US & World Daily Markets Financial Briefing 05-06-2006

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Stocks slide on Iran supply threats

NEW YORK - Stocks tumbled in early trading Monday as crude futures raced higher on Iran's threat to cut its oil exports if Western nations punish or attack the country over its nuclear arms program.
   
The warning unnerved an energy market already concerned about the chance that another severe hurricane season could devastate Gulf Coast refineries again. A barrel of light crude jumped $1.02 to $73.35 on the New York Mercantile Exchange.
   
Investors remained hesitant to buy up stocks after last week's data on manufacturing activity and job growth provided little clarity on inflation and whether the Federal Reserve will keep raising interest rates. But signs of a moderating economy gave stocks some strength toward the end of the week, leaving the major indexes slightly higher.
  
Wall Street awaited more clues on the economy's health from the Institute of Supply Management's services index later in the session. Growth in the nation's service sector was expected to slow by 3 points to a reading of 60.
   
In the first hour of trading, the Dow Jones industrial average lost 71.08, or 0.63 percent, to 11,176.79.
   
Broader stock indicators also fell. The Standard & Poor's 500 index was down 6.26, or 0.49 percent, at 1,281.96, and the Nasdaq composite index dropped 13.35, or 0.6 percent, to 2,206.06.
   
Bonds were flat after last week's rally, with the yield on the 10-year Treasury note unchanged at 5 percent from late Friday. The U.S. dollar was little changed against other major currencies; gold prices returned to $650 an ounce.
   
Higher oil prices helped some stocks to gains. Dow Jones industrial Exxon Mobil Corp. advanced 20 cents to $61.85, and ConocoPhillips rose 34 cents to $64.85. Drilling services firm Halliburton Co. rose 47 cents to $77.25.
   
SanDisk Corp. added $1.01 to $56.14 after Bear Stearns upgraded the flash memory maker to "outperform," citing lesser concerns about near-term oversupply issues.
   
The Russell 2000 index of smaller companies slid 4.79, or 0.65 percent, to 732.66.
   
Overseas, Japan's Nikkei stock average slumped 0.77 percent. In afternoon trading, Britain's FTSE 100 gained 0.3 percent, Germany's DAX index lost 0.47 percent and France's CAC-40 was lower by 0.16 percent.

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Asian stocks close mixed, Tokyo lower on concerns over US growth

HONG KONG - Asian stocks closed mixed with weak economic data from the US and regional factors depressing trade, dealers said.
   
Tokyo share prices ended lower in reaction to Wall Street's unimpressive performance on Friday, according to dealers.
   
Investor sentiment was also hit hard when popular shareholder activist Yoshiaki Murakami admitted to insider trading in connection with transactions in shares in a broadcasting firm.
   
The Nikkei 225 Stock Average closed down 121.00 points or 0.8 pct at 15,668.31, while the TOPIX index of all first-section issues fell 11.19 points or 0.7 pct to 1,594.92.
   
Dealers said markets were focused on the outlook for the US economy after the US Labor Department on Friday said non-farm payrolls rose by just 75,000 in May, less than half the 170,000 gain expected by analysts.
   
"Given the tame payroll data, whether US consumer spending can sustain its brisk growth has become a hot issue for discussion, because developments there can directly impact the trend of corporate profits at Japanese firms," said Daiwa Securities SMBC chief market economist Seiji Shiraishi.
   
Shareholder activist Murakami told a press conference he had signed a statement during questioning last night by prosecutors in which he admitted to violating the securities and exchange law.
   
"Following the news that Murakami admitted to insider trading, players here are worried about the possibility that this development could add to the selling of Japanese shares by overseas investors, who have been net sellers recently," said Marusan Securities market analyst Takashi Ushio.

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Australian share prices finished higher as investors bought resource and energy stocks following the rise in metal and oil prices on Friday, dealers said.
   
They said the market failed to react to March quarter economic data which included lower than expected company profits, waiting instead for the release of gross domestic product growth for the first quarter on Wednesday.
   
The S&P/ASX 200 climbed 42.8 points or 0.84 pct to close at 5,120.0, advancing towards the May 11 record close of 5,364.5.
   
Hong Kong shares were higher in afternoon trade on follow-through interest in certain blue chips and property stocks as the US jobs data eased interest rate hike worries, dealers said.
   
At 3:32 pm, the Hang Seng Index was trading at 15,997.81 points, up 85.10 or 0.53 pct. Dealers said, however, that the market remained cautious and turnover was relatively small, as investors awaited the Federal Reserve decision on US interest rates by the end of the month.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on a technical rebound led by telecom and metal companies, dealers said.
   
The Shanghai A-share Index rose 16.4 points, or 0.94 pct, to 1,770.40 on turnover of 36.06 bln yuan and the Shenzhen A-share Index was up 5.97 points at 449.84 on turnover of 220.88 bln yuan.
   
Seoul share prices closed lower, reversing early gains, as most blue chips retreated on program selling, with investors largely cautious ahead of a national holiday tomorrow, dealers said.
   
The impending rate decision by the Bank of Korea and the expiry of options on Thursday also weighed on sentiment, sending the KOSPI index below 1,300 points at one stage, they added.
   
The KOSPI index closed down 7.42 points or 0.57 pct at 1,301.62.

Asian Bourse Round-Up

For a full list of closing figures, click here

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London shares - midafternoon features at 13.30 GMT

FTSE 100 risers

BHP Billiton 1,045 up 20
Commodity prices up; sector consolidation hopes

Royal Dutch Shell 1,854 up 30
Buoyant crude price

BAA 913-1/2 up 8-1/2
Gatwick sale hopes; Ferrovial/Goldman bid situation

Aviva 742 up 9-1/2
'Buy' from 'hold' - Deutsche Bank; Goldman reinitiates as 'outperform'

BP 642 up 8-1/2
Buoyant crude price

Rexam 489-1/2 up 5-1/2
'Keep buy' - Sunday Telegraph; rally ahead of possible FTSE 100 demotion

Man Group 2,462 up 19
Reportedly plans to demerge brokerage arm

InterContinental Hotels 938-1/2 up 9-1/2
Citigroup reinitiates coverage with 'buy' & 1,050p tgt; JP Morgan overweight

Diageo 896-1/2 up 7
'Buy' from 'neutral' - Merrill Lynch

Xstrata 2,063 up 13
Lehman starts coverage with 'overweight'; commodity prices up

  
FTSE 100 fallers

PartyGaming 123 down 4-1/4
Fears founders will break "lock-up" agreement

British Airways 343-1/2 down 4-1/2
Positive traffic stats offset by stronger crude price

Persimmon 1,204 down 32
Profit-taking after gains with McCarthy & Stone on Friday; interest rates

ITV 107-1/4 down 0-3/4
Lehman lowers target to 118 pence from 125, cuts estimates

Cable & Wireless 104 down 1
HSBC reiterates 'underweight'; FTSE 100 expulsion expected this week

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