US & World Daily Markets Financial Briefing 23-05-2007

The world's most trusted name in professional trader education. Click Here

Stocks are higher on more takeover news

NEW YORK - Stocks rose modestly in early trading Wednesday after Alcan Inc. rebuffed a hostile bid by aluminum competitor Alcoa Inc., and Canadian media reported that Australian mining giant BHP Billiton Ltd. might make its own offer.
   
Investors have been encouraged by a host of takeover offers this week, a sign that liquidity is high and that corporate executives are confident about the economy. There has been some $2.3 trillion worth of deals announced so far this year, according to financial data provider Dealogic, and the tally is on track to beat last year's record $4 trillion.
   
Alcan late Tuesday rejected Alcoa's $27.6 billion bid, saying it did not reflect its growth prospects. The Canadian company is said to be in talks with BHP as a way to fend off Alcoa, according to a report in Canada's Globe and Mail newspaper, which cited unnamed sources.
   
The bidding battle rumors came amid a wave of takeover activity Wednesday: EMI Group Chief Executive Jim Fifield might be in the final stages of planning an offer to buy the music company, the New York Post reported. Rival Warner Music Group Corp. in the past has also expressed interest in buying EMI.
   
And late Tuesday, Payless ShoeSource Inc. said it will buy competing shoe store chain Stride Rite for about $800 million, while real estate investment trust Crescent Real Estate Equities Co. said it will be bought by another real estate investment firm, Morgan Stanley Real Estate, for about $2.34 billion.
   
In the first hour of trading, the Dow Jones industrial average rose 23.57, or 0.17 percent, to 13,563.52.
   
Broader stock indicators were also higher. The Standard & Poor's 500 index advanced 3.13, or 0.21 percent, to 1,527.25, and the Nasdaq composite index gained 0.36, or 0.01 percent, to 2,588.38.
   
Bonds were little changed, with the yield on the benchmark 10-year Treasury note at 4.83 percent, the same as late Tuesday.
   
The advance also comes as Chinese stocks rose to a record for the third straight session Wednesday on optimism over reports the government may triple quotas for foreign investment in local bourses. The benchmark Shanghai Composite Index gained 1.5 percent to 4,173.71. The Shenzhen Composite Index rose 2.1 percent to 1,223.98, also a record close.
  
In afternoon trading, Britain's FTSE 100 was up 0.49 percent, Germany's DAX index added 0.86 percent, and France's CAC-40 rose 0.30 percent.
   
The Russell 2000 index of smaller companies was up 0.08, or 0.01 percent, at 840.00.

VantagePoint's market forecasts are nearly 80% accurate.  Take a look at actual  forecasts and see the difference they can make in your trading. Click here to see two recent forecasts now.

Pound continues to rise after BoE minutes point to further rate hike

LONDON - The pound continued to rise, reaching week-highs against the dollar and 13-day highs against the euro, boosted by this morning's hawkish Bank of England minutes which pointed to at least one further
interest rate rise to come. The minutes to the meeting earlier this month revealed a unanimous vote in favour of a quarter-point interest rate hike to 5.50 pct.
   
This means even the MPC's arch dove David Blanchflower was convinced of the need for higher rates, while crucially the meeting included a discussion on the possibility of raising rates by half a point rather than the usual quarter.
   
"Overall the minutes add strongly to our conviction that interest rates will continue to head higher over the coming months," said Philip Shaw at Investec, adding that he would not rule out a back-to-back rate hike next month.
   
He pointed to the MPC's comment in the minutes that interest rates "could be raised further as necessary" if the economy continues to develop broadly in line with its central expectations.
       
The news took the pound to a week high of 1.9821 against the dollar and the euro to a 13-day low of 0.6783 against the UK currency.
   
Elsewhere, the euro recovered modestly against the dollar after earlier dropping to six-week lows against the currency.
   
The dollar was helped higher in early trade after hawkish comments from a US Federal Reserve official caused market players to scale back their expectations for an interest rate cut over the coming months.
   
Jeffrey Lacker, a non-voting Fed official, said upside risks to inflation remain and that he is comfortable with interest rates at 5.25 pct at the moment.
   
Improving prospects for interest rates in the US and the UK has given further impetus for the carry trade, where investors borrow money in countries with low interest rates in order to invest in higher-yielding assets elsewhere.
   
The yen -- the most common funding currency for carry trades -- therefore came under fresh pressure, reaching its lowest level since February against both the dollar and the pound.

Trade with RCG fxtrader ™, the platform offering instant access to 12 major FX trading pairs with low spreads (2 pips EURUSD, USDJPY) and global news from 3 major sources.  Trade with a registered and regulated company in business for 80 years. Smart money trades here. Get your FREE Trial Today!

Euroshares higher midday as M&A talk continues in telecoms sector

LONDON - Europe's leading exchanges were rising midday on merger and acquisition talk in the telecom sector, with automotive stocks lending further support. At 12.00 pm, the STOXX 50 was up 28.50 points at 3925.85, while the STOXX 600 gained 2.50 points to 395.85.
   
Shares in Deutsche Telekom rose on the back of a report that it may acquire France Telecom's Dutch mobile assets and ahead of its AGM, dealers said.

Last week, the German press reported that Vodafone was set to buy Ya.com for about 400 mln eur. The report, in Spanish newspaper Expansion, sent stocks in the telecommunications sector sharply higher, but sources close to Deutsche Telekom said it was simply a rumour and added that the German large cap was not planning to swap assets with France Telecom. 
  
A trader at SNS Securities said the deal would reduce the number of mobile operators in the Dutch telecoms market to three from four. "Clearly that would be good news for all mobile players in the market, including KPN," he added.
   
Vodafone added 3.8 pct, Deutsche Telekom gained 2.7 pct and the Netherlands' KPN was 2.63 pct higher midday. 
   
Meanwhile, Telenor was pushed on further after Goldman Sachs raised its earnings forecasts on the group following an upgrade of the telecoms group's full-year guidance. Telenor gained 1.9 pct on last check.    
   
In the automotive sector, a bullish note by Morgan Stanley on DaimlerChrysler pushed several stocks higher, as the broker reiterated its 'overweight' rating, saying the company has the potential to hit 100 eur if it refocuses on its core operations and improves its margins.
   
The broker currently holds a 75 eur price target on the stock. The shares gained 2.97 pct midday with Volkswagen also benefiting from the momentum, adding 2.49 pct.
   
Meanwhile, shares in Peugeot gained in morning trade, but fell again midday as the company failed to hand out a 2007 profit guidance, dealers said. At last check, the stock lost 1.26 pct.
   
On the transport front, AP Moller Maersk were upgraded to 'overweight' from 'underweight' at Morgan Stanley, which upped its target for the Danish shipping company by 63 pct to 74,000 dkr.
   
In a note to clients, the US broker said the container cycle has turned earlier than expected and it anticipates 2 pct annual growth in freight rates in 2007 and 2008.The share gained 4.8 pct midday.
   
Deutsche Lufthansa was among leading blue chips on the DAX throughout the day, adding 2.00 pct at last check, after HVB upgraded it to 'buy', and with Unicredito raising the target to 24.80 eur, dealers said.
   
HVB said Lufthansa is expected to expand its passenger capacity in the course of this year while its cost savings programme could also lead to higher profits. The German broker upgraded its stance on the stock to 'buy' from 'hold' and raised its target to 24.80 eur from 22.25 eur.
   
Elsewhere, shares in STMicro retreated after Cazenove downgraded the hardware technology company to 'underperform' from 'in-line,' saying its decision to merge its flash memory business with Intel's leaves few positive catalysts for the stock going forward.
   
Yesterday Intel Corp and STMicroelectronics announced an agreement to merge their flash-memory activities into a new company with annual sales of 3.6 bln usd. Under the agreement, Intel will take a 45.1 pct stake in the new company and a 432 mln usd cash payment, while STMicro will acquire 48.6 pct of the new business and receive a 468 mln usd cash payment.

Inflation picked up in September in Europe as both areas show fragile economic growth. Just as in the U.S., rising energy prices are to blame. Read free, daily market reports available only at CMS Forex and open your free demo trading account today. Click here

Asian shares close higher, China stocks rise on yuan strength

HONG KONG - Shares across the Asia-Pacific region closed higher, with China shares continuing to rise on the strength of the yuan.

Tokyo shares ended firmer helped by gains in banks after they projected that earnings and dividends will rise this fiscal year. A weaker yen also buoyed investor sentiment. The Nikkei 225 Stock Average closed up 25.07 points or 0.14 pct at 17,705.12, well off the day's high of 17,802.71. The TOPIX index of all first-section issues edged up 8.54 points or 0.49 pct to 1,740.08, off a high of 1,748.45.
   
"Japanese stocks have reversed their relative weakness since yesterday against the background of upbeat earnings outlooks for the banking sector, as well as the firmer tone of emerging markets in Asia," said Hiroichi Nishi, general manager of equities information at Nikko Cordial Securities.
       
Australian shares ended higher as investors sought bargains following yesterday's sell-off, with particular buying seen in banking stocks. The resources sector showed resilience despite metal prices falling in overnight trade. The S&P/ASX 200 closed up 16.3 points or 0.26 pct at 6,355.1, advancing towards Monday's record finish of 6,369.0.
   
Hong Kong shares were flat in afternoon trade as investors remained reluctant to take aggressive positions amid a lack of strong leads to counter caution ahead of the conclusion of the US-China economic dialogue today. Investors also kept to the sidelines to avoid uncertainties ahead of a public holiday tomorrow. At 3.20 pm the Hang Seng Index was down by 12.79 points or 0.06 pct at 20,831.13.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on follow-through buying and continued strength in the yuan with property and auto stocks gaining ground. The Shanghai A-share Index was up 69.07 points or 1.60 pct to 4,375.18 and the Shenzhen A-share Index was up 27.22 points or 2.17 pct at 1,279.26, a record.
   
Seoul shares closed higher, with foreign investors actively building positions in financial stocks, pushing the main index to a record for a third consecutive session. The foreign interest effectively offset a mixed performance on Wall Street and caution ahead of a public holiday here tomorrow. Builders and steelmakers registered the strongest gains.
   
The KOSPI index closed up 3.71 points or 0.20 pct at a record 1,646.59. The low for the day was 1,638.36 and the high was 1,651.61. Financial markets will be closed for a public holiday tomorrow.

Get a FREE $50,000 Forex demo.  Free streaming quotes, guaranteed executions, 1% margins, and zero commissions! Click Here.

Gold steady after dollar weakens, still range-bound

LONDON - Gold steadied after the dollar weakened slightly against the euro, but the precious metal was still range-bound.
   
At 1.48 pm, spot gold was largely flat at 662.25 usd per ounce against 663 usd in late New York trades yesterday. Earlier gold dipped to as low as 657.00 usd. The weaker dollar increased gold's appeal as as an alternative asset.
   
Earlier in the session gold was under pressure after the dollar rose following hawkish comments from a US Federal Reserve official caused market players to scale back their expectations for an interest rate cut over the coming months. The dollar has now corrected.
   
"The market is still seen range-bound between 655 usd and 665 usd," said Alex Heath, head of the metals team at RBC Capital Markets.
   
Steady oil prices supported gold as some investors hedged against inflationary pressures with Brent crude at around 70 usd -- 40 pct higher than mid January prices. "Oil, currency and base metals (are) the key price drivers," said Heath.
   
Base metals are capping gold's gains currently, with copper -- the leader of the metals board -- 9 pct lower than prices at the start of this month. "The outlook for increased mine output is also weighing on base metals and hence gold prices," added James Steel analyst at HSBC.
   
Copper is a good barometer for base metals and sentiment for overall commodity prices. "In the near term (gold) prices are likely to consolidate at lower levels before the next push up," said Suki Cooper, analyst at Barclays Capital.
   
Barclays predicts gold will average 710 usd in the third quarter. Support in the near term will be found at 655, while resistance is at 670 usd, added Cooper.
   
HSBC predicts gold will average 680 usd this year, while Goldman Sachs reckons the precious metal will fetch 750 usd.
   
In other precious metals, silver was up at 13.04 usd per ounce from 12.93 usd, platinum was up at 1,292 usd from 1,288 and palladium slipped to 371 usd per ounce from 376 usd.

Increase the odds for Forex Trading success with this free online course. Learn to build a solid Forex Trading foundation and discover proven strategies for continued success.  Access this wealth of knowledge here absolutely free.

Online Trading Academy - Learn more to earn more.