US & World Daily Markets Financial Briefing 02-05-2006

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U.S. stocks rise on overseas gains, Verizon results

NEW YORK - U.S. stocks rose Tuesday, helped by gains in overseas markets and solid earnings from Verizon Communications, but investors continued to keep an eye on rising crude-oil prices.
   
The Dow Jones Industrial Average was last up 27 points at 11,370.
   
The Nasdaq Composite Index rose 4 points to 2,309 while the S&P 500 Index added 4 points to 1,309.
   
"We're rebounding with the Asian and European markets back in full play," said Peter Cardillo, chief market analyst at S.W. Bach. On Monday, stocks exchanges in those parts of the world were closed for public holidays.
   
Cardillo said energy, mining and metals stocks are propelling markets higher as underlying commodities prices surge. "But if oil prices and gold prices continue to move higher, at any given time the market could turn on the negative side."
   
On Monday, stocks ended lower as prospects of a pause in interest-rate hikes dimmed after cable channel CNBC reported that Federal Reserve Chairman Ben Bernanke felt the media had misunderstood recent remarks alluding to that possibility.
       
Stocks on the move
   
Verizon Communications was up 30 cents at $33.09 after the telecom operator and Dow component posted adjusted quarterly results that topped analyst estimates. The company also said it added 541,000 high-speed Internet customers and 1.7 million wireless subscribers in the quarter.
   
Sirius Satellite Radio Inc. rose 6.9% to $4.95 after the New York-based satellite radio provider posted a narrower-than-expected first-quarter loss and a sharp rise in the number of subscribers using its services.
   
Home builders were under pressure after key player Hovnanian Entreprises Inc. cut its second-quarter and full-year earnings forecasts late Monday amid production delays, slower sales and other issues that suggest the homebuilder is feeling the effects of a cooling U.S. housing market. Hovnanian shares were off 5.5% at $36.66.

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Car stocks are in focus as the big three auto makers and their overseas rivals release April sales figures. Analysts anticipate General Motors Corp. to lead an industry decline even though the carmaker's SUV and pickup lines are expected to have had a strong month.
   
"The feedback from April has been quiet, but with one less selling day and the midmonth religious holidays, the expectation is for softer sales," said Michael Ward of Soleil Securities.
   
Also in the car sector, shares of Visteon Corp. surged 19% to $7.01 after the auto parts maker swung to a first-quarter profit as it shed plants and returned control of a group of factories back to its former parent, Ford Motor Co.
   
In broker action, J.P. Morgan reshuffled its recommendations in the airline sector as it turned more positive on the industry, saying it will start growing again next year.
   
The broker upgraded Southwest Airlines Co. and Alaska Air Group to overweight from neutral, but cut JetBlue Airways Corp. to underweight from overweight and Frontier Airlines Holdings Inc. to underweight from neutral.

Forex

Dollar continues to weaken against rivals, euro up on data

NEW YORK - The dollar remained under pressure early Tuesday as investors continued to digest CNBC's report on Federal Reserve Chairman Ben Bernanke's comments and await his speech on Wednesday for more clues on the U.S. interest-rate outlook.
   
At the same time, the euro and pound were lifted after euro zone and U.K. manufacturing data came in above expectations.
   
Strong economic data out of the euro zone and U.K. "are fueling gains on the European currencies," said Mike Malpede, senior currency analyst at Man Global Research. "The technical dynamics still are pointing towards a weaker dollar."
    
On the currency markets, the U.S. dollar gave up further ground against the
euro, and was lower against the British pound on strong UK and euro zone
manufacturing data. The euro rose 0.6% to $1.2640 while sterling rallied 0.9% to $1.8387. Against the Japanese yen, the greenback was off 0.3% at 113.33, while the dollar changed hands at 1.2355 Swiss francs, down 0.6%.
   
"With little US data on the calendar today...trading may well stall at the spike highs made yesterday morning before news of Ben Bernanke's change of tone caused the market to buy back dollars," said Boris Schlossberg, senior currency strategist at FXCM.
   
"The EUR/USD remains grossly overbought in the near term but the momentum of the trend may carry it higher still before a more serious retracement kicks in," he said, in a note.
   
The dollar rebounded from a one-year low against the euro late Monday after CNBC anchor Maria Bartiromo said the Fed chief told her that the media and the markets had misinterpreted his words last week as a signal that the central bank would pause after one more rate hike. Bernanke also reportedly said he regretted that anyone in the financial markets would view him as dovish.
   

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Last Thursday, Bernanke told the congressional Joint Economic Committee that the Federal Open Market Committee would pause at some point to reassess the impact of its steady stream of rate hikes over the past 22 months, which brought the federal funds rate from a four-decade low of 1% to 4.75% currently.

He also said, however, that a pause did not mean further rate hikes were out of the question.
   
"He's back-tracking his past statement and he's trying to clarify through the media, which makes him look a little bit less credible. If you have a Federal Reserve board chairman that looks less credible, that could be considered dollar negative," said Malpede.
   
Analysts at ABN Amro said the "reaction looks overdone" since Bernanke was "pretty clear" in his testimony that "the Fed pause was just a pause and the next moves would be data-driven."
   
Sterling, euro up on strong data
   
The euro advanced on the dollar after a euro-zone survey on manufacturing rose to a new five-year high.
   
The eurozone manufacturing PMI index came in at 56.7 in April, up from 56.1 in March. The increase was in line with expectations.
   
Separately, the U.K. survey on manufacturing also rose to a stronger-than forecast 54.1 in April, from a seven-month low of 51.0 in March.
   
The European Central Bank meets on Thursday. Economists widely expect the bank to leave rates unchanged at 2.5% in May and raise rates by a quarter-point in June.

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Asian shares mostly higher led by Tokyo after yen eases

HONG KONG - Share prices across the Asia-Pacific region closed mostly higher, led by Tokyo as a weaker yen spurred buying in blue chip exporters ahead of the Golden Week holidays, dealers said.
   
The Nikkei 225 Stock Average finished up 228.06 points or 1.3 pct at 17,153.77, off a high of 17,188.54.
   
The broader-based TOPIX index of all first-section issues gained 20.01 points or 1.2 pct at 1,737.18, off a peak of 1,740.53.
   
Japanese financial markets are closed from tomorrow to Friday for a series of public holidays. Markets reopen next Monday.
   
Masayoshi Yano of Tokai Tokyo Research Center said investors, particularly foreign pension funds, snapped up blue chips like Canon after the yen's pullback.
   
Share prices in Hong Kong rose on news of strong sales of apartments over the three-day weekend and China's go-ahead to its Social Security Fund to begin investing overseas, dealers said.
   
At 3.00 pm, the Hang Seng Index was up 109.89 pts or 0.66 pct at 16,771.19.
   
"The market was led by H shares which were higher today after Beijing allowed its social security fund to invest in overseas markets," said Jackson Wong, investment manager at Tanrich Securities.
   
"Investors were quite relieved that Beijing did not issue any additional macro-tightening measures after May 1, removing the overhang that affected trading last week," he said.
   
Markets in China are closed this week for public holidays.
   
In Seoul, shares also finished higher, recouping much of the previous session's heavy losses, as telecom stocks, largely viewed as less susceptible to currency and oil price factors, jumped on positive earnings prospects for the coming months.
   
The KOSPI index gained 15.17 points or 1.07 pct to 1,434.90.
   
But in Australia, shares ended lower as investors sold banking stocks ahead of tomorrow's rate announcement by the Reserve Bank of Australia, with the risk building of a 25 basis point hike to 5.75 pct.
   
Dealers said all the major banks were lower as increased rates are seen as negative for earnings, although only a small minority of economists expect a rate hike.
   
Australia's fifth largest bank, St George, fell on the interest rate concerns, despite it having announced a record interim profit and a positive outlook for the full year.
   
But the market's fall was tempered by gains in most resources stocks, although BHP Billiton slipped, while Rio Tinto ended steady.
   
The S&P/ASX 200 fell 37.3 points or 0.70 pct to close at 5,273.1, falling from last Wednesday's record close of 5,327.2. The benchmark index ended above the day's low of 5,265.1 but below its high of 5,313.6.
   
The All Ordinaries Index lost 32.8 points to 5,222.4, slipping from its record close of 5,272.1, also set on Wednesday.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Gold futures climb toward $665 an ounce in morning trading

SAN FRANCISCO - June gold climbed $3 to $663.20 an ounce in morning trading, touching a high of $664.50 -- a level the futures market hasn't seen since late 1980.

Ongoing weakness in the U.S. dollar and worries about Iran continued to drum up investment demand for the precious metal. July silver rose 26.5 cents to $14.23 an ounce, but July copper fell by 4.8 cents to stand at $3.2725 a pound.

Crude-oil futures hovered around $74 a barrel as Iran's nuclear standoff with the West continued to grab the spotlight. Iran's deputy oil minister predicted prices would rise to $100 a barrel next winter as demand exceeds supply.
   
Political unrest in Nigeria, another leading oil exporter and Bolivia's decision to hand over every natural-gas and oil sale to a state-owned company also lent support. Crude for June delivery was last up 30 cents at $74 a barrel.
   
On the bond market, long-term Treasury prices rose, sending yields lower. The benchmark 10-year note was up 4/32 at 95 7/32, with its yield at 5.12%.

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