US & World Daily Markets Financial Briefing 08-02-2006

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U.S. stocks gain ground; Cisco, Pepsi results please

NEW YORK - U.S. stocks gained ground Wednesday, helped by strong
earnings from Cisco Systems Inc. and PepsiCo, and by a Pfizer plan to seek
alternatives for its consumer products unit.
   
The Dow Jones Industrial Average was up 28 points at 10,778. The S&P 500 rose 1.6 points at 1,256 and the Nasdaq composite climbed 7
points at 2,253.
   
"If Cisco can start to bring their business around and have a good report
after not doing very much of anything for the last year and a half or so, I
think that just brings a better feeling to a bit of an oversold market," said
Robert Pavlik, portfolio manager at Oaktree Asset Management. "The Pepsi report helped a little bit and McDonald's sales performance."
   
On the broader market for equities, decliners had a 15 to 12 advantage over
advancers on the New York Stock Exchange, while winners and losers were evenly balanced on the Nasdaq.
   
By sector, networkers rallied on Cisco Systems' strong quarterly earnings
performance. Computer hardware, airlines and drug stocks also put in solid
gains.   

The drop in oil sent oil services and energy stocks lower. Housebuilders
remained under pressure on the fallout over Toll Brothers lowered home delivery
forecast on Tuesday.

On the bond market, long-term Treasury prices edged higher, sending yields
lower, on expectations an afternoon sale of 10-year note will go well. A Tuesday
auction of 3-year notes received a poor reception.
   
The benchmark 10-year note last was up 3/32 at 99-17/32 with a yield of
4.56%.

Stocks on the move
   
Cisco Systems rose 6.1% to $19.19 as the world's largest maker of Internet
equipment posted stronger-than-expected sales in the second quarter.
   
Shares in Pfizer Inc. rose 3.5% to $25.80 after the drugs giant late Tuesday
said it will explore strategic alternatives for its consumer products business,
including a possible spinoff or sale.
   
Elsewhere in the pharmaceutical sector, U.S.-listed shares of GlaxoSmithKline rose 57 cents to $50.88 after the UK drugs group posted a 45% rise in quarterly profit, helped by the popularity of its asthma and diabetes drug. Cost-cutting measures also boosted the bottom line.
   
McDonald's added 24 cents to $36.43 after reporting a 9.7% advance in
January same-store sales.
   
Shares in General Motors Corp. fell 3.6% to $21.97 after Deutsche Bank cut
the automaker from to sell from hold, saying it continues to be disappointed by
the limited cash savings targeted by the current restructuring efforts.
   
PepsiCo rose 1.1% to $57.49 after the soft drinks seller posted a 12% rise
in quarterly profit, helped by volume gains in salty snacks and non-carbonated
drinks, as well as international growth.
   
Nortel Networks fell 5.3% to $2.86. The company has reached an agreement in
principle to settle two class action lawsuits.

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Dollar makes a comeback after weak Japan survey

       
NEW YORK - The dollar staged a comeback Wednesday from a beating it
suffered the day before, inflicted by worries that the Bank of Japan could
tighten its monetary policy.
   
The dollar last was up more than 0.7% at 118.32 yen. On Wednesday it traded
as low as 117.59 yen. The euro was down 0.3% at $1.1956.
   
A weak Japanese economic survey helped drive the yen off its recent highs.
Japan's Eco Watchers survey produced a 52.1 result for the most recent month,
far below the expected reading of 56.2.
   
"For a long time now the Eco Watchers Survey has been our favorite gauge of
Japanese consumer sentiment," said Boris Schlossberg, chief currency strategist
at Forex Capital Markets.
   
"This 'man in the street' poll of barbers, taxi drivers and waiters offers
some of the best clues to future Japanese consumer spending," Schlossberg said.
   
If the survey is viewed as a leading indicator of slowing Japanese consumer
demand, then it casts doubt on any change in zero interest rate policy on the
part of the Bank of Japan, he said.
   
The Bank of Japan is meeting Wednesday and Thursday. It is not expected to
loosen its monetary policy at this month's meeting, but market participants have
been preoccupied with speculation that a change could come by mid-year.
   
Many analysts think the central bank will be hesitant to abandon its zero
interest rate policy, but think it is possible it will back off its
"quantitative easing" policy of flooding the economy with extra liquidity.
   
Mike Malpede, senior currency analyst at Man Global Research, said the Bank
of Japan needs to see several more months of rising consumer prices, as well as
firmer evidence that deflation has ended, before it can feel comfortable
changing its monetary policy.
   
Wayne Roworth, senior foreign exchange dealer at CMC Markets, said the
market in upcoming weeks will parse import-export prices and other pieces of
Japanese data.

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The European markets at 12.00 GMT
   
   
LONDON - London shares were lower at midday but remained well above
early lows as the release of solid full-year results from drugs giant
GlaxoSmithKline, together with takeover moves for BAA and hopes for a Wall
Street rally, offset weakness in heavyweight mining and oil issues, dealers
said.
   
At 12.25 pm, the FTSE 100 index was down 13.5 points at 5,733.3.

FRANKFURT - Shares were lower in midday trade on the back of losses on
Wall Street, with Hypo Real Estate leading the losers on profit-taking, dealers
said.
   
At 12.31 pm, the DAX 30 index was 27.08 points or 0.48 pct lower at 5,645.84
after trading within a range of 5,598.05-5,650.33

PARIS - Shares were lower at midday in a sluggish morning's trading,
weighed down by slides on Wall Street and in Tokyo.
   
At 12.32 pm, the CAC-40 index was down 39.71 points or 0.8 pct at 4,895.69.

   
AMSTERDAM - Amsterdam shares were lower in early afternoon trade, but
off session lows as Wall Street was indicated to open higher, dealers said.
   
At 12.32 pm, the AEX stood 1.11 points or 0.24 pct lower at 451.92, after
opening at 449.27 and reaching a high of 451.93.

   
MILAN - Share prices were little changed at midday as retracing crude oil prices weighted on sector shares, offsetting gains in Telecom Italia, which
benefited from short-covering in a sector rebound, dealers said.
   
At 12.30 pm, the Mibtel index fell 0.05 pct to 36,718 points and the S&P/Mib was down 0.16 pct at 36,654.

   
MADRID - Share prices edged higher in moderate midsession trade as SCH
and Telefonica recovered from earlier losses, while Ferrovial outperformed after
confirming that it could bid for UK's BAA, dealers said.
   
At 12.34 pm, the IBEX-35 index had added 2.0 points to 11,177.1, after
trading in a range of 11,083-11,186, on turnover of 1.623 bln eur.

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Asian shares close mostly lower, Tokyo weaker on Wall St, stronger yen

       
HONG KONG - Share prices across the Asia-Pacific region ended mostly
down, with Tokyo lower across the board, pressured by a slide on Wall Street
overnight and an upturn in the value of the yen, dealers said.
   
Analysts said market sentiment was also dampened by worries over foreign
investors trimming their investment in equities here.
   
The blue-chip Nikkei index finished the day down 448.31 points or 2.7 pct at
16,272.68, its low for the session.
   
The broader TOPIX index of all first-section issues lost 42.08 points or 2.5
pct to 1,671.39, also its session low.
   
"Share prices fell sharply today," said Akio Yoshino, general manager at
Societe Generale Asset Management.
   
"This is due mainly to overnight losses in New York markets. A stronger yen
against the US dollar is another factor for the sharp fall here."
   
In Australia, share prices finished sharply lower as investors dumped
resource, energy and materials stocks after a long-awaited sell-off in commodity
markets overnight, dealers said.
   
They said the Reserve Bank of Australia holding cash rates at 5.50 pct for
the 11th consecutive month, and a 1.8 pct boost in the Westpac-Melbourne
Institute consumer sentiment index for February, failed to stop the selling
momentum.
   
The S&P/ASX 200 dropped 74.0 points or 1.51 pct to close at 4,831.4, further
retreating from last Wednesday's record close of 4,956.7.
   
The key indicator ended above its low of the day at 4,824.9 and below the
high of 4,900.2.
   
Share prices in Hong Kong closed lower as investors locked in profits in
China-related stocks after recent strong gains, with a drop in commodity prices
weighing on sentiment, dealers said.
   
Hutchison Whampoa outperformed after obtaining Italian market regulator's
approval for listing its Italian 3G unit and following news of a sharp rise in
fourth-quarter profit at Husky Energy, Hutchison's Canadian unit.
   
The Hang Seng Index closed down 143.57 points or 0.93 pct at 15,373.44, off
a low of 15,327.07 and high of 15,469.51.
    
In mainland China, A-shares in Shanghai and Shenzhen shrugged off early
weakness and closed higher amid continued buying interest in blue chips,
especially petrochemical and power listings, dealers said.
   
The Shanghai A-share Index rose 8.66 points to 1,351.47 on turnover of 16.01
bln yuan and the Shenzhen A-share Index was up 0.55 point at 326.78 on turnover of 8.03 bln yuan.
   
Share prices in Seoul finished sharply lower in a broad sell-off, with
investors anxious about a potential rate hike by the Bank of Korea and possible
program selling due to options expiry tomorrow, dealers said.
   
Trading was volatile throughout the session, with most large-cap bluechips
sliding on heavy foreign investor sell-offs and program selling to send the
market into a two-day decline, they added.
   
The KOSPI index closed down 21.29 points or 1.60 pct at 1,310.99.

Asian Bourse Round-up

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Crude futures were lower ahead of weekly supply data expected to show an
increase in the nation's oil inventories. The front-month contract last was down
26 cents at $62.83 a barrel.
   
Gold futures fell for a third consecutive session as the precious metal
continues to pull back from recent quarter-century highs. Gold for April
delivery was last down $2.40 at $552.40 an ounce.

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