US & World Daily Markets Financial Briefing 03-05-2006

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U.S. stocks edge lower; P&G weighs on the Dow

NEW YORK - U.S. stocks edged lower Wednesday, with disappointment over Procter & Gamble's results weighing on the Dow Jones Industrial Average, but an upbeat outlook from Qualcomm and a broker of upgrade of Motorola cushioned the selling.
   
The Dow Jones Industrial Average was down 10 points at 11,406.
   
The Nasdaq Composite Index fell 2 points to 2,307 while the S&P 500 Index was off 2 points at 1,310.
   
Investors are eager for Bernanke's speech today. He will be talking on revitalizing communities, but Wall Street is hoping he may have something to say about monetary policy.

At 10 a.m. Eastern the market will view the Institute of Supply Management's services sector survey for April. The MarketWatch forecast, based on a poll of economists, is for a decline in the headline index to 59.6% from 60.5% in March.
   
March factory orders, also due at 10 a.m, are expected to rise of 3.7%, up from 0.2% in February.

Stocks on the move
   
Qualcomm was up 1.7% at $51.94. The company lifted its third-quarter earnings outlook by 2 cents a share to 38 to 40 cents a share, from 36 to 38 cents a share. The San Diego company sees revenue at the high end of its earlier range of $1.77 to $1.87 billion.
   
Shares in Procter & Gamble Co tumbled 3.9% to $55.82. The world's largest consumer-goods company, said its third-quarter income rose 37%, helped by the Gillette acquisition, price increases and cost controls. But the company's sales fell short of expectations, hurt by inventory reduction efforts at retail customers like Wal-Mart Stores Inc. 
   
Time Warner Inc. posted 59% growth in first-quarter net profit on increased revenue generated by its film and television studios, cable-television networks and cable systems, though the top line at its AOL unit again declined. The company also affirmed its 2006 outlook. The stock was down 12 cents at $17.30.
   
Motorola shares rallied 3.1% to $21.92 after Bank of America upgraded the mobile phone maker to buy from neutral. The broker said Motorola should rebound from recent weak performance due to increasing "value share" gains and new products.

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Dollar mixed against rivals ahead of Bernanke

NEW YORK - The dollar was little changed against major rivals early Wednesday, with investors eagerly awaiting Federal Reserve Chairman Ben Bernanke's speech later in the session for any hints about the Fed's leanings on future interest-rate increases.
   
Bernanke is slated to speak on community revitalization in Washington at noon. Financial markets have been confused about the Fed's intentions with Bernanke's testimony last week about a possible pause in tightening undermined by later comments to a CNBC news anchor that the market had misinterpreted his words.
   
"Bernanke might want to clear up the apparent misunderstanding of his testimony last week, but even this only gave the dollar some temporary support and we suspect that it won't be any different today if Bernanke were to make the same sorts of comments," said Steve Barrow, chief currency strategist at Bear Stearns.
   
The dollar was mixed as currencies markets awaited the Fed chief's speech, rising 0.2% to 113.44 yen, as the euro rose 0.1% to $1.2625. The British pound changed hands at $1.8392, up 0.2%, while the dollar was fetching 1.2373 Swiss francs, up 0.02%.
   
Last Thursday, Bernanke told the congressional Joint Economic Committee that the Federal Open Market Committee, the Fed's policy panel, would pause at some point even if inflation risks remain. He also said, however, that a pause did not mean further rate rises were out of the question.
   
But late Monday CNBC business-news 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 rise. Bernanke also reportedly said he regretted that anyone in the financial markets would view him as dovish. The dollar rebounded on the news.
   
The Fed has increased interest rates 15 times in a row since June 2004. The federal funds rate currently stands at 4.75%. Fed policy-makers are still widely expected to boost benchmark rates to 5% at their next meeting May 10.
   
The European Central Bank meets Thursday on interest rates, with expectations in the market that the ECB will indicate that rates will rise in June.
   
Aussie rallies
   
The Australian currency rose to its highest level against the U.S. dollar in eight months after the Reserve Bank of Australian increased its interest rates by 25 basis points to 5.75%, the first move in14 months.
   
"Consumer price inflation has picked up to around 3 per cent in recent quarters. While this partly reflected rising fuel costs, underlying consumer price inflation also increased in the March quarter, to around 23/4 per cent, a rate it had not been expected to reach until the second half of the year," the statement accompanying the rate decision said.
   
"The market was slightly taken aback," said Bear Stearns' Barrow, in a note. "While central banks like the Fed (and ECB) are taking pre-emptive strikes
against inflation, the Fed now seems to be moving in a more reactive fashion and we think that this is going to weigh on the US dollar - not just against the Aussie."
   
The market will look to Friday's official statement from the central bank to see if this was a "one and done" move or if the central bank will remain hawkish into the second half of the year.
   
The Aussie was last up 0.5% at $0.7688, after earlier touching $0.7711.

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The European Markets at 12.00 BST

London - Leading shares remained weak midday as disappointing numbers from BSkyB and BAT took the gloss off early optimism prompting some investors to take profits, while ex dividend factors also weigh on the index, dealers said.
   
By 11.55 am, the FTSE 100 index was 35.9 lower at 6,046.4, having hit a high of 6,100 in early deals. The broader indices were mixed.

Frankfurt - Shares were lower in midday trade as strong figures from some of the DAX giants prompted investors to lock in profits after recent firm gains, and as oil prices crept towards record-highs, dealers said.
   
At 12.42 pm, the DAX 30 index was 38.93 points or 0.64 pct lower at 6,012.36, having moved between 6,003.21 and 6,079.80 so far this session.

Paris - Shares turned lower at midday as profit-taking set in, triggered by concerns over the effects of continued oil price rises and expectations of an ECB interest rate hike after the recent run of strong economic indicators in the Eurozone region, dealers said.
   
At 1.03 pm, the CAC-40 index was down 21.15 points or 0.40 pct at 5,220.04, off an early high of 5,267.51, on trading volume of 2.04 bln eur.

Amsterdam - Shares were down at midday, giving up early morning gains ahead of an expected lower opening on Wall Street, with Buhrmann hardest hit after reporting first-quarter results which showed some weakness in organic revenues, dealers said.
   
At 12.26 pm, the AEX was down 3.86 points at 466.27, after reaching a high of 473.75. The AMX Index was down 0.70 at 628.63.

Madrid - Share prices were near session lows in thin midday trade, with Repsol YPF leading losses and some profit taking amongst the main banks, while Ferrovial was higher on solid first quarter results, dealers said.
   
At 12.08 pm, the IBEX-35 index was down 65.6 points at 11,863.7, after trading in a range of 11,860-11,956, on thin turnover of 1.8 bln eur.

Milan - Share prices were down in midday trade, reversing initial gains, as high oil prices weighed on investors' sentiment, while Italcementi clearly outperformed on a positive broker note, dealers said.   
   
At 12.38 pm, the Mibtel index fell 0.42 pct to 29,542 points and the S&P/Mib was down 0.48 pct at 37,989, while volumes stood at 2.59 bln eur.

Helsinki - Helsinki shares were almost flat midday in fairly light trade, with Nordea falling in the wake of solid first quarter results that fell short of high unofficial expectations, dealers said.
   
At 12.44 pm, the OMX Helsinki 25 was up 0.10 pct at 2,698.88. The OMX Helsinki was 0.08 pct lower at 9,515.08.

Stockholm - Shares were little changed in early afternoon trade, with Tele2 sharply lower after reporting weaker-than-expected first quarter results, and Nordea also falling in the wake of its results, but with engineering stocks underpinning the index, brokers said.
   
At 1.25 pm, the OMX Stockholm index was down 0.13 pct at 338.82 and the OMX Stockholm 30 was down 0.21 pct at 1,043.69. Turnover was 20.464 bln skr.

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Asian shares close firmer; Sydney gains marginally after rate hike

HONG KONG - Share prices across Asia-Pacific closed firmer with stocks in Australia rising slightly after the central bank increased interest rates for the first time since March last year while gains in HSBC boosted Hong Kong equities, dealers said.
   
Markets in Japan and China are closed for public holidays until Friday and will reopen next Monday.
   
The Reserve Bank of Australia raised its official cash rate by 25 basis points to 5.75 pct and economists say more increases may be on the way.
   
The central bank said the decision was prompted by above average world economic growth and still strong commodity prices which have added to already solid domestic growth, fuelling inflation concerns.
   
The S&P/ASX 200 added 0.4 points to close at 5,273.5, off a high of 5,286.1 and a low of 5,254.6.
   
The All Ordinaries Index was up 2.5 points at 5,224.9.
   
CMC Markets' senior dealer James Foulsham said banking stocks bore the brunt of the rate increase but bargain-hunting on miners supported the main indices.
   
"Some of the retailers were weaker today after the rate decision but it will be interesting to see if we get any sort of knock on effect in coming days to other areas of the market," Foulsham said.
   
Shares in Hong Kong rose with the main index breaching 17,000 points for the first time in over five and a half years, supported by gains in HSBC after the bank declared an interim dividend yesterday.
   
At 2.57 pm (0657 GMT), the Hang Seng Index was up 207.86 points or 1.23 pct at 17,075.90. HSBC rose 1.90 hkd or 1.4 pct to 137.80.
   
"HSBC is the main contributor to the index's gains. It gained due to short-covering after declaring dividend yesterday," said Peter Lai, investment manager at DBS Vickers.   
   
In Seoul, stock prices finished flat after a choppy session as investors exercised caution amid high oil prices and the won's continued strength against the dollar.
   
The KOSPI index was up 0.27 points at 1,435.17.

Asian Bourse Round-Up

For a full list of closing figures, click here

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NEW YORK - Gold futures hit a new 25-year high on Wednesday with dollar weakness, oil strength and ongoing concerns about the U.S. and Iran boosting the metal.

June-dated gold futures ventured as high as $679 an ounce in early electronic trade and last traded up $7.90 to $675.50.
   
Crude-oil futures pulled back from early highs close to $75 a barrel as traders monitored problems in Iran and other trouble spots with large oil supplies and await weekly supply data.

The front-month contract last was 13 cents lower at $74.48. See futures movers.
   
Treasurys were mildly lower ahead of Bernanke. The benchmark 10-year Treasury note last was down 2/32 at 95-7/32 with a yield of 5.12%.

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