US & World Daily Markets Financial Briefing 02-10-2007

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Stocks flat ahead of auto, home sales

NEW YORK - Stocks barely budged in early trading Tuesday as investors awaiting reports on pending home sales and auto sales struggled to extend a rally that sent the Dow Jones industrial average back above 14,000.
   
The market, eager for more evidence to support the case for further interest rate cuts, will examine reports on September sales from the world's top automakers, and August pending home sales from the National Association of Realtors.
   
A report of weaker-than-anticipated manufacturing activity last month bolstered the case for an interest rate cut and was a partial contributor to Monday's advance, in which the Dow gained nearly 192 points to close at 14,087.55, a new high. The blue chips returned to the 14,000 level for the first time since mid-July, before the credit market crisis began pummeling stock prices.
   
The Federal Reserve holds a two-day meeting beginning Oct. 30, when the central bank will decide whether to follow its Sept. 18 interest rate cuts with a further reduction.
   
In the first hour of trading, the Dow fell 0.73, or 0.01 percent, to 14,086.82.
   
Broader stock indicators were mixed. The Standard & Poor's 500 index slipped 0.50, or 0.03 percent, to 1,546.54, while the Nasdaq composite index rose 0.44, or 0.02 percent, to 2,741.43.
   
The technology-dominated Nasdaq stayed afloat despite a disappointing earnings report from Palm Inc. The maker of the Treo smart phone reported late Monday it swung to a loss in the fiscal first quarter and predicted weaker-than-expected results for the current quarter. Palm fell 68 cents, or 4 percent, to $15.32.
   
Bond prices fell as yields rose. The 10-year Treasury note yielded 4.56 percent, up from 4.55 percent late Monday.
   
Canada-based TD Bank Financial Group agreed Tuesday to buy Commerce Bancorp Inc. in a cash-and-stock deal valued at $8.5 billion. But the acquisition news got a lukewarm reception from investors, who sent Commerce shares down 6 cents to $39.56.
   
Light, sweet crude for November fell 70 cents to $79.54 a barrel on the New York Mercantile Exchange.
   
Stock markets advanced overseas. Britain's FTSE 100 gained 0.24 percent, Germany's DAX index rose 0.44 percent, and France's CAC-40 rose 0.67 percent. The Russell 2000 index of smaller companies was up 1.61, or 0.20 percent, at 826.35.

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Dollar steady off lows as players turn cautious

LONDON - The dollar was steady at levels well off its recent lows against the euro, helped in part by Wall Street's steep gains overnight and as players exercised caution ahead of central bank rate decisions this week.
   
The euro's steep gains, which took it within striking distance of 1.43 usd this week, brought calls for them to be capped. Even the usually reticent European Cenmtral Bank chief Jean-Claude Trichet was persuaded to highlight that the US is still holding on steadfast to its strong dollar policy. France's finance minister Christine Lagarde, went a step further, calling on the US to state that belief loud and clear.
   
As things stand an interesting dynamic is emerging for the upcoming pow-wow of the world's biggest economies in Washington at the end of October. France's Largard said she is preparing a joint initiative on euro exchange rates with other euro zone ministers, ahead of this month's summit of G7 countries. A sentiment backed up by Luxembourg Prime Minister Jean-Claude Juncker.
   
Ashraf Laidi at CMC Markets said the dollar clawing back some lost ground is due to a scaling back of long euro positions ahead of the incoming ECB and G7 meetings. He added both are "likely to issue some cautionary remarks about the strength of the euro".
   
On Thursday this week, the European Central Bank and the Bank of England will announce interest rates and both central banks are expected to leave borrowing costs on hold, as they await further evidence of the impact, if any, that the summer's credit market turmoil has had on the economy.
   
David Brown at Bear Stearns said "the ECB's policy pendulum is still stuck in inflation risks territory" despite some signs that euro zone economic data are weakening, but highlighted the risk of a surprise rate cut from the BoE.
   
"The market odds for a shock Bank of England rate strike this week appear to be on the rise and it would be wise to remember to 'never say never again' to the possibility of the unexpected happening this week," he said.
   
The BoE's benchmark lending rate is 5.75 pct, while the ECB's is 4.00 pct.   

The forecasts for no change from the ECB and BoE contrast with a widespread feeling that the US Federal Reserve will cut its key interest rate again in the coming months, following its half-point decrease two weeks ago.
   
Elsewhere, the yen strengthened sharply, recovering much of its losses from yesterday as the currency's volatility continued. The yen has been affected more than many currencies by shifting risk sentiment, owing to its role as a funding currency in the risky carry trade -- a strategy where investors sell yen to fund purchases of high-yielding currencies.

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Euroshares higher midday as the Dow is set to add to yesterday's gains

LONDON - Europe's leading exchanges were gaining ground in midday deals with the US Blue Chip index on track for new gains pushing financial heavyweights higher.
   
At 12.44 am, the Dow Jones STOXX 50 was trading 29.67 points or 0.78 pct higher at 3875.84 with the STOXX 600 adding 3.32 points or 0.87 pct to 384.18.
       
Back in Europe, financial heavyweights were by far the best performing sector with the Dow Jones 600 banking sector up 2.75 pct after gains on global indices.
   
UBS gained 2.71 pct this morning, also helped by an upgrade to 'neutral' from JP Morgan, which said it likes the business mix of UBS and expects the group to do better following yesterday's profit warning. The broker said it prefers shares in Credit Suisse, however, which also issued a small profit warning yesterday, but rose 2.35 pct as well at last check.
   
And Morgan Stanley cut its price target for BNP Paribas to 95 eur from 100 eur to take into account 2008 projected earnings, but reiterated its 'overweight' stance saying the new target still represents 24 pct upside potential. Shares in the French group were trading 3.44 pct.   

ABN Amro has initiated coverage on BBVA with a 'buy' stance and 19 eur price target, according to traders.
       
In Germany, Hypo Real Estate Holdings AG surged 2.26 pct after Deutsche Bank singled out the commercial real estate bank as its top pick among German banks.  Fortis added 3.76 pct as Royal Bank of Scotland -- up 3.15 pct -- said the US stock market regulator has cleared it to issue its own shares as payment to US-based investors in ABN Amro should its joint offer for the Dutch bank succeed.
   
Hopes of further banking sector consolidation were fuelled by news Toronto Dominion Bank has bid 8.5 bln usd for Commerce Banccorp.
   
Societe Generale added 4.54 pct. Unicredit added 2.59 pct and Deutsche Bank was up 2.43 pct.
   
In earnings news, Tesco was in focus, up 3.9 pct, after in reaction to the grocer's first half results which Cazenove described as impressive in the face of challenging conditions. Cazenove reiterated its 'outperform' rating and said the results show that market concerns over UK trading momentum have been overblown.
   
In the Netherlands, Oce NV turned 0.64 pct again-- after a brief foray into the red -- after the Durch group's third quarter earnings report. Analysts remain mixed about the quality of the earnings and the group's outlook statement.
   
On the M&A front, shares in Sacyr Vallehermoso surged 9.05 pct on the back of a report that the constructor is ready to sell its 33 pct of Eiffage once the legal wrangle between the two groups is concluded.
       
And Emap, the UK publishing group, charged 2.41 pct ahead after private equity group Cinven reportedly made bids for it's business-to-business and consumer magazine business and with Bear Stearns upgrading its rating to 'peer perform'.
   
According to a report in this morning's Times, the amount of the bid is not known, although the mooted value of the business-to-business division is 1.3 bln stg and consumer magazines are valued at 700 mln stg.
   
In broker action, Cap Gemini was 2.71 pct higher after Morgan Stanley reaffirmed its 'overweight-V' rating on the IT services group. Temenos added 3.13 pct. Cheuvreux initiated coverage with an 'outperform' recommendation. Elsewhere in the tech sector, Nokia added 1.18 pct after a series of bullish notes on yesterday's 8.1 bln usd bid for digital mapping firm Navteq.
    
Fast Search & Transfer ASA, up 1.71 pct, extended yesterday's gains after the group announced its fourth search platform deal in just two days.

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Asian markets rally; HK, Seoul, Singapore, Jakarta, Sydney set records

SINGAPORE - A surprisingly strong performance on Wall Street overnight propelled stock markets across Asia higher Tuesday, sending benchmarks in Hong Kong, South Korea, Singapore, Jakarta and Australia to their highest ever levels.
   
Hong Kong's Hang Seng led the advance, adding 3.9 pct to 28,199.75 after breaking through the 28,000 level for the first time as investors returning from a public holiday were swept up in a regional rally.
   
Australia's S&P/ASX 200 ended up 1.5 pct at a record close of 6,659.9, while the All Ordinaries index ended up 1.3 pct at a record 6,667.6.
   
In Singapore, the Straits Times Index added 1 pct to a record close of 3,793.83, while in Jakarta, the Composite Index rose 2.7 pct to 2,464.94.
   
In Seoul, the KOSPI index closed up 2.6 pct at a new high of 2,014.09 after North Korean leader Kim Jong-Il welcomed South Korean President Roh Moo-Hyun to Pyongyang for a historic summit.

In Tokyo, the blue-chip Nikkei 225 Stock Average closed up 1.2 pct at 17,046.78, trading above the 17,000 level for the first time in two months. A softer yen boosted export-oriented shares while easing fears about the credit crisis supported financial stocks.
  
Among the major banks, National Australia Bank rose 1.6 pct to 40.43 aud and Commonwealth Bank added 1.8 pct to 57.60 aud. ANZ rose 2 pct to 30.20 aud and Westpac gained 1.9 pct to 29.01 aud.
   
Elsewhere, the Malaysian Kuala Lumpur Composite Index closed up 1.6 pct at 1,368.72. The Philippines Composite closed up 2.2 pct at 3,677.19, spurred by hopes the central bank will cut rates at this week's policy meeting. The Taiwanese Taiex closed up 1.4 pct at 9,623.25.
   
The Chinese market was closed for a public holiday.

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Precious Metals Summary - London PM Fixings

Gold           731.00 USD           2.0415  
               745.40 USD           overnight

Gold           358.07 STG
               364.80 STG           overnight
 
Silver         13.34  USD
               13.70  USD           overnight

Silver         653.44  pence
               670.48  pence        overnight

Platinum       1359.00 USD
               1384.50 USD          overnight

Platinum       665.69  STG
               677.58  STG          overnight

Palladium      349.50  USD
               355.00  USD          overnight

Palladium      171.20  STG
               173.74  STG          overnight

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