US & World Daily Markets Financial Briefing 25-01-2007

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Stocks open narrowly mixed

NEW YORK - Stocks were narrowly mixed in early trading Thursday, with technology shares rising modestly as profit news reassured investors nervous about the sector's prospects.

Amid a quiet opening Thursday, investors reviewed quarterly results from eBay Inc., Ford Motor Co., AT&T Inc. and examined the state of the housing sector. The National Association of Realtors said sales of U.S. existing homes fell 0.8 percent in December to a seasonally adjusted annual rate of 6.22m. Investors have wondered for months whether the housing sector and the broader economy could share a similar fate; that is, if a pullback in the housing market would drag down the rest of the economy.

In the first hour of trading, the Dow Jones industrial average was down 12.58, or 0.10 percent, at 12,609.19.

Broader stock indicators were mixed. The Standard & Poor's 500 index was down 1.50, or 0.10 percent, at 1,438.63 and the Nasdaq composite index was up 2.00, or 0.08 percent, at 2,468.28.

Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.83 percent from 4.81 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.

Beyond the deluge of earnings reports, investors again looked to economic data to help indicate where the economy might be headed. The Labor Department reported that the number of Americans seeking unemployment benefits last week surged by the largest amount in 16 months, reversing two weeks of large declines.

In corporate news, eBay jumped $3.36, or 11.2 percent, to $33.36 after the online auction house posted a 24 percent increase in profits as sales rose 29 percent.

Ford Motor Co. fell 10 cents to $8.11. The automaker reported its largest annual loss as sales fell and the company struggled with enormous restructuring costs.

AT&T Inc. rose 85 cents, or 2.3 percent, to $37.48 after company's fourth-quarter profit rose 17 percent amid growth in wireless subscribers and in its regional wireline businesses.

The Russell 2000 index of smaller companies was down 2.16, or 0.27 percent at 791.87.

Overseas, Japan's Nikkei stock average closed down 0.28 percent. In afternoon trading, Britain's FTSE 100 was down 0.18 percent, Germany's DAX index was down 0.04 percent, and France's CAC-40 was down 0.25 percent.

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Euro modestly lower on the day after softer than expected German data

LONDON - The euro remained slightly lower on the day after a couple of surveys into Germany, the euro zone's single largest economy, deteriorated in the wake of higher VAT payments in the country.

The Ifo research institute revealed that its business climate index for Germany slipped to 107.9 in January from 108.7 in December. Economists polled by AFX News had forecast the index to increase slightly to 108.9.

Meanwhile, the business assessment index, which measures current conditions, fell to 112.8 in January from 115.3 in December, but the future-looking business expectations index climbed to 103.2 from 102.5.  

Elsewhere, the GfK consumer confidence index fell to 8.5 to 4.8.  Analysts cautioned against too pessimistic an interpretation of the surveys, and noted that the dips probably reflect the knock-on effects to business from the 3.0 pct VAT hike on Jan 1.

They added that the surveys will do little to alter the prevailing view at the European Central Bank that the euro zone economy can withstand higher borrowing costs.

The ECB has been gradually raising its key refi rate to the current 3.50 pct and is widely expected to continue lifting borrowing costs over the coming months, at least to 4.0 pct.

Elsewhere, currency watchers will be awaiting this afternoon's US existing home sales data for December to see if the residential property market is struggling.

The Fed has kept its benchmark rate unchanged at 5.25 pct for four consecutive meetings after raising it 17 times in a row and is not expected to change it any time soon.

Meanwhile, the pound steadied after yesterday's sharp declines in the wake of the revelation that the Bank of England's rate-setting body only just voted for the surprise interest rate hike earlier this month.

The 5-4 vote in favour of the rate hike was unexpected and immediately reined in market expectations that the BoE will follow up January's hike with another one next month.  

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LONDON - AFX European summary - midday

LONDON - Leading shares remained firmer at midday, but off highs as weakness in the utilities sector weighed following a downbeat broker note, and with Wall Street unlikely to offer more momentum as the Dow is seen opening flat, dealers said.

At 12.11 pm, the FTSE 100 index was 7.6 points ahead at 6,322.4, having hit highs of 6,335.1 midmorning, while the broader indices were also positive.

FRANKFURT - German shares were slightly up in midday trade, led by Siemens which rallied after releasing strong Q1 figures and following overnight gains on Wall Street, brokers said.

At 12.02 pm, the DAX 30 index was up 8.41 points or 0.12 pct at 6,756.78, after moving between 6,734.05 and 6,771.42 in this session so far.

PARIS - Paris blue chips were up slightly at midday led by strong gains for Pernod Ricard after better than expected fourth-quarter sales which, together with yesterday's rise on Wall Street, outweighed losses for several other stocks.

At 12.23 pm, the CAC-40 was up 3.96 points or 0.07 pct at 5,642.04.

AMSTERDAM - Share prices were slightly higher in early afternoon trade, recovering from its mid-morning dip into the red on the back of an unexpected fall in the German Ifo business survey indicator, dealers said.

At 1.13 pm ,the AEX index was up 0.52 pct at 507.07 after falling to an intraday low of 505.42. 

MILAN -  Share prices were slightly higher at midday with focus on STMicroelectroncis after better than expected results from Nokia and the market snubbing Fiat after results that were broadly in line with analysts' forecasts, dealers said.

At 12.45 pm the Mibtel index was up 0.12 pct at 32,703 while the S&P/Mib rose 0.14 pct at 42,625 on volumes of some 2.83 bln eur.

MADRID - Share prices were higher midday, tracking other European markets and with investor attention focused on the Endesa bidding war after Acciona said it believes E. ON's offer significantly underestimates the value of the utility, dealers said.

At 12.20 pm, the IBEX-35 index gained 52.1 points to 14,590.7, on volume of about 2.7 bln eur.

ZURICH - Share prices were slightly higher in quiet afternoon trade with fresh buying interest for Roche and banking stocks offsetting a weakness in Nestle, dealers said.

At 1.20 pm, the Swiss Market Index was 25.60 points higher at 9,178.70, and the Swiss Performance Index up 20.16 points at 7,260.19. 

STOCKHOLM - Shares remained in slightly positive territory in midday trade, with Hennes & Mauritz and Nokia holding on to this morning's sharp gains sparked by their better-than-expected fourth quarter results, dealers said.

At 12.25 pm, the OMX Stockholm index was up 0.76 pct at 388.41, and the OMX Stockholm 30 was up 1.11 pct at 1,190.98.

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Asian shares close mixed, Tokyo hits a six-year high

HONG KONG - Shares across the Asia-Pacific region closed mixed, with Tokyo ending lower after hitting a six-year high in morning trade, dealers said.

Tokyo shares closed down after investors locked in profits on gains that had taken the benchmark index to its highest level in more than six years, boosted by Wall Street's performance overnight and high expectations about corporate earnings in Japan, dealers said.

The blue-chip Nikkei 225 Stock Average closed 49.10 points or 0.28 pct lower at 17,458.30, off a high of 17,617.64, its highest intra-day level since July 2000.

The broader TOPIX index of all first-section issues ended the session down 9.21 points or 0.53 pct at 1,729.40, off a high of 1,749.18.

Yutaka Miura, senior strategist at Shinko Securities, said some investors moved to sell when the Nikkei went above the 17,500-point level.

But Miura said the market had been supported by growing expectations that corporations will increase their forecasts of earnings for the fiscal year ending March.

Australian shares closed at record highs again as investors were buoyed by the overnight rise in US shares and a further gain in base metal prices in London trading, dealers said.

The market's rise was reduced by late profit taking ahead of a shortened trading week for local investors due to the Australia Day holiday tomorrow.

The S&P/ASX 200 added 1.1 points or just 0.02 pct to a record close of 5,769.9, beating yesterday's record closing level of 5,768.8.

The key index closed off a new intra-day record high of 5,802.1 and above the low of 5,769.9.

Over the trading week the index rose 76.8 points or 1.7 pct after four consecutive record closes.

The broader All Ordinaries index gained 4.2 points to a fresh record close of 5,753.3, also beating yesterday's previous record close of 5,749.1 and setting a fresh intra-day record of 5,782.9.

Hong Kong shares were weaker in afternoon trade on profit-taking in China Mobile and blue chips after recent strong gains, dealers said.

They said investors turned cautious on concerns that many stocks have become expensive following the market's run-up to near the 21,000-points level.

At 3.00 pm the Hang Seng Index had fallen 90.40 points or 0.43 pct to 20,730.65.

In mainland China, A-shares in Shanghai and Shenzhen closed sharply lower on concerns that the central bank may announce further tightening measures to curb excessive liquidity coming into the stockmarket, dealers said.

The Shanghai A-share Index fell 123.49 points or 3.95 pct to 3,001.90 and the Shenzhen A-share Index was down 31.70 points or 4.33 pct at 700.85.

Seoul shares closed little changed, giving back all their early gains, with retail investors unloading shares on uncertainty over the fundamental strength of the market, dealers said.

Following a firmer close on Wall Street, the market got off to a firm start on further interest by foreign investors, but interest soon fizzled out, they noted.

A downturn in Tokyo shares also added to the pressure, they said. The KOSPI index closed down 0.70 points or 0.05 pct at 1,382.36, after moving between 1,379.66 and 1,392.55.oul shares closed little changed, giving back all their early gains, with retail investors unloading shares on uncertainty over the fundamental strength of the market, dealers said.

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On the commodities front, BHP Billiton shares edged up half a penny at 965-1/2 as investors digest a mixed interim update, with copper price adjustments expected to eat into its earnings for the six months ended December by 200 mln usd.

In reaction, UBS reiterated its 'buy' stance on the stock, noting that while iron ore and nickel were better than expected, this was offset by another 'disappointing' performance in Petroleum, Base Metals and Coal.

A Paris-based dealer said the stock seemed to be already pricing in "the bad news".

South African Gold Fields Ltd said its second-quarter net earnings more than doubled to 104 mln usd from 44 mln usd in the same period last year.

The company, which has listings in New York, Johannesburg and Dubai, said the gold production in the quarter ended Dec 31 declined to 1.015 mln ounces from 1.040 mln a year ago. However, there was an increase of 10,000 ounces from the September quarter production of 1.005 mln.

Oil prices were steady, hovering above the 55 usd level as cold weather in the US Northeast and in Europe continues to boost demand for heating fuels.

Prices were stable despite a US inventory report, released yesterday, which showed an unexpected gain in crude oil and distillates, which include heating oil.

At 11.40 am in London, front-month Brent North Sea crude contracts for March delivery were up 15 cents at 55.58 usd a barrel, having settled up 33 cents at 55.43 usd yesterday.

Meanwhile, front-month New York light sweet crude contracts for March delivery were up 14 cents at 55.51 usd a barrel, after closing up 33 cents at 55.37 usd yesterday.

Oil prices rose yesterday, having declined earlier in the session after a US inventory report showed an unexpected 700,000 barrel rise in distillates last week and a slightly smaller-than-expected 700,000 barrel gain in crude stocks.

Most analysts expect the increased demand from the US will bite into next week's inventory report.

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