US & World Daily Markets Financial Briefing 22-01-2007

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Stocks slip ahead of earnings reports

NEW YORK - Stocks fell in early trading Monday, pulling back on rising oil prices and ongoing worries about technology stocks.
   
The market has been moving erratically of late, with investors cautious about the direction of the economy and treading carefully ahead of this week's big wave of earnings reports. The tech sector so far has been knocked down the most, after Apple Inc.'s and Intel Corp.'s results last week fell below the Street's expectations.
   
The pharmaceuticals sector got a lift Monday after Pfizer's fourth-quarter earnings came in better than expected. Investors kept their enthusiasm restrained, though, until the world's biggest drug maker releases its restructuring plan later in the day.
   
The stock market also balked at rising crude oil prices. Oil is still down about 15 percent on the year, but if fuel costs rebound, consumer spending could be crimped.
   
In the first hour of trading, the Dow Jones industrial average fell 28.12, or 0.22 percent, to 12,537.41. Broader stock indicators were also lower. The Standard & Poor's 500 index was down 0.53, or 0.04 percent, to 1,429.97, and the Nasdaq composite index was down 5.63, or 0.23 percent, to 2,445.68.
   
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.77 percent from 4.78 percent late Friday. The dollar rose against other major currencies, while gold prices also rose.
      
Pfizer, which is facing ongoing lawsuits on its cholesterol-lowering drug Vioxx, reported Monday that its fourth-quarter earnings fell, but only after taking into account the $16.6 billion sale of its consumer health care business to health care products maker Johnson & Johnson last month. Pfizer slipped 14 cents to $27.08 ahead of the release of its restructuring plan.
   
The Russell 2000 index of smaller companies was down 2.58, or 0.33 percent, to 782.48.

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Dollar stays rangebound against European currencies; Yen weakens further
 
LONDON - The dollar was rangebound against major European currencies on a quiet day for economic data, while the yen extended across-the-board losses following last week's decision by the Bank of Japan (BoJ) to leave interest rates on hold.   
   
This week sees a quiet start in terms of news, with focus centring on Wednesday's release of the minutes to the Bank of England (BoE) rate-meeting, the key German Ifo business climate indicator on Thursday, and US housing market data towards the end of the week.
   
The euro has stuck within its recent trading range against the dollar after failing to break back above the 1.30 usd level last week, while the pound has remained strong but has yet to move back above the 1.98 usd mark.
   
HBOS currency analyst Steve Pearson noted that, although UK fundamentals still look very strong after the surprise BoE interest rate hike earlier this month, the pound is looking overbought.
   
"From a purely risk/reward perspective, new (long sterling) positions at current levels cannot be recommended," he said, adding UK rate expectations are high, with the market already discounting two further rate rises.
   
Wednesday's Monetary Policy Committee minutes are expected to show David Blanchflower went against the majority and maintained his call to leave rates on hold, but if any other member joined him this would be negative for the pound, Pearson said.
   
Elsewhere, the yen continued to weaken after last week's decision by the BoJ not to raise interest rates intensified speculation the central bank bowed to political pressure.
   
This increased investor confidence that Japanese borrowing costs will remain low for some time, and effectively gives the green light for carry trades -- when investors borrow in low-yielding currencies in order to invest in higher yielding assets elsewhere -- to continue.
   
The dollar has risen further against the yen, reaching a day high of 121.79, its highest level since December, 2002, while the pound rose above the 240 yen mark for the first time since August, 1998.

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The European markets at 13.00 GMT

London - Leading shares remained higher at midday, extending gains ahead of an expected firm start on Wall Street, while miners support in the UK and ongoing bid speculation boosts shares in InterContinental Hotels and ICI.
   
At 11.57 am, the FTSE 100 index was up 26.9 points at 6,264.1, while the broader indices also traded on positive terrain. Volume was solid with 826.4 mln shares changing hands in 150,093 deals.

Frankfurt - German shares were flat in midday trading on a lack of direction. At 12.34 pm, the DAX was up 3.44 points or 0.05 pct to 6,750.61, trading between 6,742.43 and 6,766.57, with the MDAX adding 39.24 points or 0.41 pct to 9,693.23. The TecDAX gained 9.46 points or 1.20 pct to 800.64, and the DAX futures contract added 8 points or 0.12 pct to 6,787.00.

Paris - Share prices were up at midday, led by gains by Vinci and Vallourec, as M&A talk and analysts' recommendations continued to be the dominant market influences. At 12.06 pm, the CAC-40 index was up 19.00 points or 0.34 pct at 5,633.70 on volume of 1.7 bln eur.

Amsterdam - Shares in Amsterdam were almost unchanged from last Friday, with Philips down after reporting lower-than-expected underlying earnings. At 11.50 pm, the AEX was up 0.06 pct or 0.31 points at 507.44, after opening at 508.40.

Milan - Share prices were slightly higher at midday, with major gains in banking sector stocks as well as Fiat, while Alitalia slumped amid reports that Air France-KLM may not make a bid for the ailing airline. At 12.25 am the Mibtel index was up 0.28 pct at 32,508 while the S&P/Mib index rose 0.34 pct at 42,268 on volumes of some 2.4 bln eur.

Madrid - Share prices were higher in early afternoon trade, tracking positive US futures, with Acciona leading gainers as speculation of an improved bid for Endesa from E.On AG gathered pace. At 12.40 pm, the IBEX-35 index was up 84.2 points to 14,481.7, on turnover of about 2.8 bln eur.

Stockholm -  Shares were higher in midday trade led by mining stocks on firmer commodity prices, but with gains extending throughout the market following a strong overnight performance on Asian markets overnight and on positive Wall Street futures. At 12 pm, the OMX Stockholm index was up 0.78 pct at 388.14 hitting fresh six-year highs, and the OMX Stockholm 30 up 0.79 pct at 1,189.89. Turnover was 9.979 bln skr.

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Asian shares close higher, Australia and Hong Kong hitting new records

HONG KONG - Shares across the Asia-Pacific region closed higher, with Tokyo rising on a weaker yen and the Hong Kong and Australian markets trading at new record highs.
   
Tokyo shares closed higher as the yen's continued weakness against the dollar buoyed hopes that Japanese companies may upgrade their earnings forecasts for the fiscal year ending March. A number of big firms are reporting their nine months to December results in coming weeks.
   
The blue-chip Nikkei 225 Stock Average closed up 113.74 points or 0.66 pct at 17,424.18, off a high of 17,484.59. The TOPIX index of all issues listed on the Tokyo Stock Exchange's first section ended the session up 16.12 points or 0.94 pct at 1,730.33, off a high of 1,733.15.
   
Hoya, the largest Japanese maker of eyeglasses, released its April-December results and year to March projections during the afternoon session. Dealers said the figures disappointed market players, who sold off the stock, which sent its share price tumbling, but this did not dent broader market sentiment.
   
"Investors had been particularly bullish on Hoya, which had posted strong earnings recently and had been in place to benefit from a weaker yen. Although Hoya's projections failed to impress the market, hopes for more favorable earnings announcements in the coming weeks persisted, offsetting the negative reaction on the broader market," said Hiroyuki Fukunaga, chief strategist at Rakuten Securities.
   
Australian shares closed at fresh record highs as investors bought resource stocks after base metal prices such as copper rebounded in London trading on Friday. Energy and bank stocks also rose, which supported buying of the wider market.
   
The S&P/ASX 200 jumped 53.5 points or 0.94 pct to a record close at 5,726.6, surpassing last Monday's record close of 5,673.8. The key index closed off a fresh intra-day record of 5,739.8 and above the low for the day of 5,688.5.
   
The broader All Ordinaries index climbed 51.8 points to a fresh record close of 5,703.9, also beating the previous record close of 5,652.1 set last Friday, and setting a fresh intra-day record of 5,715.5.
   
Hong Kong shares were up sharply in afternoon trade, hitting a new highs on the back of strong gains in HSBC and China Mobile. The two index heavyweights were boosted by gains in the prices of their American depositary receipts on Friday, they said, noting that HSBC is being boosted by expectations that its US unit may fare better than previously thought while China Mobile has been lifted by strong subscriber numbers.
  
At 3.40 pm the Hang Seng Index had gained 404.92 points or 1.99 pct at 20,732.64. The index's previous all-time intraday-high was 20,554.58 hit on Jan 3.   

In mainland China, A-shares in Shanghai and Shenzhen closed higher amid strong capital inflows with banks, automakers and retailers gaining ground. Over 120 companies closed up their daily limits of 10 pct.
   
The Shanghai A-share Index surged 105.87 points or 3.56 pct to 3,080.75 and the Shenzhen A-share Index was up 29.36 points or 4.22 pct at 725.79, a new all time high, on turnover of 50.52 bln yuan.
   
Seoul shares closed slightly higher, rebounding from a steep decline in early trade, as futures-linked program buying picked up late in the session.
   
After a mixed Friday close on Wall Street, the local bourse fell below firm support at 1,350 points at one stage, with all major players unloading shares. But it managed to finish in positive territory toward the close, after the stronger performance by other major Asian markets, they noted.
   
Large cap IT and steel makers posted gains while retailers and builders turned sharply lower. The KOSPI index closed up 2.85 points or 0.21 pct at 1,363.41, after moving between 1,348.46 and 1,364.67.

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LONDON - Nickel prices surged to a new all-time high as the market remained concerned about critically low stocks, rising demand and possible supply disruptions.
   
At 1.47 pm, LME nickel for three-month delivery was quoted at 36,650 usd a tonne, after earlier hitting 37,349 usd a tonne -- its highest ever level.
   
"Nickel is seemingly immune from what is happening in the rest of the commodity complex, as it barrels on to new highs on the back of steady stainless (steel) demand and tight stocks," said Man Financial analyst Ed Meir.
   
The LME said in a daily report earlier nickel stocks held in its warehouses have fallen by another 126 tonnes to total 5,052 tonnes -- equivalent to just over a day of global consumption.
   
"While demand for stainless steel is projected to remain solid in 2007, global nickel supplies are lingering at precariously, dangerously low levels," said Deutsche Bank analyst Peter Richardson.
   
Demand for nickel is principally linked to the production of stainless steel, which makes up around 62 pct of nickel usage worldwide.
   
Demand aside, analysts said nickel continues to be plagued by worries over possible strike action at Xstrata's Sudbury mine in Ontario. Workers at the mine have put forward a strike mandate before their union leaders, while pay talks with the company continue.
   
"With stocks very low and other supply concerns to the fore, a short squeeze up to 40,000 usd a tonne should not be ruled out," said UBS Investment Bank analyst Robin Bhar. Nickel prices have soared 180 pct since the start of 2006.

Gold drifted lower amid continued dollar strength but analysts said the metal's near term prospects have improved now that oil has staged a modest recovery. Lower oil prices pressure gold as they reduce the metal's appeal as a hedge against oil-induced inflation.
   
At 10.32 pm, spot gold was quoted at 634.73 usd an ounce, down from 635.55 usd in late New York trade Friday.
   
The dollar climbed to a four-year high against the yen earlier and has remained steady against the euro after Friday's gains. Gold often moves counter to the dollar as it is seen as an alternative investment to the US currency.
   
Elsewhere, silver edged up to 12.86 usd an ounce against 12.83 usd, platinum edged up to 1,158.00 usd against 1,157.00 usd, while palladium dipped to 338.00 usd against 340.00 usd.

Crude oil prices climbed 62 cents to $52.61 a barrel on the New York Mercantile Exchange Monday.

At 11.37 am in London, front-month Brent North Sea crude contracts for March delivery were up 27 cents at 53.71 usd, after surging 1.69 usd to close at 53.44 usd on Friday.

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