US & World Daily Markets Financial Briefing 24-10-2006

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Stocks fall in early trading

NEW YORK - Wall Street retreated Tuesday as investors awaited the results of this week's Federal Reserve meeting and regrouped after Monday's record-setting session.
   
Some pullback was to be expected after the Dow Jones industrials surged 114 points to a new record high close; the broader market indexes also posted substantial gains.
   
The Federal Open Market Committee was beginning a two-day meeting, and while many investors expected the central bank's policymakers to leave interest rates unchanged for the third straight meeting, there was still much concern on the Street about the assessment of the economy to be issued Wednesday afternoon.
   
In the meantime, Wall Street was also keeping a close eye on third-quarter earnings reports. Telecom operator BellSouth Corp.'s results were well ahead of analyst expectations. Lockheed Martin Corp., the world's largest defense contractor, also surpassed expectations.
   
In the first hour of trading, the Dow Jones industrial average was down 12.72, or 0.10 percent, at 12,104.19.
   
Broader stock indicators were also lower. The Standard & Poor's 500 index was down 4.29, or 0.31 percent, at 1,372.73, and the Nasdaq composite index was down 6.93, or 0.29 percent, at 2,348.63.

Stocks in focus
   
Texas Instruments shares weakened 1.4 percent in Germany after reporting slower-than-forecast 13 percent sales growth and warning that fourth-quarter semiconductor growth will be below the seasonal average.
   
Shares of STMicroelectronics, a TI peer that puts its own quarterly statement out after Tuesday's close, dropped 1.9 percent in Paris.
   
Outside the U.S., there was an influx of news in the commodity sector. Oil giant BP reported a 4 percent profit decline, oil and aluminum producer Norsk Hydro reported a 15 percent profit rise and metals giant BHP Billiton unveiled a 19 percent decline in copper output.
   
Another metals producer, Anglo American, slipped after naming Alcan's Cynthia Carroll as its next chief executive.
   
Cambrex agreed to sell its bioproducts and biopharma units to Swiss pharmaceutical ingredient maker Lonza for $460 million in cash. Cambrex will use the estimated $450 million in proceeds to repay outstanding debt and, along with an additional $125 million to $150 million from new lines of credit, pay a special dividend between $13.50 and $14.50 a share.

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Dollar little changed; euro gets support from data

LONDON - The dollar stayed little changed ahead of the US rate verdict tomorrow where US rate setters are predicted to signal continued caution over the path of inflation.
    
No change in the benchmark rate is expected tomorrow. The Fed has kept the benchmark rate unchanged at 5.25 pct at its past two meetings but the no change verdicts come after 17 consecutive quarter point hikes.
   
Elsewhere, the euro found some buying support after news that euro zone industrial orders rose by 3.7 pct in August from July and by 14.3 pct from a year earlier.
         
The pound, meanwhile, was dented after an unexpectedly weak snapshot of the manufacturing sector from a key UK business lobby.
   
The Confederation of British Industry reported a dramatic slump in demand, both domestic and overseas alongside a drop in levels of optimism. Markets had been holding out for modest improvements.
   
"This survey suggests that industry may be starting to feel the effects of the high sterling exchange rate and the US economic slowdown. And with these effects likely to intensify, there is a danger that the recovery in the industrial sector seen in recent quarters could fade away quite quickly," said Paul Ashworth at Capital Economics.
   
Robert Howard at Thomson Ifr Markets warned that the euro, in particular, may well gain further ground if some key levels give.
   
"Some stops reportedly reside above 0.6720 stg. The triggering of these orders could further inflate the cross towards 0.6730-35 stg," he said.
   
Despite the weak data, however, the Bank of England is widely predicted to hike its benchmark repo rate to 5.00 pct from 4.75 in November in response to elevated inflation levels.

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The European Markets at 11.30 GMT

London - Leading shares traded flat at midday, as expectations of a weak open on Wall Street after yesterday's record high dampened earlier upbeat sentiment following solid results from BP and Reckitt Benckiser. At 12.26 pm, the FTSE 100 index was 0.2 points lighter at 6,165.9, off a late morning high of 6,180.4, while the broader indices traded mixed.

Frankfurt - German shares were lower midday in very quiet trade with investors largely sidelined ahead of tomorrow's US FOMC rate decision and a busy few days on the corporate earnings front.
   
At 1 pm, the DAX 30 was off 3.5 points, or 0.11 pct, at 6,239.39,  while the MDAX was up 19.11, or 0.06 pct, at 8,707.73. The TECDAX was also higher, up 2.36 points, or 0.35 pct at 684.25. The DAX future was down 10 points at 6,272.5.

Paris - Share prices were lower late morning as investors pocketed gains after the CAC-40 closed at a five-year high yesterday and as US futures pointed lower ahead of tomorrow's rate decision by the Fed. At 11.20 am the CAC-40 was down 13.20 or 0.24 pct at 5,398.61.

Milan - Share prices were flat at midday in cautious trade ahead of the start today of a two-day US FOMC meeting, with BPM and Finmeccanica outperforming. At 11.42 am, the Mibtel was up 0.13 pct at 30,223 points and the S&P/Mib gained 0.11 pct to 39,424.

Madrid  - Madrid shares were lower in light midday profit taking and amid slightly weaker US futures as the market gears up for more third-quarter earnings reports on both sides of the Atlantic. At 12.58 pm, the IBEX-35 index lost 52.2 points to 13,568.5, after trading in a range of 13,547-13,635 on turnover of 1.1 bln eur.

Stockholm - Shares were flat in midday trade as Volvo edged higher after chief executive Leif Johansson said the company expects the North American truck market to pick up in the second half of next year following an expected sharp fall in the first half. At 12.25 pm, the OMX Stockholm index was up 0.08 pct at 352.90 and the OMX Stockholm 30 down 0.15 pct at 1,097.35.

Copenhagen - Share prices were slightly lower in late midmorning trade, tracking falls elsewhere in Europe, with Jyske Bank falling after its nine-months earnings failed to live up to market expectations. At 11.40 am, the OMXC20 index was 0.97 points lower at 420.46 and the OMXCB Benchmark index was down 0.10 points at 397.96.

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Asian shares close mixed on profit taking, wiping out gains spurred by Wall St

HONG KONG - Shares across the Asia-Pacific region closed mixed as profit takers moved into markets and investors were cautious ahead of this week's meeting of the US Federal Open Markets Committee (FOMC).
   
Tokyo shares closed mixed as last-minute profit-taking wiped out early gains spurred by another record-breaking performance by the Dow Jones Industrial Average overnight. Investors opted for caution ahead of the FOMC meeting and the release of more earnings by Japanese companies.
   
The downturn in crude oil prices also didn't help as it sparked selling in energy-related stocks such as oil refiners and non-ferrous metals firms. The Nikkei 225 Stock Average closed down 8.35 points or 0.05 pct at 16,780.47. It traded between 16,759.98 and 16,901.53.
   
The broader TOPIX index of all first-section issues was up 3.14 points or 0.19 pct at 1,662.53, after moving between 1,659.55 and 1,672.02.
   
Australian shares ended lower as investors took further profits, with sentiment cautious ahead of consumer inflation data due tomorrow and the FOMC meeting.
   
Banking stocks were mixed as a result of the inflation concerns, while resource and energy stocks largely fell following the overnight drop in metal and oil prices. The S&P/ASX 200 lost 16.4 points or 0.31 pct to close at 5,317.1, above the day's low of 5,315.9 and below the high of 5,357.5.
   
Hong Kong shares were firmer in afternoon trade following Wall Street's sharp gains overnight. At 3.27 pm the Hang Seng Index was up 68.97 points or 0.38 pct at 18,158.82.
   
In mainland China, A-shares in Shanghai and Shenzhen closed sharply higher on fresh fund inflows with heavyweight blue chips and banks snapped up in particular.
   
The Shanghai A-share Index gained 48.19 points or 2.61 pct at 1,896.32 and the Shenzhen A-share Index was up 9.70 points or 2.13 pct at 463.84.
   
Seoul shares closed slightly higher but off their intraday high as institutional investors cut their positions and as many investors await this week's FOMC meeting. The market rose through 1,370 points at one stage in line with Wall Street's overnight rally, but shed most of early gains toward the close, they noted.

The KOSPI index closed up 1.55 points or 0.11 pct at 1,366.50, after moving between 1,364.07 and 1,374.43.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Gold steadies but analysts say outlook remains shaky

LONDON - Gold steadied, after having traded down earlier in the session, as the precious metal found support from a slight recovery in oil prices, but analysts warned the outlook for bullion remains shaky.
   
Gold has been strongly correlated with oil recently and, with oil having dropped some 25 pct since mid-July, the metal is losing its appeal as a hedge against oil-induced inflation.
   
At 1.26 pm, spot gold, which earlier hit a low of 576.75 usd, was quoted at 580.05 usd, up slightly from the 579.60 usd level touched when the COMEX market closed in New York yesterday.
   
Other precious metals were mixed. Spot silver was up at 11.66 usd an ounce against 11.60 usd, platinum fell to 1,063.00 usd against 1,066.00 usd, while palladium was up at 317.50 usd against 316.00 usd.
      
Oil prices have steadied slightly after trading lower earlier in the session as traders waited to see if OPEC members will follow Saudi Arabia's lead and make good on their pledges to cut production.
   
Today, Crude-oil futures slipped 34 cents to $58.47 a barrel.

Copper prices build Mueller's 3Q profit

MEMPHIS, Tenn. - Mueller Industries Inc., maker of copper and aluminum products, said Tuesday third-quarter profit more than doubled after the company boosted prices on copper products because of the metal's high market price.
   
Earnings ballooned to $51.6 million, or $1.38 per share, from $24.3 million, or 66 cents per share, in the year-earlier period.
   
Sales jumped 47 percent to $636 million from $434.1 million at the same time last year, largely due to higher prices.
   
Copper costs surged in the quarter: The metal averaged $3.54 per pound in the recent period compared with $1.70 per pound a year ago. Mueller said that it generally passes higher raw material costs on to its customers by raising its selling prices.
   
The company said it also recorded more state income tax benefits during the quarter, which amounted to $10.4 million or 28 cents per share. These items lowered the overall effective tax rate to 11.3 percent for the quarter.
   
Mueller ended the quarter with $170.5 million in cash. Mueller shares rose 42 cents to $37.40 in premarket trading.

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