US & World Daily Markets Financial Briefing 26-10-2006

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Stocks up on Exxon Mobil, durable goods

NEW YORK - Wall Street extended a three-session advance on Thursday, buoyed by strong results from Exxon Mobil Corp. and an economic report that signaled robust corporate spending. In early trading, the Dow rose 12.89, or 0.11 percent, to 12,147.57. The Dow, which set a new closing high of 12,134.68 Wednesday, reached a new trading high Thursday, 12,165.26.
   
Broader stock indicators also gained. The Standard & Poor's 500 index rose 2.72, or 0.20 percent, to 1,384.94, and the Nasdaq composite index added 2.33, or 0.10 percent, to 2,358.92. The Russell 2000 index of smaller companies was up 3.14, or 0.41 percent, at 770.29.
   
The Dow Jones industrials, which reached another closing high Wednesday, gained after component Exxon Mobil posted the second-largest quarterly profit recorded by a publicly traded U.S. company. Blue chips have been on a three-month tear, boosted even further as third-quarter earnings season continues to run ahead of Wall Street expectations.
   
The Commerce Department reported capital spending continued to rise as durable goods orders jumped by the most in more than six years. The report came one day after the Federal Reserve kept interest rates unchanged, and indicated it was watching inflation but was not intent on raising interest rates.
   
Bonds extended their own rally, with the yield on the benchmark 10-year Treasury note falling to 4.74 percent from 4.76 percent late Wednesday.
   
Stocks in focus

Software giant Microsoft will unveil quarterly results after the market close. Aetna Inc., Bristol-Myers Squibb, GlaxoSmithKline, Starwood Hotels & Resorts and Wendy's International also are due to report quarterly financials.
   
Royal Dutch Shell reported a 34 percent profit fall on rising costs, increased taxes and Nigerian unrest, though the adjusted profit came in much higher than analysts had anticipated.
   
Also in the oil arena, China's Citic Group overnight said it's agreed to pay $1.91 billion before cash and debt adjustments for the Kazakhstan oil assets of Calgary-based, privately held Nations Energy.
   
Continuing the M&A theme, Clear Channel Communications also may rise after saying it's considering various strategic alternatives to counter its lackluster stock performance. Recent reports suggest the founding Mays family may want to take the company profit.
   
A Motorola executive told a French newspaper the company may want to buy the Sagem mobile phone operations from France's Safran. The company in response said a link-up with another mobile phone maker is only one possibility and that
Motorola remains a competitor.
   
Elsewhere, Symantec is expected to fall after the computer security software maker didn't meet consensus estimates with its quarterly results.
   
Red Hat is expected to tumble after Oracle Systems said it would begin offering support for Red Hat's Linux operating system.
   
Sony reported a 94 percent profit decline on its massive battery recall, mounting costs for the PlayStation 3 console and rising marketing costs and poor performance at its movie production division.

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Dollar drifts lower as US rate hike prospects fade

LONDON - The dollar continued to drift lower after the US Federal Reserve dampened expectations of another increase soon in US interest rates.
   
The Fed kept its benchmark rate unchanged at 5.25 pct for the third meeting in a row but toned down its rhetoric. In particular, there was no mention that rising energy prices may keep inflation at elevated levels, in a departure from previous statements.
   
Overall, the Fed was seen to be a little less hawkish than predicted even though it continued to say it will remain on a rate-tightening bias. The lone vote for a quarter-point hike from the same rate setter for the third time in a row also had little impact.
    
The US currency has lost around 0.4 pct of its value against its fellow majors in the wake of the statement.
       
The benchmark rate is predicted to be lowered next year as growth levels disappoint and inflation becomes less of a worry. The case depends very much on how upcoming US data will pan out.
   
Today's US data did little to alter those expectations even though durable goods orders soared in September by the largest amount in more than six years. Analysts said the data is particularly volatile and not at the forefront of the Fed's thinking.
   
The Commerce Department reported that orders for durable goods rose by 7.8 pct last month to 226.7 usd bln. The increase followed two consecutive months of declines and was the biggest gain since June 2000.
   
The improvement was more than triple the 2.3 pct gain that Wall Street had been expecting, but virtually all of the strength came from a giant 183.2 pct increase in orders for commercial aircraft. Outside of transportation, orders were up a far weaker 0.1 pct.
   
Elsewhere, the yen was well bid ahead of Japanese inflation figures for September due tomorrow and the Bank of Japan's monetary policy announcement on Tuesday.
   

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The European Markets at 13.00 GMT

London - UK blue chips dipped lower midday as AstraZeneca weighed following uninspiring numbers and drug trial woes, and peer GlaxoSmithKline fell back as the delay of its US Cervarix filing overshadowed a doubling of the group's share buyback and strong Q3 results, dealers said. However, an expected higher open on Wall Street could boost shares back into positive terrain later in the session.
   
At 12.27 pm, the FTSE 100 index was 3.0 points weaker at 6,211.6, having earlier hit a high of 6,244.6, while the broader indices managed to hold on to morning gains.

Frankfurt - German shares were higher in midafternoon trade as investors drew comfort from the US Federal Reserve's decision to keep rates on hold, while M&A speculation within the steel sector lifted ThyssenKrupp.
   
At 2.35 pm, the DAX 30 index was 31.01 points or 0.49 pct higher at 6,295.93. The MDAX was at 8,777.70, up 27.86 points or 0.32 pct, while the TecDAX was 5.48 points or 0.80 pct higher at 692.60.
   
Paris - Share prices were higher midday as US futures pointed to a strong opening later today and as France Telecom and Total moved higher in heavy volume. At 11.30 am the CAC-40 index was up 29.97 points or 0.55 pct at 5,452.25.

Milan - Share prices were flat at midday, while Fiat fell on profit-taking after the release of third quarter results. At 12.10 pm, the Mibtel was up 0.05 pct at 30,305 points and the S&P/Mib gained 0.12 pct to 39,455. Fiat fell 1.63 pct to 13.85 after the release of third-quarter results that showed a trading profit at the top end of market expectations.

Madrid - Madrid shares were higher in brisk trade, boosted by Telefonica's strong performance in line with other European telecoms. At 12.25 pm, the IBEX-35 index rose 77.9 points to 13,714.8, after trading in a range of 13,681-13,730, on turnover of 1.8 bln eur.

Stockholm - Shares remained in slightly positive territory in midday trade, but off earlier highs in the wake of sharp losses in AstraZeneca after its Q3 report and disappointing drug news, while Swedbank moved sharply higher after its strong Q3 results. At 1.40 pm, the OMX Stockholm index was up 0.33 pct at 355.16 points, while the OMX Stockholm 30 index was up 0.35 pct at 1,103.65.

Brussels - Shares were up late morning as imaging group Barco rallied after falling over 6 pct yesterday on its third quarter results. At 11.26 am, the Bel 20 was up 14.37 points, or 0.34 pct at 4188.57.

Zurich - Share prices moved higher in midday trade, extending yesterday's gains and reaching another record high following a positive close on Wall Street after the US Federal Reserve left interest rates unchanged. At 12.22 am, the Swiss Market Index was 61.12 points higher at 8,743.61, while the Swiss Performance Index up 44.07 points at 6,818.56.

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Asian shares close higher on corporate earnings, US rate decision

HONG KONG - Shares across the Asia-Pacific region closed higher as companies reported higher earnings and on the US Federal Reserve's decision to keep interest rates steady.
   
Tokyo shares ended higher as investors sought stocks of companies that reported positive first-half earnings.
   
Sentiment also got a boost from Wall Street's advance overnight after the Federal Reserve left its key rate steady and said US economic growth would probably pick up in the months ahead.
   
The Nikkei 225 Stock Average climbed 112.30 points or 0.67 pct to close at 16,811.60, off a high of 16,863.24. The broader TOPIX index of all first-section issues gained 11.21 points or 0.68 pct to settle at 1,664.59.
    
Australian shares finished at a record closing high led by the banking sector after Australia's third largest bank, ANZ, reported a record profit for the year to September and said its earnings momentum would continue.
   
The resources sector also supported the broader market on healthy rises in oil, gold and base metal prices and media stocks were in focus following changes to media ownership rules which will allow foreign ownership as well as relaxing cross media ownership restrictions.
   
The S&P/ASX 200 rose 37.4 points or 0.70 pct to close at a record 5,389.7, but below the day's high of 5,391.1 and above a low of 5,361.8. The key index surpassed its record closing high of 5,364.5 set on May 11 but was short of its all-time intra-day high of 5,406.7 reached on May 10.
   
Hong Kong shares were higher in afternoon trade on hopes that the Industrial and Commercial Bank of China will make a strong debut tomorrow and with sentiment also positive following the US Federal Reserve's decision on interest rates.
   
At 3.29 pm the Hang Seng Index was up 166.04 points or 0.91 pct at 18,323.98. China Mobile provided additional support amid hopes the company will post strong results for 2006.
   
In mainland China, A-shares in Shanghai and Shenzhen closed slightly higher ahead of the debut of Industrial and Commercial Bank of China (ICBC) tomorrow, with property and telecom plays buoyed.
   
The Shanghai A-share Index gained 4.27 points or 0.22 pct to 1,902.14 and the Shenzhen A-share Index was up 0.06 points or 0.01 pct at 464.12.
   
Seoul shares ended slightly higher in thin trade, as heavy sell offs by institutional investors were effectively offset by support from foreign and retail investors.
   
The KOSPI index closed up 2.22 points or 0.16 pct at 1,373.65, after moving between 1,369.66 and 1,377.40.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Gold finds support from oil prices and weaker dollar

LONDON - Gold found support from renewed concerns about inflation as oil prices continued to gain lost ground and as the dollar drifted lower in the wake of the Fed's decision to keep interest rates unchanged.
   
"The combination of firmer oil/weaker dollar and the reiteration of inflation risk in the Fed's statement have given gold a lift," said James Moore at theBulliondesk.com.
   
At 11.38 am BST, spot gold was up 4.40 usd at 595.2 usd/oz. Despite today's gains, however, it will take a rally above 600 usd before it can be safely said that gold has overcome its recent downtrend he added.
   
John Reade at UBS pointed out that while sentiment surrounding gold appears to have improved, there is little follow through buying seen as yet.
   
He noted that there is plenty of room for investors and funds to buy gold if they find a trigger, however.
   
Gold's movements have been strongly correlated with oil recently due to the metal's status as a hedge against inflation. As oil prices fell some 25 pct since mid-July gold lost some of this appeal, drifting lower from highs above 720 usd in May this year. But each time oil recovers, investors appear to be seeking out the metal again in order to take bets against inflation.

A barrel of light, sweet crude fell 2 cents to $61.38 in pre-opening trading on the New York Mercantile Exchange. Crude advanced on Wednesday after a report showed an unexpected drop in inventories.
   
Higher oil prices throughout most of the third quarter helped Exxon Mobil report a profit of $10.49 billion during the period. The average market price for crude held at around $70 a barrel in the period after peaking above $78 per barrel in July.
   
The company's shares rose 77 cents to $71.76.

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