US & World Daily Markets Financial Briefing 05-01-2007

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Motorola Dow, Nasdaq slide on Fed rate concerns

NEW YORK - A surprising surge in job creation and wages sent stock and Treasury prices falling Friday as investors saw their hopes for an interest rate cut dwindling.
   
The Labor Department's payrolls report suggests Americans won't be suffering from a slowing economy as much as investors anticipated -- news that would normally be positive for stocks, but not if the U.S. Federal Reserve uses it as a reason to hike interest rates. A rise in rates could crimp consumer spending, and further weaken the housing market by making mortgages pricier.
   
The jobs report followed a disappointing report by Motorola Inc., which warned Friday that a shortfall in its cell-phone devices will eat into fourth-quarter sales and earnings estimates.
   
Strong December sales figures from the nation's two biggest consumer electronics retailers, Best Buy and Circuit City, failed to give Wall Street a big enough boost to offset the jobs report and Motorola's news.
   
In the first hour of trading, the Dow Jones industrial average fell 28.44, or 0.23 percent, to 12,452.25.
   
Broader stock indicators also fell. The Standard & Poor's 500 index was down 4.90, or 0.35 percent, at 1,413.44, and the Nasdaq composite index was down 13.06, or 0.53 percent, at 2,440.37. The Russell 2000 index of smaller companies fell 7.13, or 0.90 percent, to 782.82.
   
Prices plummeted in the Treasury market, with the 30-year bond price dropping more than a full point after the jobs report. The yield on the benchmark 10-year Treasury note soared to 4.70 percent from 4.61 percent late Thursday.
   
The dollar rose against other major currencies, while gold prices slipped.
   
Stocks in focus

Motorola fell $2.06, or 10 percent, to $18.49, after the world's second largest cell-phone maker slashed its earnings estimates.
   
Best Buy rose 23 cents to $50.07, after the largest U.S. consumer electronics retailer said sales at stores open more than 14 months rose 7 percent.
   
Circuit City slipped 26 cents to $19.74, pulling back after rising about 4 percent in pre-market trading on its report that December same-store sales, those from stores open at least a year, rose 4.2 percent.

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Dollar surges after upside US jobs surprise

LONDON - The dollar surged on the news that the US economy created more jobs than anticipated during December.
   
The Labor Department reported that the US economy added 167,000 jobs in December, more than double what the market anticipated.
   
There was further good news that the number of jobs added in October and November, was revised up by 29,000 to a cumulative two-month total of 240,000.
   
Elsewhere, the unemployment rate, taken from a separate survey of households, remained at 4.5 pct in the month, while average hourly wages rose 0.5 pct in December, or 0.08 usd, to 17.04 usd.
   
The payrolls data are crucial for the market's assessment of the likely path of US interest rates in the coming months.
   
The dollar was ravaged towards the end of last year after a wave of bad US economic news stoked fears that the world's largest economy may slow down dramatically and prompt the US Federal Reserve into loosening policy.
   
That triggered a sharp slide in the dollar to a 21-month low against the euro and to its lowest level against the pound since sterling's ignominious exit from the European exchange rate mechanism in September 1992.
   
The Fed has kept its benchmark rate unchanged at 5.25 pct for four consecutive meetings after raising it 17 times in a row.  
     
In the wake of the payrolls data, the euro fell towards 1.30 usd from near 1.31 before, while the pound slipped to the 1.93 usd mark from 1.94. Against the yen, the dollar climbed to 118.60 yen from the 118 mark.
   
Divyang Shah, global strategist at IDEAglobal.com, said there's a chance that the euro will dip below 1.30 usd in the wake of the data as the market moves to price in the Fed staying put while the next rate hike from the European Central Bank has been priced in.
 

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The European markets at 13.00 GMT

London - UK blue chips remained weaker at midday, although off earlier lows thanks to steadying commodity prices and strength across the retail sector. By 12.10 pm, the FTSE 100 index was down 15.9 points at 6,271.1, well above its early low of 6,246.8, with the broader indices also recovering. Volume was average, with 1.08 bln shares changing hands in 170,593 deals.

Frankfurt - German shares were lower in late morning trade, pulled down by a lower close earlier this morning on the Nikkei index, a flat close on Wall Street yesterday and a forecast lower opening to trade across the Atlantic later today with relatively quiet newsflow providing few surprises on the main indices. At 11.21 pm, the DAX 30 index was down 31.91 points or 0.48 pct at 6,642.49, after moving between 6,626.45 and 6,661.90 this session.

Paris - Shares remained lower at midday as oil-related stocks were knocked down by higher than expected US fuel inventories. At 12.34 pm, the CAC 40 index was down 12.66 points or 0.23 pct at 5,561.90. Of stocks in the index, 27 were down and 13 were up.

Amsterdam - Shares in Amsterdam fell in midday trade, pulled down by negative heavyweight oil issues as well as lower US futures. At 12.44 pm, the AEX was down 2.10 points or 0.42 pct at 498.23, after opening at 498.39 and reaching a low of 497.13.

Milan - Share prices narrowed earlier losses at midday with the oil sector still weighing on the index while shares in Alitalia continued to shine amid speculation on who may buy the ailing airline. At 12.20 pm, the Mibtel index fell 0.04 pct to 32,045 points and the S&P/Mib was down 0.12 pct at 41,790.
   
Madrid - Share prices were lower in brisk midday trade amid profit taking after yesterday's late rally and light newsflow, with Telefonica, REE and Enagas outperforming, while Endesa was down. At 12.48 pm, the IBEX-35 index was down 12.6 points at 14,369.6, after trading in a range of 14,290-14,378, on turnover of 3.2 bln eur.

Stockholm - Shares closed a shortened session today little changed, as weakness among engineering stocks was offset by telecom operators, Scania, and AstraZeneca. The OMX Stockholm index closed down 0.10 pct at 372.71 and the OMX Stockholm 30 down 0.21 pct at 1,147.22. Turnover was 10.490 bln skr. The Swedish markets closed at 12.50 pm today.

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Asian shares finish lower as investors pocket gains from yr-end rallies

HONG KONG - Asian share prices closed mostly weaker as investors continued to pocket gains made in year-end rallies around much of the region, dealers said.
   
In Tokyo, investors locked in profits ahead of a long weekend. Japanese financial markets are closed Monday for a public holiday. Speculation over the possibility of a Bank of Japan rate hike this month boosted the yen, dampening interest in export-oriented shares, they said.
   
The Nikkei 225 Stock Average closed down 262.08 points or 1.51 pct at 17,091.59, while the broader-based TOPIX index of all First Section shares slid 23.62 points or 1.39 pct to 1,675.33.
   
Seoul shares slumped for a third day in a row, with sentiment unnerved by reports that Pyongyang may be preparing for a second nuclear weapons test. A US television network, citing defense officials, said preparations for a test are under way at the same site as the first explosion last October. A South Korean foreign ministry official said that "mysterious" activity had been monitored in the area.
   
The KOSPI closed down 11.53 points or 0.83 pct at 1,385.76. It lost 48.70 points for the week. KOSDAQ shares also closed lower as investors cut positions ahead of the options expiry and start of the corporate earnings season, next week. The KOSDAQ index finished down 1.59 points or 0.26 pct at 602.35, losing 3.8 points over the week.
   
Taipei also was hit by jitters over the reports of a possible second North Korean weapons test with the weighted index ending down 98.94 points or 1.25 pct at 7,835.57. Concerns expressed by creditor banks over reorganization plans sought by two local firms also hurt sentiment. For the week the index gained a modest 0.5 pct.
   
Chinese bourses, which have rallied to record levels on optimism over the strong yuan, upcoming IPO's and corporate earnings prospects, had a mixed day.  In the A-shares market, profit takers took the gloss off the recent strong run-up in the banking sector, while a rotational shift into automakers in Shenzhen saw prices finish in positive territory.
   
The benchmark Shanghai Composite Index, which covers both A- and B-shares listed on the Shanghai Stock Exchange, closed down 74.39 points, or 2.74 pct, at 2,641.33. The Shanghai A-share Index slipped 79.12 points or 2.77 pct to 2,778.46 while the Shenzhen A-share Index ended up 9.17 points or 1.60 pct at 581.65.
     
It was a mixed day in Manila, with the benchmark index weakening, due to losses in key blue chips, but with the broad market was higher as buying interest emerged in some lower liners.
   
The composite index closed down 16.35 points at 2,996.39 but was up 0.46 pct on the week.
   
Hong Kong, however, managed to finish higher as a late round of buying buoyed the index after sharp losses yesterday. The Hang Seng Index ended 185.70 points higher at 20,211.28.

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New York's light sweet crude hits 18-month low of 54.90 usd

LONDON - The price of New York's light sweet crude oil slumped to below 55 usd a barrel to the lowest level for more than 18 months, owing to warm winter weather in the US that has reduced demand for heating fuel, traders said.
   
New York's main contract, light sweet crude for delivery in February slid 69 cents to 54.90 usd before the official opening of floor trading in the United States. It was the lowest level since June 14, 2005.
   
In London, Brent North Sea crude for February delivery lost 61 cents to 54.50 usd - the lowest point since November 2005.

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