US & World Daily Markets Financial Briefing 25-05-2007

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U.S. stocks rebound following pullback
 
NEW YORK - Wall Street opened higher Friday as investors adjusted positions ahead of a long holiday weekend, and drew optimism from the Nasdaq Stock Market Inc.'s deal to acquire Sweden's OMX AB.
   
The $3.67 billion deal gives Nasdaq an entrance into Europe through OMX, which operates exchanges in seven Nordic countries. It will become the world's second trans-Atlantic exchange after the New York Stock Exchange bought Paris-based Euronext earlier this year.
   
Stocks also moved higher a day after a sizable pullback and as Chinese stocks rose to fresh record highs Friday. The retreat Thursday followed housing data that showed sales of single-family homes surged in April by the largest amount in 14 years but that prices fell sharply as well. While a resilient housing market would likely be good for the economy, it could also reduce the likelihood the Federal Reserve would reduce interest rates.
   
In the first hour of trading, the Dow Jones industrial average rose 46.89, or 0.35 percent, to 13,488.02. The Dow has fallen in the last four sessions.
   
Broader stock indicators rose. The Standard & Poor's 500 index rose 5.73, or 0.38 percent, to 1,513.24, and the Nasdaq composite index rose 12.31, or 0.49 percent, to 2,550.23.
   
Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.87 percent from 4.84 percent late Thursday. The dollar was mixed against other major currencies, while gold prices rose. Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 95.5 million shares.
   
The Russell 2000 index of smaller companies rose 4.94, or 0.60 percent, to 828.74.
   
In afternoon trading, Britain's FTSE 100 slipped 0.03 percent, Germany's DAX index rose 0.25 percent, and France's CAC-40 fell 0.02 percent.
   
Stocks in focus
   
In corporate news, retailer Gap Inc. rose 19 cents to $18.48 after reporting its first-quarter profit fell 26 percent. Results excluding costs for shutting the company's handful of Forth & Towne stores topped Wall Street's forecast.
   
SourceForge, formerly VA Software Corp., said its third-quarter profit rose as a result of the sale of its enterprise software business. The stock jumped 57 cents, or 15.3 percent, to $4.30.

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Yen weakens as equity markets come off lows; focus on US housing data

LONDON - The yen turned weaker as equity markets improved from earlier lows. The Japanese currency had moved higher overnight on the back of softer equity markets and after the OECD's warning earlier this week about overvalued asset prices and the risk of a sharp unwinding of carry trades.   
       
The yen has become increasingly sensitive to movements on equity markets recently, as share prices are seen as an overall measure of global risk appetite and therefore popularity for the carry trade, he said.
   
The carry trade is where money is borrowed in currencies with low interest rates, most typically the yen, in order to invest in higher yielding assets elsewhere.
   
Analysts noted that reports of North Korea firing missiles in the direction of the Sea of Japan were also weighing on the Japanese currency.
   
Elsewhere, the market awaited the release of further data on the US housing market in the form of existing home sales numbers.
   
Yesterday, the dollar received a boost after strong new home sales data eased concerns about a housing-fuelled recession.
   
Government figures showed sales of new homes surged in April by the largest amount in 14 years, jumping by 16.2 pct to a seasonally adjusted annual rate of 981,000 units. Tempering the data somewhat was the news that the median price of a new home dropped by 11.1 pct, the largest amount on record.
   
The dollar has been steadily gaining as US rate-setters have stepped up their warnings on the upside risks to inflation and played down the downside risks to growth.
   
This morning, however, the euro came off overnight lows of close to 1.34 usd after solid German consumer confidence data.
   
The GfK market research institute said its consumer climate index for Germany is forecast to rise to 7.3 points in June from a revised 5.7 points in May, well above expectations for a much more modest increase to 6.5.

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Euroshares remain weak midday on Chinese market concerns; OMX up on Nasdaq bid

LONDON - Europe's leading exchanges remained lower midday, as investors stayed sidelined amid concerns surrounding overheating Chinese markets, but OMX surged after its US peer Nasdaq made a cash and stock bid for the Scandinavian stock exchange operator. At 11.50 am, the STOXX 50 was down 7.02 points at 3,889.93, while the STOXX 600 fell 1.39 point to 392.16.
   
Among highlights in Europe today, European bourse were in focus after the Nasdaq Stock Market Inc made a cash and stock bid for OMX, up 11 pct at 163 dkr, that values the Scandinavian stock exchange operator at 25.1 bln skr, or 3.7 bln usd. OMX shares surged 16 pct in opening trade.
   
The bid was unanimously recommended by the boards of directors of OMX and NASDAQ. Investor AB, Nordea AB and OMX CEO Magnus Boecker, who together represent around 16.6 pct of OMX's share capital, have entered into irrevocable undertakings to accept the bid.
   
Trading in shares on the Nasdaq was halted for "news pending" just before the exchange closed in New York on Thursday. Trading in OMX, Europe's fifth largest stock exchange, was also halted in midday trading yesterday, pending an announcement. Nasdaq's takeover of OMX comes after a failed bid for the London Stock Exchange.
   
It also comes a month after the New York Stock Exchange completed its 14 bln usd acquisition of Euronext, which operates the Paris, Amsterdam, Brussels, and Lisbon stock exchanges.
   
Carrefour shot up 3 pct as rumours resurfaced of a possible leveraged buyout (LBO) offer for the retailer, although dealers did not lend much credence to what they said was very vague talk.
      
Elsewhere, shares in Mediolanum continued sharply higher, after its CEO and key shareholder Ennio Doris said in a TV interview that the company has received approaches by foreign rivals interested in buying it, dealers said.
   
Staying in M&A, shares in Belgo-Dutch bancassurance group Fortis fell 2.9 pct after the consortium it is in, which is vying to buy Dutch peer ABN Amro NV, said it will delay its announcement on whether or not it plans to make a formal bid for the Dutch bank until Tuesday May 29, traders said. In addition, the share is trading ex-dividend after the AGM approved a dividend payment of 0.82 eur.
   
On the earnings front, shares in the Norwegian oil services technology group ElectroMagnetic GeoServices ASA (EMGS) fell 4.6 pct to 103.0 nkr after the company posted a first quarter EBITDA loss.
   
In other news, UBS said it is looking for options to divest its 20.7 pct stake in Swiss rival Julius Baer, with the lock-up period for the non-strategic holding expiring at the end of today.
   
At current market prices, proceeds from a disposal would be more than 4.1 bln sfr, which corresponds to a pretax capital gain of roughly 2.1 bln, it said.
   
Gains from the Julius Baer stake will be used to buy back shares in the coming months, as part of the 2007-2010 share repurchase program announced on March 8, 2007, the bank said.
   
Dutch life insurance group Aegon took on 0.7 pct to 14.99 after starting its share buyback programme, which it expects to be completed before June 30.  Aegon said it will repurchase 11.6 mln common shares.

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Asian shares close mostly lower, with continuing fears about China markets

HONG KONG - Shares across the Asia-Pacific region closed mostly lower, with many markets remaining nervous about a stockmarket bubble in China, but China shares continuing to rise.
   
Tokyo shares closed lower following Wall Street's overnight weakness, with investors remaining wary over China after former Federal Reserve chairman Alan Greenspan warned of a possible decline in China's stock markets. The Nikkei 225 Stock Average closed down 215.76 points or 1.22 pct at 17,481.21, off a low of 17,370.18. For the week, the index lost 0.27 pct. The TOPIX index of all first-section issues slipped 22.57 points or 1.3 pct to 1,715.54, off a low of 1,703.38. Over the week, the index declined 0.21 pct.
   
Mitsushige Akino, chief fund manager at Ichiyoshi Management, said investors were keeping their guards up over China after Greenspan expressed concern this week about an eventual sharp correction in China's markets.
   
Australian shares ended down as investors continued to take profits after the indices reached record highs on Monday. A further decline in metal prices overnight weighed on resource stocks, while negative sentiment lingers after recent comments from former Federal Reserve chairman Alan Greenspan warning of a possible "dramatic correction" for Chinese equities.
   
The S&P/ASX 200 closed down 26.3 points or 0.42 pct at 6,252.8, retreating again from Monday's record finish of 6,369.0. Over the trading week the benchmark index lost 59.7 points or 0.95 pct.
   
Macquarie Asset Management private client advisor Joseph Youssef said a sell-off was not surprising given the market's recent strength. He said the weakness has largely been confined to the major bank and resources stocks which led recent advances. "They were at the forefront of the rally so it is not surprising to see them sold off," Youssef said.
   
Hong Kong shares were sharply lower in afternoon trade as the bourse faced the twin impact of fears of a market bubble forming in China and receding hopes for an early reduction in interest rates in the US. The market was closed for a holiday yesterday. At 3.30 pm the Hang Seng Index was down 278.92 points or 1.34 pct at 20,520.05.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on fresh fund inflows as the yuan continued to strengthen, with yesterday's weaker close proving to be only a brief pause amid continued global warnings about the unchecked rise in Chinese stock prices. The Shanghai A-share Index was up 27.13 points or 0.62 pct at 4,381.57 and the Shenzhen A-share Index was up 20.72 points or 1.63 pct at 1,292.32.
   
Seoul shares closed lower, with foreign investors unloading shares following the broad global market correction and ahead of the weekend. Some investors also belatedly responded to former US Federal Reserve chairman Alan Greenspan's reported warning of a possible "dramatic contraction" in Chinese stocks.
   
But the main index closed off its low for the day as bargain hunting picked up in late trade, with China market gains also helping to trim losses, dealers said. The KOSPI index closed down 2.03 points or 0.12 pct at 1,644.56, after moving between 1,627.59 and 1,645.08. It ended the week with a gain of 32.31 points or 2.0 pct.

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Gold recovers from 9 week lows but analysts wary on near term outlook

LONDON - Gold recovered from yesterday's 9 week lows as the dollar gave back earlier gains against the euro, but analysts warned the metal's near term outlook has worsened.
   
"The already weak current sentiment has taken a further beating on Thursday by the 1.3 pct loss on the day, and is now treading dangerously close to the key 650-648 usd support band," said Standard Bank in a note.
   
The bank added the best outcome for gold in the near term would be a period of consolidation above this support band, and that should gold fall below this band it could spell a trend reversal.
  
At 9.55 am, spot gold was quoted at 655.25 usd an ounce, up slightly from the 653.60 usd level seen in late New York trades yesterday, when the metal hit an intraday low of 651.30.
   
In other precious metals, silver was up slightly at 12.86 usd an ounce against 12.84 usd, platinum fell to 1,278 usd against 1,280 usd while palladium edged down to 365 usd against 368 usd.

Copper recovers from 8-week lows after surprise drop in Shanghai stocks

LONDON - Copper recovered from yesterday's eight-week lows following a surprise drop in Shanghai inventories and another decline in stockpiles monitored by the London Metal Exchange. Weekly data out in China earlier showed copper inventories monitored by the Shanghai Futures Exchange fell to 99,027 tonnes this week from 99,556 tonnes in the previous week.
   
Meanwhile, the LME said in its daily report copper stocks held in its warehouses fell by 1,975 tonnes to total 134,125 tonnes. LME stocks have fallen from around 200,000 tonnes at the start of the year to under 140,000 tonnes.
   
At 12.14 pm, LME copper for three-month delivery was trading up at 7,120 usd a tonne against 7,000 usd at the close yesterday, when the metal hit an intra-day low of 6,952 usd.
   
Copper has lost nearly 9 pct of its value since the start of the month, mainly on speculation high Chinese imports in the year to date have led to a stock pile-up in Shanghai.
   
Imports rose 161.5 pct from a year ago to total 186,212 tonnes, although they remained well below the record of import level of over 200,000 tonnes in March.
      
In other metals, nickel was up over 2 pct at 16,300 usd a tonne against 45,010 usd at the close yesterday, as the metal remained underpinned by worries over strike action at CVRD-Inco's Voisey's Bay mine in Canada. Zinc was up at 3,605 usd a tonne against 3,570 usd, lead rose to 2,160 usd against 2,120 usd, aluminium edged up to 2,782 usd against 2,755 usd while tin climbed to 13,925 usd against 13,850 usd.

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