US & World Daily Markets Financial Briefing 07-11-2006

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Stocks rise as investors await elections

NEW YORK - Wall Street extended its advance in early trading Tuesday as investors awaited the outcome of congressional elections that could tip the balance of power in Washington to the Democrats.
   
The election could strip power from Republicans in the House of Representatives for the first time since 1994. Stocks often rally after elections as Wall Street bets change will lead to a more business-friendly environment.
   
Toyota Motor Corp. helped lift stocks in early trading after the automaker reported quarterly profit surged 34 percent. Technology stocks gained, with Applied Materials Inc. up after Bank of America raised its price target on the chip maker.
   
In the first hour of trading, the Dow Jones industrial average rose 25.61, or 0.21 percent, to 12,131.16 after rising 119 points Monday on a spate of merger announcements.
   
Broader stock indexes also gained. The Standard & Poor's 500 index rose 1.31, or 0.09 percent, to 1,381.09, and the Nasdaq composite index added 4.36, or 0.18 percent, to 2,370.31.

Easing concerns about the U.S. economy and a flurry of takeovers helped the Dow industrials to break a six-session losing streak on Monday. The Dow industrials finished with a 119 point rise, and the Nasdaq Composite rose 35 points and S&P 500 gained 15 points.

Gold futures slipped 40 cents to $627.50 an ounce.

Stocks in focus

Toll Brothers on Tuesday gave a mixed picture on the key pillar of the U.S. economy, the housing market. The luxury home builder said it hasn't spotted a recovery in the housing market, but added the market may improve more rapidly than generally anticipated once the current inventory overhang is absorbed and consumer sentiment turns positive.
   
Toll Brothers cut its home delivery forecast for the year ending Oct. 31, 2007, and reported a 10 percent decline in fiscal fourth-quarter home building revenue.
   
Earnings releases are still expected to feature even though the third-quarter reporting season is winding down. Dean Foods, Sara Lee and R.R. Donnelley are among the companies to unveil earnings.
   
Shares of RealNetworks may rise after it nearly quadrupled its third-quarter profit on demand for games.
   
Elsewhere, The New York Times reported that Comcast will carry the planned Fox business news channel from News Corp.

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Dollar steady vs euro as US elections nerves offset weak euro zone data

LONDON - The dollar was steady against the euro as worries ahead of the outcome of today's mid-term elections in the US were offset by weak euro zone and German data.
   
The Democrats are expected to make substantial ground on the Republicans in both the House and the Senate in the US elections, a result which is broadly expected to put some pressure on the dollar.
   
The euro was unable to make much ground on the US currency, however, as one set of data showing an unexpected monthly fall in euro zone retail sales during September and another showing an unexpected fall in German industrial output kept the single currency firmly within the day's ranges.
   
Elsewhere, the pound failed to make any headway after a stronger-than-expected retail sales survey from the British Retail Consortium this morning. The survey showed like-for-like retail sales rose by 2.6 pct year-on-year in October, up from 2.4 pct in in September and well above expectations for a drop in growth to 2.0 pct.
   
With the market fully expecting the Bank of England to raise interest rates by a quarter point to 5.00 pct on Thursday this week, however, the news was of little benefit to sterling.
   
"The market effect of this release is likely to be muted given it does not affect the outlook for monetary policy this week," said Daragh Maher at Calyon.

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The European Markets at 13.30 GMT

London - Leading shares picked up again late morning to trade slightly firmer at midday ahead of an expected cautious start on Wall Street amid US mid-term elections, while M&S led UK gainers. At 11.48 am, the FTSE 100 index was 11.6 points higher at 6,236.1, heading back towards the morning high of 6,241.8, while the broader indices were also marginally higher.

Frankfurt - German shares were flattening off midmorning following a strong start to the session on the publication of a succession of healthy third quarter results, with Deutsche Postbank topping the leaders' chart and news from utility RWE that it would reject any attempt by Russian group Gazprom to buy a stake in it.
   
At 11.30 am, the DAX 30 index was 4.48 points or 0.07 pct higher at 6,335.13, having opened at 6,334.19. The MDAX was at 8,803.63, up 2.38 points or 0.03 pct, while the TecDAX was at 696.96, up 4.22 points or 0.61 pct.
   
Paris - Share prices remained slightly higher at midday, in line with other European markets. At 12.03 pm the CAC-40 index was up 15.21 points or 0.28 pct at 5,417.57. Volume was modest at 1.36 bln eur as many investors waited on the results of Tuesday's US mid-term elections and more third quarter results later in the week.

Milan - Milan shares were little changed at midday trade with gains in Telecom Italia, fuelled by hopes it could sell its TIM Brasil unit, pared by losses in BPM and Mediaset. At 12.46 pm, the Mibtel index edged up 0.07 pct to 30,940 points and the S&P/Mib was up 0.11 pct at 40,253, while volumes were 2.54 bln eur.

Madrid - Share prices were higher midday, with the IBEX-35 index hovering around the key 14,000 level amid a raft of domestic earnings reports, with construction companies again in demand, while Telefonica underperformed. At 12.30 pm, the IBEX-35 index put on 35.1 points to 14,000.1, after trading in a range of 13,982-14,025, on turnover of 1.9 bln eur.

Amsterdam - Shares in Amsterdam were flat at midday as investors awaited a raft of corporate earnings figures due later in the week, while Ahold fell after a downgrade by JP Morgan. At 11.50 am, the AEX was 0.15 pct or 0.74 points higher at 494.80 and trading in the range 494.05-496.08.

Stockholm -  Shares in Stockholm were slightly higher in midday trade led by NCC after the construction company's far better-than-expected third quarter results, and by mining stocks amid higher base metal prices. At 12.30 pm, the OMX Stockholm index was up 0.38 pct at 355.79 and the OMX Stockholm 30 up 0.28 pct at 1,106.00. Turnover amounted to 9.964 bln skr.

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Asian shares close mixed following record close on Wall St

HONG KONG - Shares across the Asia-Pacific region closed mixed, with the Tokyo market remaining cautious despite Wall Street hitting a new high overnight.
   
Tokyo shares ended mixed, giving up gains made earlier in the session in tandem with the rebound on Wall Street after investors became cautious while they await the results of the mid-term elections in the US.
   
Investors also turned nervous ahead of the release of machinery orders data for September and the special quotations for settling futures and options contracts.
   
The blue-chip Nikkei 225 Stock Average closed 28.65 points or 0.18 pct higher at 16,393.41, after touching a high of 16,512.51. The broader TOPIX index of all first section issues fell a marginal 0.03 points to 1,616.68.
   
Kazuhiro Takahashi, equity general manager at Daiwa Securities SMBC, said: "The morning gains in the market here were largely led by the rebound on the US stock markets, but there were no other strong factors to raise share prices."
   
During the midday break, Bank of Japan governor Toshihiko Fukui said the central bank would take preemptive action to quell any incipient spike in inflation that, if not dealt with immediately, would require even more aggressive increases in interest rates later on.
   
Takahashi said this had strengthened the yen against the US dollar and so hurt shares of exporters.
   
Australian shares finished at a new record high as investor sentiment was buoyed Wall Street and stronger base metal prices. The S&P/ASX 200 rose 47.5 points or 0.87 pct to close at 5,491.6, surpassing yesterday's record close of 5,441.1. The key index closed off a fresh intra-day record of 5,496.3 and above the day's low of 5,460.4.
   
Hong Kong shares were stronger in afternoon trade, with the index breaching the 19,000 points level in the morning, led by property stocks and other blue chips after several banks cut their prime lending rate and following Wall Street's rally. At 3.24 pm the Hang Seng Index was up 174.51 points or 0.92 pct at 19,111.06.
   
In mainland China, A-shares in Shanghai and Shenzhen closed mixed with some profit-taking seen even as banks and energy issues gained ground.  The Shanghai A-share Index added 3.39 points or 0.17 pct to 1,985.33 and the Shenzhen A-share Index was down 1.21 points or 0.26 pct at 468.33.
   
Seoul shares closed higher, recovering all their losses from the previous session, with a firmer Wall Street and heavy program buying buoying overall sentiment.
   
The market briefly raised hopes of rising through long-time resistance at 1,400 points when it hit 1,390. But it shed some early gains due to sell offs by foreign investors amid caution ahead of the expiry of options contracts and the Bank of Korea's rate decision on Thursday. Steel makers, telecoms and financial stocks led the advance.
   
The KOSPI index closed up 8.25 points or 0.60 pct at 1,387.44, after moving between 1,385.41 and 1,392.51.

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Oil prices drift lower on profit-taking

LONDON - World crude oil prices drifted lower on profit-taking following gains made the previous day, and as traders mulled recent comments from OPEC members.
   
New York's main contract, light sweet crude for delivery in December, slid 11 cents to 59.91 usd per barrel in electronic deals before the official opening of the US market.
   
In London, Brent North Sea crude for December delivery handed back 11 cents to 59.64 usd per barrel in electronic trading.
     
Crude futures are currently holding around the 60-dollar mark. Yesterday, they hit a ten-day high in New York and a one-week peak in London after fresh unrest in key producer Nigeria.
   
Rebels forced the closure yesterday of more facilities in the oil-rich Niger Delta region of OPEC member Nigeria.
   
The shutdown of a flowstation belonging to the Italian company Agip led to a loss in oil output of 55,000 barrels per day.
   
Nigerian production has been slashed by a total of some 500,000 bpd, owing to violence in the Niger Delta area.
   
Meanwhile, traders tracked the latest news flow from OPEC.
   
Fimat analyst John Kilduff said that "particularly supportive" comments came from Saudi Arabian Oil Minister Ali al-Naimi yesterday.
   
"He said that OPEC will have to take more action in December, that the market was oversupplied and inventories too high," Kilduff noted.
   
Iran's oil minister today did not rule out a further output cut by the cartel to boost crude prices if the cut agreed last month had no effect.
   
Asked if a new OPEC production cut was necessary, Oil Minister Kazem Vaziri Hameneh told reporters: "This depends of the effects of the output cut on the price of oil."
   
OPEC slashed oil production by 1.2 mln bpd from Nov 1, saying it was acting to correct an over-supplied market.
   
OPEC has said it may decide on an additional cut at its scheduled meeting in the Nigerian capital Abuja on Dec 14.

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