US & World Daily Markets Financial Briefing 06-08-2007

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Stocks waver after Friday's plunge

NEW YORK - Stocks fluctuated in early trading Monday following a sharp pullback Friday brought by concerns about the credit market and ahead of the Federal Reserve's meeting Tuesday.
   
Wall Street is looking for signs of encouragement after the fractious trading of the past two weeks. In a day devoid of economic news and with few earnings reports, investors are likely to remain cautious, especially with the Fed's meeting on interest rates slated for Tuesday. Policy makers are widely expected to hold the benchmark rate steady at 5.25 percent; as usual, the greater concern is with the Fed's economic assessment statement.
   
In the first hour of trading, the Dow Jones industrial average rose 40.32, or 0.31 percent, to 13,222.23.
   
Broader stock indicators were mixed. The Standard & Poor's 500 index rose 2.09, or 0.15 percent, to 1,435.15, and the Nasdaq composite index fell 2.34, or 0.09 percent, to 2,508.91.
   
Stocks have endured a volatile couple of weeks as troubles in the global credit markets -- rooted in the rise of subprime loan defaults in the U.S. -- have unfolded.
   
The yield on the 10-year note rose to 4.69 percent from 4.68 percent late Friday. Bond prices move opposite their yields.
   
In corporate news, Bear Stearns Cos. co-President and co-Chief Operating Officer Warren Spector resigned after the collapse of two hedge funds that invested in risky mortgage-backed securities. Spector was directly in charge of the investment bank's asset management business. Bear Stearns fell 85 cents to
$107.49.
   
UnitedHealth Group Inc., the nation's second-largest health insurer, rose 40 cents to $47.90 after raising its earnings forecast for 2007 due to positive adjustments related to its Medicare business.
   
Cooper Tire & Rubber Co. on Monday said it swung to a second-quarter profit after sales jumped 17 percent, driven by higher prices in North America and strong growth in Europe and Asia. The tire maker's results beat Wall Street's expectations. Cooper advanced 93 cents, or 4.4 percent, to $22.05.
   
Late Sunday, Japan's Fast Retailing Co. raised its bid by $50 million to $950 million to acquire tony clothing merchant Barneys New York. Barneys, owned by Jones Apparel Group Inc., has been the subject of a bidding war between Fast Retailing and Istithmar, a Dubai-based investment firm. Jones Apparel fell 50 cents, or 2.4 percent, to $20.01.
   
Crude oil futures fell $2.02 to $73.46 in preopening trading on the New York Mercantile Exchange. Gold prices fell, while the dollar moved in a mixed range against other major currencies.
   
Declining issues outnumbered advancers by about 5 to 2 on the New York Stock Exchange, where volume came to 214.8 million shares. The Russell 2000 index of smaller companies fell 8.06, or 1.07 percent, to 747.36.
   
In trading abroad, London's FTSE 100 fell 0.02 percent, Germany's DAX index rose 0.18 percent and France's CAC-40 fell 1.20 percent.

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Dollar stays under pressure ahead of US rate decision Tues

LONDON - The dollar remained under pressure, suffering after Friday's weak US jobs data and ahead of tomorrow's US interest rate decision.
   
The weaker-than-expected US non-farm payrolls numbers and fears over the potential spillover effect from a substantial downturn in credit markets have combined with concerns that the Federal Reserve will not be in a position to cut interest rates any time soon -- a move which would help revive the flagging US economy.
     
The Federal Reserve is widely expected to leave interest rates unchanged at tomorrow night's meeting, but all attention will focus on the accompanying statement for comments on the recent turmoil on financial markets and any hints on the timing of a rate cut.
   
The dollar has been losing ground against both low-yielding and high-yielding currencies, Katzive said, with the euro earlier hitting a high of 1.3839 usd, just shy of the late July record high of 1.3851.
   
The euro was faring well across the board, surging to two-month highs against the pound as the currency benefited from safe-haven flows as well as much stronger-than-expected German industrial orders data this morning.
   
The pound edged lower meanwhile. Data released earlier today showed UK manufacturing output expanded for the fourth consecutive month during June -- the first time in eight years that the UK has seen such a run of expansion -- but failed to suggest there will be any chance of an upward revision to second
quarter GDP as a result.
   
Elsewhere, the yen came off earlier highs, though remained above Friday's levels. Ongoing credit problems and stock market losses had benefited the yen overnight as investors edged away from risky carry trades -- where money is borrowed in low-yielding currencies such as the yen in order to invest in higher-yielding currencies elsewhere. The currency was off earlier highs, however.   

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Euroshares off lows midday as bargain hunters provide support in volatile market

LONDON - At 12.28 pm, the Dow Jones STOXX 50 fell 10.55 points or 0.28 pct to 3,707.76 as the STOXX 600 retreated 1.37 points or 0.37 pct to 370.66.
   
The focus today was on financials, as Fortis' shareholders voted in favour of a 13 bln eur capital hike which will allow the bank to raise enough cash to finance its part of the takeover of ABN Amro.
   
Shares worth 1.148 bln eur will be issued, whilst the capital increase may be up to 4.609 bln eur. Management has previously said it will use up to 13 bln eur to fund its part of the acquisition. Fortis' shares fell 1.79 pct.
   
Barclays, on the other hand, gained 0.88 pct as investors took the view its bid is less likely to succeed now.
   
Elsewhere in the banking sector, Natixis, up 9.96 pct, rebounded from its Friday plunge, after the company reassured the market about its exposure to sub-prime credit and announced that its core shareholders are planning to raise their stakes.
   
IKB also made up earlier losses, up 7.11 pct, fuelled by takeover speculation and as Commerzbank upped its stance on the stock to 'hold' from 'sell', but lowered its target to 12 eur from 17.
   
Takeover speculation was in full swing after Financial Times Deutschland reported Commerzbank and Unicredito Italiano SpA's HVB are both interested in buying stakes in the troubled German bank, according to dealers.
   
Franco-Belgian banking group Dexia SA gained 4.86 pct after the company said it will issue a press release this evening to address concerns over its exposure to the US sub-prime mortgage market.
   
On the earnings front, Allianz' Dresdner Bank division posted a 24 pct rise in first half net income to a record 1.05 bln eur and said it does not expect problems in the US sub-prime market to trigger a crisis in financial markets.
   
Strength in the manufacturing and service economy should offset money market instability, chairman of Dresdner's board of directors Herbert Walter told reporters in a conference call this morning. Shares in Allianz gained 0.16 pct.
   
Elsewhere in M&A, Henkel KGaA and Akzo Nobel have struck a deal to take over Britain's Imperial Chemical Industries PLC (ICI), according to reports in the Financial Times and Wall Street Journal.
   
ICI is to allow Henkel and Akzo access to its books after tentatively agreeing to accept their offer of 670 pence per share, valuing the maker of Dulux paint at about 8 bln stg, the reports said.
   
Shares in Henkel fell 0.27 pct, as Akzo Nobel dropped 1.43 pct and ICI added 1.11 pct.
       
Over in Spain, Endesa was up 0.11 pcct after the utility's board gave a favourable assessment of the 40.16 eur per share joint offer by Acciona and Enel. Acciona was 1.97 pct higher and Enel added 0.20 pct.
   
On earnings news, Munich Re rose 0.94 pct after it presented second quarter figures which exceeded expectations. The company also upped its guidance for the full year to 3.5-3.8 bln eur in net profit from previous 3.0-3.2 bln eur.
       
In broker action, Norske Skogsindustrier retreated 0.67 pct after a string of brokerages cut their earnings forecasts and price targets following last week's weaker-than-expected second quarter results.

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Asian stock markets battered by US credit turmoil

MUMBAI - Stock markets across Asia tumbled Monday, dragged down by Wall Street's sharp decline Friday as investors continued to fret about the growing problems in the US credit markets.
   
The Singapore Straits Times Index led the decline, shedding 3.7 pct of its value to close at 3,308.99. Banks were among the worst hit as players dumped stocks in the sector amid worries over exposure to collateralized debt obligations, which are securities backed by bonds and loans and which could include US subprime mortgages.
   
In Hong Kong, the Hang Seng closed down 601.71 points or 2.7 pct at 21,936.73, Australia's S&P/ASX 200 shed 100.8 points or 1.7 pct to 5,920.2, and Taiwan's weighted index closed down 116.09 points or 1.3 pct at 8,941.73.
   
In Japan, stocks ended almost flat as bargain hunting emerged after the key Nikkei index plunged more than 300 points during the session in a knee-jerk reaction to Wall Street's tumble Friday.
   
The renewed strength of the yen also weighed on investor sentiment. In the afternoon, however, the yen's relatively softer tone in foreign exchange trading, coupled with talk that the unwinding of yen carry trades may have mostly run its course, helped perk up sentiment.
   
Some market players also took comfort in data which showed that Japan's index of leading economic indicators rose to 80.0 in June from 40.9 in May -- matching market expectations. The Nikkei 225 Stock Average finished down 65.40 points or 0.4 pct at 16,914.46, while the broader TOPIX index was down 4.50 points or 0.3 pct at 1,668.04.
   
In South Korea, shares closed weaker on Wall Street's slide Friday, prompting heavy selling by foreign funds.
       
Indonesian shares closed sharply lower after witnessing a sharp sell-off following Wall Street's plunge.     Also, volumes were thin as many investors chose to stay on the sidelines ahead of the central bank's monetary policy meeting Tuesday. The market widely expects Bank Indonesia to keep its benchmark interest rate unchanged at 8.25 pct. The composite index slid 80.68 points or 3.6 pct to 2,189.11.
   
Chinese markets bucked the negative trend which plagued the region, with China A-shares closing at another record high, helped by gains in steel and metal companies.  The Shanghai Composite Index, which covers both A- and B-shares listed on the Shanghai Stock Exchange, closed up 67.33 points or 1.5 pct at a record 4,628.11.

Indian shares closed lower but buying in ITC Ltd and State Bank of India shares cut losses, as global markets continued to suffer the effects of the US subprime lending crisis.
   
The Bombay Stock Exchange's benchmark Sensex closed down 1.55 pct or 235.37 points at 14,903.03 and the National Stock Exchange's S&P CNX Nifty closed 1.41 pct lower at 4,339.50 points.
       
Elsewhere, Malaysia's Kuala Lumpur Composite Index fell 44.52 points or 3.3 pct to 1,290.90 and Manila's composite index ended down 2.8 pct to 3,256.99, its lowest level in more than three months.

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Gold steadies on continued dollar weakness
 
LONDON - Gold steadied after touching a one-week high Friday, as the dollar remained on the back foot in Europe, still unable to shake off a weak US labour market report.
   
The Labour Department reported Friday that US unemployment rose in July to its highest level since January. At the same time, the US economy added fewer jobs than expected last month.
   
The data weighed heavily on the dollar and on US equity markets, and sent gold to a one-week high of 675.28 usd an ounce. Gold often moves counter to the dollar as it is seen as an alternative investment to the US currency.
   
"For today, gold is steady on the dollar weakness ... I think overall sentiment in the dollar is growing bearish -- that's good for gold and going forward that will be the driving factor that gets gold over 700 usd an ounce," said TheBullionDesk.com analyst James Moore.
   
He added that for the time being however, bullion will probably meet strong technical resistance around the 675 usd an ounce area, and that it may head lower if US equity markets open weaker later today.
   
At 11.21 pm, spot gold was trading at 674.58 usd an ounce against 674.50 usd in late New York trades Friday.
   
Gold has come under pressure in recent weeks as concerns over the fall-out from the US sub-prime mortgage crisis sparked rise in risk aversion and led investors to move into safer assets like bonds and currencies.
   
Elsewhere, platinum edged up to 1,295 usd per ounce against 1,290 usd, while its sister metal palladium dipped to 362 usd an ounce against 364 usd.
   
Analysts say wage negotiations in South Africa, the world's largest platinum producer, will continue to underpin platinum this week as union officials and management from Anglo Platinum are set to resume talks.
   
Silver was mostly flat at 13.12 usd an ounce against 13.13 usd.

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