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

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U.S. stocks rally, bolstered by April jobs data

NEW YORK - U.S. stocks rallied in early trading Friday as slower-than-anticipated April jobs growth offset a larger-than-anticipated rise in hourly earnings, and bolstered hopes the Federal Reserve may no longer need to continue raising interest rates.
   
The Dow Jones Industrial Average rose 61 points to 11,499.
   
The Nasdaq Composite Index climbed 15 points to 2,339 while the S&P 500 Index was up 8 points at 1,320.
   
Stocks gained after nonfarm payrolls expanded by 138,000 in April, less than the 199,000 expected by economists surveyed by MarketWatch. The unemployment rate remained at 4.7% as expected.

Berkshire Hathaway set to hit acquisition trail?
   
Berkshire Hathaway gears up for its annual meeting this weekend, with The Wall Street Journal suggesting its chairman 75-year old Warren Buffett may use the meeting to announce a number of acquisitions. In his annual letter to shareholders earlier this year, Buffett made it clear he was looking for attractive buys to put his company's $40 billion cash pile to work.
   
"If you have a business that fits, give me a call," he wrote. "Like a hopeful teenage girl, I'll be waiting by the phone."
   
The Journal, citing unnamed analysts, said San Francisco PG&E and Los Angeles automotive insurer Mercury General may be possible acquisition targets. A PG&E spokesman declined to comment, while Mercury General Chairman and Chief Executive George Joseph - who's nine years older than Buffett- told the paper he hasn't been approached by anyone at Berkshire.

PG&E shares were up 2.5% at $40.43 while shares of Mercury General climbed 2.9% to $57.18.
   
Other stock standouts
   
Toll Brothers rose 3% to $30.50 even after the luxury home builder reported a 29% decline in the value of signed contracts and cut its delivery estimate for the year by 200 homes. Chief Executive Robert Toll, however, maintained that excess supply in the market was a short-term phenomenon.
   
El Paso surged 9.6% to $14.78 after the energy firm reported first-quarter earnings that tripled and topped Wall Street forecasts.
   
Warner Music , which earlier in the week spurned a $4.2 billion takeover offer from EMI Group, rallied 7.9% to $31 after the company posted a narrower-than-expected loss.

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Dollar falls to 1-year low vs. euro, pound, franc on jobs data

NEW YORK - The dollar slumped to fresh one-year lows versus the euro, pound and Swiss francs and also fell against the yen early Friday after the U.S. nonfarm payrolls number came in far lower-than-expected.
   
Nonfarm payrolls expanded by 138,000 in April, the Labor Department said Friday. Economists surveyed by MarketWatch were looking for about 200,000 new jobs in the month. Payroll growth in February and March was also revised down by a total of 36,000 to 200,000 new jobs in each month.
   
However, average hourly earnings increased 9 cents, or 0.5%, to $16.61. Economists expected earnings to rise 0.3%. Earnings are up 3.8% in the past year, the biggest year-over-year gain since August 2001.
   
"The FX market now accentuates the negative in U.S. economic releases and minimizes the positive," said Kathy Lien, chief strategist at FXCM. "There is little reason for any traders to remain dollar bulls."
   
But "despite the tame figure, wage pressures are beginning to assert themselves. This paves the way for at least one more rate hike by the Federal Reserve. Anything beyond becomes data dependent," she added.
   
The U.S. dollar turned lower against the Japanese yen and extended losses against the euro as the weaker-than-expected employment report raised the odds of the Federal Reserve putting a temporary halt to its cycle of interest rate increases.

The euro was last up 0.3% at $1.2734. Against the yen, the greenback was off 0.6% at 112.78. The British pound traded at $1.8577, up 0.3%. The dollar weakened to 1.2238 Swiss francs, down 0.3%.
   
The Fed has increased interest rates 15 times in a row since June 2004, which has given the U.S. currency a very attractive yield differential against the euro and yen. The federal funds rate currently stands at 4.75%.
   
Fed policy-makers are widely expected to boost benchmark rates to 5% at their next meeting May 10. After that, analysts say the Fed could take a break, but perhaps only temporarily.
   
The dollar weakened across the board Thursday, after hawkish comments from the European Central Bank president boosted expectations the bank will raise interest rates by a quarter-point in June.
   
Also on Friday, Iran took a step toward establishing an oil trading market denominated in euros, rather than the U.S. dollar, by registering an oil bourse on the Persian Gulf island of Kish in which oil would be sold in euros, according to AP, citing a state-run television in Iran.
   
The news followed recent comments by Middle Eastern central banks, including the United Arab Emirates and Qatar that they're looking to raise the euro's weighting in their foreign-exchange reserves.
   
Analysts said euro-denominated oil sales could eventually convince more central bankers to diversify their reserves away from the dollar, causing the U.S. currency to decline further.
   
Aussie falls slightly
   
The Australian dollar weakened slightly after the Reserve Bank of Australia's statement on monetary policy was viewed as less hawkish than the market was looking for.
   
The statement made no explicit reference to the future direction of interest rates.
   
The Australian currency rose to its highest level against the U.S. dollar in eight months Wednesday after the Reserve Bank of Australia increased its interest rates by 25 basis points to 5.75%.
   
The Aussie dollar weakened to $0.7673, before paring losses to trade at $0.7717, up 0.1%.

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The European Markets at 12.00 BST

London - Share prices remained near session highs at midday, paced by a firm banking sector, following reports of a bid for Alliance & Leicester from SCH, while buoyant metal prices continued to support mining stocks, dealers said.
   
By 12.10 pm, the FTSE 100 was up 22.8 points at 6,059.7, while the broader indices were also firmer.
   
Frankfurt - Shares were higher in midday trade as Wall Street gains overnight and consensus-beating first-quarter results from Deutsche Boerse last night boosted sentiment, dealers said.
   
At 11.18 am, the DAX 30 index was 35.18 points or 0.58 pct higher at 6,074.50, having moved between 6,045.83 and 6,080.19 so far this session. The MDAX was at 8,916.29, up 50.40 points or 0.57 pct, while the TecDAX was at 745.27, up 5.63 points or 0.76 pct.

Paris - Shares were higher on further positive first quarter reports and ahead of the release of the monthly US jobs report this afternoon, dealers said.
   
At 1.08 pm, the CAC-40 index was up 24.30 points or 0.47 pct at 5,258.04, having touched a new 5-year intraday high of 5,268.13, on trading volume of 1.84 bln eur. Of the CAC-40 stocks, 29 were higher and 11 were lower.

Amsterdam - Shares traded traded higher in early afternoon trade led by financials and VNU, dealers said.
   
At 1.06 pm, the AEX was up 2.31 points or 0.50 pct at 468.90, after opening at 467.37 and reaching a high of 469.35.

Brussels - Shares edged up this morning as the market continues yesterday's positive trend and confidence after Wall Street's gains yesterday, dealers said.
   
At, 11.27 am the Bel 20 was up 14.98 points or 0.38 pct at 3966.93.
   
Milan - Share prices edged up at midday, helped by gains among insurers, while Banca Intesa was also well bid after a press report that it abandoned talks with Capitalia over a possible merger, dealers said.
   
At 12.15 am, the Mibtel index was up 0.13 pct at 29,684 points and the S&P/Mib was up 0.09 pct at 38,170, while volumes stood at 2.03 bln eur.

Madrid - Share prices were higher in light early afternoon trade, tracking the firmer trend across the rest of Europe ahead of US April jobs data, with Metrovacesa leading gains on counterbid news, dealers said.
   
At 1.28 pm, the IBEX-35 index was up 47.9 points at 11,976.5, after trading in a range of 11,922-11,983, on thin turnover of 2.711 bln eur.

Stockholm - Shares remained in slightly positive territory in midday trade, little changed from earlier levels, dealers said.
   
At 12.10 pm, the OMX Stockholm index was up 0.59 pct at 341.77, while the OMX Stockholm 30 index was up 0.76 pct at 1,053.56. Turnover was 13.93 bln skr.

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Asian stocks mixed; Sydney rebounds led by resources while Telecom drags NZ

HONG KONG - Share prices across the Asia-Pacific region were mixed today, with markets in Japan, Hong Kong, Seoul and China closed for public holidays.
   
In Sydney, stocks closed higher on a rebound after yesterday's sharp sell-off, with the resources sector providing the lead.
   
CMC Markets dealer Josh Whiting said stronger base metals prices, a higher close in the US market and a less hawkish statement from the Australian Reserve Bank all combined to help return some gains to stocks.
   
The S&P/ASX 200 advanced 66.2 points or 1.28 pct to close at 5,255.4, while the All Ordinaries Index jumped 62.8 points or 1.22 pct to 5,209.5.
   
"BHP Billiton and Rio Tinto led the overall market higher, thanks to a focus on a fresh 18-year high in the price of copper," Whiting said.
   
Macquarie Bank rose after saying it could potentially make a takeover offer for transport group Patrick Corp with a consortium, countering Toll Holdings' long-fought battle to acquire Patrick.
   
But Telecom Corp of New Zealand plunged again after reporting a 18.9 pct drop in third quarter profit. The telco's fall adds to the sharp drop in the last two sessions following news that the New Zealand government plans to open competition on the company's network.
   
Telecom fell sharply in New Zealand too, leading Wellington's benchmark NZX-50 index to drop by 1.02 pct to 3,655.88 points. For the week, the index lost 3.7 pct.
   
Telecom lost a further 0.34 nzd or 6.7 pct to end at 4.72 nzd, knocking another 666 mln nzd off the company's value.
   
ABN Amro Craigs broker Matt Willis said some investors may have been looking for an excuse to take some money off the table, given the recent strong performance of the market, while "there are perhaps some stocks benefiting from the sell down of Telecom."
   
Meanwhile, in Taipei share prices closed mixed as profit-taking cut into intraday gains driven mainly by continued purchases by foreign investors.
   
The weighted index closed up 25.40 points or 0.35 pct at 7,370.44. But decliners led risers 451 to 419, with 71 stocks unchanged.
   
"Investors determined it was time for locking in profits as the market had gained 1,000 points in just a few months," said Alex Huang, assistant vice president at Barits International Securities.
   
But "any correction is unlikely to prove severe, though," Huang said. "Solid support can be expected at about 7,200 points next week."    
   
In Singapore, shares were trading lower in the afternoon as investors continued to take profits for a second day after the market's recent run-up to fresh highs.
   
The Straits Times Index was down 9.53 points or 0.36 pct at 2,635.17.

Asian Bourse Round-Up

For a full list of closing figures, click here

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NEW YORK - On the bond market, long-term Treasury prices turned positive, sending yields lower after the data. The benchmark 10-year note was up 13/32 at 95 12/32, with its yield at 5.1%.
   
Gold futures logged another 25-year high, and copper set a fresh record as uncertainty about supplies and worry about the nuclear standoff with Iran boosted demand for metals.
   
Gold for June delivery was last up $3 at $679.50 an ounce. Copper was down 1.3 cents at $3.46 a pound, after earlier setting a new record of $3.555.
   
After losing more than $2 a barrel in the previous session, crude-oil futures rose early Friday with traders still too worried about developments in Iran and other trouble spots to keep the contract under $70.

Crude for June delivery was last up 56 cents at $70.50 after ending at a one-month low under $70 on Thursday.

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