US & World Daily Markets Financial Briefing 20-04-2007

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Stocks up on earnings; Dow nears 13,000

NEW YORK - Wall Street bounded higher Friday morning after Google Inc. led a series of stronger earnings reports that propelled the Dow Jones industrials further into record terrain and toward its first assault on the 13,000 mark.
   
In the first hour of trading, the Dow Jones industrial average spiked 112.99, or 0.9 percent, to 12,921.51 after setting a new intra-day high of 12,950.44. The blue-chip index has hit 33 record closes since the beginning of October last year.
   
After tempering their expectations for the first-quarter, investors have been pleasantly surprised by the first torrent of reports, helping major indexes rebound from February's market plunge. The Nasdaq composite is now at a six-year high, and the Standard & Poor's 500 index is at a six-and-a-half year high.
   
So far, 16 of the 30 Dow components have posted financial results for the first three months of the year -- and ten surpassed analyst forecasts. Dow components Honeywell International Inc., Pfizer Inc., Caterpillar Inc. and McDonald's Corp. helped drive the index Friday after posting strong results.
   
Google reported late Thursday a 69 percent jump in first-quarter profit to exceed analyst expectations. The results helped reassure some investors who had grown cautious about the technology sector after disappointing earnings earlier in the week from companies such as Yahoo Inc.
   
Broader stock indicators advanced. The Standard & Poor's 500 index was up 12.64, or 0.86 percent, at 1,483.37, and the Nasdaq composite index surged 24.58, or 0.98 percent, at 2,529.93.

In afternoon trading, Britain's FTSE 100 was up 0.82 percent, Germany's DAX index was up 1.38 percent, and France's CAC-40 was up 1.41 percent.
   
Oil prices rose, after a sharp drop a day earlier. A barrel of light sweet crude climbed $1.02 to $62.85 a barrel in electronic premarket trading on the New York Mercantile Exchange.
   
Honeywell, the diversified industrial conglomerate, said Friday its profit spiked 21 percent.
   
Pfizer, the world's largest drug maker, said its profit fell 18 percent due to one-off charges and weak sales of diabetes drug Exubera. However, excluding the  charges, the results easily beat predictions.
   
Caterpillar Inc., one of the world's largest construction equipment makers, said Friday its first-quarter profit fell 3 percent, but earnings per share increased and exceeded Street forecasts.
   
McDonald's Corp.'s first-quarter earnings surged 22 percent. The profit results were in line with predictions, but the fast-food leader's revenue exceeded them.
   
Other strong first-quarter earnings reports Friday were oil services company Schlumberger Ltd. and Xerox Corp., which both beat Street expectations. Schlumberger said its profit jumped 63 percent in the first quarter on strong revenue growth in international markets, while Xerox profits jumped by nearly 17 percent in the first quarter of the year.
   
Investors looked past worse-than-expected earnings from Advanced Micro Devices Inc. released late Thursday. The chip maker's profit was hurt by lower chip sales and prices, but its shares rose in after-hours trading on signs that the price battle between AMD and Intel Corp. is easing, and that AMD is willing to outsource to cut costs.

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Pound remains firm, euro steady as Ecofin comments lack impact

LONDON - The pound remained steady above the 2 usd level after its brief dip this morning, which came in the wake of mixed UK retail sales data.
   
The pound briefly fell below the 2 usd threshold as monthly sales growth in March came in slightly under expectations, but closer analysis of the figures showed that firms are confidently pushing price rises through to consumers. Expectations of a hike in interest rates in May to 5.5 pct therefore remain intact, and further rises are also a subject of speculation.
   
"With strong consumer demand providing a potential boost to retailers' pricing power, rates look likely to rise in May, and probably again thereafter," said Vicky Redwood, UK economist at Capital Economics.
   
With no further economic news due out today, investors' attention will next turn to mortgage lending and money supply figures on Monday. Later, on Tuesday, the Bank of England's Monetary Policy Committee will come before the Treasury committee, with the market scanning their comments for clues as to how high interest rates will go.
   
Elsewhere, the euro remained steady against the major currencies, off earlier highs in narrowly ranged trade, with markets watching comments from a meeting of euro zone finance ministers and central bankers to assess levels of concern over the euro's strength.
   
The buoyant euro -- which is within striking distance of its all-time high against the dollar -- has led to worries it may impact euro zone economic growth.
   
But few concerns have been expressed so far at the Ecofin meeting, with euro group president Jean-Claude Juncker saying he is not worried about the currency's appreciation, and Portuguese representative Vitor Constancio making a reference to tight vigilance, only to seemingly contradict the comment later.
   
"Euro/dollar has remained within a tight range as comments from the Portuguese ECB member Constancio confused the market," said analysts at BNP Paribas. "Within an early statement he suggested that the ECB is watching the euro exchange rate closely ... later he made it clear that the ECB is not targeting
the exchange rate and the economy is still strong."
   
Today's only euro zone data -- French household consumption of manufactured goods -- was above expectations, showing a 0.7 pct rise in March, rebounding from a 0.5 pct fall in February. Analysts said the data bodes well for the euro zone growth outlook, although their immediate impact on the market was negligible.
   
Meanwhile, the yen remained weak as carry trades recovered, despite news of a 0.9 pct rise in the Japanese all-industry index, beating forecasts for a 0.3 pct fall.
   
"It would be wrong to buy the yen using the stronger economic performance as a reason -- a better Japanese economy could even prompt the yen to move lower if a stronger economy takes risk appetite up," said analysts at BNP Paribas.
   
Finally the dollar stayed weaker, near day lows against the euro, after yesterday's weak Philadelphia Fed's survey of manufacturing activity was unchanged in April from late March, confounding expectations of a rise.
   
With no data out today, focus is likely to be on US Treasury Secretary Henry Paulson's speech in China.

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Top Stories in Europe at 12.05 GMT

London - The board of Alliance Boots PLC, the international health and beauty retailer, has recommended an improved 10.9 stg a share takeover offer from Stefano Pessina, executive deputy chairman and 15 pct shareholder, and Kohlberg Kravis Roberts (KKR), the US private equity group, the parties said in a statement.
 
The improved offer, which is inclusive of any final dividend to be declared for the year to March 2007, values the group at 10.6 bln stg. A previous indicative offer of 10.4 stg a share valued the group at 10.1 bln stg.

Swiss Re is today expected to announce a deal with Friends Provident to manage longevity risk for 1.7 bln stg of annuities, the Wall Street Journal reported. The foray into this segment of the market, in which insurers sell annuities guaranteeing customers a steady retirement income in exchange for premium payments, will be the Swiss reinsurer's first.

Stockholm - Sony Ericsson Mobile Communications AB said first quarter pretax profits rose by 139 pct to 362 mln eur, as sales rose 47 pct to 2.925 bln eur, boosted by strong handset shipments and improving operating margins. But despite sharp increases, both numbers fell slightly short of market forecasts, which centred on a pretax profit of 368 mln eur and sales of 3.084 bln eur, according to a survey by SME Direkt.

Paris - Intervention by French regulators may oblige Sacyr Vallehermoso to replace the all-share exchange offer it lodged for Eiffage yesterday with a cash bid, said a source close to the French constructor. The value of the cash bid should be set at 129.5 eur per share, the morst recent price at which Spanish shareholders bought Eiffage shares, the source told Agence France-Presse overnight.

Frankfurt - Unicredito Italiano SpA's chief executive Alessandro Profumo and Societe Generale's CEO Daniel Bouton are currently holding talks, Handelsblatt reported, citing sources within the financial industry. The two managers are not discussing plans for a specific project, it said.

Converium Holding AG is in talks to find a white knight bidder, averting a looming hostile takeover offer from French rival Scor SA, Handelsblatt reported, citing Converium's chief executive officer Inga Beale. "We are in talks with other partners," including private equity investors, Beale told the newspaper.

Milan - Telefonica SA will study over the weekend the possibility of buying a controlling stake in Telecom Italia SpA, the daily Il Sole 24 Ore said without giving a source. The daily said that Telefonica could seek to buy from Pirelli & C SpA a 66 pct stake in the holding company Olimpia SpA, which owns 18 pct of Telecom Italia.

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Asian shares close higher on real estate, steel maker gains

HONG KONG - Shares across the Asia-Pacific region closed higher, supported by a fresh record close on the Dow Jones Industrials index overnight. In many markets, gains were led by property stocks.
   
Tokyo shares got a lift from a softer yen which benefited exporters. The Nikkei 225 Stock Average closed up 80.65 points or 0.46 pct at 17,452.62, off the day's high of 17,502.02. For the week, the index gained 0.51 pct.
   
The TOPIX index of all first-section issues added 3.14 points or 0.18 pct to 1,710.07, off a high of 1,714.54. For the week, the index rose 0.27 pct.
   
Australian shares closed higher on support for banks and as fears subsided that any move by Chinese authorities to cool economic growth will impact commodity prices.
   
The S&P/ASX 200 closed up 42.4 points or 069 pct at 6,207.5, short of Wednesday's record close of 6,236.9. The benchmark index closed off a high of 6,211.0 and a low of 6,168.9. Over the trading week, the S&P/ASX 200 added 71.8 points or 1.2 pct.
    
"Following a shake-out in Asian share markets on Thursday, investors have sought the safety of local banking stocks expecting upcoming earnings announcements to be beneficial for sentiment in that sector," CMC Markets senior dealer Josh Whiting said.
   
Hong Kong shares were stronger in afternoon trade with investors hoping that China will take a measured approach as it tries to cool down its economy. At 3.45 pm the Hang Seng Index was up 197.47 hkd or 0.97 pct.
   
In mainland China, A-shares in Shanghai and Shenzhen closed broadly higher amid a strong rally following yesterday's slump, with banks, steelmakers and property developers snapped up, dealers said.
   
The benchmark Shanghai Composite Index, which covers both A- and B-shares listed on the Shanghai Stock Exchange, closed up 135.19 points, or 3.92 pct, at 3,584.20, after moving between 3,460.90 and 3,591.46.
   
Share prices in Seoul closed sharply higher, with investors taking their cue from a rebound in other Asian markets after yesterday's heavy selling, dealers said.
   
The KOSPI index closed up 19.42 points or 1.28 pct at 1,533.08, after moving between 1,518.58 and 1,533.09. The index finished the week higher, with a gain of 12.3 points, or 0.8 pct. 
  
Foreign investor interest in both the spot and futures markets improved overall supply and demand conditions, the dealers said, with steel makers, builders and shipbuilders among the most sought after stocks.

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Gold extends gains as dollar flounders, oil gains

LONDON - Gold rose in afternoon trade to breach the 692 usd barrier as the dollar continued to slip against sterling and the euro, and oil rose on supply fears ahead of the Nigerian elections tomorrow.
   
Platinum meanwhile extended gains to set a fresh five-month high for the third day in a row.
   
At 3.43 am, spot gold was at 690.75 usd an ounce, up from 683.55 usd in late New York trade yesterday. The precious metal briefly traded as high as 693.50 usd.
   
Gold, which is typically seen as an alternative investment to the dollar and trades in an inverse relationship to it, benefited from a weakening of the US currency against the euro and sterling.
   
"Gold remains a dollar story," said Jon Nadler, an analyst at Kitco. "It is looking at the pound and the euro and it almost has no choice but to rise." The dollar stayed weaker early afternoon, near day lows against the euro, after yesterday's weak Philadelphia Fed's survey of manufacturing activity.
   
The index was unchanged in April from late March, confounding expectations of a rise.
   
A hike in oil prices on supply worries amid violence in Nigeria, Africa's biggest oil producer, and positive sentiment towards the commodities complex, illustrated by copper's rise to touch the 8,000 usd per tonne mark, also underpinned gold prices.
   
Platinum meanwhile extended gains into the afternoon, hitting a fresh 5-month high of 1,330 usd an ounce as investors anticipated the launch of a number of new investment funds.
   
ETF Securities said yesterday it is listing five new exchange-traded commodities (ETCs) -- which allow investors to trade commodities through ordinary brokerage accounts -- on the London Stock Exchange from April 24.
    
ETFs and ETCs back metal bought on paper with physical stock, meaning their launch typically cuts the amount of physical stock available in the market, further pushing prices.
   
At 2.43 pm, platinum was trading at 1,314 usd per ounce. The white metal stood at 1,296 usd in late New York trade yesterday.
   
Among other precious metals, palladium edged up to 383 usd from 376 usd yesterday, while silver rose to 13.92 usd from 13.70 usd.

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