US & World Daily Markets Financial Briefing 02-02-2007

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Stocks narrowly mixed on jobs data

Stocks were narrowly mixed in early trading Friday as Wall Street absorbed a weaker-than-expected employment report that curbed investors' bullish sentiment following three days of straight gains.

The January jobs report, which showed the country's unemployment rate at a four-month high of 4.6 percent, came as a surprise on Wall Street. A reading of 4.5 percent had been expected. The Labor Department report signaled employers were more cautious than expected in adding jobs in the new year. The economy added 111,000 jobs last month, below the 150,000 that had been expected. The figures are subject to revisions but nevertheless draw scrutiny.

In a week full of corporate profit reports, the Federal Reserve's decision on interest rates and the jobs report stood out and, as expected, played the greatest role in shaping investor sentiment. The Fed's decision to leave short-term interest rates unchanged and its comments that the economy remains solid and that inflation appears to be in check helped drive stocks sharply higher. The Dow Jones industrials and the Russell 2000 index of smaller companies set closing highs Thursday.

In the first hour of trading Friday, the Dow Jones industrial average was down 6.57, or 0.05 percent, at 12,667.11. Shortly after the opening bell the Dow logged a fresh trading high of 12,683.93 before moving lower; the previous high set Thursday, was 12,682.57.

Broader stock indicators were higher. The Standard & Poor's 500 index was up 1.61, or 0.11 percent, at 1,447.55 and the Nasdaq composite index was up 5.09
or 0.21 percent, at 2,473.47.

Bonds rose on the jobs report, with the yield on the benchmark 10-year Treasury note falling to 4.82 percent from 4.83 percent late Thursday. The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude rose 30 cents to $57.60 per barrel in premarket electronic trading on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies was up 0.30, or 0.04 percent, at 808.07.

Overseas, Japan's Nikkei stock average rose 0.16 percent. In afternoon trading, Britain's FTSE 100 was up up 0.57 percent, Germany's DAX index was up 0.45 percent, and France's CAC-40 was up 0.38 percent.

In corporate news, Internet retailer Amazon.com Inc. fell $1.55, or 4 percent, to $37.14 after the company's fourth-quarter profit halved but came in above Wall Street's forecasts.

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Dollar recovers as weak Jan US payrolls numbers offset by back revisions

The dollar recovered earlier losses in the wake of this afternoon's key US jobs data as market players turned to focus on upward revisions to back data, rather than the weaker-than-forecast headline reading and a higher unemployment rate.

Official data released this afternoon showed US non-farm payrolls rose by 111,000 during January, well below the 150,000 gain forecast by analysts. The unemployment rate also rose unexpectedly to 4.6 pct from 4.5 pct in December.

Immediately after the data, the euro reached a four-week highs against the US currency of 1.3064 usd, while the pound briefly touched an nine-day high of 1.9748 usd.

The dollar soon recovered much of those losses, however, as the headline readings were offset by news of substantial revisions to back data, with payrolls for November and December revised up by a total of 81,000.

"The upward revision in December jobs was a bright spot in the data and some dollar bulls are taking heart from the data," said Russell Bloom at Thomson IFR Markets.

For 2006 as a whole, revisions meant that a total of 405,000 additional jobs were created than previously estimated.

The figures are strong enough to confirm the market's view that the US Federal Reserve will not cut interest rates any time soon.

Earlier this week, the Federal Reserve left interest rates unchanged at 5.25 pct, while its accompanying statement pointed to strengthening economic growth but moderating inflation.

Later this afternoon, market players will also be looking out for the latest University of Michigan survey on US consumer sentiment.

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European summary -Midday

LONDON - Leading shares remained strong midmorning as investors tucked into Sainsbury on the back of merger and acquisition excitement after a trinity of private equity firms confirmed they are eying the supermarket giant, dealers said.

At 10.15 am, the FTSE 100 was up 36.6 points to 6,318.8. The broader indices were also higher.

FRANKFURT - Shares were higher in midday trade, continuing to advance to the highest levels in six years, led by E. ON, which is expected to enter its final sealed offer for Spanish utility Endesa today, and with investors awaiting a raft of key US jobs data later this afternoon, dealers said.

At 11.42 am, the DAX was up 16.00 points or 0.23 pct at 6,867.28, after trading between 6,848.17 and 6,871.88.

PARIS - Share prices were firmer early afternoon, with investor sentiment buoyed by robust US consumer spending figures and the retail sector in focus amid speculation of a private equity takeover.

At 12.25 pm the CAC-40 index was up 17.70 points or 0.31 pct at 5,679.95 on volume of 2.0 bln eur.

AMSTERDAM - Share prices were up in quiet midday trade with investors looking to US non-farm payroll data expected later today to give a heartier push to the market, dealers said.

At 12.11 pm, the AEX was up 1.65 point or 0..3 pct at 507.24, after opening at 507.23 and raching a high of 506.57. 

MADRID - Share prices were slightly higher in cautious midday trade ahead of the key US jobs data later today, with Endesa, Gas Natural and Acciona in focus ahead of E. ON's final bid presentation, while heavyweight blue chips were mixed, dealers said.

At 12.46 pm, the IBEX-35 index gained 20.8 points to 14,591.0, after trading in a range of 14,551-14,598, on turnover of 1.8 bln eur.

STOCKHOLM - Shares were slightly lower in midday trade, weakening a touch from morning levels as Ericsson extended its losses after its badly received fourth-quarter report, dealers said.

At 12.05 pm, the OMX Stockholm index was down 0.10 pct at 387.68, and the OMX Stockholm 30 was down 0.28 pct at 1,188.33. 

HELSINKI - Shares were slightly lower in midday trade, with losses in a group of blue chips offsetting gains in some key stocks, brokers said.

At 12.36 pm, the OMX Helsinki 25 was 0.02 pct lower at 3,006.79 and the OMX Helsinki was down 0.25 pct at 10,083.16 on 461 mln eur turnover.

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Asian shares close mixed, China A-shares sharply lower on tightening fears

Shares across the Asia-Pacific region closed mixed, with some markets boosted by Wall Street's rise overnight but Tokyo flat on profit taking and China A-shares sharply lower on fears of further government tightening, dealers said.

Tokyo shares closed flat, having shed gains made during the course of the day in response to the release of healthy corporate quarterly results, dealers said.

They said while sentiment remained generally positive, with Matsushita Electric Industrial having yesterday joined other major companies in increasing its forecasts of earnings for the fiscal year ending March, investors had sought further incentives to chase prices higher.

Short-term players moved to lock in profits, as they usually do before the weekend, dealers said.

The blue-chip Nikkei 225 Stock Average closed 27.61 points or 0.16 pct higher at 17,547.11, off a high of 17,633.61.

The broader TOPIX index of all first-section issue ended 3.82 points or 0.22 pct higher at 1,742.40, off a high of 1,750.72.

Australian shares closed at fresh record highs as sentiment remained broadly bullish, although some caution ahead of US Jan payrolls data tonight limited the upside, dealers said.

The S&P/ASX 200 ended up 17.4 points or 0.30 pct to a new record close of 5,831.5, beating yesterday's previous record of 5,814.1. The key index also hit a fresh intra-day record of 5,841.3. The low for the day was 5,816.8.

Over the trading week the benchmark index climbed 61.6 points or 1.1 pct.

Hong Kong shares were stronger in afternoon trade as Wall Street's gains overnight and robust US consumer spending data encouraged investors to build positions in property stocks and China financials, dealers said.

At 3.50 pm the Hang Seng Index was up 102.25 points or 0.50 pct at 20,532.41.

In mainland China, A-shares in Shanghai and Shenzhen closed sharply lower on heavy institutional selling prompted by fears of more government measures to curb market liquidity, dealers said.

They noted that financial and property issues were among the most heavily sold stocks.

The Shanghai A-share Index was down 118.43 points or 4.05 pct at 2,808.34
and the Shenzhen A-share Index was down 19.70 points or 2.87 pct at 666.28

Seoul shares closed sharply higher with sentiment underpinned by Wall Street's advance on robust consumer spending data, dealers said.

Foreign investors' strong interest in blue chips pushed the benchmark index well above 1,400 points to its highest in a month, they added.

The KOSPI index closed up 30.24 points or 2.19 pct at 1,413.14, off a high of 1,413.34 and a low of 1,386.06. The benchmark index rose 42.81 points for the week.

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Source - AFX News/Associated Press

Metals - Gold retreats after hitting fresh 6 month peak yesterday

Gold edged lower after hitting a fresh 6 month high yesterday, but analysts said the metal's strong performance this week will likely be repeated in the weeks ahead.

At 11.13 am, spot gold was quoted at 655.58 usd an ounce, up from the 657.40 usd level seen in late New York trades yesterday, after the metal had set a fresh six month peak of 661.40 usd.

"The theme of Friday volatility is likely to continue today, and could trigger some profit taking after a week of solid gains," said TheBullionDesk.com analyst James Moore.

The recent solid gains in gold, which have come alongside an inflow of investor money, should see the metal targeting the 676 usd level it reached in July last year.

Gold rallied yesterday buoyed by fund buying, steadying oil prices and a sagging US dollar. However, the metal retreated earlier in Asia as some players took the view the past week's gains were overdone.

Kitco analyst Jon Nadler said there is some uncertainty in the market about "the possible sustainability of prices at levels higher than say 672-675 usd".

Still, he believes "there is also quite a palpable sense of confidence that gold has found whatever drivers it had been searching for to ... break out of the congestion we witnessed in the 635-650 usd area".

The dollar is holding steady today, however, its prospects are weighed down by increased speculation US interest rates have already hit peak in this rate hiking cycle.

"Traders are back to focusing on the systemic illness of the US currency and the new-found vigour in crude oil," said Nadler.

Gold generally moves counter to the dollar as it is seen as an alternative investment to the US currency. However, it usually moves in line with oil as it is often bought as a hedge against oil-led inflation.

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