US & World Daily Markets Financial Briefing 27-02-2006

U.S. Stocks at a Glance

U.S. stocks pare gains after weak housing data

NEW YORK - U.S. stocks pared gains Monday after a surprise fall in January new home sales prompted concern about a potential slowdown in economic growth, but strong earnings from Lowe's Cos. and a drop in oil prices were putting a floor on declines.
   
Walt Disney Co. edged higher on a media report the company could be bought by Apple Computer Inc.
   
The Dow Jones Industrial Average was up 39 points at 11,100, but off an early high of 11,123.
   
The Nasdaq Composite Index rose 11.50 points to 2,298 while the S&P 500 Index gained 3.7 points to 1,293.13.
   
Marc Pado, U.S. market strategist at Cantor Fitzgerald, said stocks are holding up well despite headwinds. "Consolidation is a healthy development, especially in light of the pop in crude and the worsening inversion of the yield curve."
   
On the data front, the latest data appeared to confirm a slowdown in the housing market.
   
Sales of new homes in the United States fell 5% to a seasonally adjusted annual rate of 1.233 million in January, the lowest in a year, the Commerce Department said. Economists had been expecting home sales to remain level at about 1.27 million. December sales, however, were revised higher.
   
Other key reports this week include fourth-quarter gross domestic product data, two reports gauging consumer sentiment, and reports on the health of the nation's manufacturing and services sectors.

Stocks  in focus

Shares in Walt Disney Co. were up 37 cents at $28.35 on a report in financial weekly Barron's that Apple Computer Inc. may make a bid for the entertainment giant.
   
The newspaper said the move could come once Apple Chief Executive Steve Jobs
becomes Disney's largest shareholder, with the completed acquisition by that company of Jobs' computer animation business, Pixar. Jobs would own 7% of Disney once that deal is wrapped up.
   
Lowe's Cos. rose 3.9% to $68.13 after the home-improvement retailer posted earnings that topped analysts' estimates, helped by strength in installation services, special orders and its commercial businesses.
   
Rival Home Depot Inc. was up 21 cents at $41.84.
   
On the deals front, Britain's National Grid PLC on Monday agreed to buy KeySpan Corp. of the U.S. for $7.3 billion. The deal was widely anticipated. KeySpan shares were off 65 cents at $40.76 in morning trading.
   
Merrill Lynch shares rose 97 cents to $77.73 after the bank's board approved the buyback of up to $6 billion of its common stock.

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Brokerage action
   
Shares in SanDisk Corp. were up 6.8% at $60.15 after Citigroup upgraded the flash-memory developer to buy from hold, citing the company's strong Internet protocol, vertically integrated supply and new products. Flash memory holds data without power and is commonly found in digital music players, digital cameras and cell phones.
   
The broker also lifted its rating on M-Systems Flash Disk Pioneers , a rival to SanDisk. M-Systems' shares climbed 5.1% to $27.08.
   
But Citigroup also downgraded five semiconductor equipment makers on declining optimism that big orders will materialize to sustain meaningful order growth in the second half of the year.
   
Of the five stocks, Advanced Energy Industries was the biggest percentage decliner, down 8.8% at $14.26. Applied Materials was down 2.7% at $18.29.
Mattson Technology Inc. , Asyst Technologies and Lam Research Corp were all
trading lower.

Forex

Yen advances on Japanese government comments

NEW YORK - The yen extended gains from last week early Monday, surging to fresh one-month highs against the dollar and six-week highs against the euro, on fresh signs the Bank of Japan will soon end its ultra-easy monetary policy and edge up interest rates.
   
Japanese Prime Minister Junichiro Koizumi said Monday that he supported moves by the Bank of Japan to overhaul its quantitative monetary policy, the daily Nihon Keizai Shimbun reported.
   
In early New York trading, the dollar was changing hands at 116.07 yen, down from 116.87 yen late Friday. The dollar had touched 115.64 yen earlier in the session, the lowest level since Jan. 27.
   
The yen also hit a two-month high versus the euro. The euro last changed hands at 137.54 yen, down 1% from 138.74 yen late Friday. The euro had earlier dropped to 137.17, the lowest level since Jan. 12.
   
The euro was last trading at $1.1845, down from $1.1875 late Friday. The euro hasn't been able to rise against the greenback.
   
Overnight, Koizumi said "the government and the BoJ are now making a coordinated effort to terminate deflation."
   
"The final decision on which action Japan should take in line with such efforts is up to the central bank," he told reporters at his official address.
   
BoJ governor Toshihiko Fukui indicated on Feb. 23 that the central bank will shift policy "promptly" as soon as certain conditions are met -- one of these being consistent year-on-year positive CPI growth. Fukui said the consumer price index "should show a relatively clear uptrend" from January.

Economic policy minister Kaoru Yosano said it would be acceptable for the BoJ to end its quantitative easing policy, once it thinks that deflation is over.

 Analysts widely expect the BoJ to end its easing monetary policy, which involves pumping cash into the economy, in April, but recent comments from Japanese officials have fueled speculation that the BoJ may do so as early as March.

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Europe at a Glance

The European markets at 12.00 UTC

London - UK blue chips maintained gains in midday trade, boosted by healthy earnings reports and strong M&A activity in the utilities sector, with Wall Street set to open in positive territory boosted by easing oil prices, dealers said.
   
At 12.02 pm, the FTSE 100 was up 8.3 points at 5,868.8, having fallen back from an opening peak of 5,893.3.

Frankfurt - Shares were slightly higher in quiet midday trade as Tokyo posted gains this morning and as oil prices fell, with utility stocks in focus following a fresh bout of M&A news in the sector, dealers said.
   
At 12.09 pm, the DAX 30 index was 7.56 points or 0.13 pct higher at 5,878.35, having moved between 5,874.42-5,893.51 so far this session.
   
The MDAX was at 8,410.79, up 34.20 points or 0.41 pct, while the TecDAX was at 755.70, up 12.54 points or 1.69 pct.
   
The DAX futures contract was at 5,888.00, up 12.50 points or 0.21 pct, while bund futures were at 120.15, down 0.13 point.

Paris - Share prices were slightly lower at midday, with trading on  dominated by the weekend announcement of merger between Gaz de France and Suez.
   
At 12.07 pm, the CAC-40 index was down 7.17 points or 0.14 pct at 5,066.78.
There were 20 decliners and 20 gainers among the CAC-40 shares.
   
Volume was 1.87 bln eur.
   
On the Matif, March CAC-40 futures were trading down 5.0 points or 0.10 pct at 5,073.0.

Amsterdam - Shares were up at midday as US futures indicated a higher opening on Wall Street, while KPN dropped as Vodafone wrote off billions on its German operations, prompting fears that KPN could face the same growth problems, dealers said.
   
At 12.22 pm, the AEX was up 1.76 points or 0.38 pct to 466.33 after opening at 465.29 and reaching an earlier high of 466.97.

Madrid - Share prices were slightly higher midday in thin trade led by gains in Gas Natural and blue chips, while Telecinco slipped lower, dealers said.   
   
At 11.48 am, the IBEX-35 index was up 14.7 points at 11,801.6, after trading in a range of 11,790-11,828, on turnover of 761 mln eur.
   
Equities opened higher, boosted by ongoing M&A activity in the energy sector, though trade was cautious amid a lack of fresh leads.

Milan - Share prices were slightly up at midsession trade led by sharp gains in Saipem on acquisition news and ahead of its full-year results later today, while telecoms were hit by a disappointing guidance at UK peer Vodafone, dealers said.
   
At 1.07 pm, the Mibtel index rose 0.34 pct to 29,138 and the S&P/Mib was up 0.11 pct at 38,162. Volumes stood at 2.15 bln eur.

Stockholm - Share prices were little changed in early afternoon trade, off earlier levels as some profit-taking took hold in the absence of market driving news, dealers said.
   
At 1.45 pm, the OMX Stockholm index was up 0.08 at 322.78, while the OMX Stockholm 30 index was flat at 1,010.77. Turnover was 8.80 bln skr.

Helsinki - Shares were flat in midday trade, with sentiment-driven strength in utilities and industrials offset by declines in telecoms on a huge goodwill writedown and downbeat 2007 outlook from Vodafone, dealers said.
   
At 12.24 pm, the OMX Helsinki 25 index was 0.02 pct lower at 2,611.32 points.
   
The OMX Helsinki index was down 0.03 pct at 8,996.28 points, while the Helsinki CAP portfolio index was 0.07 pct higher at 4,878.99 points.

Brussels - Shares were lower, led down by utility Suez, which took a fall on news of Gaz de France's 70 bln eur white knight bid for the group, dealers said.
   
At 1.41 pm, the Bel-20 index was down 33.03 points or 0.84 pct at 3,896.09.

Athens - Shares were edging higher in late morning trade, with banking sector gains partially offset by losses for telecoms, as investors also focused on Hellenic Telecommunications (OTE) which announced results earlier, brokers said.
   
At 11.50 am the ASE general index was 0.3 pct higher at 4,257.4 and blue chips were up 0.5 pct at 2,358. Mid caps were also up 0.5 pct at 4,342.7.
   
OTE was down 1.3 pct to 18.20 eur.

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Asia at a Glance

Asian shares close mostly higher, Tokyo stronger on energy, steel issues

       
HONG KONG - Share prices across the Asia-Pacific region closed mostly higher with Tokyo stronger on gains among energy and steel shares, dealers said.
   
They added that market sentiment was also buoyed by foreigners having been net buyers before the opening bell for a second consecutive day.
   
But share prices were top heavy because the market lacked major leads and because of the yen's rise against the US dollar, dealers said.
   
The Nikkei 225 Stock Average finished up 91.04 points or 0.6 pct at 16,192.95, after touching a high of 16,290.15.
   
The broader TOPIX index of all first-section issues gained 9.08 points or 0.55 pct at 1,656.82, off its peak for the day of 1,664.19.
   
"Overseas investors were net buyers for the second straight day," having been net sellers for nine consecutive days until last week, said Hideyuki Suzuki, a strategist at SBI Securities.
   
Share prices in Australia finished higher as strong company earnings reports boosted investor sentiment and stronger metal and energy prices encouraged support for resources stocks, dealers said.
   
They said the market remained in positive territory despite official data showing company profits rising at a slower than expected pace in the December quarter.
   
Dealers said global miner Rio Tinto led the resources sector higher, while a jump in oil prices on Friday due to a terrorist attack in Saudia Arabia lifted support for leading oil and gas stocks Woodside and Santos.
   
The S&P/ASX 200 rose 30.7 points or 0.63 pct to close at 4,924.1, gaining on the record high of 4,956.7 set on Feb 1.
   
In Hong Kong, share prices were trading higher in the afternoon as HSBC attracted strong institutional interest ahead of its 2005 results announcement
early next week, dealers said.
   
Select property stocks were boosted by news of strong apartment sales over
the weekend, while Sinopec Corp was sharply higher following reports that British oil giant BP PLC could take a 25 pct stake in the Chinese oil refiner.
   
At 3:31 pm, the Hang Seng Index was up 112.67 points or 0.71 pct at 15,968.72.
   
In mainland China, A-shares in Shanghai and Shenzhen closed mixed with strong gains in market heavyweight China Petroleum & Chemical Corp (Sinopec) (SHA 600028; HK 0386; NYSE SNP) offset by liquidity worries over upcoming IPO approval resumption, dealers said.
   
The Shanghai A-share Index added 0.74 point to 1,360.60 on turnover of 13.08 bln yuan and the Shenzhen A-share Index was down 1.88 points at 325.03 on turnover of 6.37 bln yuan.
   
Share prices in Seoul ended higher on foreign investor support, rising for a third trading session, with Samsung Electronics, POSCO and brokerages leading the rise, dealers said.
   
Foreign investor interest picked up and program buying kicked in towards the close to total 67.3 bln won for the day, helping the index reach the 1,370-point level.
   
The KOSPI index closed up 9.06 points or 0.66 pct at 1,374.88.

Asian Bourse Round-up

For a full list of closing figures, click here

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Commodities

Crude-oil futures fell after surging more than $2 amid simmering tensions in Iraq, a failed terrorist attack on a Saudi Arabian oil installation and a report of more trouble for Shell in Nigeria. Continuing political friction between Venezuela and the U.S. further boosted oil.
   
The benchmark April contract was down $1.26 at $61.65 in New York trading. 
    
Gold futures were lower in morning trading. The benchmark April contract was off $5.70 at $555.50 an ounce.
   
On the bond market, long-term Treasury prices briefly strengthened, sending yields lower after the latest housing data came in weaker than expected, easing
fears the economy may be overheating and raising hopes the Fed may now its end of cycle of rate hikes sooner rather than later.
   
The benchmark 10-year note was last up 3/32 at 99 15/32, with its yield at 4.57%.

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