US & World Daily Markets Financial Briefing 02-11-2006

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Stocks lose ground in early trading

NEW YORK - Stocks moved higher Thursday with retailers reporting a mixed sales performance in October and a slowdown in the productivity of American workers.
   
In the opening minutes, the Dow Jones industrials lost 65.23 points to 12,015.50, the S&P 500 dropped .37 of a point to 1,367.44, and the Nasdaq lost 9.44 points to 2,324.91.
   
U.S. stocks ended lower on Wednesday, with the Dow industrials dropping 49.7 points, the Nasdaq Composite slipping 32 points and the S&P 500 dipping 10 points. Disappointing factory and housing data contributed to the pessimistic tone.
   
Drug, teen and department sectors are likely to lead the sales upturn, the research company said.
   
Data Thursday includes weekly jobless claims, third-quarter productivity and unit labor costs and September factory orders.
   
In addition, the European Central Bank held its key interest rate steady at 3.25 percent as expected on Thursday.
     
Elsewhere, Smith & Nephew said it's in "very preliminary" merger talks with Biomet. Smith & Nephew slipped over 2 percent in London, while German-listed Biomet shares rose over 3 percent.
   
Also on the medical device front, Becton, Dickinson edged past estimates with its fourth-quarter profit rise and predicted fiscal 2007 earnings above analyst expectations.
   
International Paper, Whole Foods Market and Univision Communications also are due to report earnings.
   
Unilever, the Anglo-Dutch food and consumer products maker, announced a sharp profit decline but also said it would return 750 mln euros to investors this year and start a share buyback plan in 2007.

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Euro steady after mixed US data, hawkish Trichet comments

LONDON - The euro was steady against the dollar following some mixed US data and after European Central Bank president Jean-Claude Trichet signalled that rates are likely to rise again in December, much as the market had expected.
   
The ECB left its key refi rate unchanged at 3.25 pct today, but Trichet indicated in his accompanying press conference that a hike next month can be expected through his reference to the need for "strong vigilance" on inflation. This is in line with market expectations.
   
"The ECB tipped its hand at a December hike, saying strong vigilance is of the essence, its secret code for a hike at the next meeting," said Jamie Coleman at Thomson IFR Markets.
   
Market players will now be waiting for the Q&A session for any clues on the rate outlook for 2007, he said.
    
Trichet told the press conference that the ECB must exercise "strong vigilance" on inflation risks and reiterated that interest rates are still too low. He also said inflation is likely to increase again over the next few months, although growth may moderate slightly over the second half of the year.
   
Meanwhile, weaker-than-expected US jobless claims weighed slightly on the dollar, but the effect was tempered somewhat by news of a sharp rise in unit labour costs to mark the fastest annual pace in more than two decades.
   
US weekly jobless claims unexpectedly rose by 18,000 to 327,000 in the week ended October 28, well above the 310,000 forecast by analysts and the highest number of claims since the week to July 8.

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The European Markets at 12.30 GMT

London - Leading shares were flat at midday, recovering morning losses before an expected firmer start to US trading, with the UK's Unilever and BG up on well-received results, but Smith & Nephew weak as merger concerns offset interims.
   
At 12.00 pm, the FTSE 100 index was just 1.2 points weaker at 6,148.4, having fallen to 6,119.8 in early morning deals, while the broader indices traded on both sides of breakeven.

Frankfurt - German shares were lower at midday as weak economic data hit Wall Street overnight and amid a mixed bag of domestic third-quarter results, although Man AG and Altana AG bucked the negative trend.
   
At 10.50 am, the DAX 30 was 9.67 points lower, or 0.17 pct at 6,280.19, while the MDAX was up 10.89 points or 0.10 pct higher at 8,6707.16. The TECDAX was down 2.87 or 0.42 pct at 687.18. The DAX future was up 26 at 6,307.0.
   
Paris - Share prices fell in midday trade on profit-taking after the index rose yesterday in defiance of declines on Wall Street and as investors held back before today's ECB governing council meeting. At 11.35 am, the CAC-40 index was down 33.05 or 0.62 pct at 5,337.81.

Milan - Share prices were flat at midday, underpinned by gains in the luxury sector after PPR expressed interest in buying luxury goods companies and a newspaper report said the IPO of the upmarket furniture group Poltrona Frau was oversubscribed. At 12.11 pm, the Mibtel index was up 0.05 pct at 30,552 points and the S&P/Mib was 0.07 pct lower at 39,724.

Madrid - Madrid shares were lower in light midday trade on profit-taking after recent historic highs and with investors cautions before the ECB meeting later today. At 12.33 pm, the IBEX-35 index slipped 14.4 points to 13,755.9, after trading in a range of 13,677-13,775 on thin turnover of about 1.3 mln eur.

Zurich - Share prices moved higher in thin morning trade led by sharp gains in Credit Suisse after the bank's forecast-beating third-quarter results. At 10.40 am, the Swiss Market Index was 10.50 points higher at 8,623.50, and the Swiss Performance Index up 6.51 points at 6,739.66.

Brussels - Shares were lower late morning as investors took profits after yesterday's low-volume holiday trade. At 11.39 am, the Bel 20 was down 15.31 points or 0.37 pct at 4,150.66.

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Asian shares close mixed; Tokyo falls on US economy fears

HONG KONG - Shares across the Asia-Pacific region closed mixed, with Tokyo's Nikkei index falling on growing concern about the slowing US economy but other markets shrugging off a weaker Wall Street overnight.
   
Tokyo shares ended lower, with the market also being depressed by profit-taking and with investors reluctant to take decisive positions before a three-day weekend. Financial markets will be closed tomorrow for a public holiday.
   
The blue-chip Nikkei 225 Stock Average closed 25.24 points or 0.15 pct lower at 16,350.02, off a low of 16,209.14. Over the week, the index fell 1.9 pct.
   
The broader TOPIX index of all first-section issues fell 3.49 points or 0.22 pct to 1,619.02, off a low of 1,607.94. Over the week, the index fell 1.9 pct.
   
Australian shares closed lower as investors sold banking stocks, which led the wider market into negative territory and below yesterday's record highs. Australia's fourth largest bank, Westpac, fell after reporting a 9.8 pct rise in net cash profit for the year to September.
   
The result was in line with expectations but investors are concerned about falling margins within the sector.

The S&P/ASX 200 retreated 7.0 points or 0.13 pct to close at 5,409.4, below yesterday's record close of 5,416.4. The key index ended above the day's low of 5,375.8 and below the day's high of 5,412.1.
   
Hong Kong shares were higher in afternoon trade as continued gains in HSBC and rotational buying of laggards sent the benchmark index above the 18,500 level to a fresh record. Sentiment remained positive despite falls on Wall Street overnight. At 3.26 pm the Hang Seng Index was up 134.38 points or 0.73 pct at 18,588.03.
   
In mainland China, A-shares in Shanghai and Shenzhen closed slightly lower on profit-taking with banks and telecom companies losing ground. The Shanghai A-share Index slid 4.79 points or 0.25 pct to 1,945.03 and the Shenzhen A-share Index was down 0.04 points or 0.01 pct at 465.22.
   
Seoul shares finished higher, extending their rally for a third day to hit a six-month high on easing geopolitical concerns. Investors quickly shrugged off Wall Street's weaker close following downbeat US economic data.
   
Most blue chips gained on institutional interest, although foreign investors stayed net sellers for a fifth day ahead of the options contract expiry next week.
   
The KOSPI index closed up 9.38 points or 0.68 pct at the high of 1,383.73, and off a low of 1,370.30. This was the highest level since May 17 when the index hit 1401.47. The record of 1,464.70 was reached on May 11.

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Gold eases a touch on profit taking but further gains seen; oil lower

LONDON - Gold was a touch lower on light profit-taking, but well-supported above the 600 dollar level after having hit an eight-week high yesterday.
   
Analyts believe gold will likely resume gains, boosted by the dollar's weakness after a weak manufacturing sector report out of the US yesterday which reignited speculation that the Federal Reserve could start cutting interest rates next year.
   
At 14.50 GMT, spot gold was down $1.20 to $618.10.
   
Gold closed at 616.60 usd in New York last night but rose to 619.35 usd in after-market trade; modest profit-taking has been the theme so far this morning, said James Moore at theBulliondesk.com.
   
But with the metal having closed above its 100- and 200-day moving averages, it leaves it "well placed for further gains with upside resistance pegged at 625 usd and potentially 645 usd," added Moore.
   
There were some caveats, however. Gold's gains may be hampered if there is any sudden collapse in the price of oil or a surge in the dollar from tomorrow's US non-farm payrolls reading, he said.
   
Oil prices dropped as the market digested a mixed supply outlook in the US, the world's biggest consumer of energy. Crude oil futures slipped 36 cents to $58.35 a barrel in electronic trade,

In London, Brent North Sea crude for December delivery shed also 40 cents to 58.58 dollars per barrel in electronic trading. A US government report published yesterday showed that US crude oil stockpiles rose last week but reserves of refined products fell.
   
It came amid forecasts of warm weather conditions in the northern hemisphere, dampening demand for heating oil.
   
Crude futures fell "following a build up in US crude inventories", Sucden analyst Michael Davies said in London.
   
OPEC agreed last month to cut its actual production to 26.3 mln bpd from 27.5 mln currently, which is below its official quota of 28 mln, in place since July 2005. OPEC was spurred into action to combat a steep fall in oil prices, which are well off all-time highs above 78 dollars per barrel reached in July and August.   

Levels of distillate products, such as heating oil and diesel fuel, were down 2.7 mln barrels to 141.3 mln over the week. That compared with a smaller forecast fall of 1.2 mln barrels.
   
Gasoline (petrol) stocks fell 2.8 mln barrels to 204.6 mln, against expectations of a decline of 925,000 barrels.

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