US & World Daily Markets Financial Briefing 27-07-2007

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Stocks bounce around following pullback

NEW YORK - Wall Street bounced around Friday -- at turns rising, falling and trading flat -- as investors already anxious after the second-biggest market drop this year digested a stronger-than-expected read on
the economy.
   
Wall Street shuddered Thursday amid worries over the U.S. mortgage and corporate lending markets, sending the Dow Jones industrials down by as much as 450 points before it closed with a deficit of 311. Investors globally took flight from equities, shifting cash into safer investments in Treasurys.
   
Investors seemed little-moved by a stronger-than-expected consumer sentiment reading. the Reuters/University of Michigan index rose to 90.4 in July from 85.3 in June.
   
Also Friday, the Commerce Department reported that the U.S. economy was strong during the second quarter as the drag from the housing sector lessened. GDP during the quarter was up at a 3.4 percent annual rate April through June, compared to a prediction of 3.3 percent by economists.
   
Although the GDP reading might have reassured investors that the economy was more than holding up even with soaring fuel prices, it also raised the possibility that the Federal Reserve, ever vigilant about inflation, might lean toward raising interest rates. Higher rates would exacerbate the market's intensifying concerns about credit.
   
In morning trading, the Dow Jones industrial average rose 19.43, or 0.14 percent, to 13,493.00.
   
Broader stock indicators also fell. The Standard & Poor's 500 index rose 1.99, or 0.13 percent, to 1,484.65, and the Nasdaq composite index rose 4.41, or 0.17 percent, to 2,603.75. Declining issues outnumbered advancers by about 9 to 5 on the New York Stock Exchange, where volume came to 249.7 million shares.
   
Bonds fell modestly after huge advance Thursday, with the yield on the benchmark 10-year Treasury note rising to 4.80 percent from late Thursday's 4.79 percent.    

There will be little corporate earnings news for traders to mull over during the session, with about half the Standard & Poor's 500 index already having posted results over the past few weeks.

The biggest earnings news before the opening bell came from Chevron Corp., which reported second quarter profit climbed 24 percent to surpass analyst estimates as the second largest U.S. oil business cashed in on higher gasoline prices. Chevron fell 2 cents to $87.44.
   
Oil prices might also be a driver for the stock market on Friday as it resumed its rally that was cut short Thursday when stocks plummeted. Light, sweet crude on Friday rose 42 cents to $75.37 on the New York Mercantile Exchange.
   
The Russell 2000 index of smaller companies fell 1.47, or 0.19 percent, to 790.01.
   
Britain's FTSE 100 slipped 0.28 percent, Germany's DAX index dropped 0.71 percent, and France's CAC-40 rose 0.08 percent.

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Dollar slips as fall in inflation offsets firm US Q2 GDP figures

LONDON - The dollar dropped slightly as a larger than expected fall in core US inflation offset a robust set of second quarter GDP figures.
   
The US economy is estimated to have grown 3.4 pct between April and June compared to the same period a year ago, slightly faster than the 3.2 pct economists had expected.
   
However this news was countered by figures showing that the Federal Reserve's preferred measure of inflation, the core PCE price index, rose 1.4 pct in the second quarter, down sharply from the 2.4 pct rise in the prior quarter and the slowest pace since the second quarter of 2003.
   
This news is likely to have strengthened the possibility that there might yet be a cut in US interest rates before the end of the year.
   
At 1.41 pm, the euro was trading at 1.3660 usd, having been at 1.3643 shortly before the data was released.

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Euroshares lower midday as Dow set to add to losses; mixed earnings news

LONDON - Europe's leading exchanges were lower midday as the Dow looked set for further losses on concerns over the health of the US economy and with fears of a possible 'credit crunch' spreading, and as investors digest a new rack of earnings reports.
   
At 12.14 pm, the STOXX 50 was down 20.7 points at 3714.49 and the STOXX 600 was 2.36 points lower at 372.2.
    
In the automotive sector, Volkswagen AG stormed 3.01 pct higher after the company said first half net profit was 1.959 bln eur compared with 1.186 bln eur in the same period last year and as it presented a bullish outlook for the full year.
   
Shares were also supported by reports Porsche has acquired more options to be able to increase its stake in the German automaker if necessary. "We have secured several options to enable us to further increase our stake in VW if we deem it necessary," chief financial officer Holger Haerter told the Financial Times. "Now we are prepared for anything," he said. Porsche currently holds a 31 pct stake in VW.
   
Staying in the sector, Michelin fell 2.59 pct after its first half results and car parts maker Valeo slumped 2.97 pct after last night's numbers came in at the low end of analysts' forecasts.
   
Saint-Gobain couldn't hold on to opening gains -- even after its stronger than hoped for first-half earnings and improved outlook -- and turned 0.79 pct lower. French luxury goods company LVMH gained 1.55 pct after its second quarter numbers, which were slightly ahead of forecasts.
   
Eyewear maker Luxottica -- down 1.58 pct -- said last night that it increased its full-year EPS guidance to 1.11-1.13 eur from 1.07-1.09 eur after releasing consensus-beating second quarter results. Goldman Sachs, though, said the retail performance was somewhat disappointing.
   
Clarins slumped 2.65 pct as it presented first half results last night which showed a 3 percentage points decline in operating margins.
   
Atos Origin turned positive for a short time in lunchtime deals amid spurious talk Siemens was looking to make a bid for it. Shares were up 0.27 pct, having been up nearly 2 pct.
   
And Infineon was 2.05 pct higher after the chipmaker released third-quarter figures -- including a 197 mln eur net loss -- which traders said were worse than expectations.
       
French IT consultancy Capgemini also disappointed, down 3.18 pct, saying first half operating profit was 229 mln eur, up from 139 mln a year earlier.
   
Analysts at Natixis said they were disappointed by results from Capgemini's outsourcing activities, while UBS said first half outsourcing bookings were ahead of its forecast but the book-to-bill ratio "was not especially inspiring."
   
Intesa SanPaolo added 2 pct after it announced it would be buying back its own shares to buy CR Firenze and as analysts continue to believe the deal will improve the banking group's growth profile.
   
But Alliance & Leicester fell 1.75 pct after it said its first-half profit rose 10 pct, broadly in line with analyst estimates, underpinned by tight cost controls.

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Asian shares fall on Wall Street sell-off; Nikkei hits 3-month low

MUMBAI - Shares across the Asia-Pacific region fell Friday, following sharp sell-off on Wall Street overnight, with shares in Japan  hitting a three-month low and Hong Kong index crashing over 600 points.
   
In Japan, shares of exporters came under selling pressure on fears that a firmer yen will hurt their earnings. Investors were also cautious as they awaited the outcome of elections Sunday to the upper house of parliament.
   
The blue-chip Nikkei 225 Stock Average declined 418.28 points or 2.4 pct to close at 17,283.81, its lowest level since May 1, when it finished  at 17,274.98. The broader TOPIX index fell 37.47 points or 2.2 pct to 1,699.71.
   
Hong Kong share prices crashed, with the main index posting its biggest single-day drop since March 5, following Wall Street's sell-off. Selling in the local bourse was spread  across the board, with HSBC among the stocks hit as investors fretted over the bank's exposure to the US sub-prime mortgage market. The Hang Seng Index closed down 641.28 points or 2.76 pct at 22,570.41.
   
Australian shares closed sharply lower too as investors reacted to the slide in global equities amid worries of the US subprime  mortgage market and the broader housing sector, and their impact on the world's largest economy.
   
The S&P/ASX 200 closed down 175.6 points or 3 pct at 6,082.9, its low for the day. Over the trading week, the benchmark index lost 338.9 points or  5.3 pct. The All Ordinaries index fell 174.1 points or 3 pct to 6,127.3. Index leader BHP Billiton lost 1.33 aud or 3.6 pct to 35.97 aud, while Rio  Tinto fell 3.25 aud or 2.5 pct to 90.60 aud.
      
South Korean shares closed sharply lower as investors rushed to reduce their positions in the wake of the Wall Street sell-off.  The main KOSPI index posted its steepest one-day points decline since April 2000, closing 80.32 points or 4 pct lower at 1,883.22. Over the week, the KOSPI lost 100.33 points or 5 pct.
      
In Taipei, the weighted index closed down 404.14 points or 4.22 pct at the day's low of 9,162.28. The index ended the week with a cumulative  loss of 423.62 points, or 4.42 pct.
       
Meanwhile, China A-shares closed mixed with Shanghai slightly lower as banks were hit by profit-taking after the composite index hit a new high yesterday.  The benchmark Shanghai Composite Index, which covers both A- and B-shares listed on the Shanghai Stock Exchange, closed down 1.10 points or  0.03 pct at 4,345.36, after falling by 1.79 pct in the day.
       
Elsewhere, in Philippines shares closed sharply lower hit by across the board selling which pushed the main index to its weakest close in nearly  two months, as investors reacted to the massive overnight sell-off on Wall Street. The 29-company composite index declined 140.92 points or 3.8 pct to 3,518.76, its lowest finish since June 7, when it settled at 3,528.79. The  index posted a drop of 6 pct from the previous week. The broader all-share index fell 89.19 points or 4 pct to 2,283.23.
   
Singapore's Straits Times index closed down 87.03 points or 2.4 pct at 3,492.70. The index lost 158.68 points or 4.3 pct during the week.
   
Malaysian share prices closed sharply lower as well, with The Kuala Lumpur Composite Index losing 26.12 points or 2 pct to 1,355.38. For the week, the KLCI lost 26.98 points or 2 pct.
   
Indonesian shares closed sharply lower as well, as investors sold down shares across the board. The composite index closed down 66.85 points or 2.8 pct at 2,298.41.  

Indian shares ended the day sharply lower, with heaving selling across the board, after Asian and US markets plunged. The Bombay Stock Exchange's 30-share Sensex ended down 3.43 pct, or 541.74 points, at 15,234.57 points. The National Stock Exchange's 50-share S&P CNX Nifty closed 3.78 pct down, at 4,445.20 points.

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Gold extends losses as Wall St slide seen continuing

LONDON - Gold extended losses into the afternoon as expectations yesterday's US equity slide could continue today prompted a wave of risk aversion and further selling of the precious metal to cover positions
elsewhere.
   
The dip came despite a slight softening in the US dollar after the second-quarter core inflation indicator came in lower than expected, strengthening expectations for a future rate cut.
      
At 2.19 pm, spot gold was trading at 660.90 usd an ounce, against 662.60 usd in late New York trade yesterday. The precious metal rallied this morning to a high of 666.80 usd in a correction from last night, before easing in later trade.
   
The Dow Jones industrials average closed down more than 310 points, after earlier slumping nearly 450 points. The slide prompted investors globally to pull away from riskier assets such as equities and commodities in favour of shifting cash into safer investments in Treasurys.
   
Gold holdings specifically have been liquidated to cover losses elsewhere, analysts said. "Gold was being liquidated because it could be sold... to get the liquidity that the global capital markets now so materially crave," said Dennis Gartman, editor of the Gartman Letter trading note.
       
Among other precious metals, platinum also slipped sharply on fears demand from car manufacturers, who use platinum in the manufacture of catalytic converters, could ease.
   
Nissan announced earlier that it has developed a new catalyst that halves the use of platinum group metals, which it is planning to launch in 2009.
   
"The outlook for both of the PGMs has been supported by the increasing price-inelastic demand from industrial use, but should the autocatalyst demand start to recede, this would expose prices to downside risk," said analysts at Barclays Capital.
   
Platinum dipped to 1,279 usd per ounce against 1,311 usd in late New York trade yesterday, while palladium eased to 359 usd from 363 usd. Meanwhile silver was trading at 12.70 usd against 12.89 usd.

At 3.03 pm, LME copper for three-month delivery was trading at 7,820 usd, up from 7,765 usd at the close yesterday.
   
Among other base metals, lead was flat at 3,076 usd yesterday, while nickel edged up to 31,350 usd from 31,200 usd.
   
Zinc was trading at 3,495 usd against 3,499 usd, tin held firm at 15,500 usd, and aluminium edged up to 2,754 usd from 2,736 usd.

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