US & World Daily Markets Financial Briefing 02-05-2007

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Stocks jump after factory order increase

NEW YORK  - Stocks jumped Wednesday, sending the Dow Jones industrials past 13,200 for the first time after a strong reading on U.S. factory orders stoked investor optimism about the economy.
   
The Commerce Department said orders to U.S. factories jumped 3.1 percent in
March -- the largest increase in a year -- amid strong demand for commercial
aircraft and a sharp rise in an indicator of how much companies are investing in their business. The increase easily outpaced the 2 percent rise analysts had been expecting.
   
As investors begin to look toward Friday's Labor Department reports on nonfarm payrolls and unemployment, they are also keeping watch over corporate profits as they try to determine how quickly the economy might be slowing and whether the stronger-than-expected earnings might continue to give stocks a lift.
   
Yum Brands Inc., parent of fast-food chains KFC, Taco Bell and Pizza Hut, reported a 14 percent increase in first-quarter earnings as its international operations turned in a tidy profit.
   
In midmorning trading, the Dow rose 61.43, or 0.47 percent, to 13,197.57. The blue chip index hit a fresh trading high of 13,205.62 after reaching 13,184.14 Tuesday. The Dow has set 16 record closes this year and 38 since the beginning of October; the latest closing high came Tuesday.
   
Broader stock indicators rose Wednesday. The Standard & Poor's 500 index advanced 7.39, or 0.50 percent, to 1,493.69, and the Nasdaq composite index rose 17.21, or 0.68 percent, to 2,548.74.
   
Bonds fell following the factory order data. The yield on the benchmark 10-year Treasury note rose to 4.65 from 4.64 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices fell.
   
Light, sweet crude fell 35 cents to $64.05 per barrel on the New York Mercantile Exchange.
   
In perhaps an early read on Friday's jobs numbers, an employment indicator published by ADP and Macroeconomic Advisers reported an increase of 64,000 in private jobs in April.
   
On Tuesday, a takeover bid launched by News Corp. for Wall Street Journal parent Dow Jones & Co. buoyed investor sentiment and help send stocks higher. Dow Jones fell $1.30, or 2.3 percent, to $54.87 after jumping 55 percent Tuesday, while News Corp. on Wednesday advanced 49 cents, or 2.1 percent, to $23.48.
   
In other corporate news, Yum Brands rose $3.92, or 6.2 percent, to $67.04 after its earnings report.
   
Cablevision Systems Corp. jumped $2.68, or 8.2 percent, to $35.35 after the cable TV provider and owner of New York's Madison Square Garden, said it struck a $10.3 billion deal to be taken by its controlling shareholders, the Dolan family. The family had tried three other times to take the company private.
   
Time Warner Inc. said its first-quarter earnings fell 18 percent. The media conglomerate topped Wall Street's expectations, however, as growth in its cable business helped boost revenue. Time Warner rose 45 cents, or 2.1 percent, to $21.04.
   
Advancing issues outnumbered decliners by 3 to 1 on the New York Stock Exchange, where volume came to 306.1 million shares.
   
The Russell 2000 index of smaller companies rose 7.29, or 0.89 percent, to 823.54.
   
Britain's FTSE 100 rose 0.67 percent, Germany's DAX index advanced 0.41 percent, and France's CAC-40 rose 0.39 percent.

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Dollar softens after weak ADP US payrolls forecast

LONDON - The dollar softened slightly after a weaker-than-expected ADP forecast for US payrolls data, due later this week.
   
The payroll services firm ADP forecast an increase of 64,000 non-farm payrolls in April, below a consensus for 115,000. In March there was a 180,000 increase. The forecast precedes the actual figure, which is due Friday and will be closely watched as a sign of the health of the US economy.
   
Myra Dsouza at Thomson's IFR Markets noted the ADP is volatile and has typically been off by an average of 20,000 in the last year.
   
However, "even that addition to the print challenges our estimates and the survey median of 115,000" Dsouza noted.
   
A weak payrolls number on Friday would re-ignite fears of a further slowdown in US economic growth as well as the possibility of a rate cut by the Federal Reserve later this year.
   
Overnight, however, the dollar saw a brief moment of strength against other currencies after a robust manufacturing ISM indicator beat expectations, raising hopes that the contraction in the industrial sector may have bottomed out.
   
The euro also strengthened somewhat this morning after the euro area manufacturing PMI survey remained flat at 55.4, against expectations for 55.5 but still at a strong level. German unemployment continued to fall, to 7.2 pct in March from 7.3 pct in February.
   
"Euro zone employment conditions are getting stronger and inflation risks are receding," said David Brown at Bear Stearns. "The ECB should take comfort from the stronger real activity signals and slower inflation pressure," which is consistent with views for a rate hike in June, said Brown.
   
The euro's strength was most evident against currencies from low-yielding countries like Switzerland and Japan, where investors borrow to invest in euro area countries with higher interest rates.
   
Meanwhile, the pound remained steady, weakening only against the euro, after data this morning showed a gradual easing in UK mortgage approvals.
   
Market expectations, however, are for a rate hike, as soon as next month, with the possibility for more hikes expected to keep the pound well-supported.

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Frankfurt - At 1.12 pm, the DAX was 31.07 points or 0.42 pct at 7,439.94, after trading between 7,424.91 and 7,453.98 earlier today.
   
The MDAX gained 17.13 points or 0.16 pct to 10,758.12, while the TecDAX dropped 4.64 points or 0.52 pct to 882.76. DAX futures gained 61.50 or 0.83 pct to 7,480.00, while bund futures lost 0.44 or 0.39 pct to 113.83.
    
Continental rose 3.82 eur or 3.73 pct at 106.30, as the best performer on the DAX after the tyre and autoparts specialist released first-quarter figures that showed a strong growth in its EBIT and solid growth in other key areas.
   
Henkel, another company releasing first-quarter figures today, followed, up 3.20 eur or 2.77 pct at 118.80. EON added 2.61 eur or 2.37 pct at 112.98, as investors speculated on a possible share buyback, which might be announced as soon as tomorrow at the utility's annual general meeting and which would boost the group's earnings per share.
   
Milan -  At 12.45 pm the Mibtel index was up 0.23 pct at 34,057, while the S&P/Mib index gained 0.24 pct at 43,859 on volumes worth some 4.131 bln eur. Among the best performers was Fondiaria-SAI, up 2.35 pct at 39.99 after UBS reiterated its 'neutral' stance on the stock but upped the target to 42 eur from 38 eur.
   
Assicurazioni Generali was also stronger, up 1.12 pct at 34.31 after UBS upped the target to 39 eur from 37 eur while keeping the 'buy' stance on the stock. Alleanza, a unit of Generali, was up 0.98 pct at 10.44, while Unipol gained 1.01 pct at 2.957.
  
Telecom Italia fell 1.33 pct at 2.187 after JP Morgan downgraded ordinary shares to 'neutral' from 'overweight', while upping the target to 2.2 eur from 2.1 eur, but upgraded savings shares to 'overweight' from 'neutral'.   Telecom Italia Media fell 2.56 pct at 0.331 after Monday's strong rally, on hopes that it could be soon be sold by its controlling shareholder, Telecom Italia.
  
Madrid - At 12.43 pm, the IBEX-35 index put on 22.1 points to 14,396.7, after trading in a range of 14,363-14,462, on turnover of 2.4 bln eur.
      
Media issues were in focus after News Corporation's 60 usd per share offer for Dow Jones yesterday put the sector in the spotlight, with Telecinco adding 0.14 eur to 22,38, Prisa gaining 0.13 to 16.67, Sogecable rising 0.41 to 30.39 and Antena 3 putting on 0.03 to 15.82.    
   
Selected real estate and constructors extended losses, with Inmocaral down 0.08 at 4.19, Urbis falling 1.37 or 5.01 pct to 25.95, Astroc off 0.57 or 3.90 pct at 14.02, Ferrovial down 0.90 at 79.20 and ACS shedding 0.10 to 45.65, ahead of first quarter results due tomorrow after the close.   
   
Stockholm - At 12.15 pm, the OMX Stockholm index was down 0.69 pct at 411.03 points, while the OMX Stockholm 30 index was down 0.92 pct at 1,262.09. The main sub-indices moving at midday were banks, down 0.67 pct; healthcare, 1.61 pct lower; and telecommunication services, down 4.16 pct.
   
The major movers within these indices were SEB A, down 1.21 pct at 244.50; Elekta B, 2.74 pct lower at 115.50, and TeliaSonera, down 5.50 pct at 51.50. The Swedish government said it intends to sell 8 pct of TeliaSonera to institutional investors, and has agreed not to sell any more shares on the bourse until April 2008 at the earliest. OMX was up 4.02 pct at 168.
   
Zurich - At 3.13 pm, the Swiss Market Index was 41.04 points lower at 9,387.23, while the Swiss Performance Index was down 25.27 points at 7,594.84. The SMI has been underperforming other European markets with gains in insurers and Nestle failing to make up for weak financials, chemicals and pharma stocks.
   
Syngenta was the biggest faller, down 11.1 sfr or 4.6 pct at 230.3, with investors opting to take profits after the Swiss agricultural chemical group reported first quarter sales growth of 9 pct to 2.96 bln usd, topping analysts' consensus forecast of 2.92 bln usd, dealers said.
    
Other notable decliners included Synthes, down 2.80 sfr or 1.8 pct at 156.70. Heavyweight Novartis shed 0.15 sfr at 70.3 sfr, while peer Roche fell 0.40 sfr at 227.70, reversing earlier gains. Fellow heavyweight Nestle was up 3 sfr at 482.75. 

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Asian shares close higher on Wall St lead; Japan boosted by soft yen

HONG KONG - Share prices across the Asia-Pacific region closed mostly higher, taking a lead from Wall Street's further gains overnight amid mergers and acquisitions related news.     
    
Most markets resumed trading after the Labor Day break yesterday, with only the Chinese, Malaysian and Indian bourses still shut in an extended holiday. 
   
In Tokyo share prices got an additional boost from the yen weakness, which helps exporters, but trading was generally quiet as many investors are away for the Golden Week holiday. The Japanese markets will be shut tomorrow and on Friday. The Nikkei 225 index closed up 119.94 points or 0.69 pct at 17,394.92. 
   
Mitsushige Akino, chief fund manager at Ichiyoshi Management, said the gains "were underpinned by the upbeat tone on Wall Street overnight, which prompted market expectations that foreign investors will buy Japanese shares. Also, the softer yen sparked buying." But he noted some caution due to holidays over the next two days, and ahead of the release of key US non-farm payrolls data on Friday.
    
Meanwhile, Australian share indices hit fresh records following Wall Street's overnight advance and a stronger-than-expected US manufacturing survey outcome for April. An announcement by the Reserve Bank of Australia that it is keeping its official cash rate at 6.25 pct also helped underpin interest in banks.
   
The S&P/ASX 200 ended up 91.9 points or 1.50 pct at a record close of 6,237.7, while the All Ordinaries index gained 84.3 points or 1.37 pct to a new closing high of 6,224.5
   
In other markets, Korean share prices were led higher by major IT stocks and financials while shipbuilders and machinery makers were mixed amidst some profit-taking. "The market saw a good start for the new month thanks to the Dow's record-breaking rally," Meritz Securities' analyst Shim Jae-Yeop said.
   
The KOSPI index closed up 11.06 points or 0.72 pct at 1,553.30.
    
In Hong Kong, share prices were higher following the positive lead from US and gains in index heavyweight HSBC, which was boosted by news that a unit of Dubai International Capital LLC has made a substantial investment in the bank.
    
"The market was oversold before the Labor Day holiday and this, together with a strong showing of Wall Street last night, encouraged bargain-hunting," said Alex Wong, asset management manager at Ample Capital.
   
In late trade, the Hang Seng index was up 61.77 points or 0.30 pct at 20,380.75, with HSBC up 1.10 hkd or 0.76 pct at 145.50.
  
Elsewhere in the region, the Taiwan stock market's benchmark index closed up 27.62 points at 7,903.04, while Singapore's Straits Times Index was up 31.48 points or 0.94 pct at 3,392.77 in afternoon trade.

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Copper steady after gaining on US manufacturing data

LONDON - Copper was steady in early trade as the market consolidated following yesterday's gains on the back of stronger-than-expected US manufacturing data, which hinted at a continuation of strong demand.
   
In the background, the ongoing strike in a key Peruvian mine helped support prices. But, trade was light with the main Asian markets closed for the Golden Week holiday.
   
"Global metal demand remains robust as (shown) by the US ISM released yesterday which surprised on the upside," said JP Morgan analyst, Michael Jansen.
   
Yesterday's Institute for Supply Management's April manufacturing index jumped to 54.7 from 50.9 in March, against expectations the number would rise to 51.0. A reading over 50 indicates growth in the sector.
  
At 11.09 am, LME copper for 3-month delivery stood at 7,958 usd per tonne, against 7,990 usd at the close yesterday.
  
Fears over supply disruptions from a miners' strike in Peru also simmered, although the protest, which is entering its second day, is largely seen to be under control, analysts said. Peru is the world's third-largest copper producer.
   
"We are in the final stretch of a solution," Peruvian Prime Minister Jorge del Castillo was quoted as telling a news conference after meeting with union leaders and the labour minister.
   
Elsewhere, the red metal was supported by another fall in LME certified stocks, which fell 2,325 tonnes to 154,225 tonnes, said the LME in a daily report.
   
Among other metals, nickel prices were up, supported by a fall in LME stocks which, up until yesterday, had been rising for some days. Inventories of the metal, used extensively in stainless steel production, dropped 204 tonnes to 4,776 tonnes on the day, said the LME.
   
Nickel was up at 48,700 usd from 48,600 usd yesterday. A continued "tight stock environment in nickel continues to skew the risks towards higher prices," said Jansen at JP Morgan.
   
Stocks are still so low that they would not satisfy one day's worth of global consumption.
   
Aluminium eased to 2,827 usd against 2,847 usd at the close yesterday, zinc dipped to 3,875 usd against 3,860 usd, and tin dropped to 13,950 usd from 14,000 usd. Lead rose slightly to 2,015 usd from 2,010 usd.

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