US & World Daily Markets Financial Briefing 06-12-2006

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Stocks fall in early trading

NEW YORK - U.S. stocks dropped Wednesday, with energy inventory data and Yahoo Inc.'s management shake-up set to be market themes.
   
In the opening minutes, the Dow Jones industrials fell 5.21 points to 12,326.39, the S&P 500 slipped .99 of a point to 1,413.77, and the Nasdaq eased off 4.91 points to 2,447.47.
   
On Tuesday, the Dow industrials advanced 47 points, the Nasdaq Composite rose nearly 4 points and the S&P 500 ended 5.6 points higher. Data showed services sector growth and weaker-than-expected inflation.
   
With the key nonfarm payrolls report out on Friday, investors may take a look at ADP's own forecast for employment growth, though that hasn't always served as an accurate indicator of the U.S. government's numbers.
   
The U.S. dollar rose against the euro and the pound, though it was steady against the yen.

Stocks in focus
   
Yahoo Inc. will be in the limelight after it said it is reorganizing in a move that will see the departure of Chief Operating Officer Dan Rosensweig and Lloyd Braun, who heads the media group. Terry Semel, Yahoo's chairman and chief executive, said in a statement that three operating groups will emerge from the reorganization, with the chief of each reporting directly to him.
   
Novell may see some pressure after the networking software firm late Tuesday produced a 2007 revenue forecast below market expectations.
   
Privately held Skywire Software agreed to buy Docucorp International for $127 million, or $10 a share in cash.
   
Merrill Lynch downgraded railroad operators Burlington Northern Santa Fe and Canadian National to neutral from buy, saying that both companies are now closer to the broker's price targets. The broker also told clients it's adjusting its outlook for weaker volumes in the fourth quarter and slower economic growth into 2007.

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Oil edges up ahead of US inventory data, traders still mulling OPEC cuts
      
At 10.20 am in London, front-month Brent North Sea crude contracts for January delivery were up 7 cents at 63.39 usd a barrel, after dropping 13 cents to settle at 63.32 usd per barrel.
   
Meanwhile, front-month New York light sweet crude contracts for January delivery were up 3 cents at 62.46 usd a barrel, after losing a penny to close at 64.43 usd a barrel.
   
Analysts expect today's US inventory data will show distillates, which include the key winter heating oil fuel, fell by around 500,000 barrels last week as cold temperatures hit the US Northeast.
     
The expectation, if confirmed, would give members of the OPEC cartel even more incentive to cut production when they meet to set output levels in Abuja, Nigeria on Dec 14, analysts said.
       
Most OPEC members, including top producer Saudi Arabia, have indicated they would support another cut in output at next week's meeting in order to balance an oversupplied market.
   
At its October meeting, OPEC agreed to cut output by 1.2 mln bpd, effective Nov 1, in a bid to defend oil prices, which have fallen some 20 pct off all-time peaks above 78 usd touched in July and August.
   
Oil prices fell yesterday after the US National Weather Service forecast above normal temperatures in the northern US from Dec 9-13, and average temperatures in the south of the country.

"Warmer-than-normal temperatures across Canada and the northern US is consistent with the National Weather Service's long-range outlook based on the moderate El Nino conditions," warned Citigroup analyst Tim Evans.
   
He added that "the entire winter may look a lot like the recent swings, with occasional Arctic blasts interrupting the dominant pattern of warmer-than-normal air".

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The European Markets at 13.00 GMT

London - Leading shares were flat at midday, having given up morning gains amid caution ahead of Gordon Brown's pre-budget speech and with Wall Street seen opening little changed, dealers said. Meanwhile, Royal Bank of Scotland led the gainers following its pleasing update. At 11.50 am, the FTSE 100 index was flat at 6,086.4, while the broader indices traded on firmer ground.

Frankfurt - German shares were slightly higher in relatively low volume midday trade, with gains led by Deutsche Post on a positive reaction to an analysts conference yesterday. At 12.30 pm, the DAX 30 index was up 2.85 points or 0.04 pct at 6,375.65 having moved between a low of 6,358.99 and a high of 6,385.44 so far this session.

Paris - Share prices were down slightly at midday as expectations of a lacklustre opening for Wall Street this afternoon spurred consolidation on the French market, with Capgemini leading declines after announcing a share capital hike. At 12.46 pm the CAC-40 index was down 12.73 points at 5,346.96, handing back part of yesterday's 1.2 pct rise, on volume of 1.6 bln eur.

Milan - Share prices were flat at midday with Alitalia up on the government's planned sale of at least a 30.1 pct stake and Parmalat up amid expectations of a settlement on its legal claim with Deloitte & Touche. At 12.40 pm, the Mibtel index was up 0.04 pct at 31,114 points and the S&P/Mib was up 0.07 pct at 40,436.

Amsterdam - Shares in Amsterdam traded broadly lower as DJIA futures pointed to a flat or lower opening on Wall Street in the absence of guiding local corporate news. At 12.37 pm, the AEX was down 0.35 pct or 1.69 points at 475.95, after trading in a range of 475.79-478.36.

Madrid - Shares were higher in quiet midday trade taking a lead from overnight strength on Wall Street while Ferrovial and Acerinox led gainers. At 12.10 pm, the IBEX-35 index was up 20.2 points at 14,053.6 after trading in a range of 14,019-14,081, on volume of 877 mln eur.

Stockholm - Shares continued to hover around the flatline in midday trade, little changed from morning levels, with construction firm NCC sharply outperforming after a broker upgrade. At 12.15 pm, the OMX Stockholm index was up 0.02 pct at 352.46 points, while the OMX Stockholm 30 index was down 0.06 pct at 1,088.98.

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Asian shares close mixed on economic news, Wall St rise

HONG KONG - Shares across the Asia-Pacific region closed mixed after an overnight rise on Wall Street, with Tokyo rising on positive economic signals while Seoul fell as the won rose to a nine-year high against the US dollar.
   
Tokyo shares finished higher after release of the index of leading economic indicators for October, which boosted optimism about the economy.
   
The blue-chip Nikkei 225 Stock Average closed 105.52 points or 0.65 pct higher at 16,371.28, after touching a high of 16,401.31. The broader TOPIX index of all first section issues closed 16.28 points or 1.02 pct higher at 1,615.17, off a high of 1,618.00.
   
The index of leading indicators jumped to 50.0 points from a revised 25.0 in September, matching market expectations, preliminary data from the Cabinet Office showed. A reading above 50 points to economic expansion over the subsequent six months, while a figure below 50 suggests contraction.
   
Hiromishi Nishi, equity chief at Nikko Cordial Securities, said: "Investors snapped up stocks as optimism spread in the market following the leading index, which returned to 50.0." He added: "Bargain-hunters also scooped up exporters' shares, such as autos, which had sagged yesterday because of the firmer yen."
    
Australian shares closed higher with investor sentiment buoyed by the overnight rise on Wall Street. A 2.87 bln aud takeover within the media sector also boosted support for the wider market. The S&P/ASX 200 rose 40.2 points or 0.74 pct to close at 5,466.7, the day's high and off a low of 5,437.0.
   
Hong Kong shares were higher in afternoon trade, buoyed by Wall Street and a rise in China telecom stocks and financials.
   
Chinese telecoms continued to rise on expectations that authorities will issue 3G licenses soon, while financial stocks rose on the prospect of a stronger yuan. At 3.23 pm the Hang Seng Index was up 76.84 points or 0.41 pct at 19,021.35.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower on profit-taking with metals and financials losing ground. The Shanghai A-share Index tumbled 17.58 points or 0.77 pct to 2,266.31 and the Shenzhen A-share Index was down 6.99 points or 1.31 pct at 526.50.
   
Seoul shares closed lower as the won rose to a nine-year high against the US dollar, sending most exporters into heavy falls. The market opened firmer on Wall Street's rebound but soon fell through 1,400 points, although it managed to trim most of the early losses on program buying.
   
The KOSPI index closed down 6.86 points or 0.48 pct at 1,413.73, off a low of 1,399.68 and a high of 1,423.07. The won gained 0.85 pct to close at 916.4/usd, its highest level since September 1997. The won's rally was mainly driven by the global weakness of the US dollar on weak US economic data and fears of a rate hike in Japan.

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Copper dips after strong gains, aluminium falls after options expiry; gold slips

LONDON - Copper edged lower following a surprisingly strong performance yesterday that saw the metal put up encouraging resistance in the face of a general sell-off in commodities which was driven by dollar strength.
   
At 12.44 pm, LME copper for three month delivery edged down to 7,032.50 usd a tonne against 7,175.00 usd at the close yesterday.
   
Copper closed higher yesterday even as the dollar strengthened after some better than expected US economic data helped dissipate concerns that the world's largest single economy is heading for recession.
   
"Although still the laggard in the base metals camp, we were encouraged by copper's rally" yesterday, said BaseMetals.com analyst William Adams. "The fact that prices failed to break lower suggests a certain amount of underlying buying and Tuesday's rebound also suggests buyers, or short covers, were prepared to chase the market higher," he said.
   
Copper also took its lead yesterday from aluminium, which surged to a six month peak yesterday on increased buying ahead of today's December options expiry.

Gold fell again as the dollar continued to recover from recent heavy declines after some better than expected US service sector data helped dissipate concerns the world's largest economy is heading for recession.
   
At 2.59 pm, spot gold, which earlier hit a low of 633.70 usd an ounce, was quoted at 637.40 usd, down from the 642.80 usd level seen in late New York trade yesterday.
     
The dollar was buoyed yesterday after the ISM's non-manufacturing index for November came in better than expected. It continued higher today as investors booked profits ahead of tomorrow's rate decision from the European Central Bank.
   
Gold often moves counter to the dollar as it is seen as an alternate investment to the US currency. Also, a weaker dollar makes gold cheaper for holders of other currencies.
   
UBS Investment Bank analyst John Reade said the price action in gold has been worrying of late as the metal only managed to "rally grudgingly" following heavy falls in the dollar.
   
He added while he still sees the metal moving higher over the next three months, he would not be surprised to see it remaining under pressure over the next week or two.
   
Elsewhere, silver was also lower, having fallen off 6 month high points yesterday in sympathy with gold, while platinum fell sharply following a sell-off in Asia earlier.
   
Silver was at 13.79 usd, down slightly from 13.85 usd level seen in late New York trades yesterday, while platinum was down at 1,125.00 usd against the 1,130 usd level seen in late trades yesterday.

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