US & World Daily Markets Financial Briefing 06-10-2006

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Stocks fall on jobs data

NEW YORK - Stocks fell in early trading Friday, halting three straight days of record-setting gains after the Labor Department said employers added far fewer jobs than analysts expected.
   
The report gave investors further confirmation that the economy is slowing, and Friday's Wall Street decline indicated they're concerned that the economy might be moderating too much.
   
The good news in Friday's report was that the unemployment rate fell to 4.6 percent. But the 51,000 jobs added was well below the 120,000 Wall Street had been expecting.
   
In the first hour of trading, the Dow Jones industrial average was down 45.78, or 0.39 percent, at 11,820.91 after closing Thursday at 11,866.69, its third straight record high close.
   
Broader stock indicators were lower Friday. The Standard & Poor's 500 index was down 3.28, or 0.24 percent, at 1,349.94, and the Nasdaq composite index fell 10.49, or 0.45 percent, at 2,295.85. The Dow on Thursday closed at a highest-ever 11,866.69 and set a trading high of 11,870.06. Crude-oil futures slipped 16 cents at $59.87 a barrel in electronic trading.
   
Stocks in focus

Shares in Micron Technology tumbled 7 percent in Germany after the chipmaker reported a below-expectations 48 percent profit rise on 8 percent sales growth.
   
WebMethods Inc. and Guitar Center also are expected to come under pressure after cutting its earnings outlook.
   
Crown Castle said it's offering $5.8 billion in stock and cash for Global Signal Inc. to make a company with 24,000 wireless sites.
   
Sovereign Bancorp may fire CEO Jay Sidhu next week, The Wall Street Journal reported Friday, citing four people familiar with the matter. Seven of the bank's 12 directors have scheduled a board meeting for Tuesday, in which they intend to push for his removal because of unhappiness with its share price and deteriorating operating position.
   
Sidhu last year survived a proxy fight with the bank's largest shareholder at the time, San Relational Investors. Sovereign is nearly 20 percent held by Spain's Banco Santander Central Hispano. Santander shares rose 2.5 percent in Madrid.
   
Also on the move in Europe were shares of Barclays and Lloyds TSB, as the UK banks continue to benefit from takeover speculation.

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Dollar recoups knee-jerk losses on closer inspection of US jobs data

LONDON - The dollar suffered a knee-jerk sell-off after the headline number in today's crucial US jobs report disappointed to the downside, but soon more than recouped its losses following a closer inspection of the data.
   
The Labor Department reported that US employers added 51,000 jobs in September, lower than the 120,000 expected by Wall Street.  The September rise was the lowest since last October and stoked immediate concerns about the extent to which the US economy is slowing down.
   
However, the impact was diminished by the news that the August increase was revised higher to 188,000 from 128,000. In addition, the unemployment rate, which is based on a separate survey, fell to 4.6 pct last month from 4.7 pct, while average earnings rose 0.2 pct to 16.84 usd.
   
Analysts said today's data will further cement expectations that the US Federal Reserve will keep its benchmark Fed funds rate unchanged at 5.25 pct for the third meeting running on Oct 25.
     
The dollar has also been supported against the euro today on mounting expectations that the European Central Bank will stop raising borrowing costs once it has increased its key refi rate another quarter point to 3.50 pct in December.
  
The ECB has been steadily raising rates since last December to rein in inflationary pressures, partly associated with the pick up in economic growth in the 12-nation single currency zone.
   
The Fed meanwhile called a halt to its two-year rate-raising campaign in August, partly over fears that any further tightening would push the US economy into recession.
   
Policy-makers suggested the cooling economy would eventually lessen inflation pressures. Energy prices now seem to be supporting this view, as well as helping support economic growth.
   
The economy grew at a 2.6 pct annual pace in the spring -- less than half the pace of the first three months of the year. Growth in the July-to-September period could come about the same or even less -- at around a 1 pct pace.

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The European Markets at 11.30 GMT

London - The FTSE 100 clung to the 6,000 level at midday, with a bounce in PartyGaming and further M&A excitement across utilities helping to ease nerves before this afternoon's key non-farm payrolls data.
   
By 12.10 pm, the FTSE 100 index was just 1.9 points lower at 6,004.2, while the broader indices were also firmer. Volume was slightly above average, with 1.13 bln shares changing hands in 143,700 deals.

Paris - Share prices were slightly lower at midday, drifting little from last night's close as investors awaited this afternoon's September jobs report in the US, which could bolster investor hopes that further interest rate hikes are now out of the picture.
   
At 1.01 pm, the CAC-40 index was down 6.42 points at 5,282.11, on volume of 1.7 bln euro. On the Matif, October CAC-40 futures were trading off 7 points at 5,288.5 while the euro was also little changed at 1.2677 usd compared to 1.2686 late yesterday.

Frankfurt - German shares were a tad firmer at midday, with investors sidelined ahead of important US jobs data due later in the session, with ongoing consolidation across several sectors offering support.
   
At 2.09 pm, the DAX 30 was up 4.83 points or 0.08 pct at 6,080.11 off an intrady high of 6,088.44, with the MDAX down 37.89 points or 0.44 pct at 8,547.96. Elsewhere, the TECDAX was down 3.25 points or 0.49 pct at 658.18. Meanwhile DAX futures were last trading at 6,121, down 3 points or 0.05 pct from yesterday's close.

Amsterdam - Share prices were little changed at slightly lower levels in early afternoon trade as investors await the publication of key US jobs data later today. At 1.27 pm, the AEX index was down 0.01 pct or 0.04 point at 486.12, near intraday highs, after opening at 486.22 and falling to an early morning low of 484.65.

Madrid - Madrid shares were at record intraday highs in brisk midday trade as M&A fever spread over the banking sector, with Banesto and SCH heating up the speculation. At 12.55 pm, the IBEX-35 index gained 36.0 points to 13,164.0, after trading in a range of 13,092-13,286, on turnover of 2.9 bln eur.

Milan - Share prices were slightly higher at midday, while Telecom Italia fell following a downgrade by Deutsche Bank. At 11.46 am, the Mibtel was up 0.10 pct at 29,743 points and the S&P/Mib added 0.13 pct to 39,007.
   
Stockholm - Shares were marginally higher in late morning trade led by banks, and by steel producer SSAB, but pressured by telecom stocks and oil stocks. At 11.30 am, the OMX Stockholm index was up 0.21 pct at 341.30 and the OMX Stockholm 30 up 0.29 pct at 1,063.45.

Helsinki - Helsinki shares were flat in early afternoon trade, with sharp gains in Nokian Tyres on bargain-hunting offset by falls in selected blue chips, including Stora Enso amid talk that Morgan Stanley has put a sell order on a sizeable chunk of the company's shares. At 1.44 pm, the OMX Helsinki 25 was 0.01 pct higher at 2,610.62 and the OMX Helsinki was down 0.01 pct to 8,829.39 on 353 mln eur turnover.

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Asian stocks close mixed; Tokyo hit by profit-taking ahead of long weekend

HONG KONG - Share prices across the Asia-Pacific region closed mixed, with the Tokyo market slightly lower on profit-taking ahead of a long weekend in Japan, and as major holidays shut markets in China, South Korea and Taiwan.
   
In Japan, commodity-sensitive stocks like oil refiners and steelmakers helped the market trim losses and recover from the day's lows, thanks to a rebound in commodity prices overnight.
   
Analysts said the Tokyo market will continue to track Wall Street next week with investors particularly keen on the latest nonfarm payroll data due out tonight for further signs on the health of the US economy. The benchmark Nikkei 225 Stock Average will likely move between 15,900 and 16,700 points during the shortened trading week, they said.
   
The Nikkei 225 closed down 13.27 points or 0.08 pct at 16,436.06, off a low of 16,360.64. For the week, the index gained 1.9 pct.
   
The broader TOPIX index of all first-section issues was up 1.01 points or 0.06 pct at 1,634.21, after touching a low of 1,625.88. The index added 1.4 pct for the week. Losers outpaced gainers 1,248 to 364, with 85 issues finishing flat.  Volume dropped to 1.54 bln shares from 1.88 bln shares yesterday.
   
Hideo Mizutani, chief strategist at Sieg Securities, said tonight's US nonfarm payrolls for September and the machinery orders in Japan for August due next Tuesday are key to determining how the US and Japanese economies are faring at this stage.
   
The market expects Japan's core private-sector machinery orders to have risen by 11.3 pct in August from July after a surprisingly sharp 16.7 pct slump in July from June.
   
Shinko Securities market analyst Yutaka Miura said that given the Nikkei 225's sharp advance recently, it may need to consolidate first at the 16,000 level before advancing further, adding the return of foreign investors into the Japanese market would be key to any future gains.
   
Australian share prices closed slightly higher as investors sold banking stocks, while gains in leading telco Telstra and energy stocks supported sentiment.

The S&P/ASX 200 added 1.4 points or 0.03 pct to close at 5,219.3, below the day's high of 5,229.3 and above the low of 5,213.8. Over the trading week the key index advanced 65.2 points or 1.27 pct. The All Ordinaries Index climbed 3.5 points to close at 5,178.3.
   
The total number of shares traded was 1.13 bln, worth 3.53 bln aud, with rises outnumbering falls 600 to 442 and 348 shares remained unchanged. The S&P/ASX 200 December futures contract gained 5.0 points to 5,236.0.
   
Telstra gained after briefing investors on a five year transformation plan in which it laid out revisions to growth targets that were slightly better than expected.
   
Hong Kong shares were slightly lower in afternoon trade as investors took a cautious stance following the market's sharp gains yesterday, which led the benchmark index to its highest finish since July 2000.
   
Some stocks, including China Mobile, saw profit-taking but the impact was offset by a positive lead from Wall Street where the Dow Jones Industrial Average ended at another all-time closing high overnight.
   
At 3:30 pm the Hang Seng Index was down 10.05 points or 0.06 pct at 17,892.15.

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Gold steadies above 570 usd

LONDON - Gold steadied above 570 usd, having recovered from three and a half month low points yesterday, as it benefited from slightly steadier oil prices.
   
Gold has come under pressure recently from falling oil prices, which reduce investors' inflation concerns, thereby limiting the metal's appeal as a hedge against inflation.
   
At 1.46 pm, spot gold, which earlier hit a high of 573.30 usd, was quoted at 571.10 usd an ounce, little changed from the 570.80 usd level reached when the COMEX market closed in New York yesterday.
   
Other precious metals were mixed. Spot silver was up at 11.06 usd against 10.99 usd, platinum was down at 1,076.50 usd against 1,081.00 usd, while palladium edged up to 297.00 usd against 296.00 usd.
   
"Today's outlook for gold doesn't seem as bad as in the last days. We don't expect the energy market to weigh on gold, at least today, as it seems to be range-bound," said Dresdner Kleinwort analyst Peter Fertig.
   
Oil prices rose yesterday, while bullion recovered from a three and a half month low of 559.25 usd touched on Wednesday, after OPEC president Edmund Daukoru said the cartel might hold an emergency meeting to discuss output cuts.

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