US & World Daily Markets Financial Briefing 06-11-2007

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Stocks move higher after pullback

NEW YORK - Stocks rebounded early Tuesday as global stock markets came back from a widespread pullback brought on by renewed concerns about credit.
   
Big names on Wall Street such as Citigroup Inc. and Merrill Lynch & Co. have stirred gloom on Wall Street of late by taking or warning of big write-downs on debt tied to faltering mortgages. The uncertainty about U.S. credit problems has spread to other markets as well.
   
Citi and Merrill, among others, have been bombarded by securities they hold that are tied to subprime loans, those made to borrowers with poor credit. A sharp pullback in housing prices has tripped up borrowers and sent mortgages defaults higher. That soured debt has come back to haunt banks.
   
While investors appeared willing to look past some unease about subprime debt on Tuesday, concern about inflation persists, with gold prices surging past $800. Gold has in recent sessions moved above the psychological benchmark; before its recent movement it hadn't traded above $800 since 1980.
   
In the first hour of trading, the Dow Jones industrial average rose 40.81, or 0.30 percent, to 13,584.21 after falling 51 points in an erratic session Monday.
   
Broader stock indicators also rose. The Standard & Poor's 500 index rose 7.11, or 0.47 percent, to 1,509.28, and the Nasdaq composite index rose 11.23, or 0.40 percent, to 2,806.41.
   
Bonds fell. The yield on the 10-year Treasury note, which moves opposite the price, rose to 4.37 percent from 4.34 percent late Monday. The dollar reached yet another record low against the euro Tuesday. The 13-nation currency rose to a high of $1.4569 in mid-afternoon trading before falling back slightly.
   
Light, sweet crude jumped $1.94 to $95.92 per barrel in premarket trading on the New York Mercantile Exchange.
   
In addition, Fed Chairman Ben Bernanke is scheduled to speak in San Antonio Tuesday afternoon. As always, investors will be watching for any clues about policymaker's reading of the economy. They're particularly anxious after the Fed indicated last week it might stop lowering rates. Investors are also awaiting his scheduled testimony Thursday before Congress' Joint Economic Committee.
     
With no major economic news due Tuesday, investors will be focused on corporate results.
   
Agricultural processor Archer Daniels Midland Co. said its fiscal first-quarter profit rose 9 percent as improved results at its oilseeds processing business offset higher corn prices. ADM rose $2.67, or 7.7 percent, to $37.19.
   
Molson Coors Brewing Co., one of the world's largest brewers, fell $1.09 to $55.49 after reporting its third-quarter earnings fell because of a charge for closing a Canadian brewery and weather in Britain that cut into sales.
   
Beazer Homes USA Inc. said it plans to book a charge in the fourth quarter and suspend its dividend to help cut costs. The homebuilder rose 2 cents to $9.54.
   
First Solar Inc. jumped $16.44, or 11.1 percent, to $164.54 after the solar-cell maker signed a long-term module supply agreement with a unit of Babcock & Brown and Ecostream Switzerland GmbH that is expected to generate sales of about $1 billion.
   
Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where volume came to 132.6 million shares. The Russell 2000 index of smaller companies rose 2.92, or 0.37 percent, to 793.35.
   
Overseas, Japan's Nikkei stock average closed down 1.62 percent, while Hong Kong's Hang Seng index rose 1.71 percent a day after falling 5 percent. Britain's FTSE 100 rose 0.66 percent, Germany's DAX index rose 0.55 percent, and France's CAC-40 rose 0.68 percent.

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Credit concerns continue to batter dollar as euro hits fresh record high

LONDON  - The euro hit fresh record highs against the dollar as the US currency remained firmly in the doldrums, battered by mounting concerns over a crisis in the US banking sector sparked by exposure to
sub-prime.
   
The high profile write-down, to the tune of 8-11 bln usd, at US financial giant Citigroup over the weekend had left markets nervous about just how entrenched the current financial crisis is.
   
"It sounds like we are only scratching the surface with this sub-prime debt," said Mic Mills, a trader at TradIndex.com. This is leading to intensified speculation that the Federal Reserve will cut interest rates again in December, he said.
   
Meanwhile, the market continues to stick to the 'decoupling' theme -- that the crisis will be largely contained to the US while economies in the rest of the world emerge relatively unscathed.
   
"The dollar is under pressure from US equities underperforming their European counterparts ... global investors continue to invest heavily in Europe, while pulling out of US markets," said Manuel Oliveri at UBS.
   
The final estimate to the euro zone services PMI index this morning showed an upward revision to 55.8 in October from the provisional estimate of 55.6, a sizeable rise from 54.2 in September.
   
Meanwhile, although euro zone retail sales numbers came in below forecasts, higher-than-expected PPI data meant that the European Central Bank is likely to continue its hawkish stance on interest rates on the grounds of rising inflationary pressure.
   
All this gave a further boost to the euro, which hit a fresh record high of 1.4555 against the dollar.
   
Elsewhere, the Swiss franc rose to its highest level against the dollar since early 2005, boosted by news that the OECD has raised its forecast for Swiss growth, commenting that the Swiss National Bank may have to raise interest rates again.
   
The Australian and New Zealand dollars also saw significant gains on the back of sharp rises in commodity prices, while further increases in the oil prices took the Canadian dollar to yet another multi-year high of 0.9234 per US dollar.
   
The Australian dollar is also benefiting from expectations that the Reserve Bank of Australia will raise interest rates by 25 basis points when it announces its decision later tonight.
   
Later today, attention will focus on a speech scheduled for this evening by US Federal Reserve chairman Ben Bernanke.

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Euroshares up midday, BMW and PPR disappoint with earnings

LONDON - Europe's leading exchanges were up in midday trading, but off intra-day highs, with earnings news from BMW and PPR disappointing investors.
     
In Europe, the focus was on earnings results throughout the morning. "There are still a lot of companies due out later this week and thus far it hasn't been bad at all. BMW disappointed, but apart from that we've seen a solid set," one Frankfurt-based trader said.
       
Today, automaker BMW disappointed somewhat and was sent 3.68 pct lower by investors. Higher costs and exchange rate effects were behind the weak results, but BMW also pointed to "strong" business developments in the fourth quarter, with car sales of around 400,000 that would lead to "very positive" earnings results in the last three months of the year.
   
Elsewhere, shares in Gas Natural SDG rose 4.43 pct after the utilities group reported strong nine month results with a net profit at the high end of forecasts and EBITDA beating expectations.
   
And Swiss Re shares climbed 1.96 pct on better-than-expected third quarter results, with the reinsurer attributing its strong performance to disciplined underwriting and a low incidence of natural disasters.
   
Meanwhile, Deutsche Post added 2.77 pct following reports that the logistics group is considering selling off vacant real estate worth 1-1.5 bln eur.
   
In broker action, shares in Ericsson gained 1.68 pct after Goldman Sachs upgraded the telecom equipment maker to 'buy' from 'neutral.' Goldman said the negative mix factors that led to the October profit warning will be rectified within 12-18 months or sooner, as nothing has changed fundamentally.
   
And CGG Veritas charged 2.42 pct ahead, while Tullow Oil added 3.32 pct. Both stocks will be added to the MSCI Provisional Global Standard starting on the close of Nov 30.
   
In the telecom sector, Portugal Telecom was up 3.50 pct after UBS lifted its recommendation to 'buy' from 'neutral,' following the completion of its PT Multimedia spin off which it says has changed the structure of the company.
   
A bullish note by Deutsche Bank gave a push to shares in ThyssenKrupp, up 2.66 pct. "2007 was a great year for ThyssenKrupp and we have indications that this scenario is likely to repeat in 2008," the brokerage said in a note to clients.
   
Meanwhile, Natixis tumbled 6.3 pct after Fitch issued a ratings review of bond insurers, highlighting a "high" risk of downgrade for Natixis subsidiary CIFG due to its exposure to collaterised debt obligations (CDOs), backed with subprime loans.
   
Later today, peer Commerzbank AG, up 0.11 pct, will be in the spotlight as it releases third quarter results, which analysts expect to come in robust. Analysts will particularly be looking for more clarity regarding Commerzbank's sub-prime related write-offs.
   
The bank set aside 46 mln eur in sub-prime provisions in the second quarter and said at the time that its expects to write off a similar sum in the third quarter. However, chief executive Klaus-Peter Mueller since said in an interview that the forecast sum will not be enough.

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Asian markets mixed as subprime worries persist; alibaba.com shines

SINGAPORE - Stock markets across Asia were mixed Tuesday with Australia , South Korea and Hong Kong rebounding from their prior-day lows after Wall Street clawed back most of its early losses overnight.
   
Other markets lost steam on continued concern that the US subprime mortgage crisis has yet to run its course.
   
In Tokyo, shipping stocks were gainers on expectations of continued strong demand from China. Nippon Yusen closed up 30 yen or 2.7 percent at 1,140, Kawasaki Kisen Kaisha gained 47 yen or 3.3 percent to 1,483 and Mitsui OSK Lines was 42 yen or 2.4 percent higher at 1,774.
   
Nippon Steel advanced 25 yen or 3.5 percent to 738, Sumitomo Metal Industries rose 4 yen or 0.8 percent to 527 and Kobe Steel was 4 yen or 1.1 percent higher at 385.

The Nikkei 225 closed down 0.1 percent at 16,249, while the broader Topix was marginally lower at 1,574.
   
In Sydney, the S&P/ASX 200 finished a choppy session up 0.7 percent at 6,628 and the All Ordinaries rose 0.6 percent to 6,659, buoyed by a recovery in the banking sector
       
The Korean KOSPI closed up 1.9 percent at 2,054, as institutional investors snapped up technology stocks like Samsung Electronics, LG Philips LCD and other blue chips after the market's three-day slump.
   
In Hong Kong, alibaba.com, operator of the largest business-to-business website in China, soared on its first day of trading, highlighting investor confidence in the prospects for growth in the mainland's e commerce sector.
   
alibaba.com, which holds the largest market share for e-commerce trade in China, gets the bulk of its revenue from small- to medium-size manufacturers and traders that pay a fee to join its website in a bid to showcase their products and services.
   
Shares of alibaba.com climbed to 39.20 Hong Kong dollars, almost tripling from the initial public offering price of 13.50 dollars. The stock opened at 30 dollars.

The Hang Seng was up 0.7 percent at 29,144 after swinging between positive and negative territory for much of the morning. The index suffered its biggest ever one-day decline on Monday after the Chinese government said a much-anticipated scheme allowing mainlanders to invest directly in the Hong Kong market would be delayed.
       
The Singapore Straits Times Index was up 0.2 percent at 3,678, while the Kuala Lumpur Composite was down 0.2 percent at 1,382.
   
The Taiwanese Taiex was down 0.2 percent at 9,292 and the Shanghai Composite lost 1.7 percent to 5,536.
   
In Mumbai, the Sensex was up 0.1 percent at 19,604. In Pakistan, the Karachi 100 was up 6 points at 13,284. The index lost 4.7 percent on Monday as investors reacted to President Pervez Musharraf's imposition of emergency rule.

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Copper up on weak dollar, Peru strike supports; tin at new high

LONDON - Copper edged up on dollar weakness and as the threat of supply disruptions from Peru sparked jitters, while tin hit a record high as markets digested news Indonesia might consider export quotas.
   
All dollar-denominated commodities, including oil and gold, have been rallying today as the dollar hit a fresh record low against the euro earlier today, which made them cheaper for those trading in other currencies.
   
For the base metals, however, price gains were capped by renewed fears US demand might soften as a result of lower liquidity, stemming from defaults in the sub-prime lending sector.
   
At 12.45 pm, LME copper for three-month delivery was up at 7,480 usd a tonne against 7,405 usd at yesterday's close.
   
News from the world's biggest bank, Citigroup, reignited fears of slower growth going ahead after the head Chuck Prince resigned on Sunday, admitting the institution suffered major losses because of the sub-prime debacle.
   
Fundamentally, though, the threat of further strike action in Peru lent copper some support.
   
Some workers, including those at a few major mines, nationwide have been on strike this week, demanding higher wages. Peru is the world's third biggest producer of the red metal.
   
Meanwhile, tin hit its highest value since the new contract started in 1989 of 17,100 usd per tonne, helped by news that the Indonesian government is considering a tin export quota.
   
Indonesia's biggest tin exporter, state-owned PT Timah, has proposed an export quota of 90,000 tonnes be introduced in 2008. Exports last year are estimated at 120,000 tonnes.
   
Tin was trading up at 17,000 usd per tonne from 16,775 at the close yesterday.
   
Nickel was up, following copper's lead and on dollar weakness, but ample inventories of the metal, which have risen 1,237 pct since hitting a record low of 2,982 tonnes in February, capped gains.
   
Nickel was up at 31,800 usd a tonne from 31,605 usd. Aluminium rose to 2,633 usd a tonne against 2,611 usd at yesterday's close. Lead traded higher at 3,735 usd against 3,700 usd yesterday and zinc rose to 2,770 usd a tonne from 2,725 usd.

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