US & World Daily Markets Financial Briefing 08-12-2006

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3M U.S. stocks fall in early trading
 
NEW YORK - U.S. stocks moved lower Friday, with the global economic picture in focus. In the opening minutes, the Dow Jones industrials dropped 10.42 points to 12,267.99, the S&P 500 slipped 0.64 of a point to 1,406.65, and the Nasdaq lost 5.46 points to 2,422.23.
   
U.S. stocks closed lower Thursday, as concerns over possible delays to Apple Computer's iPhone offset increased confidence in the labor market after weekly jobless claims numbers. The Dow industrials fell 30 points, the Nasdaq Composite shed 18 points and the S&P 500 lost 5.6 points.
   
Attention on Friday is on the November payrolls report. Employers boosted payrolls by a respectable 132,000 in November, but the unemployment rate rose to 4.5 percent as jobseekers streamed into the labor market by the thousands with the onrushing holidays.
   
Japanese growth meanwhile was revised sharply lower to show 0.8 percent annualized growth, versus an earlier 2 percent growth view. Paul Donovan, an economist at UBS, said the concern was that private demand was a lot weaker than first thought.
   
Stocks in focus
   
3M Co., a component of the Dow industrials, was downgraded to neutral from overweight at Prudential Equity Group, which said it will take some time for the stock to regain its valuation premium.

Fears over the company's optical film business have been extinguished by strong third-quarter figures, but convincing investors to pay a premium for the company as economies in Europe and North America slow could take more time than originally anticipated, Prudential said.
   
Merrill Lynch downgraded its rating on the mining sector to neutral, blaming concerns over a slowing global economy in 2007 and also manipulation of metals prices. It downgraded BHP Billiton and Rio Tinto to neutral.
     
Barclays climbed in London trading for the second straight day, with a Merrill Lynch analyst report saying Bank of America is "very interested" in buying the British bank. The report suggested Bank of America would pay a 25 percent to 30 percent premium for Barclays, valuing the U.K. bank at around $118 billion.
   
Oracle Corp. late Thursday raised its bid for the shares it doesn't already own in India's i-Flex Solutions.
   
Hewlett-Packard late Thursday said it will pay $14.5 million to settle a civil lawsuit from the California attorney general over the company's probe into boardroom leaks.
   
Xilinx may see pressure after cutting its sales outlook, due to softer business conditions in November. J.P. Morgan downgraded the chipmaker to neutral from overweight.

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Euro back above 1.33 usd as dollar gains on US data prove short-lived

LONDON - The euro rose back above the 1.33 level against the dollar as the US currency's gains following better-than-expected US jobs data proved to be short-lived amid talk of Russia buying euros.

Data from the Labor Department this afternoon showed US non-farm payrolls rose by 132,000 in November, above market expectations for a gain of around 100,000.

Revisions to back data were broadly positive, with October's payrolls revised down to show a gain of 79,000 from the previous estimate of 92,000, but September's reading was revised up substantially to 203,000 from 148,000 previously.

Thomson IFR Markets analyst Jamie Coleman said, given the mixed revisions, "there is something for everyone" in the report, which he described as "unspectacular". On balance, it will be seen as slightly reducing the chances of a Federal Reserve interest rate cut early in 2007, he said.

He added that reports have also emerged of the Russian central bank buying euros, helping to push the European currency back up on renewed speculation that central banks are diversifying their reserves away from the dollar.

Immediately after the data, the euro dropped to a low of just below 1.3250 but buyers soon moved back in on dips and the currency rose back above the 1.33 level to reach a day high of 1.3347.

Against the yen, the dollar fell back down towards the 115 level after touching a high of 115.88 immediately following the data. The pound meanwhile rose sharply to a high of 1.9688 usd after earlier dropping to 1.9533.

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The European Markets at 13.00 GMT

London - Leading shares were flat midday, drifting ahead of this afternoon's US jobs data, with downgrades across the mining industry outweighing further M&A talk among financials.
   
By 11.55 am, the FTSE 100 index was down 0.8 points at 6,130.5, while the broader indices were mixed. Volume was below average, with 843.4 mln shares changing hands in 131,057 deals.

Frankfurt - German shares were lower in midday trade, tracking overnight losses on Wall Street, ahead of key US jobs data with a dearth of market-moving news. At 12.43 pm, the DAX 30 index was down 16.50 points or 0.26 pct at 6,396.53, having moved between a low of 6,384.08 and a high of 6,409.80 so far this session.

Paris - Share prices were broadly lower at midday as last night's weakness on Wall Street encouraged investors to take profits ahead of another round of US data this afternoon, expected to provide more clues to the outlook for the world's leading economy. At 12.53 pm the CAC-40 index was down 19.88 points or 0.4 pct at 5,359.33, on volume of 1.4 bln euro.

Milan - Share prices were flat at midday, with gains in Capitalia on takeover speculation offsetting losses in Generali, brokers said. At 12.35 pm, the Mibtel index was down 0.06 pct to 31,228 points, while the S&P/MIB fell 0.12 pct to 40,628.

Madrid - Share prices were flat in thin early afternoon trade, ahead of key US jobs data, with many domestic investors out for a three-day weekend. At 1.10 pm, the IBEX-35 index fell 3.8 points to 14,059.0.

Stockholm - Shares remained in slightly negative territory in midday trade, but a touch off morning lows, with medical products firm Getinge sharply higher after announcing the acquisition of a UK firm. At 12.15 pm, the OMX Stockholm index was down 0.23 pct at 354.29 points, while the OMX Stockholm 30 index was down 0.30 pct at 1,092.93.

Zurich - Shares moved lower in thin midday trade in line with other European markets, with overnight losses on Wall Street and weakness among the market's heavyweights weighing on the index, as traders waited for US employment data due out this afternoon. At 12.35 pm, the Swiss Market Index was 38.38 points lower at 8,532.53, and the Swiss Performance Index was 25.37 points down at 6,718.36.

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Asian shares close lower on negative economic signals

HONG KONG - Shares across the Asia-Pacific region closed lower on nervousness about the economic outlook in the region.
   
Tokyo shares finished lower on renewed economic concerns after the government revised down its real GDP figure for the third quarter and following a weaker-than-expected rebound in October private sector machinery orders.
   
The Cabinet Office said core private sector machinery orders rose a seasonally-adjusted 2.8 pct in October from the previous month following a 7.4 pct drop in September, which was below the consensus forecast of a 5.7 pct rise based on a Nihon Keizai Shimbun poll of economists.
   
Before the opening bell, the government said real GDP in the third quarter to September grew by a revised 0.2 pct from the previous quarter and was up by an annualized rate of 0.8 pct. Its preliminary estimate, released last month, showed a quarter-on-quarter GDP growth of 0.5 pct for an annualized rate of 2.0 pct.
   
The Nikkei 225 Stock Average closed down 55.54 points or 0.34 pct at 16,417.82, after touching a low of 16,387.80. For the week, the index added 0.6 pct. The broader TOPIX index of all first-section issues fell 6.43 points or 0.40 pct to 1,616.34, off a low of 1,613.54. For the week, the index gained 0.7 pct.
   
Market watchers expect Japanese shares to undergo a mild correction next week following the release of the revised data.
  
Australian shares closed down as investors sold resource stocks after base metal prices dropped in overnight trading. The S&P/ASX 200 lost 39.4 points or 0.72 pct to close at 5,425.8, the day's low. The high was 5,461.2. Over the trading week, the key index slipped 2.1 points or 0.04 pct.
   
Hong Kong shares were weaker in afternoon trade as profit-takers continued to dominate trade, with China stocks under pressure. At 3.24 pm the Hang Seng Index had fallen by 154.16 points or 0.82 pct at 18,688.83.
   
In mainland China, A-shares in Shanghai and Shenzhen closed sharply lower on market talk of a possible hike in interest rates soon, as well as profit-taking, with property and telecom stocks pressured. The Shanghai A-share Index tumbled 66.19 points or 2.92 pct to 2,200.54 and the Shenzhen A-share Index was down 17.57 points or 3.35 pct at 506.35.
   
Seoul shares ended sharply lower as the won's major retreat failed to convince investors that it was reversing course from recent highs. Market jitters over possible heavy program selling ahead of triple witching next week also deterred investors from bargain-hunting.
   
The KOSPI index closed down 19.87 points or 1.41 pct at 1,390.43, off a low of 1,386.26 and a high of 1,400.98. The main board index ended the week with a loss of 42.93 points. The won turned lower after surging over seven straight trading days, ending down 0.86 pct at 920.30, after government intervention.

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Oil prices jump on Nigeria concerns

LONDON - World crude prices rose strongly today after threats of further attacks to oil facilities in Nigeria and ahead of next week's output meeting by OPEC, analysts said.
   
New York's main contract, light sweet crude for delivery in January, climbed 74 cents to 63.23 usd per barrel in electronic deals before the official opening of the US market.
   
In London, Brent North Sea crude for January delivery surged 1.08 usd to 63.65 usd in electronic trading.
   
A militant group in southern Nigeria, notorious for previous hostage-takings, claimed responsibility today for yesterday's attack on an Agip oil facility in which four foreigners were kidnapped and at least one person killed. They threatened to launch further attacks on Nigeria's oil industry in "the following days".
   
Nigeria, Africa's biggest oil producer and world's fifth-biggest exporter, derives more than 95 pct of its foreign exchange from oil, but unrest in the delta in recent months has caused the country's daily output, normally some 2.6 mln barrels, to fall by about 25 pct.
   
The market was gearing up for OPEC's meeting in Nigeria next Thursday.
   
There is "continued concern over whether OPEC is going to cut their production quota again", Global Insight analyst Simon Wardell said.
   
The Organization of Petroleum Exporting Countries is likely to propose a further production cut of 1.0-1.5 million barrels per day (bpd) to support prices, Indonesian Energy Minister Purnomo Yusgiantoro said Friday.
   
At its most recent meeting in Qatar in October, OPEC approved a cut in its output quota of 1.2 mln bpd to stem falling prices, which have dropped from record highs above 78 usd in July and August.

Elsewhere, Gold futures slipped $1.80 to $635.20 an ounce.

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