US & World Daily Markets Financial Briefing 07-07-2006

Trade your way to Financial Fitness!
Click here to find out more.

Dow, Nasdaq slide in early trading

NEW YORK - Corporate profit warnings and record oil prices overshadowed a benign jobs creation report and sent stocks lower Friday as investors worried that the economy was cooling too quickly.
   
The Labor Department reported the creation of just 121,000 jobs in May, short of the 175,000 economists expected. With the unemployment rate steady at 4.6 percent, the report was exactly what Wall Street had hoped for -- low unemployment, but modest job growth that won't spark a sharp increase in consumer demand, which could foreshadow inflation and interest rate hikes.
   
However, with 3M Co. warning of lower-than-expected earnings, investors grew concerned that slower economic growth, while good for keeping rates steady, could cut into corporate profits.
   
Record oil prices also pressured stocks, with traders worrying that consumers hit with higher energy prices would spend less elsewhere. A barrel of light crude set an intraday record of $75.78 before retreating to $75.52, up 38 cents, in electronic trading prior to opening on the New York Mercantile Exchange.
   
In the first hour of trading, the Dow Jones industrial average fell 81.40, or 0.73 percent, to 11,143.90.
   
Broader stock indicators also lost ground. The Standard & Poor's 500 index lost 2.50, or 0.2 percent, to 1,271.58, and the Nasdaq composite index dropped 13.91, or 0.65 percent, to 2,141.18.
   
Bonds rallied for a second straight session, with the yield on the 10-year Treasury note falling to 5.16 percent from 5.18 percent late Thursday. The dollar fell against most major currencies, while gold prices rose.
   
The early losses illustrated the acute balance investors, perhaps unrealistically, are seeking. On the one hand, a strong economy could spark inflation, but a weak economy would eat into corporate profits and send stocks lower.

While the Federal Reserve seeks to maintain that balance, the selloff is indicative of investors' chronic worries that the balance will shift, or has already.

Stocks in focus
   
The industrial conglomerate 3M, seen as something of a barometer for its sector, was particularly troubling for Wall Street. 3M cut its second-quarter and 2006 profit forecasts due to lower-than-expected sales, and its stock tumbled $6.03, or 7.4 percent, to $75.36.
   
Other companies added to the dour mood with more warnings of sales shortfalls. Advanced Micro Devices Inc. fell 87 cents, or 3.6 percent, to $22.96 after cutting its revenue forecasts. The announcement also took rival Intel Corp. lower as well, down 26 cents at $18.59.
   
And Starbucks Corp. stock suffered after the coffeehouse chain reported June sales figures that fell short of analysts' forecasts. Starbucks slid $2.05, or 5.4 percent, to $35.83.
   
The Russell 2000 index of smaller companies was down 3.49, or 0.48 percent, at 717.15.

VantagePoint's market forecasts are nearly 80% accurate. Take a look at actual forecasts, become eligible for a Complimentary VantagePoint Market ($750 value!) and see the difference they will make. Click here to see two recent forecasts now.

Dollar slips back slightly after softer than anticipated US jobs report

LONDON - The dollar slipped back slightly on the news that fewer jobs than expected were created in the US in June, suggesting that economic growth is decelerating.
   
Figures from the Labor Department showed payrolls increased by 121,000 in June, higher than the upwardly-revised 92,000 improvement in May (the original estimate was 75,000), but down on the 160,000 consensus forecast.
   
In fact, market participants had been positioned for something even better after a strong survey earlier this week from the ADP Employer Services.
  
Today's snapshot of job activity also showed that the nation's civilian unemployment rate held steady at 4.6 pct, diminishing concerns about the economy using up its spare capacity.
   
Divyang Shah, global strategist at HBOS, said the payrolls are an important market event but stressed that inflation data are more important at present.
   
"In the current environment it's the inflation data that has proved to be much more important as it is this that has surprised to the upside," he said. "Thus while the FX market will react to payrolls and probably play on it over next week, the events over the following week will prove more insightful as to the Fed rate outlook," he added.
   
Expectations of a Fed rate hike in August diminished substantially to around a 65 pct probability last week when the Fed's policy-makers published a relatively dovish statement alongside its decision to lift its key Fed funds rate a quarter point for the seventeenth consecutive occasion to 5.25 pct.
   
Elsewhere, the euro continued to make marginal headway in the wake of yesterday's hint that the European Central Bank will hike rates by a quarter point at its early-August meeting.   
   
The ECB's president Jean-Claude Trichet said the central bank will continue to exercise "strong vigilance" with regard to potential inflationary risks in the euro zone as economic recovery gathers pace and oil prices remain high.
   
A rate hike next month looks even more likely because Trichet said the ECB's rate-setting governing council will meet in person on August 3, instead of via the planned teleconference. It traditionally holds its August meeting via teleconference and without the usual press conference.
   
Simon Derrick, currency strategist at Bank of New York, said the "lethargic" price action suggests that the market has "fully accommodated the latest overtures from the ECB and has already placed its bets accordingly".

Inflation picked up in September in Europe as both areas show fragile economic growth. Just as in the U.S., rising energy prices are to blame. Read free, daily market reports available only at CMS Forex and open your free demo trading account today. Click here

The European Markets at 12.00 BST

London - Leading shares turned higher midday, reversing this morning's losses, with Corus Group firmer on revived M&A speculation, and with investors looking to the US nonfarm payrolls data this afternoon for direction, dealers said.
   
At 12.190 pm, the FTSE 100 Index was up by 2.10 points to 5,892.1, reversing this morning's losses, which saw the Index as low as 5,858.4, while the broader market remained in negative terrain.

Frankfurt - Shares were lower in midday trade as Wall Street pointed to a lower opening while awaiting the release of non-farm payroll figures due later today, dealers said.
   
At 12.27 pm, the DAX 30 index was 27.09 points or 0.48 pct lower at 5,668.38, having moved between 5,628.19 and 5,680.18 so far this session. The MDAX was down 32.65 points or 0.41 pct at 7,878.83, while the TecDAX lost 8.48 points or 1.29 pct at 649.04.

Paris - Shares were slightly lower in midsession trade as many investors cashed in yesterday's gains ahead of key US June jobs data due later this afternoon, while the slump by technology stocks was offset by gains in Total and EADS, dealers said.
   
At 12.55 pm the main CAC-40 index was down 5.32 points or 0.11 pct at 4,961.13, on trading volume of 1.22 bln eur.
   
Amsterdam - Shares were broadly lower at midday, with tech and consumer electronics stocks leading the way down, dealers said.
   
At 12.05 pm, the AEX was 2.11 points or 0.48 pct lower at 440.80, after opening at 441.69 and reaching a low of 438.82.
   
Brussels - Shares were lower in early afternnon trading on profit-taking, in line with other European markets, on cautious trading ahead of key US jobs data later in the session, with utility Suez leading the blue-chips down, traders said.
   
At 1.53 pm, the Bel 20 was off 12.58 points or 0.34 pct at 3,714.81.

Milan - Share prices were lower at midday as most blue chips retracted after yesterday's gains and ahead of US jobs data later this afternoon, while Parmalat was higher on hopes it could soon settle its dispute with Popolare Italiana, dealers said.
   
At 12.45 pm, the Mibtel index fell 0.37 pct to 27,881 points and the S&P/Mib was down 0.34 pct at 36,409, while volumes were 1.56 bln eur.

Madrid - Share prices were lower midday in thin trade ahead of key US nonfarm payroll data and in-line with Europe, with BBVA higher and Iberia down ahead of next week's pilot strike, dealers said.
   
At 12.33 pm, the IBEX-35 index was down 30.4 points at 11,606.4, after trading in a range of 11,541-11,626, on turnover of 708 mln eur.

Helsinki - Helsinki shares were slightly lower in thin midday trade, with Nokia under pressure amid a weaker tech sector following US chip maker Advanced Micro Devices' admission that second quarter sales will fall short of market expectations, dealers said.
   
At 12.25 pm, the OMX Helsinki 25 was 0.09 pct weaker at 2,453.12 and the OMX Helsinki was down 0.35 pct at 8,637.01. Turnover was 179 mln eur.
   
Athens - Greek shares were higher in late afternoon trade, off early lows after a volatile start, and led by bottler Coca-Cola HBC, brokers said.
   
At 2.20 pm the ASE general index was 0.4 pct higher at 3,622.1 points, with advancers outnumbering decliners, 139 to 67. The blue chip index was 0.2 pct higher to 1,966.8 points. Mid caps were 0.2 pct higher at 3,998.8 points, but small caps were up 0.9 pct at 715.7 points.

All it takes is 2 minutes a day to get your hands on some of the best stock option trades going! MICC - 1207%, AMR - 612%, HMY - 400%, GFI -177%, AEM - 1079%, VRTX - 192%, ALXN - 433%, ZRAN - 380%, ATHR - 326%, TKLC - 64%, TWTC - 540%

If you ever thought about trading options, now is the time to take a closer look. Click here

Asian shares close mixed ahead of US data release, NKorea tension

HONG KONG - Shares across the Asia-Pacific region closed mixed as markets awaited US June non-farm payroll data to be released tonight and further developments on North Korea, dealers said.
   
Tokyo's Nikkei 225 index fell while the TOPIX index rose, with dealers saying investors were wary ahead of the release of the US figures.
   
If the data shows strong numbers of new jobs, dealers said it will support the case for an additional US Fed rate hike, which could again cause global equities markets to slump.
   
The possibility of more North Korean missile tests or other belligerent actions by Pyongyang also overshadowed the market, they said.
   
At the close, the Nikkei 225 Stock Average was down 13.79 points or 0.1 pct at 15,307.61, off a low of 15,276.15. For the week, the index was down 1.3 pct.
   
The broader TOPIX index of all first-section issues finished up 0.86 points or 0.05 pct at 1,573.15, after touching a high of 1,584.00. For the week, the index lost 0.9 pct.
   
Australian shares ended higher as investors took a positive lead from the overnight rise on Wall Street, dealers said.
   
They said resource stocks attracted the majority of interest today after base metals rose sharply in London trade overnight.
   
The S&P/ASX 200 rose 15.0 points or 0.29 pct to close at 5,135.3. Over the trading week the key index climbed 61.4 points or 1.21 pct.
   
Hong Kong shares were lower in afternoon trade with the market cautious ahead of the release of the US non-farm payroll data, dealers said.
   
They said geopolitical concerns following North Korea's missile tests also prompted investors to lock in profits from yesterday's gains.
   
At 3:28 pm the Hang Seng Index was down 25.00 points or 0.15 pct at 16,415.99.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower on profit-taking amid a lack of fresh leads, with banks and automakers in particular losing ground, dealers said.
   
The Shanghai A-share Index fell 12.10 points or 0.66 pct to 1,819.21 and the Shenzhen A-share Index was down 1.03 points or 0.22 pct at 460.64.
   
Seoul shares closed higher with investors welcoming the Bank of Korea's decision to hold rates steady after North Korea's missile tests, dealers said.
   
The central bank kept the benchmark call rate for July at 4.25 pct, noting the escalation of geopolitical tensions, which it said requires careful monitoring. At the same time it also warned against inflationary pressures in the coming months.
   
The KOSPI index closed up 9.97 points or 0.79 pct at 1,273.93. For the week, the benchmark index fell 21.22 points.

Asian Bourse Round-Up

For a full list of closing prices, click here

HotSignals.com Inc to be featured on World Business Review for Innovative Financial Trading Technologies, hosted by Alexander Haig with industry expert Al Berkeley. Explore Hotsignals, simple yet effective scanning technology here. Example: Short 18th January on GOOG at $444.91

Increase the odds for Forex Trading success with this free online course. Learn to build a solid Forex Trading foundation and discover proven strategies for continued success.  Access this wealth of knowledge here absolutely free.

Online Trading Academy - Learn more to earn more.

Comments

We welcome any suggestions or comments you may have concerning our bulletin, so please do contact us via comments@advfn.com. To advertise with ADVFN please contact Dunstan Rickard dunstanr@advfn.com North America Sales Manager +44 (0)20 7070 0986