US & World Daily Markets Financial Briefing 08-08-2007

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Wall Street advances after Cisco report

NEW YORK - Stocks advanced Wednesday as investors, relieved that the Federal Reserve still predicts moderate economic growth despite credit concerns, reacted warmly to solid results from Cisco Systems Inc.
   
The computer network equipment maker said profit jumped 25 percent in its fiscal fourth quarter and raised its revenue forecast for fiscal 2008. Cisco rose more than 5 percent in early trading.
   
Meanwhile, wireless provider Sprint Nextel Corp. posted a steep decline in its second-quarter profit, but the results beat Street expectations and the company said its subscriber base rose by 400,000 to 54 million customers during the quarter. Sprint rose 2.8 percent.
   
The upbeat news in the technology sector gave investors another reason to buy back into the stock market -- a day after the Federal Reserve said despite an increasingly difficult credit environment, the economy should keep growing moderately. It said again that inflation remains its primary concern.
   
The housing market is still weak: Toll Brothers Inc.'s preliminary measure of fiscal third-quarter revenue showed home building revenue fell 21 percent. However, the company's chief executive said he sees housing demand increasing, and the quarterly revenue estimate of $1.21 billion was better than analysts expected. Toll Brothers rose 3.9 percent.
   
The Dow Jones industrial average rose 58.69, or 0.43 percent, to 13,562.99, while the Standard & Poor's 500 index rose 10.94, or 0.74 percent, to 1,487.65.   

The technology-dominated Nasdaq composite index gained 33.63, or 1.31 percent, to 2,595.23.
   
Bonds fell, with the yield on the 10-year Treasury note rising to 4.82 percent from 4.77 percent on Tuesday.

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Pound rises after hawkish BoE inflation report

LONDON - The pound strengthened after the Bank of England's quarterly inflation report suggested interest rates will rise to 6.00 pct by the end of the year.
   
In its quarterly Inflation Report, the BoE said the annual rate of CPI inflation will only fall back towards the 2.0 pct target in two years time if rates rise once more in the next few months.
   
The central bank said the risks to the near-term inflation profile are slightly higher than they were at the time of the last inflation report in May, but the risks to the medium-term profile are slightly lower.
   
"On the face of it, the most likely scenario is that the BoE will tighten once again unless there is a surprisingly acute downturn in domestic demand, a sudden retreat in pricing intentions or greater dislocation in financial markets," said Daragh Maher, senior forex strategist at Calyon.
   
"All are possible, so a rate hike is not guaranteed, but it is questionable how long the hawks will be willing to wait before pulling the rate trigger again," he said.
   
He added that sterling markets have priced in an 80 pct probability of a rate hike happening in November. At present the benchmark rate is at 5.75 pct.
   
However, if next Wednesday's minutes to August's rate setting meeting reveal any signs that there were calls for a hike, then that probability may rise further, Maher said.
   
The dollar came off highs against the euro after the Federal Reserve last night reiterated that inflation remains its primary concern, effectively ruling out a near-term interest rate cut.
     
Elsewhere, the Australian dollar was firmer, supported by last night's expected decision by the Reserve Bank of Australia to raise interest rates to 6.50 pct, the highest level in 11 years.
   
Gains were limited, however, as the move had been expected, while market players remain wary of pushing higher-yielding currencies such as the Australian dollar too high amid the current volatility in financial markets.

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Euroshares higher midday, ING ahead on earnings, market unimpressed with BoE

LONDON - At 11.51 am, the Dow Jones STOXX 50 gained 31.45 points or 0.84 pct to 3,786.40 as the STOXX 600 rose 4.00 points or 1.07 pct to 377.62.
   
ING Groep impressed investors with its second quarter results and gained 3.79 pct. Brokerage Cazenove said net profit came in 4 pct ahead of its estimates. The broker said ING presented "solid results with better than expected life new business value, wholesale banking and retail banking results" and maintained its 'outperfom' rating on the stock. 
   
Axa was also higher, up 2.89 pct, as results in ING's insurance business lifted investor's hopes that its half year results, due on Friday, may well come in strong.
   
Staying with financials, Friends Provident was trading higher --up 1.82 pct-- as speculation over a possible counter bid for the company offset disappointment after the company said its target of tripling its new business profit by 2008 could take longer than expected to achieve as it confirmed a 7 pct increase in first-half profit.   
   
Adidas gained 1.53 pct, off earlier highs, as it said second-quarter profit rose 27 pct as costs related to the acquisition of Reebok declined and synergies in purchasing started to filter through. Shares gave in a little after the company said it expects weakness in its North American business to continue for another 6-9 months as sales and orders of Reebok brand shoes in the region continue to lag.
   
Elsewhere, Hermes International gained 9.11 pct with Clarins adding 8.08 pct as Exane BNP Paribas said increased Chinese tourism is likely to offset any tailing off in luxury goods demand because of an expected flattening in the number of Japanese travellers.
      
Meanwhile, Dutch engineering group Arcadis NV slumped --down 4.03 pct-- after reporting second-quarter sales growth that exceeded expectations but issuing a conservative outlook.
   
Telecommunications group Swisscom climbed 4.01 pct pct higher, on good results. A local trader noted that the new guidance for the company was welcomed by investors. Other results out today are ITV, Royal & Sun Alliance and Hellenic Petroleum.
   
In other news, Nokia said it is to widen its source of supply for chipsets in key mobile phone technologies and scale back its own in-house chipset development in a major strategy shake-up. Shares gained 1.89 pct. The announcement provided a boost to to STMicroelectronics which charged ahead, gaining 5.24 pct on the news that Nokia picked the chip maker as its main supplier for 3G.
   
It added that it is in talks about transferring part of its Integrated Circuit (IC) operations to STMicroelectronics as part of a deepening of its ties in 3G technology with the French group.   

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Asian shares close higher as Fed statement eases US credit crunch worries

MUMBAI - Shares across the Asia-Pacific region closed higher, with Tokyo's Nikkei 225 index rising above the 17,000-point level for the first time in about a week, as the Federal Reserve's statement on the US credit squeeze eased investors' worries.
   
The blue-chip Nikkei 225 Stock Average rose 107.51 points or 0.6 pct to close at 17,029.28. The TOPIX index gained 8.88 points or 0.5 pct at 1,669.04.
     
The market shrugged off the latest machinery orders data, announced before the opening bell, which were much lower than expected. Core private-sector machinery orders fell a seasonally adjusted 10.4 pct in June from May.
   
In Australia, shares ended sharply higher for the second straight trading day as sentiment continued to gain strength from the rebound in US sharemarkets this week. The S&P/ASX 200 closed up 115.8 points or 1.9 pct at 6,100.8. The All Ordinaries index jumped 111.1 points or 1.9 pct to close at 6,124.7.
   
Hong Kong shares ended a two-day fall as buying interest was revived by the Fed's assurances that the US economy remains sound. Gains spread across the board, driven by strong first-half earnings announced by major local and mainland Chinese corporations.
   
Cathay Pacific Airways highlighted the robust performance of major companies as its first-half net profit topped market expectations. The Hang Seng Index closed up 628.68 points or 2.87 pct at 22,536.67.
   
In mainland China, A-shares closed mixed, with gains in major banks such as Industrial and Commercial Bank of China helping send the Shanghai Composite Index to a new record close for a fourth straight day. The Shanghai A-share index closed up 13.40 points or 0.27 pct at 4,893.58 and the Shenzhen A-share Index was down 23.42 points or 1.66 pct at 1,390.
       
In South Korea, shares closed sharply higher, as investors cheered the announcement that the two Koreas will hold a summit late this month for the first time in seven years. The KOSPI index closed up 43.59 points or 2.3 pct at 1,903.41 after trading between 1,873.99 and 1,905.22.
   
Taiwan shares closed at the day's high after Wall Street's extended gains. The weighted index closed up 237.15 points or 2.68 pct at 9,099.46.
   
Philippine shares also closed higher, with Fed's decision taken as a sign that the US economy, Philippines' biggest export market, was still in good shape. Manila's composite index closed up 27.57 points or 0.8 pct at 3,375.91. The broader all-share index rose 20.01 points, or 0.9 pct to 2,163.03.
   
Malaysian share prices closed sharply higher. The Kuala Lumpur Composite Index (KLCI) closed up 17.04 points or 1.3 pct at 1,307.17.
   
Singapore and Indonesia shares closed sharply higher as well, with The Straits Times Index gaining 111.16 points or 3.40 pct to 3,413.17 and Jakarta's composite index rising 88.57 points or 4.1 pct at 2,262.64. Singapore markets will be closed Thursday for the National Day.

Indian shares closed sharply higher on the back of information technology, banking and heavyweight energy stocks after the government tightened external commercial borrowing norms to rein in a buoyant rupee. The Bombay Stock Exchange's benchmark Sensex rose 2.51 pct, or 375.21 points, to close at 15,307.98. The National Stock Exchange's S&P CNX Nifty climbed 2.43 pct to 4,462.10 points.
   
Among sector indices, the BSE IT Index was the top gainer, advancing 4.11 pct to 4,808.43 points, on heavy buying in shares of IT companies, which depend on software exports to the US. A weaker rupee boosts the margin of these companies by increasing the value of software exports.

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Copper falls as huge stocks gain shows less Chinese demand

LONDON - Copper prices dropped after a massive rise in stockpiles of the red metal at the Gwangyang warehouse in South Korea, indicating a decline in demand from China.
   
Copper prices have been underpinned by continued demand from the world's largest consumer of the metal, as the base metals complex has been rocked recently by fears of a global economic slowdown in the wake of the US sub-prime crisis.
   
"The great shining light for copper has been continued demand out in the Far East," said Sucden broker Steve Hardcastle. "Against the macro picture of the last few days, if China is temporarily not buying at these prices we're going to see support being stripped away."
   
Copper inventories in London Metals Exchange (LME) monitored warehouses increased by a huge 8,675 tonnes to 114,275 tonnes, with the vast majority of those gains coming from Gwangyang.
   
At 11.38 am, LME copper for three-month delivery was trading down at 7,575 usd a tonne against 7,750 usd at the close yesterday.
       
In other metals, tin consolidated back to 16,500 usd a tonne against 16,755 usd, having hit an all-time high of 17,050 yesterday.
   
Lead eased to 3,100 usd a tonne against 3,146 usd. Lead production at Ivernia's Magellan mine in Australia is still shut in on environmental grounds, while the strike at Exarro's Rosh Pinah plant continues for now.
   
Nickel fell to 28,200 usd a tonne versus 28,900 usd at the close yesterday, following a 1,152 tonne increase in LME monitored stockpiles. Zinc edged lower to 3,365 usd versus 3,380 usd, while aluminium slipped to 2,639 usd versus 2,664 usd at the close yesterday.

At 2.34 pm, spot gold was trading up at 676.15 usd an ounce against 671 usd in late New York trades yesterday. Earlier today gold fell to as low as 669.50 usd. In other precious metals, silver was up at 13.15 usd from 13.05 usd and platinum was higher at 1,284 usd from 1,282 usd, while palladium eased to 359 usd from 360 usd.

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