US & World Daily Markets Financial Briefing 01-06-2006

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Stocks higher on inflation-friendly data

NEW YORK - Wall Street edged slightly higher Thursday after the latest batch of economic data gave Wall Street mixed signals on inflation, a day after the Federal Reserve said it was concerned about rising prices.
   
While the Institute for Supply Management's manufacturing index for May slid 2.9 points to 54.4 -- a sign of moderating economic activity -- the report's prices paid index surged 5.5 points to 77. Investors have been fearful of inflation, which could prompt the Fed to continue boosting interest rates.
   
But other reports had better news for inflation. The Labor Department revised upward its estimate of first-quarter productivity growth to 3.7 percent but said wage costs rose just 1.6 percent instead of an initial reading of 2.5 percent.
   
First-time jobless claims increased by 7,000 to 336,000 last week, compared with predictions for a 9,000 decline. A steady climb in applications indicated moderating strength in the labor market, the Labor Department said.
   
Meanwhile, strong May retail sales gave stocks a boost, having shown that consumers were unfazed by record prices at the gasoline pumps.
   
In the first hour of trading, the Dow Jones industrial Average rose 4.40, or 0.04 percent, to 11,172.71. On Wednesday, the Dow gained 74 points after dropping 184 points on Tuesday.
   
Broader stock indicators advanced. The Standard & Poor's 500 index was up 2.50, or 0.2 percent, at 1,272.59, and the Nasdaq composite index rose added 5.31, or 0.24 percent, to 2,184.19.
   
Bonds steadied after Wednesday's dive, with the yield on the 10-year Treasury note down to 5.12 percent from 5.13 percent late in the prior session. The U.S. dollar advanced against the Japanese yen; gold prices plunged to $630 an ounce.

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Crude futures fell further on signals that the Organization of Petroleum Exporting Countries will not tighten current output, and as traders awaited the government's weekly update on U.S. reserves. A barrel of light crude dipped 89 cents to $70.40 on the New York Mercantile Exchange.
   
Retail stocks were in focus as consumers spent freely last month despite soaring gasoline prices. Federated Department Stores Inc. added 76 cents to $73.59 on its sharply better-than-forecast May sales; JCPenney Co. also saw strong sales, lifting its stock $2.26 to $63.02.
   
Meanwhile, Wal-Mart Stores Inc.'s modest results sent shares down 35 cents to $48.10.
   
Food producer H.J. Heinz Co. posted a 19 percent drop in quarterly profit and said it plans to slash 2,700 jobs and close 15 plants to cut costs. Heinz rose 95 cents to $43.30.
   
The Russell 2000 index of smaller companies gained 2.80, or 0.39 percent, to 723.81.

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The European Markets at 12.00 BST

London - Leading shares remained lower midday ahead of a likely negative start on Wall Street after yesterday's FOMC minutes failed to offer insight into future US interest rate movements, and as the mining sector continued to come under pressure, dealers said.
   
At 12.02 pm, the FTSE 100 index traded 25.9 points lower at 5,697.9 after initially hitting morning highs of 5,754.8.

Frankfurt - Shares were sharply lower in midday trade, pulling back from yesterday's gains, as US stock futures pointed to losses on Wall Street this afternoon and as financial stocks and index heavyweights RWE and E.ON slid, dealers said.
   
At 11.34 am, the DAX 30 index was 78.77 points or 1.38 pct lower at 5,614.09, having moved between 5,603.10 and 5,694.27 so far this session.

Paris - Shares turned lower by midsession in line with other European indices, erasing the gains from yesterday's rally, as investors remain uncertain in the current market volatility, dealers said.
   
At 1.13 pm, the main CAC-40 index was 36.97 points or 0.75 pct lower at 4,893.21, on trading volume of 1.86 bln eur.
  
Amsterdam -  Share prices were lower in early afternoon trade ahead of the US macroeconomic data due later as US futures indicated a lower opening on Wall Street, dealers said.
   
At 1.03 pm, the AEX index was down 4.07 points or 0.92 pct at 436.34, just off its intraday low of 435.62 and after reaching an early high of 442.35.

Madrid - Share prices were lower in modest midday trade, depressed by the weaker US futures ahead of key US data later this afternoon, with blue chips like Telefonica hit by profit-taking, while Sogecable and Zeltia gained, dealers said.
   
At 11.43 am, the IBEX-35 index was down 62.6 points at 11,277.9, after trading in a range of 11,244-11,375, on turnover of 973 mln eur.

Milan - Share prices were lower in volatile midday trade, reversing initial gains, with Fondiaria-SAI leading the losers after sharp gains yesterday and Alitalia higher following the release of April traffic figures, dealers said.
   
At 12.39 pm, the Mibtel index fell 0.28 pct to 27,846 points and the S&P/Mib was off 0.34 pct at 36,326, while volumes stood at 2.2 bln eur.

Stockholm - Shares remained in slightly negative territory in midday trade in line with the rest of Europe, as US futures pointed to a lower opening on Wall Street, dealers said.
   
At 12.05 pm, the OMX Stockholm index was down 0.51 pct at 305.96, while the OMX Stockholm 30 index was down 0.56 pct at 942.73. Turnover was 10.27 bln skr.

Zurich - Share prices were lower in volatile midday trade, reversing gains made yesterday and earlier today, tracking other key European markets and led down by Swiss Life, ABB and Holcim, traders said.
   
At 11.44 am, the Swiss Market Index was 47.51 points lower at 7,556.89, and the Swiss Performance Index down 31.12 points at 5,893.45.

Helsinki - Helsinki shares moved into the red in midday trade after initial gains, in line with other European bourses amid renewed profit-taking, brokers said.
   
At the OMX Helsinki 25 was 0.32 pct lower at 2,452.49 and the OMX Helsinki was down 0.13 pct at 8,759.16.

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Asian shares close mixed; economic fears offsetting bargain hunting

HONG KONG - Shares across Asia-Pacific markets closed mixed with nervousness about the US economy offsetting interest from bargain hunters, dealers said.
   
Tokyo share prices finished higher, supported by Wall Street's recovery overnight, but a lack of follow-through buying in the afternoon saw the Nikkei finish off its intra-day high, they added.
   
They noted that many local players remained wary about the intentions of foreign investors following a wave of capital repatriations.
   
Investors also wanted to see the result of US non-farm payroll data for May due out tomorrow, they said.

Worries about the knock-on effect of a weakening US economy has prompted many large offshore institutional investors, particularly hedge funds, to cut positions and repatriate funds from Japan and some other Asian countries
   
The blue-chip Nikkei 225 Stock Average closed up 36.41 points or 0.2 pct at 15,503.74, off a high of 15,655.000. The TOPIX index of all first-section issues rose 4.62 points or 0.3 pct to 1,584.56.
   
Shinko Securities strategist Tsuyoshi Segawa said the local market got off to a firm start, showing "a typical knee-jerk reaction to the overnight rebound on Wall Street.
   
"At the same time, there appeared to be signs that the recent repatriation of capital from Japan by foreign investors, particularly hedge funds, may now be tapering off."
   
Australian shares ended sharply higher as investor sentiment rebounded in response to Wall Street and with bargain hunting after recent heavy sell-offs, dealers said.
   
They said index-leading resource stocks BHP Billiton and Rio Tinto recovered some of their losses from yesterday, despite mixed base metal prices overnight and lower oil and gold futures.
   

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Dealers said the Australian Bureau of Statistics capex report for the March quarter, showing strong investment intentions for the next June fiscal year, aided buying sentiment.
   
The S&P/ASX 200 rose 58.9 points or 1.18 pct to close at 5,060.6, moving back towards the May 11 record close of 5,364.5.
   
Hong Kong shares were slightly lower in afternoon trade, with investors focused on Bank of China as it posted sharp gains on its trading debut, dealers said.
   
The Hang Seng Index was trading at 15,706.29 at 3:30 pm, down 157.21 points or 0.99 pct in see-saw trading. Dealers said the market continued to be affected by volatility in global markets.
   
Bank of China finished the morning at 3.375 hkd, up 14 pct from its IPO price of 2.95 hkd after opening at 3.15 hkd.
   
In mainland China, A-shares in Shanghai and Shenzhen closed sharply higher, with steel companies active on M&A speculation and financial stocks buoyed by the Bank of China's strong debut, dealers said.
   
The Shanghai A-share Index rose 45.22 points, or 2.62 pct, to 1,769.56 on turnover of 38.28 bln yuan and the Shenzhen A-share Index was up 13.37 points at 3.09 at 446.51 on turnover of 22.57 bln yuan.
   
Seoul share prices closed sharply lower, retreating under the 1,300 point level, after a reported military alert due to missile activity in North Korea and political uncertainty after yesterday's local elections, dealers said.
   
A raft of positive economic data, including robust May exports, failed to lift sentiment as many investors were focused on a possible slowdown in the second half, they added.
   
The KOSPI index closed down 22.61 points or 1.72 pct at 1,295.09.

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