US & World Daily Markets Financial Briefing 08-09-2006

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Wall Street opens modestly higher
 
NEW YORK - Stocks rose modestly in early trading Friday, rebounding from two days of losses despite another warning from a homebuilder about falling demand.
   
Investors apparently took in stride Lennar Corp.'s announcement that it was lowering its third-quarter profit forecast, joining several of its rivals in pointing to lackluster demand in a slowing housing market.

Warnings earlier in the week from companies such as Beazer Homes USA Inc. and Hovnanian Enterprises Inc. provided mounting evidence of a slowing housing sector and left Wall Street unnerved at the prospect of a sharp economic slowdown.
   
Investors also were awaiting comments from Cleveland Federal Reserve President Sandra Pianalto, who was scheduled to speak on inflation Friday morning. Some on Wall Street interpreted remarks from San Francisco Fed President Janet Yellen on Thursday as indicating further interest rate hikes were likely.
   
Many investors are wary of more rate hikes, contending the Fed's previous string of 17 straight increases have already slowed the economy too quickly. The Fed, which left rates unchanged at its last meeting, plans to meet again Sept. 20.
   
In the first hour of trading, the Dow Jones industrial average rose 26.57, or 0.23 percent, to 11,358.01.
   
Broader stock indicators were also higher. The Standard & Poor's 500 index was up 2.96, or 0.23 percent, at 1,296.98, and the Nasdaq composite index gained 5.53, or 0.26 percent, at 2,160.82.

Overseas, the Bank of Japan kept interest rates at 0.25 percent. The dollar continued to gain ground against the British pound after recent turmoil from Tony Blair's announcement that he will step down as prime minister sometime in the next year.
   
Sterling weakened 0.2 percent at $1.8718, the yen was steady and the euro edged 0.1 percent lower.
   
Crude-oil futures continued to drop, hovering around the $67-a-barrel level in electronic trading.
   
BP indicated it could get its Prudhoe Bay pipeline in Alaska pumping at full capacity by the end of October, if the U.S. government gives its alternative pipeline plan approval. BP shares rose in London.

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National Semiconductor may drop after reporting that sales in the November quarter will decline 2 percent to 5 percent from the prior quarter. Fiscal first-quarter net income rose 40 percent, it said late Thursday.
   
Apparel maker Quiksilver slipped 9 percent in Germany after warning that fiscal fourth-quarter earnings will decline due to softness in the golf market. Third-quarter net income dropped 78 percent on higher costs and a seasonally weak quarter at Rossignol and Cleveland Golf.
   
Hewlett-Packard may see activity as further details about its leak probe emerge. The Wall Street Journal reported that Patricia Dunn, its non-executive chairman, is vowing to stay on in her job because she didn't know that investigators used any improper tactics. The Journal and The New York Times added that H-P targeted the phone records of nine journalists.
   
Both insurers named Prudential were upgraded on Friday. Prudential Financial was upgraded to overweight from neutral by J.P. Morgan on its strong fundamentals and reduced Japanese competition concerns.

Prudential plc, the U.K. insurer unrelated to its American counterpart, was upped to buy from neutral at Merrill Lynch, with the broker arguing market fears are overdone.

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The European Markets at 12.00 GMT

London - Leading shares were off highs at midday, with a U-turn by mining stocks and a downgrade on AstraZeneca pulling the FTSE well below its best levels of the session, traders noted. By 12.10 pm, the FTSE 100 was up 16.3 points at 5,874.4, below its early high of 5,899.0, while the broader UK indices remained positive.

Frankfurt - Shares were higher in midday trade, bouncing back from this week's losses, as US stock futures pointed to gains on Wall Street this afternoon and as upbeat broker comments boosted selected stocks, though Metro slumped on a 17.5 mln share placement.

At 11.31 am, the DAX 30 index was 32.78 points or 0.57 pct higher at 5,806.50, having moved between 5,779.44 and 5,811.59 so far this session.

Paris - Share prices were slightly higher at midday, recovering from the steep declines seen in recent sessions, but dealers said persistent doubts about the US economic outlook will keep investors from pushing stocks much higher ahead of the weekend. At 1.40 pm, the CAC-40 index was up 10.25 points at 5,070.34, on volume of 1.6 bln eur.
   
Amsterdam - Share prices were slightly higher in early afternoon trade, rebounding from recent losses ahead of an expected firmer start to trading on Wall Street, dealers said. At 1.34 pm, the AEX index was up 0.19 pct or 0.87 point at 464.33, after trading in a narrow range of 464.09-465.99.

Brussels  -  The Bel 20 was up 7.33 points or 0.19 eur at 3,875.25 at 1.50 pm. Belgacom led the index higher, up 0.64 eur or 2.27 pct at 28.85, whilst Omega Pharma was down sharply on disappointing second quarter results.

Madrid  - Share prices were higher midday, but off session highs as some profit-taking in Telefonica and BBVA partially offset firm US futures, dealers said. At 12.35 pm, the IBEX-35 index put on 44.4 points to 12,058.9, after trading in a range of 12,027-12,094, on thin turnover of 1 bln eur.
   
Milan  - Share prices were higher at midday trade, led by gains in Pirelli and its affiliate Telecom Italia amid speculation about asset sales, dealers said. At 12.31 pm, the Mibtel index was up 0.43 pct at 29,007 points and the S&P/Mib added 0.40 pct to 37,772, while volumes were 1.48 bln eur.

Zurich - Share prices were higher in afternoon trade in line with other European equity markets, helped by easing oil prices, Japanese gains and moderately positive US futures, traders said. At 1.30 pm, the Swiss Market Index was 28.28 points higher at 8,154.39, and the Swiss Performance Index up 23.3 points at 6,351.07.
   
Stockholm - Shares were slightly higher in midday trade, led by OMX on acquisition rumours and by the banks, but with positive Nasdaq futures helping tempt bargain hunting across the market after recent losses, brokers said.

At 12.20 pm, the OMX Stockholm index was up 0.53 pct at 320.93 points, while the OMX Stockholm 30 index was up 0.49 pct at 994.36.

Helsinki - Shares were higher in midday trade on bargain-hunting, with Nokia shrugging off its weaker ADR price overnight on Wall Street and gaining, after a straight run of losses since the beginning of the month, dealers said. At 12.10 pm, the OMX Helsinki 25 was 0.77 pct higher at 2,520.10 and the OMX Helsinki was up 0.60 pct at 8,612.68, on 274 mln eur of turnover.

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Asian shares close mixed with Tokyo higher on futures, options settlements

HONG KONG - Shares across the Asia Pacific region closed mixed, with Tokyo closing higher on buying inflated by the settlement of special quotations on futures and options contracts.
   
They said the Bank of Japan's decision to keep the overnight call rate target at 0.25 pct, announced before the market closed, had been widely expected and was therefore already priced in although it did provide some measure of relief to investors worried about the central bank's future policy direction.
   
For next week, analysts said the Nikkei is expected to move within the 16,000-point levels, with the market likely to be supported by expectations of strong revised June quarter GDP data due out on Monday.
   
They warned, however, that some caution may begin to set in ahead of the first-half earnings reporting season in October.
   
The blue-chip Nikkei 225 Stock Average closed up 68.05 points or 0.4 pct at 16,080.46, off a high of 16,156.18. For the week, the index fell 0.3 pct.
   
The broader TOPIX index of all first-section issues rose 6.46 points or 0.4 pct at 1,619.92, after touching a high of 1,626.80. For the week, the index fell 0.8 pct.

Australian share prices closed lower as falls in metal prices overnight prompted selling of major resource stocks, dealers said.
   
They said the market was weighed down by the resources sector because of falls in index-leading mining stocks such as BHP Billiton and Rio Tinto.
   
The S&P/ASX200 index ended down 10.4 points at 5,098.3, off a high of 5,106.2 and a low of 5,061.4.
   
Over the week the benchmark index gained 2.3 pct. The All Ordinaries Index fell 12.6 points to 5063.2.
  
Hong Kong shares were higher in afternoon trade on a technical rebound off falls over the past three sessions, with investors picking up select attractively-priced property and blue chip stocks, dealers said.
   
They said the upside was capped by caution ahead of the weekend while many investors are also focused on China Merchants Bank's initial public offering which opened for retail subscription today. At 3.29 pm the Hang Seng Index was higher by 54.44 points or 0.32 pct at 17,150.88.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher with carriers and real estate developers gaining ground on the back of a rising yuan, dealers said.
   
The Shanghai A-share Index rose 7.17 points or 0.41 pct to 1,753.75 and the Shenzhen A-share Index was up 0.61 points or 0.14 pct at 434.57.
   
Seoul shares closed slightly higher as heavy program buying offset profit-taking by foreign and retail investors ahead of the weekend, dealers said.
   
The market was fickle in initial trade as investors took a cautious stance ahead of triple witching next Thursday, but it gained momentum to close in positive territory, they noted.
   
The KOSPI index closed up 3.72 points or 0.28 pct at 1,354.89, ending the week with a loss of 1.78 points, after moving between 1,344.68 and 1,358.10.

Asian Bourse Round-Up

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Gold slides, weighed down by weaker oil, stronger dollar; Copper, aluminium fall

LONDON - Gold edged lower, continuing yesterday's slide, as oil slid to new five-month lows and as dollar sentiment benefited following hawkish comments yesterday from the San Francisco Federal Reserve Bank President.
   
At 12.48 pm, spot gold, which earlier hit a low of 611.80 usd, was quoted at 612.20 usd, down from 617.30 usd at the time of the COMEX market close in New York yesterday. Other precious metals were lower.
   
Spot silver was at 12.29 usd an ounce against 12.55 usd yesterday, platinum was at 1,237.50 usd against 1,246.00 usd while palladium was at 332.00 usd against 344.00 usd.
   
Gold fell yesterday as traders watched oil prices unravel while the US dollar sprang back to higher levels, and as positive supply news added further pressure to prices.
   
It continued lower today as oil prices struck new 5 month lows on fading supply worries and as the firmer mood in the dollar looked to weaken sentiment in the precious metals market.
   
Dollar sentiment has been boosted by comments yesterday from San Francisco Federal Reserve President Janet Yellen, who said until inflation pressures recede, the central bank should lean toward further rate hikes.
   
Higher rates boost the dollar by making certain types of investments more attractive. A stronger dollar tends to weigh on gold as the precious metal is seen as an alternative investment to the US currency.
   
Copper prices fell, while aluminium eased off yesterday's 2 month highs as the market changed course after several days of strong gains, sparked by seasonal fund buying and fears supplies will not be able to match rising demand.
   
At 1.58 pm, LME copper for three-month delivery was at 7,830.00 usd a tonne, down from 8,015.00 usd at the close yesterday, while aluminium was down at 2,640.00 usd a tonne against 2,670.00.
   
Other metals were also lower. Zinc was at 3,610.00 usd against 3,660.00 usd, lead was at 1,317.50 usd against 1,320.00 usd, nickel was at 28,200.00 usd against 28,450.00 usd and tin was at 9,225.00 usd against 9,250.00 usd.
   
"After several days of solid gains, we are seeing the flip side of fund buying set in, namely, that in the absence of any compelling reason to push higher, fund money could switch gears," said Man Financial analyst Ed Meir.
   
A flurry of fund buying following the end of the summer lull took base metals higher this week, with copper climbing above the psychologically important 8,000 usd mark and lead hitting a 4 month peak.
   
BaseMetals.com analyst William Adams noted metals held up well yesterday amid sharp falls in oil prices and gains in the dollar, sparked by fading hopes that US interest rates have peaked.

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