US & World Daily Markets Financial Briefing 03-04-2006

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U.S. stocks open higher amid buoyant M&A

NEW YORK - U.S. stocks opened higher Monday as solid gains in overseas markets and a slew of merger and acquisition deals led by General Motors Corp's sale of a majority stake in its GMAC financing arm, got the second quarter off to a positive start.
   
The Dow Jones Industrial Average was up 56 points at 11,165. The Nasdaq Composite Index rose 7 points to 2,346 while the S&P 500 Index climbed 6 points at 1,300.
   
Historical performance suggests investors can expect a solid kick-off to the second quarter.
   
The Dow industrials have ended the first session of the month with gains 8 out the last 11 times, according to the Stock Trader's Almanac. April is still the best month in the year for the blue-chip index, with an average gain of 1.8% since 1950, the Almanac said. 
       
Strength in overseas markets helped boost stock market futures, with Japan's benchmark Nikkei 225 index climbing to its highest level in nearly six years. In Europe, Germany's bourse hit a five-year high.

Merger Monday lives up to its name
   
Dow industrials component General Motors climbed 0.9% at $21.48 after the automaker said it would generate $14 billion in cash from the sale of a 51% stake in its financing unit.
   
Lucent Technologies rose 1.6% to $3.10 after the telecommunications equipment maker cemented a deal to be bought by France's Alcatel for $13.45 billion in stock. U.S.-listed shares of Alcatel surged 5.1% to $16.20.
   
Among other M&A deals, Dow member Verizon Communications said it was selling some telecommunications assets for $3.7 billion, Motorola agreed to sell its automotive electronics business for $1 billion in cash and Service Corp. International said it's going to buy Alderwoods Group for $856 million.
   
Elsewhere, Wal-Mart Stores Inc was one of only a handful of Dow stocks trading lower after the retail giant offered up a March same-stores outlook at the lower end of its previous forecast range. The stock was last off 25 cents at $46.99.

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Dollar up on Tankan survey, US optimism

NEW YORK - The dollar started the new quarter on a firm footing, rallying to a three-week high against the yen, after a business sentiment survey in Japan disappointed, reinforcing the market's view of a go-slow attitude on interest rate hikes in the world's second-largest economy.
   
The dollar also gained on expectation that this week's U.S. economic data would support further interest-rate tightening by the Federal Reserve.
   
In early New York trading, the dollar was fetching 118.30 yen, up 0.5%, after earlier touching 118.79 yen, the highest level since March 13. The euro was changing hands at $1.2069, down 0.4%. The British pound weakened 0.5% to $1.7280, while the dollar strengthened 0.4% to 1.3091 Swiss francs.
   
At 10 a.m. Eastern, traders will review the manufacturing ISM survey and construction spending data. Economists polled by MarketWatch expect the ISM in March to rise to 57.3% from 56.7%.
   
Tankan offers a mixed picture
   
The yen was pressured after a business sentiment survey showed Japanese large manufacturer's sentiment declined for the first time in four quarters, boosting expectations that interest rates in Japan will remain at zero for some time.
   
The Bank of Japan's quarterly Tankan survey showed the headline diffusion index measuring large manufacturers' business conditions at 20, down 1 point from the December survey. Economists had expected a 2-point gain.
   
However, the headline sentiment indicator for non-manufacturers improved slightly. The report also showed large firms plan to boost investment spending by 2.7% in fiscal 2006.
   
Overall, the survey still points to an improvement in the January quarter and reinforces the view the economy remains on a recovery track, analysts said.
   
In European trading, the euro found some support on data that showed the euro-zone PMI manufacturing reading jumped to 56.1 in March from 54.8, the strongest level since September 2000. German PMI rose to 58.1 from 55.8.
   
But the pound was pressured as UK PMI slipped to 50.8 from 51.5.
   
The European Central Bank will meet on Thursday with most economists expecting the central bank to keep rates unchanged at 2.5%.
   
The Bank of England will also announce its rate decision this week. Most economists forecast the BOE will hold rates steady at 4.5%.

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London

For a list of today's FTSE risers and fallers click here

Frankfurt

German shares higher midafternoon as Wall Street seen gaining; Adidas sparkles

At 2.44 pm, the DAX 30 index was 22.89 points or 0.38 pct higher at 5,992.97, having moved between 5,978.46 and 6,009.83 so far this session - the latter the highest level since July 2001.
   
The MDAX was at 8,673.39, up 3.40 points or 0.04 pct, while the TecDAX was at 727.78, up 0.56 point or 0.08 pct. The DAX futures contract was at 6,028.00, up 23.00 points or 0.38 pct, while bund futures were at 116.59, down 0.37.

Adidas led large-caps higher, adding 4.59 eur or 2.81 pct to 167.78, after its CEO Herbert Hainer told Tagesspiegel that the sporting goods retailer will sell more World Cup-related merchandise than originally planned.
   
In an interview, Hainer said that sales of football products will increase by at least 20 pct in 2006 compared to the year-earlier period.

MAN was another firm spot, gaining 1.13 to 58.40, as JP Morgan branded the German truckmaker its top pick among European truck stocks and reiterated its 'overweight' rating.

Auto stocks were a bright feature ahead of US sales figures later today, with BMW and DaimlerChrysler rising 0.17 to 45.62 and 0.32 to 47.72 respectively, while Porsche added 9.48 to 799.48.
   
However, it was Volkswagen that put in the best performance of the German autostocks, climbing 1.36 to 63.67, as Volkswagen Group China said its sales in China reached 164,339 units in the first quarter this year, up almost 40 pct from a year earlier.
   
This morning, the Financial Times Deutschland reported that VW's share of the China market has stabilised at 16 pct in the first two months of the year after a period of decline, with Jan-Feb unit sales rising 57.5 pct year-on-year.
 
Continental gained 1.35 to 92.20, after the tyremaker said it is to acquire Motorola Inc's automotive electronics operations for 1 bln usd, in a deal expected to close in the first half of this year pending regulatory approval.

Deutsche Bank climbed 0.38 to 94.63, as the market welcomed news its supervisory board chairman Rolf Breuer will resign on May 3 and be replaced by the bank's chief financial officer, Clemens Boersig, who will be succeeded by Anthony Di Iorio.
 
Bucking the trend, Altana slid 0.61 eur or 1.19 pct to 50.53, on the back of a report in the Frankfurter Allgemeine Sonntagszeitung that there is a lack of strategic partners that would be interested in buying the company's pharmaceutical unit or parts of it.

Paris

Paris shares higher midday after positive PMI data; Alcatel surges on merger

At 1.08 pm, the CAC-40 index was 30.25 points or 0.58 pct higher at 5,251.10, on volume of 1.89 bln eur. On the Matif, April CAC-40 futures were trading 40.0 points or 0.77 pct higher at 5,258.0.

Alcatel's shares soared 0.76 eur or 5.95 pct to 13.54. After it reached the merger agreement with Lucent, its stock was upgraded to 'buy' from 'hold' at ABN Amro, while Exane BNP analysts raised their objective for the share to 18 eur from 15.
   
Lucent will become an Alcatel subsidiary, with each Lucent common share being replaced by 0.1952 of an American Depository Share (ADS) representing an ordinary Alcatel share. Alcatel shareholders will own about 60 pct of the merged company and Lucent shareholders will own about 40 pct.

Lafarge gained 2.40 eur or 2.57 pct to 95.95 amid expectations it will extend its offer for minority shares in its North America unit.
   
The stocks added to gains made last week after Belgian financier Albert Frere announced he had raised his stake in the group to 8.1 pct from 6.5 pct via his GBL investment vehicle.
   
Electricite de France rose 1.29 eur or 2.76 pct to 48.08, after chief executive Pierre Gadonneix told German daily Handelsblatt that he is interested in acquiring Suez and Gaz de France's Belgian assets after the two companies merge as planned.

Vinci was the main decliner, dropping 1.05 eur or 1.29 pct to 80.30. Capgemini reversed Friday's gains by dropping 0.46 eur or 1.03 pct to 44.50.

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Asian shares close up, Tokyo hits 68-month high on upbeat expectations

HONG KONG - Share prices across the Asia-Pacific region ended up, with Tokyo's Nikkei 225 ending at a 68-month high, as investors took an upbeat view of the economy following today's March Tankan survey results, dealers said.
   
While the large manufacturers diffusion index came in below expectations, the broad thrust of the survey showed businesses remained positive about the economy going forward.
   
The Nikkei 225 Stock Average closed up 273.65 points or 1.6 pct at 17,333.31. It was the best finish since July 18, 2000 when the index settled at 17,349.59.
   
The broader TOPIX index of all first-section issues gained 26.48 points or 1.5 pct to 1,754.64, the highest finish since Feb 7, 2000 when the index closed at 1,754.78.
   
The March Tankan business sentiment survey showed the diffusion index for large manufacturers fell to 20 from 21 in the December poll, the first drop in four quarters and below market expectations.
   
But the outcome also showed a rise in the index for large non-manufacturers to 18 from 17 previously, while the survey noted that the index for large manufacturers is expected to recover to 22 in the June survey.
   
Mistsushige Akino, chief fund manager at Ichiyoshi Investment Management said sluggishness in parts of the Tankan survey may have dampened concerns about prospects for a near-term hike in the Bank of Japan's key interest rate which could have helped underpin the day's gains.
   
Share prices in Australia closed at a fresh record high as the benchmark S&P/ASX 200 index built upon the March quarter's gain of 402.0 points or 8.5 pct, dealers said.
   
They said resources supported the market higher with global miners BHP Billiton and Rio Tinto both reaching record levels on the prospect of uranium sales to China as well as the likelihood of a further rise in iron ore prices.
   
The uranium sales agreement between Australia and China could lead to exports of 20,000 tons of uranium to China per year, and includes safeguards to guarantee uranium exports will only be used for peaceful purposes.
   
Dealers said the agreement could also mean a breakthrough for numerous uranium explorers which surged after the agreement was made public.
   
The S&P/ASX 200 rose 50.8 points or 0.99 pct to close at 5,180.5.
   
Share prices in Hong Kong were trading sharply higher on a rebound in index heavyweight China Mobile after Friday's steep fall, dealers said.
   
They said property stocks also posted strong gains, with a rally on the Japanese market helping nudge the local benchmark index higher.
   
At 3:23 pm, the Hang Seng Index was up 227.50 points or 1.44 pct at 16,032.54.
   
In China A-shares in Shanghai and Shenzhen closed higher, supported by renewed fund inflows due to a stronger yuan, with financial firms and property developers in demand, dealers said.
   
The Shanghai A-share Index added 22.17 points to 1,383.50 on turnover of 17.34 bln yuan and the Shenzhen A-share Index was up 6.36 points at 340.30 on turnover of 11.32 bln yuan.
   
Share prices in Seoul ended firmer, rising for an eighth trading session, with large cap IT, bank stocks and KEPCO leading the rise, dealers said.
   
The market remained strong throughout the session, as gains in major global markets and solid South Korean export data for March boosted investor sentiment.
   
The KOSPI index closed up 20.15 points or 1.48 pct at 1,379.75.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Gold, silver futures rise to more than two-decade highs

SAN FRANCISCO - June gold climbed $5.70 to $592.40 an ounce in morning trading after touching a 25-year high of $594.20, and May silver climbed to a 22-year high of $11.78 an ounce, trading lately at $11.695, up 17.5 cents.

"The perfect storm for gold might be steadily rising energy prices and a world economy that is registering just enough growth to keep the threat of higher interest rates in check," Nell Sloane, an analyst at NSFutures.com said in daily commentary.

May copper was also up 6.4 cents to trade at $2.527 a pound after a record $2.54.

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