US & World Daily Markets Financial Briefing 21-09-2006

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Stock prices rise day after Fed decision

NEW YORK - Stock prices rose modestly in early trading Thursday as Wall Street gained renewed confidence from the Federal Reserve's decision to leave interest rates unchanged as oil prices remained near recent lows. In the first hour of trading, the Dow Jones industrial average rose 1.69, or 0.01 percent, to 11,614.88.
   
Broader stock indicators were also higher. The Standard & Poor's 500 index, which reached a five and a half year high Wednesday, was up 1.17, or 0.09 percent, to 1,326.35 and the Nasdaq composite index advanced 3.63, or 0.16 percent, to 2,256.52.
   
Stocks, which built on Wednesday's rally, received a slight boost as Wall Street got its first sizable batch of corporate earnings news in some time.   

Bond prices rose, with the yield on the benchmark 10-year Treasury note falling to 4.72 percent from 4.73 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices fell.
   
Oil was up 30 cents at $61.04 in pre-opening trading on the New York Mercantile Exchange.
   
The Fed's decision to leave interest rates unchanged signaled that the central bank doesn't believe inflation is rising too rapidly for now and that growth in the economy continues to slow.
   
To gain further insight into the health of the economy, Wall Street was awaiting the Philadelphia Fed's report on regional manufacturing activity for September.
   
In corporate news, FedEx Corp. said its first-quarter profit rose 40 percent amid strong demand for ground and international express shipments. The Memphis-based shipping concern has been able to pass on rising fuel costs to consumers in the form of surcharges.

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Dollar falls after weak jobless claims data; Pound rises further

LONDON - The dollar fell after US weekly jobless claims numbers came in below market expectations, while the pound continued to rise following this morning's better-than-expected UK manufacturing survey.
   
US jobless claims rose by 7,000 to 318,000 in the week to Sept 15, official figures showed, well above the 310,000 predicted by analysts.
   
"US jobless claims were modestly weaker than expected, providing the market with a brief upside catalyst.," said Jamie Coleman at Thomson IFR Markets.
   
The market "retains an intense focus" on the outlook for US interest rates, while assuming the European Central Bank will keep raising rates to match its "extremely hawkish rhetoric", he said.
   
The Federal Reserve's statement accompanying last night's decision to leave interest rates unchanged was seen by the market as being on the dovish side as the Fed added a "reduced impetus from energy prices" to the factors set to cause inflation to moderate.
   
"The inclusion of falling energy prices as a downside risk to inflation as opposed to an upside risk to growth is something of an unexpectedly dovish tilt, albeit a minor one," said Steve Pearson at HBOS.
   
Meanwhile, the pound continued to push higher, nearing the 1.90 usd mark against the dollar for the first time since early September and touching a new 10-month high against the euro of 0.6704, after a survey showed UK manufacturing orders rose to a 21-month high in September.
   
The news gives further support to the case for higher interest rates, with market participants increasingly convinced that the Bank of England will raise rates again in November.

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The European Markets at 11.30 GMT

London - Leading shares advanced at midday, reversing opening weakness, with a strong performance from Morrison Supermarkets on the back of its solid first-half results helping to offset weakness among oil issues, and with Wall Steet seen rallying further at the open.
   
At 11.51 am, the FTSE 100 index was 19.2 points firmer at 5,885.4, recovering from earlier weakness, while the FTSE 250 index matched gains, up 26.8 points at 9,817.9.

Frankfurt - Shares were higher in midday trade, with transport sector shares among the top performers, as oil remained near six-month lows. At 11.45 am, the DAX 30 index was 20.29 points or 0.34 pct higher at 5,974.67, having moved between 5,936.00 and 5,979.41 so far this session.

Paris - Share prices were higher at midday as bargain-hunting resumed after a tentative start to trade, buoyed by overnight gains on Wall Street and positive US futures. At 11.30 am the CAC 40 index was up 25.91 points or 0.50 pct at 5,218.65, having slid to 5,175.18 in early trade.

Amsterdam - Share prices were higher at midday, led up by US futures indicating a higher opening of Wall Street, while Hagemeyer led gainers after a bullish research note from a brokerage. At 12.20 pm, the AEX was up 2.54 points or 0.53 pct to 479.00, after opening at 476.22 and trading in a range of 475.92-480.59.

Madrid - Share prices were higher midday amid positive sentiment, following the US Fed's decision to leave rates unchanged, with Metrovacesa and Inditex leading the gainers. At 12.27 pm, the IBEX 35 index gained 47.1 points to 12,473.5, after trading in a range of 12,394-12,502, on turnover of 1.418 bln eur.

Milan - Share prices were higher in midday trade, with Telecom Italia leading the advance amid continued talk about potential assets sales, and banks supported by M&A speculation. At 12.13 pm, the Mibtel index was up 0.42 pct to 29,232 points and the S&P/Mib was up 0.46 pct at 38,264, while volumes were 1.53 bln eur.

Stockholm - Shares were slightly higher in midday trade, supported by banks and retailing stocks amid light profit-taking elsewhere. At 12.20 pm, the OMX Stockholm index was up 0.20 pct at 335.67 and the OMX Stockholm 30 was up 0.19 pct at 1,041.97.

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Asian shares close mostly higher on Wall St rise; weaker yen boosts Tokyo

HONG KONG - Shares across the Asia-Pacific region closed mixed as Wall Street's overnight rise fuelled buying in Asia, with Japanese shares also supported by a weaker yen.
   
Tokyo shares ended higher led by exporters and technology issues, which received a boost from the softer yen and the solid rebound of their counterparts on the US market.
   
The release this morning of Japan's trade balance figures for August also soothed concerns that exports were slowing, encouraging buying of exporters.
   
At the close, the blue-chip Nikkei 225 Stock Average was up 115.56 points or 0.74 pct at 15,834.23, off a high of 15,859.21 and a low of 15,674.84. The broader TOPIX index of all first-section issues was up 9.90 points or 0.63 pct at 1,580.08, after touching a low of 1,559.82 and a high of 1,583.23.
   
"Expectations are rather high that blue-chip exporters and technology shares may upgrade their profit forecasts amid solid demand in the US and a softer yen," Mito Securities strategist Susumu Abe said.
   
The Ministry of Finance said Japan's trade surplus surged by 95.5 pct to 200.5 bln yen last month from 102.5 bln a year earlier, as exports grew by 17.7 pct to 6.14 trln yen, supported by increased auto exports, which were up 29.4 pct.
   
But continued selling pressure from foreign investors and speculation that some US hedge funds were reducing positions capped the market's upside.
   
Australian shares closed slightly lower as investors continued to reduce holdings of major banking and resource stocks. The S&P/ASX 200 eased 2.6 points or 0.05 pct to close at 4,995.9, above the day's low of 4,984.9 and well below a high of 5,035.4.
   
Hong Kong shares were higher in afternoon trade with demand for China Mobile after the company announced strong subscriber numbers for August and interest in property stocks after the US FOMC left its key interest rate unchanged.
At 3.26 pm the Hang Seng Index was up 104.91 points, or 0.60 pct, at 17,617.87.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on sustained fund inflows with banking stocks and retailers targeted, dealers said.
   
The Shanghai A-share Index rose 8.57 points or 0.47 pct to 1,829.41 and the Shenzhen A-share Index was up 1.65 points or 0.37 pct at 449.87.
   
Seoul shares finished higher but well off their intraday highs as Samsung Electronics and other major exporters turned lower on the won's sharp advance against the US dollar.
   
The market started strongly after Wall Street's overnight rally but then gave up most of the early gains as the won surged through the 950 level, they added. The KOSPI index closed up 0.35 points or 0.03 pct at 1,366.79, off a high of 1,378.79 and a low of 1,363.48.

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Gold steady as mkt recovers slightly, but outlook still shaky

Gold prices were largely unchanged after recovering slightly yesterday, as increased physical buying in Asia was offset by fears over the outlook for commodities, which have sustained heavy losses recently.
   
At 12.31 pm, spot gold, which earlier hit a low of 574.38 usd, was quoted at 581.10 usd against 580.40 usd at the time of the COMEX market close in New York yesterday.
   
Other precious metals were mixed. Spot silver was at 11.00 usd against 11.02 usd, platinum was down at 1,133.00 usd against 1,137.00 usd, while palladium was up at 307.50 usd against 304.00 usd.
   
Gold closed up yesterday as the market appeared to be forming a base between 570-575 usd, removing itself slightly from oil, which closed down again yesterday, extending falls of more than 20 pct since early August.
  
The precious metal, which hit a three-month low last Friday, is struggling to find support even as the dollar looks set to remain under mild pressure after the statement accompanying the Fed's rate verdict was viewed as slightly dovish.
   
In a widely anticipated move, the Fed yesterday kept interest rates unchanged for a second month, citing a "reduced impetus from energy prices" as one of the factors that should cause inflation to moderate over time.
   
Gold often moves counter to the dollar as it is seen as an alternative investment to the US currency. Also, a strong dollar makes bullion expensive for holders of other currencies.
   
The precious metal has lost about 20 pct of its value since touching 730 usd in May -- the highest level in a quarter of a century -- on concerns about geopolitical tensions and inflation.
 
Copper prices were higher as the market found support from concerns about supply shortages in China, but worries the recent slump across the commodities spectrum will continue near-term limited gains.
   
At 2.44 pm, LME copper for three-month delivery edged up to 7,500.00 usd from 7,449.00 usd at the close yesterday.
   
Aluminium edged up to 2,515.00 usd from 2,500.50, zinc climbed to 3,452.50 usd from 3,340.00 usd, nickel rose to 27,300.00 usd from 26,955.00 usd and lead edged up to 1,367.50 usd from 1,365.00 usd.
   
Tin bucked the trend, however, dipping to 8,930.00 usd from 8,995.00 usd.

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