the economy into a pronounced slowdown.
   
On Monday, the National Association of Home Builders expects to release its index on builders' perceptions of new single-family home sales and near-term sales prospects on Monday. Also, the Chicago Fed is expected to report that its manufacturing index rose 0.3 percent in February.
   
Concerns about the economy and areas such as the subprime mortgage lending sector, which makes a business of making loans to people with poor credit, helped push stocks lower last week. The Dow industrials fell 1.35 percent, the S&P 500 gave up 1.13 percent, and the Nasdaq composite index slid 0.62 percent.
   
In corporate news, ServiceMaster Co., a provider of housecleaning, landscaping, and pest-control services, agreed to be acquired by an investment group for about $4.48 billion.

The deal, led by Clayton, Dubilier & Rice Inc., has a value of $5.5 billion when including about $1.02 billion in debt. The company said in late November it was considering a change in its strategy.

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Dollar firms against yen, Swiss franc as risk appetite picks up

LONDON - The dollar was firmer, particularly against the low-yielding yen and Swiss franc, as gains on equity markets sparked an increase in risk appetite and a pick-up in the carry trade.
   
The carry trade is when money is borrowed in low-yielding currencies, in order to invest in higher-yielding assets elsewhere. Recently, sharp falls on equity markets amid worries about trouble among US sub-prime mortgage lenders had sparked some unwinding of these trades.
   
"The dollar is firmer... most notably against the lower yielding yen and Swiss franc, as rallying stock markets shore up risk sentiment," said Daniel Katzive at UBS.
   
At the same time, higher-yielding currencies benefited, with the Australian dollar trading close to the 0.80 level against the US dollar and the New Zealand dollar rising above 0.70 usd for the first time since March 1, while the pound was also firmer.
   
UBS expects pressure on carry positions to resume in the coming weeks. However, given the quiet data calendar this week, the current rebound in carry trade sentiment "could have a bit further to go", to the benefit of the dollar, Katzive said.
   
He noted that better sentiment on financial markets has seen the odds of the US Federal Reserve cutting interest rates "cut back moderately", particularly given last week's firm US inflation data.
   
Elsewhere, focus for the yen will also centre on the two-day meeting of the Bank of Japan's policy board, which began today. It is set to leave interest rates unchanged and is not expected to raise borrowing costs again until much later in the year.

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Top Stories in Europe at 11.05 GMT

London - First Choice Holidays PLC has confirmed it is to merge with the tourism division -- excluding certain hotel assets -- of TUI AG of Germany to create TUI Travel PLC. TUI Travel PLC, which will have some 27 mln customers and serve over 200 destinations, will be headquartered in the UK and listed on the London Stock Exchange, said First Choice in a statement. The deal is due to be completed in the third quarter of 2007.

UK bank Barclays PLC said it will issue a statement responding to weekend press reports that it has made a takeover approach to Dutch rival ABN Amro NV before the London stock market opens tomorrow. "Barclays PLC notes the recent press speculation in relation to ABN AMRO Holding NV. An announcement clarifying the position will be made before open of business tomorrow," the bank said in a brief statement.

Delling Group said it won a contract extension worth 150,000 stg for marketing support services to Swedish telecom operator TeliaSonera. It will provide marketing material and related services for Telia's products within all the major airports in Sweden during 2007.

Madrid - Banco Santander Central Hispano SA has decided against acquiring 200 branches of Poland's BPH bank as it considers the price of 1.0-1.5 bln eur too high, El Pais reported, citing comments by SCH chairman Emilio Botin at a recent executives meeting. The Spanish bank already has consumer financing operations in Poland through its PTF Poslkie unit, but the purchase of the BPH branches would have meant a substantial boost to its business in the country.

Athens - Marfin Popular Bank said that it has reached an agreement to acquire 99.2 pct of Ukraine's Marine Transport Bank (MTB) for 137.4 mln usd. Marfin added that it will also acquire three associated leasing companies for 0.7 mln usd. MTB was established in 1993 it provides the full range of universal banking services and as of September 30, 2006, it had deposits of 156.2 mln usd, total loans of 148.3 mln usd and share capital including reserves of 34.1 mln usd.

Zurich - Sika AG said it is selling its bituminous coatings production in Germany to Walter Maeder Aqualack Gmb, withdrawing from the business of supplying coatings to the cast iron pipe industry. The divestment is in line with the group's strategy to focus on its core activities, Sika said.

Swatch Group reported better-than-forecast full-year net profit of 830 million sfr, up from 621 mln last year, driven by improved sales particularly in the core watch and jewellery segment. Looking ahead, the Swiss watch-maker said it expects further sales growth and profitability in 2007, after a strong start to the year.

Oslo - Aker Yards ASA said Norwegian investors now hold 22 pct of the company after former holding company Aker ASA completed the sale of its 40.1 pct stake at an average price of 500 nkr per share.
 
The sale of the stake has been controversial, with many Norwegian stakeholders expressing concern the traditional heart of Kjell Inge Rokke's business empire was likely to be owned by a variety of international investors rather than a single industrial owner.

Paris - Accor said it has signed a 20-year renewable contract with Moorfield Real Estate Fund to manage 23 hotels under the Mercure brand in the UK. According to a company press release, the 23 hotels represent a total of 2,236 rooms and generated revenues of around 84 mln stg or roughly 122 mln eur in 2006.

Frankfurt - Deutsche Bahn AG would prefer to sell its joint-venture shipping unit, Scandlines AG, to Baltic Ferry Development but the Danish state -- which owns 50 pct of Scandlines -- wants the buyer to be financial investor 3i, Financial Times Deutschland said, citing sources. The newspaper said 3i has submitted a higher offer than Baltic Ferry.

Deutsche Postbank AG said its fourth-quarter pretax profit increased to 290 mln eur from a pro-forma 166 mln a year earlier, beating expectations on strong interest income. Analysts polled by AFX News had forecast pretax profit to rise to 278 mln eur.

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Asian shares close higher on bargain hunting, corporate activity

HONG KONG - Shares across the Asia-Pacific region closed higher, ignoring a rate increase in China announced over the weekend as investors went bargain hunting and responded to corporate activity.
   
Tokyo shares ended higher, recouping recent losses after investors sought out bargains, with high-technology stocks and defensive shares such as those of drug makers boosting the market.

The blue-chip Nikkei 225 closed 265.40 points or 1.59 pct higher at 17,009.55, off a high of 17,026.46. The TOPIX index of all first-section issues gained 17.02 points or 1.01 pct to close at 1,694.08, off a high of 1,695.69.
   
Hideo Mizutani, chief strategist at Sieg Securities, said buyers' appetites had been stronger than expected. "Although the upside was weighed down around the 17,000-point level, share prices made strong gains, considering the lackluster performance of US stock markets," he said.
   
Investors were also encouraged by rallies in the Shanghai markets, he added. But Mizutani said uncertainty about the US economy meant there was doubt about the ability of the market to rise further.
   
Investors were waiting for the outcome of the FOMC meeting amid waning expectations that it will cut US interest rates and also wanted to see the outcome of the meeting of the Bank of Japan's policy board, with expectations that the central bank will leave its overnight call rate target unchanged at 0.50 pct.
   
Australian shares ended higher as investors turned their attention to merger and acquisition activity within the banking and insurance sector after Bank of Queensland proposed a merger with Bendigo Bank. The S&P/ASX 200 closed up 23.4 points or 0.40 pct at 5,859.7. The key index closed off the day's high of 5,875.0 and above the day's low of 5,818.6.
   
Hong Kong shares jumped in afternoon trade led by blue chips on expectations that they will announce strong 2006 results this week. Fresh talk of A-share listings in mainland China by some Hong Kong-listed firms also helped sentiment.
   
China's interest rate hike had a muted impact on the market as the move had been largely expected. At 3.25 pm the Hang Seng Index was up 260.38 points or 1.37 pct at 19,213.88.
   
In mainland China A-shares in Shanghai and Shenzhen closed higher on sustained capital inflows, with investors shrugging off the central ban's interest rate hike and pushing banks and airlines higher.
   
The People's Bank of China said it was raising bank lending and deposit rates by 27 basis points in a move aimed at maintaining price stability. The increase takes one-year bank deposit rates to 2.79 pct and the one-year lending rate to 6.39 pct. The Shanghai A-share Index closed up 88.63 points or 2.88 pct at 3,167.72 and the Shenzhen A-share Index was up 10.03 points or 1.24 pct at 818.80.
   
Seoul shares closed sharply higher, with banks rallying to help the benchmark KOSPI index rise past 1,440 points.
   
Initial sentiment was cautious after Wall Street's Friday retreat and China's rate tightening but the market rebounded on foreign investors' buying of futures and program buying amid hopes that the US Fed may cut rates in response to mortgage loan woes.
   
The KOSPI index closed up 15.51 points or 1.09 pct at 1,443.39, rising for a third session. The index hit a high of 1,444.76 and a low of 1,430.36.

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Copper edges lower; tin hits new record high, gold rises

LONDON - Copper edged lower on worries an interest rate hike in China might slow economic growth and crimp demand for the metal, while tin hit a new record high amid continued worries over supply disruptions in Indonesia.
   
LME copper for 3 month delivery was down at 6,575 usd a tonne at 12.57 pm, against 6,610 usd at the close Friday, when it hit a three month high of 6,620 usd a tonne.
   
The Chinese Central Bank said at the weekend it will raise interest rates by 0.27 percentage points for the third time in eleven months, in a bid to temper credit and investment growth.
   
Copper has gained 3.5 pct this year, underpinned by declining LME stocks - down 9 pct from a month ago - and strong demand from China.
   
Data out last week showed China's copper concentrate imports rose an annual 30 pct to 390,000 tonnes in February, while the country's copper output fell 4.8 pct on the year to 222,000 tonnes.
   
Tin bucked the falling trend in the metals complex today to trade up at 14,000 usd a tonne against 13,845 usd at the close Friday. Earlier, the metal hit a new contract high of 14,125 usd.
   
A crackdown by the Indonesian government on illegal tin mining has sent the metal to ever higher levels this year. Indonesia is the world's second largest tin producer.
   
On Friday, the metal hit a fresh contract high even after Indonesia pledged to maintain annual supply of 90,000 metric tonnes in a bid to stabilise prices. According to tin industry organisation ITRI, Indonesian output in 2007 will be 28 pct lower than the 125,000 tonnes produced last year.
   
Nickel was down at 47,050 usd a tonne against 47,700 usd at the close Friday, when it hit a record high of 48,500 usd amid critically low inventories and strong demand from the stainless steel market. Stainless steel demand accounts for about 70 pct of total nickel consumption.
     
In other metals, zinc was down at 3,230 usd a tonne against 3,250 usd at the close Friday, aluminium edged down to 2,812 usd against 2,814 usd while lead fell to 1,920 usd against 1,926 usd.

At 12.47 GMT gold was up at 653.20 compared with 652.40 usd in late New york trades Friday. Earlier in the session gold hit 656 usd.
   
"Buying was strong in the Asian timezone with the weaker yen allowing yen-denominated gold prices to push sharply higher," said JP Morgan analyst, Michael Jansen.
   
Gold is likely to rise further if the Federal Reserve hints at higher inflation in its statement, due to be released Wednesday. However, a slightly stronger dollar capped gains.
   
A strong euro against the dollar on Friday spurred buying as effectively the dollar was weaker. Gold moves in the opposite direction to the US currency. However, the dollar was firmer today as the euro reversed gains.
   
In other precious metals, platinum was up at 1,226 usd against 1,217 usd, palladium was up at 350 usd against 348 usd while silver was down at 13.09 usd against 13.13 usd in late New York trades Friday.

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