US & World Daily Markets Financial Briefing 23-03-2007

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Stocks open flat ahead of housing report

NEW YORK - Stocks opened quietly Friday, trading mostly flat as investors awaited a report on home sales that could indicate whether Wall Street's somewhat less-pessimistic view of the sector is warranted.
   
The housing report could justify some of the more upbeat sentiment about the housing sector in recent days. The Federal Reserve this week said an "adjustment" in the housing sector was continuing, offering some relief for investors left unnerved by the woes among so-called subprime mortgage lenders. Wall Street had grown concerned that an implosion among subprime lenders, which make loans to people with poor credit, could spill over into other parts of the economy and derail already slowing economic growth.
   
In the first hour of trading, the Dow Jones industrial average fell 6.41, or 0.05 percent, to 12,454.73.
   
Broader stock indicators also slipped. The Standard & Poor's 500 index fell 0.54, or 0.04 percent, to 1,434.00, and the Nasdaq composite index fell 1.45, or 0.06 percent, to 2,450.29.

The Russell 2000 index of smaller companies rose 0.55, or 0.07 percent, to 808.60.
   
In afternoon trading, Britain's FTSE 100 rose 0.13 percent, Germany's DAX index rose 0.05 percent, and France's CAC-40 added 0.17 percent.
   
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.57 percent from 4.58 percent late Thursday.
   
Light, sweet crude rose 61 cents to $62.30 in premarket electronic trading on the New York Mercantile Exchange. Oil prices rose following word that Iranian naval vessels had seized 15 British sailors in Iraqi waters.
   
Stocks in focus

In corporate news, Amgen Inc. fell $2.55, or 4.2 percent, to $57.92 after the company halted a trail of colon cancer drug Vectibix after the product hastened the development of colon cancer when used in combination with Avastin.
   
DaimlerChrysler AG drew investors' attention amid reports the automaker would sell its Chrysler unit. DaimlerChrysler rose $3.14, or 4.1 percent, to $80.74.

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Dollar stable ahead of housing data

LONDON - The dollar was stable against other major currencies ahead of key US housing data later this afternoon.
    
Analysts said the dollar's stability, having recovered after Wednesday's Federal Reserve rate-setting meeting, suggests a reconsideration of the implications of the FOMC's statement. It was originally seen as fairly dovish, but there are now suggestions the Fed is more concerned about inflation than originally thought.
   
"Far from being a retreat from an unambiguously hawkish bias and a reflection of downgraded risks to inflation, the latest FOMC statement simply conveys a greater appreciation of the downside risk to growth," said Bank of New York analyst Neil Mellor.
   
However, all eyes will be on the existing home sales date later today. Sales are seen returning to their downward trend in February, falling to 6.30 mln units after rising slightly in January to 6.46 mln units.      
   
The numbers will be watched closely as the US housing market's instability is seen by many to be the weak link that may trigger a wider and more severe slowdown in the US economy.  In its latest policy statement, the Federal Reserve acknowledged the housing sector is experiencing an ongoing "adjustment".
   
"We expect to see some evidence that the market is far from stable," said Ian Stannard, currency strategist at BNP Paribas. "The market has fairly weak expectations for the data and if that is met then we could well see the dollar coming back under," he added.   
   
Meanwhile, the euro was steady in midday trade, off earlier lows having been pushed down following a speech last night by outgoing European Central Bank member Mitja Gaspari. Gaspari said euro zone inflation is under control and that it is too soon to talk about interest rate increases. 
   
Stannard noted: "Against sterling the euro's been towards the bottom end of the week's trading range following the strong UK data this week, and pushed lower by Gaspari's speech".

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Top Stories in Europe at 11.05 GMT

Paris - Axa said it has agreed a partnership with Banca Monte dei Paschi di Siena SpA (BMPS) covering bancassurance and pensions activities in Italy, and will pay 1.15 bln eur to acquire 50 pct of certain BMPS assets as well as management rights over the insurance and pension assets. Axa said it will acquire 50 pct of MPS Vita (life insurance), MPS Danni (non-life insurance) and the BMPS pension funds business.

Brussels - The European Commission said it has stopped the clock again on its probe into the merger of Sony Corp and Bertelsmann AG's recorded music divisions pending further information on the deal from the companies. "Please note that the commission yesterday sent an Article 11 decision to the parties involved in the Sony/BMG merger for failure to provide requested information," it said in a press statement.

Madrid - Spain's CNMV market regulator said late Thursday it was suspending trading in electricity giant Endesa. The suspension came amid speculation that Italy's Enel would launch a rival bid to Germany's EON, with the press saying Enel on its own or along with Acciona may bid over 40 eur per share.

Vodafone, Telecom Italia, France Telecom's Orange and Jazztel have presented firm offers for Deutsche Telekom's Spanish unit, Ya.com, Cinco Dias reported, without citing a source. The end of this week has been flagged as the deadline for bids, the newspaper said, but it did not rule out the possibility of further bids from other candidates.

Frankfurt - Deutsche Telekom AG is in exclusive talks with US telecoms service company EDS regarding a possible partnership with the German telecoms giant's unit T-Systems, Handelsblatt said, citing industry sources. T-Systems and EDS declined comment to Handelsblatt.

BASF AG's oil & gas unit Wintershall wants to invest more than 3.5 bln eur by 2010, primarily in Siberia, the unit said at its full-year conference. The company also plans to invest in construction of Baltic Sea pipeline Nord Stream as well as in infrastructure in its German home market.

Amsterdam - Rabobank wants to sell off its online broker Alex as it no longer considers the subsidiary a core activity, Dutch newspaper Het Financieele Dagblad reported citing sources close to the bank. Rabobank acquired Alex, which has some 100,000 customers, from Dexia in 2002, reportedly paying tens of mlns of eur at the time for the firm which is now said to be worth many times that amount.

Wolters Kluwer NV is understood to have agreed to sell its education division to international private equity group Bridgepoint Capital for over 750 mln eur, the Financial Times reported, without citing sources. A spokesperson for Wolters Kluwer declined to comment.

London - Citigroup Inc chairman and CEO Charles Prince is under pressure from a faction within his company to make a rival bid to UK's Barclays PLC for ABN Amro Holding NV, the Wall Street Journal said, citing sources familiar with the matter. The newspaper said any deal would give Citigroup a stronger presence in continental Europe, noting the two banks have complementary businesses in the US and Latin America.

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Asian shares close mixed, with investors looking for leads

HONG KONG - Shares across the Asia-Pacific region closed mixed, with slight movements recorded in most markets as investors looked for news to inspire trade.
   
Tokyo shares ended mixed, but the key Nikkei index posted gains for a fourth straight session after US markets showed signs of stabilising overnight despite lingering worries over the state of the economy.
   
Some investors were also reluctant to build fresh positions ahead of the weekend and book-closing next week for the fiscal year-end. The blue-chip Nikkei 225 Stock Average closed up 61.41 points, or 0.35 pct, at 17,480.61, off a high of 17,534.77. The key Nikkei index gained 4.4 pct this week.
   
The TOPIX index of all the issues listed on the Tokyo Stock Exchange's first section was up 10.14 points, or 0.59 pct, at 1,741.94, off a high of 1,745.61.
   
"The market may trade downwards next week as post-dividend trading starts," said Masatoshi Sato, strategist at Mizuho Investor Securities. "But the extent of the decline is likely to be relatively limited, as investors will likely hold back from deciding their stance one way or another ahead of the release (on April 2) of the Bank of Japan's 'tankan' business sentiment survey," he added.
   
Australian shares closed slightly lower as local investors took profits in certain sectors after yesterday's rally, which was sparked by the US Federal Reserve keeping interest rates unchanged. Caution also swayed investors ahead of the weekend and the release of US housing data later tonight.
   
The S&P/ASX 200 closed down 3.4 points or just 0.06 pct at 5,952.3, above the day's low at 5,938.6 and below the high of 5,968.1. Over the trading week, the benchmark index regained 116.0 points or 1.99 pct.
   
Hong Kong shares were flat in afternoon trade with some profit-taking and the market taking a breather after the recent buying spurred by the company reporting season.
   
Most of the big companies have reported and investors are now waiting for fresh leads, including US housing data. At 3.30 pm the Hang Seng Index was up by 1.44 points to 19,691.69.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher as morning weakness was offset by sustained capital inflows, with metals stocks and retailers gaining ground. The Shanghai A-share Index was up 3.25 points or 0.10 pct at 3,230.27 and the Shenzhen A-share Index was up 9.11 points or 1.08 pct at a record 853.16.
   
Seoul shares finished slightly lower, reversing a firmer opening, with investors turning cautious ahead of the weekend and the beginning of the corporate earnings season next month. Samsung Electronics and other IT big stocks came under pressure following Motorola's surprise warning that it may post a loss for the first quarter, they added.
   
The KOSPI index closed down 1.15 points or 0.08 pct at 1,447.38, off a high of 1,454.34 and a low of 1,443.04. The main board index gained 19.50 points for the week.

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Copper rises LME stocks fall even further

LONDON - Copper rose in London amid another large decline in LME stocks, and as the market remained underpinned by easing worries over US economic growth after the Federal Reserve softened its stance on monetary tightening earlier this week.
   
At 12.31 pm, LME copper for three-month delivery was at 6,810 usd a tonne against 6,720 usd at the close yesterday.
   
Copper gained around 1.8 pct yesterday after Chinese customs data for February showed imports of the metal nearly doubled from a year ago, and as worries over US economic growth continued to ease.
   
The metal made further gains in Asia earlier and has continued higher in London, underpinned by further large falls in inventory held by the London Metal Exchange.
   
The LME said in a daily report earlier copper stocks in its warehouses fell by 4,125 tonnes to 183,650 tonnes, with only 168,100 tonnes immediately available to the market.

Nickel was down at 44,250 usd a tonne against 45,150 usd, giving back some of the gains made yesterday after Chinese customs data showed a near record level of imports into China in February
   
Aluminium was flat at 2,780 usd a tonne, with analysts saying the metal will struggle to forge new highs as stockpiles remain plentiful. Today's LME data showed stocks rose another 4,525 tonnes to total 810,475 tonnes.
   
Other metals were all higher. Zinc was up at 3,242 usd a tonne against 3,200 usd, lead was up at 1,935 usd against 1,925 usd while tin was up at 14,325 usd against 14,050 usd.

Gold pares gains as dollar pulls back from earlier lows

At 11.24 am, gold was at 661.28 usd per ounce, down from 663.40 usd in late New York trade yesterday.
   
The metal, which rallied on dollar weakness after the Fed hinted Wednesday that it does not plan further interest rate hikes, pared gains as the US currency stabilised.
   
Investors also took profits after the metal hit a three-week high of 666.60 usd in New York.
   
"Basically the market is still quite nervous after the sharp falls of a couple of weeks ago," said analyst Matthew Turner at Virtual Metals. "The flipside of that nervousness is that you take the gains that you can get."
   
Investors remain edgy after gold prices fell sharply late February on a slide in the equity markets, as players sold profitable gold positions to cover losses elsewhere.
   
While most analysts remain bullish in the medium-to-long-term, gold is expected to remain in a holding pattern for a while yet as sentiment recovers.
   
"While gold may seem to have shrugged off the effects of global equity woes, it could remain in a period of consolidation before asserting its bullish fundamentals to push for a move targeting resistance at 672 usd, and consequently into the 680s," said Standard Bank in a note.
   
After recent weakness, the precious metal has found support in rising energy prices, as oil climbed to near 62 usd per barrel on concerns over falling US gasoline stocks, and is benefiting from a return in investors' appetite for risk.
   
The inflationary impact of rising energy prices will be felt beyond the US, in turn burnishing gold's anti-inflationary qualities in the mid-to-longer-term, said James Moore, analyst at TheBullionDesk.com.
   
Among other metals, platinum pulled back to 1,229 usd after hitting a high of 1,236 usd in late New York trade, palladium was steady at 352 usd, and silver stood at 13.30 usd, slightly off yesterday's 13.41 usd.

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