US & World Daily Markets Financial Briefing 06-04-2006

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U.S. stocks open flat; Merck hurt by Vioxx setback

NEW YORK - U.S. stocks were flat in early trading Thursday after retailers reported uninspiring March sales results, with Merck & Co. shares under pressure following a legal setback over its Vioxx painkiller.
   
3M was a bright spot, after the Dow Jones Industrial Average component raised its profit outlook for the first quarter.
   
The Dow industrials were down 6 points at 11,232.
   
The Nasdaq Composite was virtually unchanged, up 0.5 point at 2,360. On Wednesday, the tech-rich index rose to a fresh five-year high.
   
The S&P 500 Index was down 1.4 points at 1,310.17 after ending the prior session at its best level since May 2001. 
        
The March employment report is released before the market opens Friday. The economy is expected to have created around 187,000 jobs, with the jobless rate expected to remain unchanged at 4.8%.
   
Retailers in focus
   
Retailers staggered out of March with mostly subpar sales results that were pressured by the seasonal shift of Easter and uncooperative spring weather.
   
Wal-Mart Stores Inc. managed to post March same-store sales numbers that squeezed past its own recent forecast, helped by strength at its Sam's Clubs chain.
   
The world's largest discount retailer said sales from stores open at least a year rose 1.4%, climbed 1.4% in March. On Saturday, Wal-Mart told investors to expect a 1.3% increase. The stock tacked on 10 cents to $46.97.
   
Target Corp. posted a 2.2% rise in same-store sales, slightly higher than the 2.1% average estimate of analysts polled by Thomson First Call. The stock was last up 2% to $53.20.
   
Among the disappointments, Gap Inc. same-store sales tumbled 13% in March and the retailer warned of further declines for the first half of the year. Gap's stock was down 2% in early trading.
   
J.C. Penney , Saks Inc. and Abercrombie & Fitch all posted March same-store sales that came in below estimates.
   
Dow stocks in the spotlight
   
Shares in Merck & Co. were down 4.3% at $34.44 after a jury in New Jersey delivered a split decision in the cases of two men who said the suffered heart attacks after taking Vioxx.
   
The jurors found Merck liable for one of two former Vioxx users' heart attacks and ordered the company to pay $4.5 million in damages.
   
There was better news for fellow Dow component 3M.  The diversified technology company, perhaps best-known for its Post-It notes, raised its forecast for the first quarter. 3M shares were up 3.4% at $80.08.
   
American Express Co. said it's restating 2004 and 2005 results for reclassifications of certain revenue, expense items.  American Express said the move won't hurt earnings in those years, but the revised figures reduce 2005 revenue by $199 million and reduce 2004 revenue by $67 million. The stock was off 31 cents at $52.59 in early trading.

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Euro slumps on ECB chief's comments

NEW YORK - The euro fell broadly against the dollar and the yen early Thursday after the European Central Bank chief Jean-Claude Trichet was less hawkish in comments accompanying an interest-rate decision than the market was expecting.
   
The ECB on Thursday held its key interest rate at 2.5% as expected and the bank's president surprised traders by saying the market got it wrong in its expectations of a certain May hike.
   
Trichet also acknowledged that in the introductory statement, the word "vigilance" wasn't used, but said that the ECB will monitor "very closely" risks to price stability.
   
"He said the market was wrong...those who had existing positions in the market place were caught wrong-footed," said Michael Woolfolk, senior currency strategist at the Bank of New York. "He said the high probability of a May rate hike was not supported by the governing council, but he left the door open for June."
   
In early New York trading, the euro weakened 0.6% to $1.2211. It also fell 0.3% to 143.92 yen. The dollar changed hands at 117.91 yen, up 0.3%. The British pound was fetching $1.7520, down 0.01%. The dollar weakened 0.5% to 1.2909 Swiss francs.
   
Earlier, the dollar also found modest support from data that showed weekly jobless claims data that fell unexpectedly.
   
First-time claims for state unemployment benefits unexpectedly fell by 5,000 to 299,000 in the week ended April 1, the Labor Department said Thursday.
   
That's a decrease from the prior week's revised 304,000 claims and is the lowest level seen since Feb. 18.
   
Economists surveyed by MarketWatch had been expecting initial jobless claims to rise to about 306,000.
   
The euro has risen sharply in the past week amid expectations that the ECB will be raising rates more aggressively than the Federal Reserve. It had earlier climbed to a seven-month peak against the dollar and an all-time high versus the yen in the session.
   
Narrowing interest-rate spreads between the dollar and other currencies will discourage foreign investors from financing the swelling U.S. current account deficit.
   
Also on Thursday, the Bank of England left its key interest rate unchanged at 4.5% for the eighth consecutive month, as rising energy prices and a recovering housing market offset worries about slowing growth in the services and manufacturing sectors.
   
The central bank didn't issue any accompanying statement. It rarely comments on its decisions unless it moves rates.
   
Currency investors are eagerly awaiting the March non-farm payrolls report, due out Friday, for further clues on the U.S. economy and interest-rate outlook.
   
"However, unless there's a sharp increase tomorrow - and US Treasury Secretary John Snow has said it will show "good numbers", so perhaps a gain in excess of 200,000 - any notable upside may prove difficult to find," said Paul Jackson, senior FX dealer at CMC Markets.

Elsewhere, the dollar fell to new lows against the Chinese yuan at 8.0050.

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The European Markets at 12.00 BST

London - Leading shares were weaker at midday, retreating further from record highs hit early on, with Wall Street seen easier after good gains yesterday and as widely expected news of unchanged UK interest rates failed to inspire, dealers said.
   
At 12.21 pm, the FTSE 100 was 1.8 points lower at 6,042.0, down from this morning's five year highs of 6,073.3, with the broader indices also positive.
  
Frankfurt - Shares were flat in midday trade as the strengthening euro, broker downgrades and caution ahead of today's ECB decision on interest rates outweighed solid gains on Wall Street overnight, with automakers among the biggest decliners, dealers said.
   
At 11.27 am, the DAX 30 index was 0.77 point or 0.01 pct lower at 6,028.43, having moved between 6,020.44 and 6,045.62 so far this session.

Paris - Shares turned lower after a positive opening as investors were cautious ahead of this afternoon's monthly meeting of the European Central Bank governing council, dealers said.
   
At 1.21 pm, the CAC-40 index was 12.31 points or 0.24 pct lower at 5,208.92, on volume of 1.88 bln eur.
   
Amsterdam - Share prices were slightly higher in quiet early afternoon trade, with ASML leading blue chip gainers, dealers said.
   
At 1.05 pm the AEX index was up 0.2 pct at 469.49 after opening at 470.47 and reaching a high of 471.05
   
Milan - Share prices were little changed at midday trade, amid caution ahead of today's ECB meeting, with losses among most blue chips pared by gains in Autostrade, on strong first-quarter traffic data, and oil plays, dealers said.
   
At 12.40 pm, the Mibtel index was up 0.11 pct at 29,759 points and the S&P/Mib was off 0.06 pct at 38,417, while volumes stood at 2.31 bln eur.

Madrid  - Shares were slightly higher in cautious midday trading ahead of interest rate announcements in Europe, as companies with renewable energy interests led the gainers while Cintra spiked higher after an upgrade from JP Morgan, dealers said.
   
At 12.25 pm, the IBEX-35 index gained 12.0 points to 11,928.4, after trading in a range of 11,909-11,944, on turnover of 1.4 bln eur.

Stockholm - Share prices were slightly lower in midday trade, off the morning's unchanged levels as profit-taking took hold, with many shares also trading ex dividend, but with Nordic and Baltic bourse owner OMX outperforming on merger speculation, dealers said.
   
At 12.10 pm, the OMX Stockholm index was down 0.50 pct at 342.24, while the OMX Stockholm 30 index was down 0.71 pct at 1,063.80. Turnover was 13.09 bln skr.

Zurich - Swiss shares were slightly higher but off this morning's best levels in quiet midday trade on caution ahead of the ECB's interest rate decision, with gains in Novartis and the banks offsetting a weakness among the market's other heavyweights, dealers said.
   
At 12.30 pm, the Swiss Market Index was 19.82 points higher at 8,110.36, and the Swiss Performance Index was up 14.58 points at 6,234.18.
 
Helsinki - Helsinki shares were little changed midday in light trading, with Sampo lower as it went ex-dividend, dealers said.
   
At 12.11 am, the OMX Helsinki 25 index was 0.08 pct lower at 2,714.42. The OMX Helsinki index was 0.06 pct higher at 9,422.41, while the Helsinki CAP portfolio index was up 0.07 pct at 5,062.55.

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Asian shares close mostly up, Japan's TOPIX hits 14 year-high

HONG KONG - Shares across the Asia-Pacific region ended mostly up, with Tokyo sharply higher aided by Wall Street's rally overnight and the yen's retreat, dealers said.
   
They added the TOPIX index finished at its highest level for more than 14 years on hopes of strong corporate earnings.
   
They said market sentiment was also buoyed by steady inflows of funds from offshore investors.
   
The blue-chip Nikkei 225 Stock Average closed up 245.35 points or 1.4 pct at 17,489.33, its high for the session. This is its strongest finish since July 11, 2000, when it ended at 17,504.36.
   
The broader TOPIX index of all first-section issues surged 29.62 points or 1.7 pct to 1,775.67, its highest close since Nov 15, 1991, when it hit 1,812.17.
   
"Share prices rallied today, taking cues from sharp gains in US markets and a weaker yen," said Hideo Mizutani, chief strategist at Sieg Securities.
   
He added that with the economy showing signs of robust growth, investor sentiment remains bullish on prospects for year-to-March corporate earnings.
   
Share prices in Australia closed at fresh record highs as rises in metal and oil prices translated into gains across the resources sector, dealers said.
   
They said overnight increases in copper and zinc prices to record levels boosted global miners BHP Billiton and Rio Tinto to fresh record highs, as well as Zinifex and Kagara Zinc.
   
However, dealers said major banking stocks fell as stronger labor data for March raised expectations for an interest rate hike in the coming months which would have a negative impact on the banks' earnings.
   
The S&P/ASX 200 rose 31.9 points or 0.61 pct to close at 5,238.9, surpassing Wednesday's record closing high of 5,207.0.
   
In Hong Kong, share prices were trading sharply higher in the afternoon on strong fund inflows and comments by a Fed official suggesting that the US is close to ending its cycle of interest-rate hikes, dealers said.
   
They said China-related stocks were boosted by continuing hopes that the Chinese yuan will be allowed to appreciate further.
   
At 4:17 pm, the Hang Seng Index was up 238.78 points or 1.48 pct at 16,338.87.
   
In mainland China, A-shares in Shanghai and Shenzhen broke a four-day rising streak and closed mixed on profit-taking with power generators and lenders under pressure, dealers said.
   
The Shanghai A-share Index shed 0.45 point to 1,404.50 on turnover of 21.70 bln yuan and the Shenzhen A-share Index was up 2.0 points at 348.54 on turnover of 14.05 bln yuan.
   
Share prices in Seoul finished higher for 11th straight trading day on sustained foreign support and program buying, with the index topping 1,400 points at one stage, the first time it has risen above that level in two months, dealers said.
   
Samsung Electronics and Hynix led the gainers as concerns over a strong won were effectively offset by hopes that they will provide indications of improved outlooks in the coming months, they added.
   
Broad sentiment was boosted by Wall Street's gains and expectations that the Bank of Korea will keep interest rates on hold tomorrow while confirming the strength of the economic recovery.
   
The KOSPI index closed up 8.23 points or 0.59 pct at 1,397.00.

Asian Bourse Round-Up

For a full list of closing figures click here

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Gold futures tap $600 in morning trading

SAN FRANCISCO - June gold climbed as high as $600 an ounce in morning trading on the New York Mercantile Exchange, after touching a high of $601.90 overnight. Futures prices haven't traded at these levels since Jan. 1980.

The June contract was last up $5 at $597.50 an ounce.

May silver also climbed to a 22-year high of $12.01 an ounce and was last at $11.94, up 23.5 cents. "Going forward, inlfationary concerns will only gain steam, the U.S. dollar will continue its downward decline and geopolitical tensions will continue to draw safe-haven buying from around the globe," said Emanuel Balarie, senior market strategist at Wisdom Financial.

Crude-oil prices rose in early trading, driven by an increase in gasoline futures to a two-month high following supply data on Wednesday that showed a sharp decline in U.S. gasoline stocks.
   
Crude for May delivery was up 72 cents at $67.79 a barrel.

On the bond market, long-term Treasury prices fell further, sending yields higher as the drop in jobless claims confirmed the strength of the economy, but also raised interest-rate fears.
   
The benchmark 10-year note was down 79/32 at 97 2/32, with its yield at 4.87%. 

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