US & World Daily Markets Financial Briefing 24-04-2007

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Stocks advance on strong earnings

NEW YORK - Stocks rose slightly in early trading Tuesday after another batch of companies posted stronger-than-expected financial results for the first quarter.
   
The advance had a cautious tone, however, especially after a Standard & Poor's report said U.S. home prices fell 1.5 percent in February from a year ago -- the steepest decline since October 1993. The cooling housing market has been a concern for many investors, who will also be looking at data on existing homes sales and consumer confidence data Tuesday.
   
Still, Wall Street appeared pleased about robust earnings from U.S. military contractor Lockheed Martin, and Dow Jones industrials AT&T Inc. and Dupont Co. International Business Machines Corp. moved higher after it increased its regular quarterly cash dividend.
   
Cell phone chip maker Texas Instruments posted a first-quarter drop in profit after the market closed Monday, but the results were better than analysts forecast. The company's data, as well as its statement that chip demand was on the rebound, assauged investors who were worried about the sector after weaker-than-anticipated earnings from several other technology companies.
   
In the first hour of trading, the Dow Jones industrial average rose 19.99, or 0.15 percent, to 12,939.39.
   
Broader stock indicators were also higher. The Standard & Poor's 500 index was up 0.21, or 0.01 percent, at 1,481.14, and the Nasdaq composite index rose 4.25, or 0.17 percent, to 2,527.92.

Also Tuesday, the Conference Board releases its April index of consumer confidence. Economists expect the confidence index to slip to 105.7 from 107.2 in March.
   
In corporate news, Toyota Motor Corp.'s quarterly global auto sales exceeded General Motors Corp. for the first time-- making the Japanese automaker the world's top auto seller.
   
Oil prices held at high levels after a sharp spike a day earlier. A barrel of light sweet crude rose 6 cents to $65.94 a barrel in electronic premarket trading on the New York Mercantile Exchange.
   
Overseas, Britain's FTSE 100 was down 0.68 percent, Germany's DAX index was down 0.78 percent, and France's CAC-40 was down 0.46 percent.

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Dollar a touch weaker ahead of US data

London - The dollar was slightly weaker ahead of existing home sales and consumer confidence data later this afternoon.
   
Existing home sales are seen at a seasonally adjusted annual rate of 6.495 mln units in March, down from the 6.690 mln unit pace in February.
   
"Today marks the start of what should be a set of relatively soft data from the US over the next few days," said Gavin Friend at Commerzbank. "Having rallied in the past few days the market now sees the dollar on a downward trend," he added.
   
Meanwhile, the euro was slightly stronger after euro zone industrial orders data. While the headline figure showed a 0.7 pct fall in February from January, analysts said this was largely due to a fall in volatile transport orders. Excluding the transport sector, orders were up 0.5 pct month-on-month.
      
Elsewhere the Australian dollar was firmer, recovering some its overnight losses after weaker-than expected inflation data which unwound expectations of an interest rate rise in May.
   
Australian first quarter CPI rose just 0.1 pct quarter-on-quarter, compared to expectations for a 0.6 pct rise, with the annual rate falling to 2.4 pct from 3.3 pct. The Reserve Bank of Australia had been widely expected to raise interest rates next month but with inflation now back below its upper end target of 3 pct, it seems increasingly unlikely.
   
"In conjunction with yesterday's unexpectedly benign producer prices report, today's equally soft CPI data - which revealed the lowest annual rate of increase in two years - have cast serious doubt on the need for a further policy adjustment," said Bank of New York currency strategist Neil Mellor.
   
"Talk is now circulating that Australian interest rates may be on hold for the foreseeable future given that favourable base effects (due to falling energy costs) could even see inflation fall below 2.0 pct in the second half of the year," he added.
   
The data gave the positive boost to the yen as it caused carry trades -- when investors borrow in low-yielding currencies in order to invest in higher-yielding assets such as the Australian dollar -- to unwind slightly, although it has since lost some of its earlier gains.
   
The pound was back above 2 usd today even as the Monetary Policy Committee gave no clues about the path of future interest rates. MPC members simply reiterated their commitment to bring inflation back down, instead.

The Canadian dollar was lower after the Bank of Canada left interest rates unchanged at 4.25 pct, saying it sees inflation risks as roughly balanced.
   
In a statement the BoC said while there is a risk that the recent high level of inflation could persist longer than projected and that there is also the chance of a more pronounced slowdown in the US economy - the country's key trading partner.
   
"The current level of the target for the overnight rate is judged, at this time, to be consistent with achieving the inflation target over the medium term," the BoC said.
  
At 2:14 pm the US dollar was trading at 1.2226 cad, having been at 1.1198 shortly before the BoC announced its decision.

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Top Stories in Europe at 12.05 GMT

Amsterdam - ABN Amro Holding NV activist shareholder The Children's Investment Fund (TCI) has demanded the Dutch bank disclose the "limited circumstances" under which the sale of its US unit LaSalle Bank can be terminated. TCI said it was concerned that the pre-agreed sale of LaSalle unfairly hinders the Royal Bank of Scotland Group consortium.

Akzo Nobel NV announced a 1.6 bln eur share buyback scheme as it reported better-than-expected first quarter results and said it is well positioned for profitable growth. The Dutch chemicals and coatings group said sales excluding its divested unit Organon BioSciences rose 1 pct to 2.501 bln eur from 2.472 bln in the same period last year. Rabo Securities had forecast sales of 2.443 bln eur.

Milan - Finmeccanica SpA, the Italian defence and aerospace group, may sell 60 pct of its Ansaldo Energia unit in an initial public offering next year, the daily newspaper MF said without giving a source. The newspaper said Ansaldo Energia, which manufactures industrial boilers and turbines, is worth about 1 bln eur.

Stockholm - SKF AB said its first quarter pretax profit rose to 1.825 bln skr from the 1.599 bln posted in the same period last year, on strong volume growth and improving margins. Market expectations were for a pretax profit of 1.700 bln skr, according to a survey of analysts by SME Direkt.

TeliaSonera AB said first-quarter EBITDA excluding non-recurring items fell to 7.583 bln skr compared with 7.816 bln last year, hit by lower fixed voice sales and increased costs in a bid for future growth. Market expectations were for an underlying EBITDA of 7.763 bln skr, according to SME Direkt.

London - US fund manager Brandes Investment Partners exceeded the 10 pct shareholding declaration threshold in Alcatel-Lucent on April 19, according to a notice published by French markets regulator AMF. The company now holds 10 pct of Alcatel-Lucent's capital and 9.86 pct of  voting rights, the AMF said.

Kohlberg Kravis Roberts (KKR), the US private equity group, and Stefano Pessina, Alliance Boots PLC's executive deputy chairman, have tightened their grip on the international health and beauty group by raising their formal offer by 4.5 pct and revealing they now own over 25 pct of the group's shares. The two developments may have delivered a knockout blow to a rival consortium led by financier Guy Hands' Terra Firma private equity group.

Paris - Danone said first quarter sales totalled 3.673 bln eur, up 3.9 pct from 3.534 bln eur a year earlier, and up 10.1 pct on a like-for-like basis. The group said its fresh dairy business continued to be the main growth driver, with sales rising 12.0 pct year-on-year on a like-for-like basis.

Grupo Rayet owns about 5 pct of Eiffage, while Spanish-controlled property group Gecina has amassed a 1.49 pct stake via Geciter, Hotel d'Albe and Capucines, the French business daily Les Echos reported without naming sources.
 
Yesterday, Eiffage's board unanimously rejected the all-share takeover offer tabled by Sacyr Vallehermoso SA, and said it is to launch legal action over "irregularities resulting from concerted action" by Spanish shareholders.

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Asian shares close mixed as domestic news offsets fall on Wall St

HONG KONG - Shares across the Asia-Pacific region closed mixed, with local factors buoying markets against a fall on Wall Street overnight and Seoul shares reaching a record high.
   
Tokyo shares ended flat after a cautious session, with investors waiting for the release of corporate financial results and a slew of economic data later this week. The Nikkei 225 Stock Average closed 3.60 points or 0.02 pct lower at 17,451.77, off a low of 17,305.78 and a high of 17,500.34. The TOPIX index of all first-section issues finished 0.53 point or 0.03 pct higher at 1,706.16, after trading between 1,691.79 and 1,711.05.
   
Fumiyuki Nakanishi, chief strategist at SMBC Friend Securities, said: "Basically, domestic investors were sitting on the sidelines as leading corporations line up their earnings results, while it seemed that foreign investors -- which means institutional investors -- reacted to shares in companies that have already released their earnings reports."
      
Australian shares closed lower after a choppy session which saw the market move in and out of positive territory. The release of lower-than-expected inflation data for the first quarter to March provided some forward momentum as investors decided that the Reserve Bank of Australia is not likely to hike interest rates anytime soon.
   
But, buying then evaporated as investors became more reluctant to take new positions ahead of markets being closed tomorrow for ANZAC day, which commemorates the nation's war dead.
   
The S&P/ASX 200 closed down 21.0 points or 0.34 pct at 6,188.2. The benchmark index closed off a high of 6,232.5 and a low of 6,177.3.
   
Hong Kong shares were flat in afternoon trade as a rebound in China Mobile offset selling driven by Wall Street's losses overnight. At 3.20 pm the Hang Seng Index had lost one point to 20,555,57.
   
In mainland China, A-shares in Shanghai and Shenzhen closed slightly higher with power generators and steel makers remaining in favor. About 60 companies closed up their daily limits of 10 pct but dealers noted that the market's upside was capped by profit taking. The Shanghai A-share Index was up 10.44 points or 0.27 pct at 3,910.39 and the Shenzhen A-share Index was up 4.22 points or 0.39 pct at 1,097.52, a new record.
   
Seoul shares closed higher to surpass yesterday's record, with foreign investors buying heavily into steel makers, shipbuilders, and shipping stocks. Initial sentiment was undercut by Wall Street's overnight pull back and a rise in oil prices but the market managed to rebound on rotational play by the foreign investors.
   
The KOSPI index closed up 12.36 points or 0.8 pct at a record of 1,556.71, rising for a third straight day. The benchmark index traded between 1,557.65 and 1,538.11.

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Zinc hits fresh 3 month high, nickel climbs briefly above 50,000 usd
 
LONDON - Copper continued higher, zinc touched a fresh three month high, while nickel traded briefly above the 50,000 usd a tonne level on worries over possible supply disruptions, dwindling stocks and strong demand.
   
Peruvian mine workers are reportedly threatening an indefinite national strike to protest against the high level of contract workers employed at mines. Peru is a major producer of copper, zinc, gold and other metals.
   
According to Numis analyst John Meyer, a widespread strike in Peru could create significant shortages of metal concentrates and could cause panic buying of metals.
   
"A one month strike in Peru would exactly halve LME copper inventories," noted Meyer. He added the possible labour unrest would have a significant impact not only on copper balances, but also on zinc and to some degree lead.
   
At 2.37 pm, LME copper for 3 month delivery was up at 7,985 usd a tonne against 7,958 usd -- near last week's 7 month high of 8,100 usd, amid a fall of 2,025 tonnes in LME copper inventories.
   
LME inventories, which now total 166,125 tonnes, have declined some 25 pct since early February, in part because Chinese imports of the metal have surged this year.
   
China reported yesterday imports of refined copper in March registered their highest ever level, rising above 200,000 tonnes. The news offset reports a strike at Indonesia's giant Grasberg mine had ended.
   
Meanwhile, gains in copper and other metals were capped by news output of key commodities at BHP Billiton, including iron ore, copper and nickel, reached record levels in the nine months to March.
   
The market was also absorbing news Xstrata has lifted force majeure on copper shipments from its Bajo de Alumbrera mine in Argentina, while BHP Billiton is planning to restart its Pinto Valley copper mine later this year.
   
Zinc was at 3,790 usd a tonne against 3,680 usd, after earlier touching a fresh three month high of 3,845 usd. Zinc inventories fell by another 475 tonnes on the LME today.
   
Meir said yesterday's Chinese data was constructive for zinc, as it showed a decrease in refined copper exports from China to 33,000 tonnes in March from 47,000 tonnes in February. This "could be the start of a downward trajectory in exports", said Meir.
   
Nickel was up at 49,700 usd a tonne against 48,825 usd at the close yesterday, after earlier hitting a day high of 50,200 usd a tonne amid still critically low LME inventories.
   
Although LME nickel inventories rose by 240 tonnes today, overall stocks at 4,314 tonnes are still equivalent to less than a day's worth of global consumption.
       
Aluminium was up at 2,862 usd a tonne against against 2,842 usd.
   
David Thurtell, an analyst at BNP Paribas, said there are reports that China is reducing tax rebates on exports such as aluminium in a bid to eliminate the ince ntive to export the metal. "That's the way China's heading, it has to, because production of aluminium has been out of control and last week the president gave a commitment to wind back investment in polluting industries" like aluminium, he said.
   
Tin climbed to 13,800 usd against 13,683 usd, while lead was down at 1,955 usd against 1,981 usd.

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