US & World Daily Markets Financial Briefing 27-04-2006

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U.S. stocks turn higher, boosted by Bernanke rate remarks

NEW YORK - U.S. stocks turned higher Thursday after Federal Reserve Chairman Ben Bernanke signaled the Federal Reserve could pause in its cycle of interest rate increases, although a pause in itself would not necessarily mean the central bank would be finished raising rates.
   
The Dow Jones Industrial Average rose 21 points to 11,375, off a morning low of 11,275.
   
The Nasdaq Composite Index climbed 8 points to 2,342 while the S&P 500 Index added 3 points to 1,308.
   
Stocks in focus
   
Shares in Exxon Mobil Corp. fell 2.7% to $61.40 after the oil giant's first-quarter earnings missed analyst estimates. The company said higher crude oil and natural gas realizations and improved marketing margins were partly offset by lower chemical margins in the latest quarter.
   
Also in the oil sector, Marathon Oil Corp. and Apache Corp. disappointed on earnings.
   
U.S.-listed shares of GlaxoSmithKline Plc. rose 3.2% to $54.75 in pre-market trading after the UK drug maker surprised the market with a 25% profit rise in the first quarter, driven by strong sales of its asthma and antiviral treatments.
   
Bristol-Myers Squibb Co. , meanwhile, posted an in-line first-quarter profit, but sales topped analyst expectations, boosted by a strong sales of its top-selling Plavix and several newer medications. The stock was off 4 cents at $24.93.
   
The pharmaceutical sector also received a lift from strong earnings from German drugs and chemicals group Bayer AG and a raised profit view from UK drugs giant AstraZeneca Plc.
  
Celgene Corp., meanwhile, saw its shares shoot up 5.9% to $39.92after the biotech's earnings handily topped analyst estimates, with revenue up more than 60% on strong sales of Thalomid, a treatment for myeloma and a solid launch for Revlimid, a drug aimed at patients suffering form transfusion-dependent anemia.
  
Walt Disney Co shares were up 1.2% at $27.54 on a New York Times report that the company has held meetings with CBS Corp. with a view to making a takeover offer for Spanish-language media group, Univision Communication Inc.

CBS shares were up 8 cents at $25.23. Univision shares were up 18 cents at $35.02.
  
On the broker front, shares in Honeywell International Inc. were down 2.6% at $42.94 after J.P. Morgan cut its rating on the defense contractor to underweight from neutral, citing concern over environmental related costs.

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Dollar slumped to new multi-month lows after Bernanke

NEW YORK - The dollar slumped to a fresh seven-month low against the euro and three-month low against the yen Thursday after Federal Reserve Chairman Ben Bernanke said the Fed could pause in its rate-hiking cycle even if inflation risks remain.
   
The Fed could pause "at some point" even if the risks to the outlook are tilted toward higher inflation, Bernanke told the congressional Joint Economic Committee in prepared testimony. But a pause in rate hikes wouldn't necessarily mean the Federal Reserve is finished raising rates, he said.
   
"Of course, a decision to take no action at a particular meeting does not preclude action at subsequent meetings," he said.
   
Bernanke's comments suggested "the Fed is closer to an end to its tightening cycle and that would be dollar-negative," said Mike Malpede, senior currency analyst at Man Global Research.
   
In New York trading, the euro was up 0.4% at $1.25, after earlier touching $1.2503, the highest level since September. The dollar fell to 114.15 yen, before paring losses to trade at 114.22 yen, down 0.5%. The British pound was up 0.5% at $1.794, while the dollar was down 0.4% at 1.2647 Swiss francs.
   
Earlier, the dollar showed little reaction to a Labor Department report that showed first-time applications for state unemployment benefits rose by 11,000 last week to a seasonally adjusted 315,000. Economists surveyed by MarketWatch were expecting a total of 305,000.
   
China surprises with rate hike
   
The yen had earlier rallied after the Bank of China surprised the market by raising interest rates by 0.27 percentage points to 5.8%, its first rate hike since October 2004.
   
The People's Bank of China announced Thursday it was raising interest rates across the board, from the benchmark one-year rate all the way through to the long term 5-year-and-up rate.
   
The Bank of China's move comes after first-quarter GDP rose a stronger-than-expected 10.2%.
   
On its website, the bank said the move is aimed at "helping China's economy maintain a stable, fast and healthy development."
   
China's central bank has recently expressed concern about the pace of bank-lending growth, after new loans rose 1.26 trillion yuan in the first quarter, compared with the country's full-year target of 2.5 trillion yuan.
   
The yen's rally later fizzled as traders awaited Bernanke.
   
Analysts at Action Economics said China's move "can be taken as an indirect indication that Beijing may let the CNY appreciate more."
   
Claudio Piron, forex strategist at JPMorganChase Bank, said "markets should not react too adversely to the PBOC decision."
   
"The last three monetary tightenings did not have any consistent or material impact on Asia FX, equity or commodity performance," Piron said.
      
The yen also came under pressure after a senior Japanese official said that markets are misinterpreting the G7 statement from its meeting last weekend, arguing that a strengthening of Asian currencies does not necessarily imply that the dollar should fall.
   
Hiroshi Watanabe, vice finance minister for international affairs, said the markets are misreading the annex to the statement, which detailed that the G3 should do more to address global imablances.
   
"Japan's government will likely be somewhat intolerant of JPY strength while the CNY remains rigid," said Action Economics.

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The European Markets at 12.00 BST

London - UK blue chips dropped back at midday as miner issues fell back on profit-taking following news of a rate hike in China, with Wall Street also seen weaker in response, while a slew of positive results from drugs majors got pushed aside, dealers said.
   
At 12.39 pm, the FTSE 100 index was 59.5 points lower at 6,058.9, albeit off the late morning low of 6,026.2 having opened at a low of 6,104.6.

Frankfurt - Shares were sharply lower in midday trade on the back of sharp falls by index heavyweights Siemens, on disappointment at the second-quarter performance of its SBS and COM units, E.ON and RWE, on concerns over falling CO2 emission prices and declining power prices, dealers said.
   
The sharp losses by Siemens, E.ON and RWE, which together account for some 25 pct of the DAX's weighting, outweighed gains by Bayer and Altana, which both posted solid sets of first-quarter results this morning.

Paris - Shares were sharply down at midday as investors took their cues from first-quarter sales reports to lock in profits made in the buoyant market of recent weeks, while stocks in energy utilities came under pressure as electricity futures and oil prices dropped, dealers said.
   
At 12.50 pm, the CAC-40 index was down 74.87 points or 1.43 pct at 5,277.45, on volume of 2.61 bln eur. Of the CAC-40 stocks, 37 were lower and 3 were higher.

Amsterdam - Shares were down at midday, led by declines in heavyweight stocks and tracking developments elsewhere in Europe, dealers said.
   
At 12.09 pm, the AEX was down 5.58 points at 471.89, after reaching a high of 476.52. The AMX-index was down 5.27 points at 633.68.

Madrid - Share prices were lower in thin midday trading, tracking general profit taking across Europe, with TPI and Iberdrola lower, while Antena 3 gained on solid first-quarter results, dealers said.
   
At 12.15 pm, the IBEX-35 index was down 68.9 points at 11,856.7, after trading in a range of 11,842-11,946, on turnover of about 865 mln eur.

Milan - Share prices were lower at midday, hit by profit-taking after two days of gains on expectations that the ECB will continue to increase interest rates, dealers said.
   
At 11.53 am, the Mibtel index was down 0.97 pct at 29,562 and the S&P/Mib dropped 0.93 pct to 37,984.

Helsinki - Share prices were lower in midday trade, with Nokia seen tracking its weaker ADR price on Wall Street and with Fortum dipping amid expectations that electricity prices will decline in 2007, dealers said.
   
At 12.10 pm, the OMX Helsinki 25 was down 1.05 pct at 2,722.53. The OMX Helsinki was 1.00 pct lower at 9,643.54.

Stockholm - Shares were sharply lower in early afternoon trade as easing crude and metal prices prompted profit-taking among mining stocks, and weak Wall Street futures hit much of the rest of the market, brokers said.
   
At 1 pm, the OMX Stockholm index was down 1.45 pct at 336.89 and the OMX Stockholm 30 down 1.38 pct at 1,039.50. Turnover was 17,072 bln skr.

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Asian shares close mixed, Tokyo stronger on earnings reports

HONG KONG - Share prices across the Asia-Pacific region ended mixed with Tokyo higher as sentiment was boosted by some strong year to March earnings reports, including from automaker Honda, dealers said.
   
They added that sentiment also got a lift from gains on Wall Street overnight.
   
The Nikkei 225 Stock Average closed up 58.61 points or 0.3 pct at 17,114.54.
   
The broader TOPIX index of all first-section issues rose 6.08 points or 0.35 pct to 1,729.37.
   
"Investors took relief from robust results such as those of Honda and they also reacted positively to the sharp rise on the Dow overnight," said Hideo Mizutani, a chief strategist at Sieg Securities.
   
Honda closed up 410 yen or 5.3 pct at 8,180. The automaker reported record earnings for the past year to March, reflecting the impact of a weak yen, one-time gains and brisk overseas car sales.
   
Share prices in Australia closed down from fresh record highs as investors took profits in resource and energy stocks following mixed metal prices overnight and a further drop in oil, dealers said.
   
They said index leading resources BHP Billiton and Rio Tinto slipped while oil and gas producer Santos fell despite announcing a 10.4 pct jump in March quarter production and a 33.5 pct surge in revenue for the period.
   
Dealers said major banking stocks rose after ANZ reported a 16.5 pct increase in first half net profit for the six months to March, boosting investor sentiment ahead of the major banks reporting earnings next week.
   
The S&P/ASX 200 lost 27.0 points or 0.51 pct to close at the day's low of 5,300.2, falling from Wednesday's record close of 5,327.2.
   
Share prices in Hong Kong were trading higher in the afternoon on a fresh inflow of institutional funds and some futures-related buying ahead of the expiry of Hang Seng April contracts later today, dealers said.
   
They said sentiment was supported by Wall Street's gains overnight after some strong economic data and a batch of positive earnings announcements.
   
At 3:27 pm, the Hang Seng Index was up 118.11 points or 0.71 pct at 16,790.77.
   
In mainland China, A-shares in Shanghai and Shenzhen closed mixed on worries over possible macroeconomic control measures with power generators and steelmakers losing ground in particular, dealers said.
   
The Shanghai A-share Index fell 0.70 point to 1,486.65 on turnover of 20.90 bln yuan and the Shenzhen A-share Index was up 1.68 points at 362.58 on turnover of 12.84 bln yuan.
   
Share prices in Seoul ended at another record high, rebounding from an earlier loss triggered by Hyundai Motor's legal troubles, dealers said.
   
Hyundai Motor fell nearly four pct at one stage after prosecutors asked for an arrest warrant for the auto group's chairman Chung Mong-Koo over a graft scandal, triggering worries about a possible management vacuum without Chung's leadership.
   
Broader sentiment was supported by Wall Street's overnight rally and South Korea's strong production data for March, they said.
   
The KOSPI index closed up 1.31 points or 0.09 pct at 1,452.53.

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Gold futures trimmed losses after Bernanke's comments. Gold for June delivery was last down $1 at $641 an ounce.
   
On the bond market, long-term Treasury prices rose, sending yields lower. The benchmark 10-year note was last up 3/32 at 95 15/32, with its yield at 5.09%. Before Bernanke's comments, the yield was at 5.143%.
   
There was some disappointment on the employment front. First-time applications for state unemployment benefits rose by 11,000 last week to a seasonally adjusted 315,000, the Labor Department said.
   
Crude-oil futures moved lower in a continued response to better-than-expected weekly inventory data, and with news of a surprise interest rate hike in China reducing demand expectations.

Crude for June delivery was last down 67 cents at $71.26 a barrel.

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