US & World Daily Markets Financial Briefing 01-08-2007

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Stocks open flat following earnings news

NEW YORK - Stocks zigzagged in early trading Wednesday as Wall Street tried to grapple with continued worries about U.S. property loans and the credit market
   
The major indexes fluctuated in the early going, a sign of how fractious the market remains after a series of triple-digit swings in the Dow Jones industrials over the past week. On Tuesday, Wall Street gave back a big early gain and resumed the sharp slide it began last week, as concerns about home loan defaults re-emerged when American Home Mortgage Investment Corp. reported troubles with its credit lines.
   
Adding to that anxiety Wednesday, The Wall Street Journal, citing anonymous sources, reported that Bear Stearns Cos. -- which riled the markets weeks ago when it shut two hedge funds that bet on risky home loans -- now faces big losses in a third fund with about $900 million in mortgage investments.
   
Whole Foods Market Inc. rose $3.27, or 8.8 percent, to $40.31 after reporting a smaller but better-than-expected fiscal third quarter.
   
In the first hour of trading, the Dow fell 31.95, or 0.24 percent, to 13,180.04 after being up more than 50 points earlier.
   
Broader stock indicators also fell. The Standard & Poor's 500 index fell 3.91, or 0.27 percent, to 1,451.36, and the Nasdaq composite index fell 13.29, or 0.52 percent, to 2,532.98.

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Dollar wobbles as ADP report suggests weak US non-farm payrolls

LONDON - The dollar had a wobble after indications that the crucial US jobs report due Friday will come in weak.
   
In data out this afternoon, the ADP national employment report showed US companies added 48,000 jobs in July, far lower than the 100,000 expected by analysts.
   
Sentiment in wider markets dived after reports of more hedge funds in trouble amid the continuing fall-out in US sub-prime mortgages. To make matters worse, American Home Mortgage Investments said that it could not meet debt service obligations. Shares of the company, which makes mortgages and bundles
them into securities, plummeted by over 90 pct. The benchmark DJIA index slumped over 100 points overnight.
   
"The dollar continues to trade well at times of equity market stress," said Daniel Katzive at UBS.
   
The yen meanwhile was well off day highs after the rout on stock markets.
   
The Japanese unit has been benefiting from increased aversion to risk, which in turn led to an unwinding in carry trades, where players take advantage of low interest rates in the second biggest economy to invest where yields are higher, such as New Zealand and Australia.
   
"When currency traders are closely watching equities, the intra-day correlation between the rising yen and falling equities is playing an increasingly vital role in repricing risk in forex markets," said Laidi at CMC
Markets.
   
The Australian and Kiwi dollars were among the biggest losers, while the euro and pound also came under pressure. The Swiss franc, another funding currency for carry trades, also enjoyed good gains while the dollar found fresh safe haven type flows.
   
"High yield/emerging market currencies have, as would be expected, suffered most heavily, with the dollar catching a bid almost by default," said Steve Pearson at HBOS.
   
Elsewhere, the pound got a short-lived boost from unexpectedly strong UK manufacturing PMI report.
   
The purchasing managers' index on UK manufacturing activity from the Chartered Institute of Purchasing and Supply jumped to a three-year high of 55.7 in July from 54.7 in June, revised up from the previous estimate of 54.3.
   
The reading was way above the consensus forecast of analysts polled by Thomson Financial News, who had predicted a fall to 53.8.

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Euroshares off lows midday as Dow futures trim losses; on strong Q2 updates

LONDON - At 1.22 pm, the Dow Jones STOXX 50 Index was down 48.81 points, or 1.29 pct at 3,745.61 while the DJ STOXX 600 Index dropped 5.37 points, or 1.41 pct to 374.74. The DJ Euro STOXX 50 Index, which tracks the performance of blue-chip companies in 12 countries using the euro, was down 73.57 points, or 1.7 pct at 4,242.12.
  
Over in France, BNP Paribas said second quarter net profit jumped 20 pct to 2.282 bln eur -- 12 pct ahead of analyst forecasts. Shares in the French bank were off 2.31 pct. And HBOS fell 4.69 pct after its second quarter results.
   
And shares in Deutsche Boerse AG fell 3.98 pct after its quarterly results fell short of estimates, and as some analysts expressed concern about weak organic growth in some segments. Exane BNP Paribas cut its rating 'neutral' from 'outperform' as a result.
   
Back in earnings, TF1 shares tumbled 14.62 pct to their lowest level since November 2005 after the television group unveiled a 5 pct drop in second-quarter advertising sales at its flagship TF1 channel.
    
Over in Germany, shares in BMW fell 3.86 pct after the car maker offered up second-quarter profits that came in slightly below expectations as currency effects and start-up costs adversely impacted earnings.
   
Henkel KGaA shares were down 2.72 pct after its second-quarter results missed analyst expectations, although broker Collins Stewart said the sell-off represented a buying opportunity.
      
Sanofi-Aventis was down 3.43 pct, underperforming an already weak health sector, after the French drugs group's quarterly profit fell short of analyst estimates after competition from generic versions of its Ambien sleep aid in the US and its anti-cancer drug Eloxatin in Europe.
  
Broker ABN Amro reiterated its 'sell' rating on Sanofi-Aventis because of concern over the generic competition to a number of its best-selling drugs.
   
Siemens turned higher -- up 0.88 eur, or 0.9 pct -- as dealers noted market relief after a rumoured placing failed to materialise. Shares fell 1.55 eur yesterday.
   
And Arcelor Mittal added 0.15 pct after the steel group posted better-than-expected second quarterly results and issued an upbeat third quarter outlook.
     
Shares in Hugo Boss were 0.08 pct higher after the company presented first half results which exceeded analyst' expectations.
   
Shares in Metro were down only 0.21 pct -- and outperforming -- after the German food retailer released second-quarter figures that were in-line to perhaps a touch above forecasts.
   
There were firm gains in the chemicals sector with ICI up 1.81 pct afetr reports  Dow Chemical, the largest chemicals group in the US, is considering making a counter-bid for the UK group which rejected a second, raised bid from Akzo Nobel on Monday.
   
The telegraph said Dow has has asked Lazard, the investment bank run by veteran deal-maker Bruce Wasserstein, to advise on options for gatecrashing the 7.8 bln stg bid. Akzo was down 0.64 pct.

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Asian shares close sharply lower on Wall Street losses; Australia hardest hit

MUMBAI - Shares across the Asia-Pacific region closed sharply lower following Wall Street's overnight losses as the meltdown in the US subprime mortgage market sent shock waves through global markets.
   
Australian indices saw their biggest one-day fall in percentage terms since the aftermath of the September 2001 terror attacks in the US. The S&P/ASX 200 closed down 203.0 points or 3.3 pct, at the day's low of 5,941.2. The All Ordinaries index dropped 198.1 points or 3.2 pct to 5,989.4.
    
Japanese shares plunged on fears that US housing and credit problems could spread into the wider American economy. The blue-chip Nikkei 225 Stock Average closed down 377.91 points or 2.2 pct at 16,870.89, its worst closing level since it ended at 16,744.15 on March 16.  The broader TOPIX index fell 37.33 point or 2.2 pct to 1,668.85.
   
China shares also closed sharply lower amid volatile trading as investors took profits after the benchmark index reached a new intraday high. Sharp falls in other Asian markets also weighed on sentiment and prompted a heavier sell-off in late trade.
   
The Shanghai Composite Index, which covers both A- and B-shares listed on the Shanghai Stock Exchange, closed down 170.47 points or 3.8 pct at 4,300.56, after hitting an all-time intraday high of 4,502.30 in the morning session.
       
Hong Kong share prices closed sharply lower again on US housing concerns and worries about unwinding of carry trades, with Japanese currency shows signs of strengthening. Drops on mainland bourses also made investors cautious. The Hang Seng Index closed down 729.58 points or 3.2 pct at 22,455.36, its biggest fall since March 5, when it dropped 777 points or 4 pct.
   
In South Korea, the KOSPI index fell 76.82 points or 4 pct to 1,856.45.
   
Malaysian share prices fell at the close of trading, with local finance, property and mining stocks suffering the biggest losses. Concerns over wider implications of problems in the US subprime mortgage market increased after Australia's Macquarie Bank said some of its funds faced large losses. The Kuala Lumpur Composite Index (KLCI) was down 34.22 points or 2.5 pct at 1,339.49.
   
In Singapore, the Straits Times index fell to its lowest levels since May, plunging 115.95 points or 3.3 pct to close at 3,431.71.
   
Taiwan share prices fell as slumps in major overseas markets rattled an already volatile local bourse. The weighted index closed down 395.37 points or 4.3 pct at the day's low of 8,891.88.
   
Philippine shares also slid as concerns over soured home loans in the US overshadowed the positive outlook for the domestic economy. Manila's composite index fell 74.75 points or 2.1 pct to 3,426.45, its weakest finish since May 30 when it had settled at 3,398.55. The all-share index fell 46.61 points or 2.1 pct to 2,222.35.
   
Indonesian shares fell in line with other regional markets. The benchmark Jakarta composite index closed down 92.37 points or 3.9 pct at 2,256.31.

Indian shares fell nearly 4 pct tracking a sell-off in other Asian markets, which were spooked by a weak closing on Wall Street on deepening subprime mortgage worries. The Bombay Stock Exchange's benchmark Sensex closed down 3.96 pct, or 615.22 points, at 14,935.77. The National Stock Exchange's S&P CNX Nifty closed 4.11 pct lower, at 4,342.90 points.

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Gold continues to languish as Wall St seen heading for lower opening

LONDON - Gold continued to languish in afternoon trade as an expected lower opening on Wall Street fuelled risk aversion among investors, and as the dollar's rally against the euro continued.
  
"The focus will be on the collapsing equity stock markets and selling of risky assets is likely to drag gold lower," said Peter Fertig, a consultant to Dresdner Bank in Frankfurt.
       
At 1.31 pm, spot gold was trading at 660.00 usd an ounce, against 667.20 usd in late New York trade yesterday. The precious metal has lost ground in line with the slide in global equities over the last 24 hours.
   
The Dow Jones Industrial Average lost nearly 150 points yesterday as fresh concerns over home loans reversed what had appeared to be a solid recovery. It was swiftly followed down by the major Asian and European bourses, fuelling concerns that the fall-out in the US market could hit the global economy.
   
As stocks slide, risk-averse investors are pulling out of 'riskier' assets such as stocks and commodities in favour of putting money into bonds and currencies. The move is benefiting the dollar, which further weighs on gold.
   
Elsewhere, expectations that European central banks are likely to up their sales of gold reserves are also weighing on sentiment, analysts said.
   
Other precious metals weakened in sympathy. Platinum dipped to 1,275 usd from 1,289 usd, palladium slipped to 358 usd from 364 usd, and silver eased to 12.79 usd from 12.96 usd.
   
Both the platinum group metals have been adversely affected by news last week that Nissan has developed technology that will cut the use of PGMs in catalytic converters, currently a key market for the metals.

At 2.35 pm, LME copper for three-month delivery was trading at 7,881 usd, down from 8 ,010 usd at the close yesterday.
   
Copper was pressured further by news that the month-long contract workers' strike at Chilean government-owned copper miner Codelco had come to an end. The end of the labour dispute at the world's largest producer of the red metal has helped ease supply fears, which have been supporting recent gains in prices.
  
Nickel, already under pressure from declining use by stainless steel manufacturers, was hit hard, down almost 2 pct at 30,850 usd, against 31,450 usd.
   
Tin fell to 15,755 usd per tonne, against 16,210 usd, while aluminium was down at 2,743 usd versus 2,751 usd.
   
Elsewhere, zinc dropped to 3,490 usd versus 3,545 usd, and lead lost close to 1 pct, down at 3,070 usd against 3,105 usd at the close on Tuesday.

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