US & World Daily Markets Financial Briefing 03-05-2007

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Stocks surge, carry S&P 500 past 1,500

NEW YORK - Wall Street surged higher on a burst of enthusiasm about the economy Thursday, lifting the Standard & Poor's 500 index past 1,500 for the first time since September 2000.
   
The S&P 500, the index most closely watched by market professionals, rose to 1,500.51 in the first hour of trading, just over a week after the Dow Jones industrial average passed 13,000 for the first time. The S&P is now within striking distance of its closing high of 1,527.46, set March 24, 2000, just as the dot-com bubble began to burst and Wall Street began a years-long decline.
   
Stocks have soared in recent weeks as first-quarter earnings beat reduced expectations, and upbeat economic news have added to the gains. On Thursday, the good news was about inflation: The Labor Department said wages, as measured by unit labor costs, rose at a tepid 0.6 percent rate in the first quarter. The news fed Wall Street's hopes for an interest rate cut later this year.
   
Perhaps giving the S&P its final push, the Institute for Supply Management said its index of non-manufacturing business rose to 56.0 in April from 52.4.
   
The modest moves in stocks Thursday come a day after Wall Street pushed higher and sent the Dow Jones industrials above 13,200 for the first time and the Standard & Poor's 500 index neared the psychologically important 1,500 mark.
   
In early trading, the Dow Jones industrial average rose 10.15, or 0.08 percent, to 13,222.03. The blue chip index has hit 17 record closes since the start of the year and 39 since the beginning of October, its latest coming Wednesday.
   
The S&P 500 index was up 3.23, or 0.22 percent, to 1,499.15, edging lower with the normal ebb and flow of trading.
   
Bonds fell following the economic data; the yield on the benchmark 10-year Treasury note rose to 4.66 percent from 4.65 percent late Thursday. The dollar was mixed against other major currencies, while gold prices fell.
      
The Russell 2000 index of smaller companies fell 0.24, or 0.03 percent, to 828.22.
  

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Swiss franc perks up after surprise inflation jump

LONDON - The Swiss franc, which has suffered in recent months because of its role as a  funding currency for carry trades, perked up a little today after strong inflation figures stoked expectations of an interest rate hike.
   
Inflation in April rose faster than expected in Switzerland, with a month-on-month rise of 1.1 pct, an annual increase of 0.5 pct. 
   
Economists polled by Thomson Financial News had forecast a yearly price hike of between 0.4-1.0 pct, while the monthly index had been expected to move between a negative 0.2 pct or a a positive 0.3 pct.
   
The statistics office said the price hike was driven by a return of regular prices following the end of the seasonal sales period as well as higher oil prices.
      
Elsewhere the dollar was relatively steady after a fairly solid week, with most market participants now positioning themselves for tomorrow's crucial US jobs report for April.
   
However, there are some concerns that the payrolls data may disappoint to the downside following yesterday's survey from the ADP payrolls services firm.
   
It reported that the US private sector added just 64,000 jobs in April. Even if the public sector added another 25,000 or so, then the total increase predicted is still shy of the 115,000 a survey of economists from Thomson Financial is suggesting.
   
If the payrolls disappoint, then many market participants think the US Federal Reserve may start cutting borrowing costs soon, as opposed to the European Central Bank and the Bank of England, which appear to have at least one more rate hike to deliver.
   
Tomorrow's euro zone services PMI survey is also expected to provide further reason for the European Central Bank to raise its key refi rate another quarter point to 4.00 pct.

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Zurich - At 14.50 pm, the Swiss Market Index was 63.66 points lower at 9,381.29, while the Swiss Performance index dropped 52.77 points to 7,581.33.
      
UBS reflected a general weakness amongst financials, which is currently weighing on the market, traders said earlier. UBS was last down 4.4 pct or 3.55 sfr at 75.20, as investors reacted to the bank's weaker-than-expected first quarter numbers. The blue-chip's results were hit by a 150 mln sfr loss at its Dillon Read Capital Management (DRCM) business, which it said it plans to reintegrate in its private banking business.
   
Other financials were mixed, with Baloise off 3.8 pct or 5.10 at 128.40 and Swiss Re trading flat at 114.50.
  
Lisbon -  At 12.50 pm, the PSI 20 index was up 48.11 points at 12,290.59. Equities opened higher after gains in New York overnight and positive Asian markets this morning, remaining in positive territory throughout the morning.
   
BES surged 0.76 eur or 5.09 pct to 15.70, adding to gains yesterday and reaching levels not seen since 1998. Citigroup hiked the bank's price target to 17.30 eur from 16.80 eur, reiterating its 'buy' stance on the back of solid first-quarter results last week and improving domestic macroeconomics.
      
Frankfurt - At 1.13 pm, the DAX was 13.81 points or 0.19 pct lower at 7,442.12, after trading between 7,424.91 and 7,453.98 earlier today. The MDAX lost 131.31 points or 1.22 pct to 10,665.76, while the TecDAX dropped 19.94 points or 2.25 pct to 864.65. DAX futures lost 30.00 or 0.40 pct to 7,480.00, while bund futures gained 0.11 or 0.10 pct to 113.74.
   
BMW, dropped 1.29 2.81 pct at 44.66, after it released first-quarter numbers that largely met consensus figures but signalled a difficult start to the year for the automaker. Altana followed, down 1.15 eur or 2.22 pct, as dealers said it continued to be affected by continued selling pressure.  Allianz lost 3.42 eur or 2.05 pct to 163.28 due to profit-taking and fears excellent numbers released yesterday might not continue throughout the year.
      
Bucking the trend, EON added 1.78 eur or 1.58 pct, as the best performer on the DAX, after the utility raised its full-year adjusted EBIT guidance following a strong first-quarter performance.
   
Milan -  At 1.10 pm, the Mibtel index was down 0.61 pct at 33,831 while the S&P/Mib index fell 0.47 pct to 43,630 on volume of some 5.242 bln eur.
  
Saipem was the most hit on the S&P/Mib after Goldman Sachs cut it to 'sell' from 'neutral' as it views the company as expensive relative to the engineering and construction sector, which it has outperformed in the year to date. News at least five foreign workers were kidnapped from one of its offshore vessels in Nigeria also hit sentiment on the stock, dealers said.
  
Pirelli continued to suffer, losing 2.29 pct at 0.877, with dealers citing uncertainty over how it will invest the 3.3 bln eur it will receive from the sale of Olimpia to holding company Telco. Telecom Italia was down 0.98 pct at 2.13 after Morgan Stanley downgraded the stock to 'underweight' from 'equal-weight'.
  
Madrid -  At 1.00 pm, the IBEX-35 index slipped 143.1 points to 14,277.0, after trading in a range of 14,176-14,454, on turnover of 3.1 bln eur.
  
Media stocks led the sell-off, with Telecinco falling 0.65 eur or 3.06 pct to 20.57, after going ex-div for 1.28 eur per share. Antena 3 was off 0.29 at 15.76 and Sogecable dropped 0.51 to 29.92, after yesterday's outperformance in line with the sector Europe-wide after News Corp's bid for Dow Jones. Selected real estate issues also moved lower, with Grupo Inmocaral slipping 0.15 or 3.48 pct to 4.16, Astroc off 0.26 at 14.12 and Metrovacesa down 0.50 at 86.00.
   
Leading blue chips slightly outperformed the overall market, with Telefonica off 0.12 at 16.46, BBVA dropping 0.12 to 17.61, SCH down 0.09 at 12.98 and Repsol YPF falling 0.07 to 24.40.
   
Paris -  At 1.00 pm the CAC-40 index was down 1.93 points or 0.03 pct at 5,988.20, on volume of 3.0 bln eur. On the Matif, May CAC-40 futures were trading up 1.0 or 0.02 pct at 5,953.5.   

Among the fallers, Sanofi-Aventis shed 1.21 eur or 1.77 pct to trade at 67.15 as its raised full-year guidance failed to impress investors. Sanofi today upped its full-year guidance for growth in adjusted EPS to 9 pct from 6 pct previously, but this remains based on both the absence of major adverse effects concerning key products such as Lovenox and Plavix in the US and a euro/dollar rate rate of 1.25 usd per euro.
   
On the upside, Vallourec led CAC-40 gainers, rising 5.89 or 2.97 pct to 204.39, pulling back from recent losses ahead of its results today.
   
Amsterdam - At 13.01 pm, the AEX was up 1.82 points or 0.34 pct at 534.06 after opening at 536.56 and trading in a range of 533.04-536.36. Unilever outperformed the AEX, rising 4.18 pct at 23.19 eur after it reported better-than-expected first-quarter earnings. The Anglo-Dutch food and consumer products giant showed underlying sales growth that analysts said was "very good".
   
Wolters Kluwer continued its upward march, gaining 2.05 pct at 22.85 amid news the publishing company has been upgraded to 'overweight' from 'equal weight' at Morgan Stanley, with an increased price target of 27 eur. The brokerage believes the market has underestimated the stock.
   
London -  At 9.50 am, the FTSE 100 was up 26.2 points at 6,510.7 but off a high of 6,530.4, while the FTSE 250 index was 9.1 points lower at 12,010.2. Volume was solid with 1.129 bln shares changing hands in 230,073 deals. Anglo Dutch food and home product producer Unilever was top of the leaders board rising 78 pence to 1,634 after its Q1 results beat expectations as it benefited from an improvement in its operating margin.
  
Elsewhere, oil giant Royal Dutch Shell took on 33 to 1,840 after Q1 earnings beat analysts' expectations, as strong downstream oil products, refinery margins and liquefied natural gas sales volumes offset the impact of weak oil and gas prices and production and higher costs. Its peers BP was 6-1/2 higher at 572-1/2, while BG Group was up 16 at 750-1/2.

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Asian shares close higher on US lead; Australia, Seoul hit new records

HONG KONG - Share prices across the Asia-Pacific region closed higher, extending gains after another record finish on Wall Street overnight in the wake of stronger-than-expected US factory orders data for March.
   
With the Japanese and Chinese markets shut for public holidays, Australia was again in the limelight as its key indices finished at fresh highs though the day's gains were relatively mild.
   
Bell Securities private client advisor Stuart Smith said the Australian market is "having a look at the ceiling and seeing if it can break through."
    
He said traders could react to tonight's US services survey for the month of April and tomorrow's Reserve Bank of Australia outlook statement, but will more than likely tread water until next Tuesday's federal budget announcement.
   
The S&P/ASX 200 ended up 7.9 points or 0.13 pct at a record 6,245.6, while the All Ordinaries index gained 12.4 points to settle at a new all-time high of 6,236.9.
      
Meanwhile, South Korea's benchmark index also hit a new high as investors cheered the strong performance of US markets.
   
Bookook Securities analyst Kim Min-Sung said that following the two months-long hefty gains, the Korean market will likely turn sideways until next week, with investors awaiting the US Federal Reserve's policy meeting as well as the Bank of Korea's rate decision and options expiry. 
  
The KOSPI index closed up 6.56 points or 0.42 pct at 1,559.86, driven by telecoms, retailers and utilities.
   
In Hong Kong, stocks were driven higher by heavyweight HSBC after comments by a bank official that the bank aims to list in Shanghai in 5-10 years.
   
News of significant investment in the bank by a private-equity firm owned by Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum also helped the stock extend yesterday's gains, while property stocks were boosted by a government land auction next week and expectations of strong apartment sales in the weeks ahead.
   
"HSBC's share price soared amid strong market liquidity. The positive news flow about the bank gave investors reasons to focus on the counter," said Conita Hung, research head at Delta Asia Securities.
   
In late afternoon trade, the Hang Seng Index was up 312.12 points or 1.53 pct at 20,700.61, with HSBC up 2.0 hkd or 1.38 pct at 147.4.
   
Elsewhere in the region, Taiwan stocks closed higher in volatile trade as large-caps, particularly those with bright earnings prospects or in industries which are seen as having bottomed out, attracted strong interest in late trade. The weighted index closed up 23.62 points or 0.30 pct at 7,926.66.
   
In other markets, Singapore's Straits Times Index was up 53.92 points or 1.58 pct at 3,471.73 in afternoon trade, while Malaysia's KLCI was up 18.64 points or 1.42 pct at 1,340.89.

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Copper continues higher on ongoing Peru strike, strong demand outlook

LONDON - Copper continued higher in afternoon trade as an ongoing nationwide strike among miners in Peru and indications of strong demand from this week's US and euro zone manufacturing data offset a fall in the US dollar.
   
Meanwhile, the LME continued to report further falls in stocks of the metal, down a further 2,200 tonnes this morning. Stocks have dropped by nearly 30,000 tonnes since the beginning of April.
   
At 2.46 pm, LME copper for three-month delivery was up at 8,015 usd a tonne against 7,745 usd at the close Friday.
      
The strike by mineworkers in Peru has supported prices since it began on Monday. Negotiations between the government and miners are continuing, although the government has announced it will declare the strikes illegal if no resolution is forthcoming.
      
Prices were further buoyed by positive manufacturing data from both the US and Europe in recent days, analysts said.
   
Data released yesterday showed the euro zone Purchasing Managers' Index was unchanged at 55.4, against forecasts for a small rise to 55.5, but still well above the 50 level that marks expansion in the sector.
   
The previous day, data from the US Institute of Supply Management was similarly positive, boosting sentiment that demand for industrial metals will remain strong.
   
Lead also posted strong gains, posting a fresh contract high of 2,090 in intra-day trade, on the back of the strikes and the ongoing hold-up in shipments from Australia's Esperance port.
   
Transportation of the metal has been suspended from the port since mid-March on concerns lead was leaching into the surrounding environment.
      
Lead was trading at 2,080 usd against 2,050 usd yesterday.
   
Among other metals, nickel rose to 49,310 usd against 48,800 usd yesterday, zinc climbed to 3,915 usd against 3,865 usd, and tin rose to 14,450 usd from 14,175 usd.
   
Aluminium inched up to 2,835 usd against 2,828 usd at the close yesterday.

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