US & World Daily Markets Financial Briefing 04-05-2006

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U.S. stocks gain on April strength for retailers, drop in oil

NEW YORK - U.S. stocks gained ground in early trading Thursday as strong retail sales growth in April and a fresh pullback in crude-oil prices offset data showing a greater-than-expected rise in labor costs.
   
The Dow Jones Industrial Average rose 38 points to 11,439.
   
The Nasdaq Composite Index was up 10 points at 2,314 while the S&P 500 Index rose nearly 4 points to 1,311.53. 
   
April sales sizzle, helped by Easter
   
Shaking off two straight months of tepid shopping trends, consumers took to the malls and shopping centers to ring up robust year-over-year sales in April.
   
Wal-Mart Stores Inc. set the pace with a 6.8% rise in store-sales, buoyed by brisk sales of toys, games and candy for the Easter holiday. Sales matched the company's own forecast and handily outpaced the 5.7% average again expected by analysts.
   
The world's largest retailer, however, is forecasting a slowdown in May, with same-store sales expected to grow between 2% to 4%. Same-store sales, a common measure of retail performance, logs sales from stores open at least a year. Wal-Mart shares were off 4 cents at $46.65 after climbing more than 1% in the prior session ahead of the release of its sales figures.
   
Rival Target Corp. posted a 10.4% rise in April same-store sales, a touch ahead of the 10% average target of Thomson First Call analysts. It sees May same-store sales increasing between 4% to 6%. Target shares were off 8 cents at $53.44.
   
Also in the discount space, Costco Wholesale Corp. posted a 7% rise in same-store sales, ahead of analyst estimates, while BJ's Wholesale Club Inc. managed a 1.2% gain in April, again ahead of Wall Street expectations.
   
American Eagle Outfitters , Limited Brands , Pacific Sunwear of California , Abercrombie & Fitch and The Gap Inc. all posted same-stores that came in ahead of analyst estimates.
   
But it was not all good news.
   
Sharper Image Corp. , the electronic gear retailer, saw same-store sales tumble 32% in April.
   
Other retailers that underperformed include Chicos's FAS , Pier 1 Imports Inc. and Hot Topic .
   
Also, Starbucks Corp. tacked on 50 cents to $37.85 after the ubiquitous coffee chain saw second quarter profit climb 17% to $127 million, or 16 cents a share, ahead of analyst expectations.

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Dollar flat after ECB rate decision, U.S. data

NEW YORK - The dollar was little changed against major rivals early Thursday as traders weighed hawkish comments made by European Central Bank president Jean-Claude Trichet against hotter-than-expected U.S. inflation data.
   
The ECB on Thursday held its key interest rate at 2.5%, but the ECB president hinted that another interest rate could come as early as next month. Trichet used the phrase "strong vigilance" to describe the ECB's view toward inflation and said the G-7 statement did not signal any change in the relationship between the euro and the U.S. dollar.
   
"The ECB holding rates steady and the weaker retail sales put a little pressure on the euro," said Mike Malpede, senior currency analyst at Man Global Research. Trichet said "that the G-7 doesn't call for a stronger euro. The euro is getting a little pressure."
   
His comments about inflation "is laying the foundation for a 25 basis points rate hike in June," he added.
   
In early New York trading, the euro was flat at $1.2622, down 0.01%. The dollar was unchanged at 117.79 yen. The British pound was fetching $1.8432, up 0.2%. The dollar was flat at 1.2373 Swiss francs.
   
Trichet "seemed to downplay the possibility of moving more aggressively with a 50 basis point hike" and his comments on the G-7 statement "is clearly placing the burden on Asian currencies to adjust higher and also suggesting there is no reason for the U.S. dollar to weaken relative to the euro," said Brian Dolan, head of currency research at Gain Capital.
   
Eurozone March retail sales declined 0.8% on a month-over-month basis, weaker than market expectations for a drop of 0.5%.
   
Dollar steadies
   
The dollar gained briefly after a Labor Department report showed a larger-than-expected increase in unit labor costs.
   
The productivity of the American workplace increased at a 3.2% annual rate in the first three months of the year. Unit labor costs - a key inflation gauge - increased 2.5% in the nonfarm business sector in the quarter. Economists predicted productivity would rise 2.9%, while unit labor costs were expected to rise 1.3%.
   
Separately, first-time applications for state unemployment benefits drifted higher by 5,000 last week to 322,000, the highest level since Nov. 19, the Labor Department said.
   
The labor unit costs came in "well above expectations" and probably "brings the Fed back in play," said Man Global's Malpede. It's probably "a little bit positive for the dollar."
   
The greenback also firmed as traders squared positions ahead of what is expected to be a solid April U.S. payrolls number on Friday.
   
Payrolls probably grew by about 200,000 after gaining 211,000 in March and 225,000 in February, according to economists polled by MarketWatch.
   
Yen under pressure
   
The greenback stabilized against the Japanese yen after Japan's Finance Minister Sadakazu Tanigaki said currency movement is excessive and the G7 statement did not mean the dollar had to adjust lower. He said the market may have misunderstood the statement on exchange rate flexibility.
   
Japanese officials, concerned about the impact of rising yen on the still fragile Japanese economy, have made a series of statement in recent days to counteract dollar weakness.
   
BOE leaves rate unchanged
   
Also on Thursday, the Bank of England left its policy rate unchanged at 4.5%, in line with expectations.
   
U.K. April services PMI surged 59.7 from 57.4, suggesting the U.K. economy continues its strong rebound.
   
Separately, data from the Halifax Building Society that showed U.K. house prices rose 2% in April, bringing the annual increase to 8%, the highest for 13 months, raising speculation the BOE may have to become vigilant about upside inflation risks the year progresses.

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The European Markets at 12.00 BST

London - UK blue chips were firmer, albeit off highs at midday supported by expectations for a firm opening on Wall Street,  and helped by a rebound in heavyweight miners and news that, as expected, UK interest rates have been left unchanged this month, dealers said.
   
At 12.30 pm, the FTSE 100 index was 22.1 points higher at 6,032.1, below the late morning peak of 6,044.8, having rallied from an early low of 6,001.1. All the broader FTSE indexes remained higher.

Frankfurt - Shares were higher in midday trade, bouncing back from yesterday's sharp losses, as consensus-beating first-quarter results from BASF, MAN and Continental AG and easing oil prices offset modest losses on Wall Street overnight, dealers said.
   
At 11.44 pm, the DAX 30 index was flirting with today's session high, up 47.29 points or 0.79 pct at 6,016.25, having moved between 5,968.68 and 6,016.90 so far this session. The MDAX was at 8,858.41, up 29.83 points or 0.34 pct, while the TecDAX was at 742.12, up 2.38 points or 0.32 pct.

Paris - Shares were higher after a series of positive corporate reports, notably from Suez and Total, as the market waited for news of the outcome of this afternoon's European Central Bank meeeting, dealers said.
   
At 1.17 pm, the CAC-40 index was up 33.60 points or 0.65 pct at 5,227.78, on volume of 1.95 bln eur.

Amsterdam - Shares traded broadly higher at midday as investors eyed US futures indicating a higher open on Wall Street, while Royal Dutch Shell boosted upward movement by rising with high trading volumes, dealers said.
   
At 12.36 pm, the AEX was up 2.10 points or 0.45 pct at 466.74, after opening at 465.11, dropping to a low of 463.34, and then bouncing back to a high of 467.01.

Milan - Share prices rose in midday trade, with investors' focus on Fiat after the release of consensus-beating first quarter results yesterday, dealers said.
   
At 11.25 am, the Mibtel index rose 0.50 to 29,601 points and the S&P/Mib was up 0.41 pct at 38,064.

Madrid - Share prices were higher in cautious midday trade ahead of statements from the ECB and BoE at midday, with Gamesa soaring on ongoing bid speculation.
   
At 12.39 pm, the IBEX-35 index was up 23.5 points at 11,900.0, after trading in a range of 11,851-11,917, on thin turnover of 1.2 bln eur.
   
Zurich - Share prices continued to decline in quiet late morning trade with oil prices continuing to weigh and a weakness in financials dragging the market into negative territory, traders said.
   
At 11.53 am, the Swiss Market Index was 43.61 points lower at 7,921.04, and the Swiss Performance Index down 18.12 points at 6,178.92.

Stockholm - Shares were slightly higher in midday trade, as the morning's profit-taking gave way to bargain hunting, with airline group SAS and mining firm Boliden, sharply lower after their weaker-than-expected first quarter results, dealers said.
   
At 12.10 pm, the OMX Stockholm index was up 0.16 pct at 338.34, while the OMX Stockholm 30 index was up 0.05 pct at 1,041.57. Turnover was 12.68 bln skr.

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Asian stocks close mostly lower; Sydney hit by profit-taking after rate hike

HONG KONG - Share prices across the Asia-pacific region closed mostly lower today, with stocks in Australia falling sharply as investors took profits following a rate hike by the central bank yesterday.
   
Dealers said there is also growing caution in the run-up to the US Federal Reserve's policy meeting next week.
   
In Sydney, the reserve bank's interest rate increase of 25 basis points weighed heavily on banking stocks, including Westpac which dropped despite announcing a 16.5 pct jump in its interim profit.
   
Mixed metals prices and a lower oil price also weighed on resources and energy stocks, while Telecom Corp of New Zealand tumbled again after the New Zealand government's opening of the telco's loop network to competition.
   
Reynolds & Co senior client adviser Michael Heffernan said the Australian dollar rising above 0.7700 usd overnight triggered selling orders in a number of sectors.
   
He said the fall in copper, lead and zinc prices in London overnight trading led to selling in most of the resource stocks, while the lingering interest rate concerns after the RBA's rate rise weighed on banks.
   
Hefferan said the selling is likely to flow into tomorrow's trading session but could turn around in the upcoming week.
       
The S&P/ASX 200 shed 84.3 points or 1.60 pct to close at 5,189.2, while the All Ordinaries Index lost 78.2 points or 1.50 pct to 5,146.7.
   
New Zealand stocks also fell sharply as investors dumped top stock Telecom after the government announced a shake up of the telecoms industry.
   
The benchmark NSX-50 index closed down 73.46 points or 1.99 pct at 3,693.2 on turnover worth 460.48 mln nzd.
   
Around 82 mln Telecom shares changed hands, accounting for more than 400 mln nzd of the turnover.
   
A New Zealand Exchange spokeswoman said the value of sales was the highest since September 2002 when Telecom's then cornerstone shareholder Verizon sold all but one percent of its 21.5 pct stake at a 10 pct discount.
   
Neil Paviour-Smith, head of sharebroking firm Forsyth Barr said the fact Telecom had sold in a reasonably tight band around the 5.00 nzd mark signalled that many investors, including institutions, may have seen the fall in share price as a buying opportunity.
   
At the market price level Telecom's dividend yield is strong, approaching 11 percent, and was helping underpin the stock, he said.
   
Telecom fell 0.56 nzd at opening to 4.99, before ending the day at 5.06.
   
Meanwhile, in Hong Kong share prices ended slightly lower on profit-taking following sharp gains over the last two days and on renewed concerns over interest rates after some strong US economic data, dealers said.
   
They said investors are also cautious ahead of a long weekend. The market will be closed tomorrow for a public holiday.
   
"The market was relatively quiet with some profit-taking in HSBC and property stocks. I don't expect any major correction," said Jackson Wong, investment manager at Tanrich Securities.
   
He said property shares turned weaker on caution ahead of the US Federal Reserve's policy meeting next Wednesday.
   
"The market is widely expecting the Fed to raise interest rates again next week. Although there are indications that local banks won't follow the rate hike in the US, trading turned cautious," Wong said.
   
The Hang Seng Index closed down 13.05 points at 17,013.93.
   
Among the few gainers in the region, shares in Seoul closed higher as investors cheered positive quarterly results by Hyundai Motor, Korean Air and KT.
   
The KOSPI index closed up 5.85 points or 0.41 pct at 1,441.02, after trading between 1,441.46 and 1,424.72.
  
"Strong corporate earnings lifted the market," Goodmorning Shinhan Securities analyst Kim Joong-Hyun said.
   
The Taiwan market was another gainer as stocks there closed higher in active trade on the back of ample liquidity and continued foreign interest.
   
"Foreign interest has extended from technology to old-economy and financial stocks," said Kai Yuan Securities' president Tom Tang.
   
The weighted index closed up 102.67 points or 1.42 pct at 7,345.04.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Gold futures edged higher. The benchmark June contract was up $5.50 at $674 an ounce.
   
On the bond market, long-term Treasury prices fell, sending yield higher on inflation concerns sparked by the productivity data. The benchmark 10-year note was off 2/32 at 95, with its yield at 5.17%.
   
Crude-oil futures fell as Iran concerns took a back seat to supply data that showed the first increase in U.S. gasoline supplies in nine weeks and placed crude inventories at their highest level in eight years. Crude for June delivery was last down 78 cents at $71.50.
   
The energy sector may be able to parry the fall in crude with news that European oil giants Royal Dutch Shell and Total reported better-than-forecast first-quarter earnings, with both companies saying rising oil and gas prices made up for declines in production.

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