US & World Daily Markets Financial Briefing 09-05-2007

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Stocks lower ahead of Fed meeting

NEW YORK - Stocks traded flat Wednesday, as Wall Street refrained from any large moves ahead of the Federal Reserve's meeting on interest rates.
   
Investors, who widely expect the Fed's Open Market Committee to keep interest rates unchanged as it has done since last summer, are more concerned about the central bank's economic assessment statement. Wall Street hopes the Fed will indicate it is inclined to cut rates by the end of the year to make access to capital cheaper, which would boost stocks. The committee releases its statement at 2.15 p.m. Eastern time.
   
In midmorning trading, the Dow Jones industrial average slipped 5.20, or 0.04 percent, to 13,303.87. The blue chip index closed slightly lower Tuesday, after hitting its 20th record close this year on Monday.
   
Broader stock indicators also fell. The Standard & Poor's 500 index was down 1.25, or 0.08 percent, at 1,506.47. Last week, the S&P 500 moved above the 1,500 level for the first time in nearly seven years, bringing the index near the closing high of 1,527.46 reached in March 24, 2000.
   
The Russell 2000 index of smaller companies was down 0.87, or 0.10 percent, at 830.03. The technology-dominated Nasdaq composite index declined 10.08, or 0.39 percent, to 2,561.67.
   
The Nasdaq was weaker than the other major stock indexes after disappointing news from companies including Dendreon Corp., Cisco Systems Inc. and Electronic Arts Inc.
   
Bonds were virtually unchanged, as investors stayed in the sidelines ahead of the Fed's decision. The yield on the benchmark 10-year Treasury note was at 4.64 percent, the same as late Tuesday. Advancing issues narrowly outnumbered decliners on the New York Stock Exchange, where volume came to 209.6 million shares.

Crude oil prices fell 9 cents to $62.17 a barrel, as the energy markets awaited the U.S. government's weekly report on petroleum inventories.
   
Stocks in focus
   
The Food and Drug Administration requested more information about Dendreon's prostate cancer vaccine Provenge, causing the stock to plunge $10.02, or 56 percent, to $7.73.
   
Cisco reported an abrupt slowdown in orders from U.S. business in its quarterly financial results. The computer network equipment maker's stock fell $1.62, or 5.7 percent, to $26.74, even though its fiscal third-quarter profit soared 34 percent.
   
Electronic Arts Inc. reported a wider fiscal fourth-quarter loss, the loss was not as large as analysts expected, but revenue was down 4 percent from the year-ago quarter, and the video game publisher said it may delay the release of its game "Spore." Electronic Arts fell $1.72, or 3.3 percent, to $51.21.
  
In other corporate news, The Walt Disney Co., one of the 30 stocks that comprise the Dow industrials, reported a better-than-expected fiscal second quarter after the closing bell Tuesday. But revenue at the company's entertainment division fell short of some analysts' expectations. Disney fell 34 cents to $36.21.

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Dollar steady ahead of FOMC meeting

LONDON - The dollar was steady, trading in narrow ranges against major currencies, as markets wait for tonight's Federal Open Market Committee meeting and the central bank's outlook statement.
   
The Fed is widely expected to keep interest rates on hold at 5.25 pct for the 11th month running, but with data this month indicating that US inflation may be beginning to fall, attention will be on whether the statement adopts a more dovish tone compared to recent months.
   
"There is room for a slight dovish tilt compared to the March statement that will help sustain the market's belief that rates will be eased at some stage," said Gavin Friend, currency strategist at Commerzbank.
   
If the statement is more dovish than expected, then the dollar could sink further below its all-time low against the euro of 1.3682, reached two weeks ago.
   
Also of interest in the US today will be a joint tri-partite hearing in the House of Representatives on currency manipulation and its effects on US businesses and workers. Analysts at BNP Paribas said if the meeting takes a protectionist stance the dollar is likely to come under pressure, particularly against Asian currencies.
   
Meanwhile the euro was also steady, largely unaffected by data showing Germany's trade surplus grew to 18.4 bln eur from 14.2 bln in February. Analysts had forecast a smaller increase to 15.4 bln eur. The figures indicate the strong euro has had little impact on German trade so far.
   
Tomorrow the European Central Bank is widely expected to keep rates on hold tomorrow, with markets forecasting a quarter point hike to 4 pct to come in June.
   
Elsewhere the pound was slightly stronger, after the British Retail Consortium reported shop price inflation in the UK was up 0.8 pct year-on-year in April, compared to 0.7 pct in March. This boosted sterling which had earlier been pushed lower following other figures from the BRC showing like-for-like retail sales, rose by 2.4 pct in April from the previous year, compared to 3.9 pct in March.
   
Analysts said the figures could point to lower-than-expected official retails sales data from the Office of National Statistics next week.
   
Finally the yen was slightly weaker, falling back after an overnight rally against the euro.

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London

FTSE 100 risers

Rio Tinto 3,531 up 226 Speculation of a possible bid from BHP Billiton

DSG International 173.7 up 6  M Stanley 'equal-weight' vs 'underweight'; Sanford Bernstein 'outperform'

BHP Billiton 1,215 up 30  Bid speculation

Anglo American 2,868 up 48  Sector consolidation hopes; more likely target for BHP - Numis Securities

Vedanta Resources 1,409 up 23  Sector consolidation hopes

Bradford & Bingley 452 up 7  HSBC upgrade to 'overweight' on earnings outlook

FTSE 100 fallers

Antofagasta 544-1/2 down 24  Ex-dividend; profit-taking after strong performance yesterday

Sage Group 258-1/2 down 9-3/4  Weaker growth in North America; Bridgewell keeps 'overweight'

Old Mutual 175.1 down 5.9  Subsidiary Nedbank releases results today; ex-dividend

Rexam 526 down 16-1/2  Ex-dividend

Reuters 615 down 15  Continued bid speculation; ABN Amro, SG Securities 'hold' vs 'buy'

Zurich -  The Swiss Market Index was 10.68 points higher at 9,387.76, while the Swiss Performance Index was up 8.04 points at 7,595.92. The SMI has come off intra-day highs as investors are hesitant to buy as they await today's decision by the US Federal Reserve on interest rates, said a local trader.
   
In focus was Swisscom, which presented disappointing first-quarter results, failing to reach expectations, said analysts. The share was last down 6.0 sfr or 1.4 pct at 421.75, the biggest faller here.
 
Frankfurt - At 2.11 pm, the DAX was 11.73 points or 0.16 pct lower at 7,430.47, after trading between 7,4989.86 and 7,428.07 earlier today. The MDAX gained 129.06 points or 0.27 pct to 10,734.41, while the TecDAX added 1.54 points or 0.18 pct to 861.48. DAX futures lost 46.50 or 0.62 pct to 7,462.00, while bund futures were flat at 113.72.

Altana was down 0.44 eur or 2.24 pct at 19.16, further correcting from strong gains on Monday and last Friday.
   
Deutsche Telekom eased 0.14 eur or 1.10 pct at 12.54. Around 12,000 workers staged a warning strike on the final day of a ballot to decide whether fully-fledged industrial action should be launched in response to the company's plans to spin off its T-Service unit into a separate entity.
   
Continental lost 1.15 eur or 1.09 pct at 104.70. Fresenius Medical Care, eased 0.79 eur or 0.69 pct at 113.26, correcting from strong gains recently.
   
Bucking today's trend, TUI gained 0.48 eur or 2.27 pct at 21.62, as  investors are expecting strong earnings posted by two Japanese shipping companies to translate into better figures for the German shipping and tourism giant.

Athens - Greek shares close flat, in line with peer European bourses, as gains by EFG Eurobank offset losses by Coca-Cola HBC, ahead of more Q1 results to be released today after the close of trade, dealers said.
   
The ASE general index and the blue chip index both closed flat at 4,743.9 and 2,513.6, respectively. Mid caps rose 0.3 pct to 6,075.1, while small caps outperformed, up 1.3 pct to 966.4. Advancers outnumbered decliners 160 to 96 while 63 were unchanged.

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Asian shares close higher on upbeat results, M&A activity

HONG KONG - Shares across the Asia-Pacific region closed higher on corporate activity in the markets, including positive earnings reports and takeover rumors.
   
Tokyo shares finished higher after Japanese shipping firms Kawasaki Kisen Kaisha and Nippon Yusen KK issued upbeat earnings forecasts for the current fiscal year, whetting investor appetite for stocks while global merger and acquisition activity gave sentiment an added lift.
   
The Nikkei 225 Stock Average closed up 91.28 points or 0.52 pct at 17,748.12, off a high of 17,753.33. The TOPIX index of all first-section issues gained 12.38 points or 0.71 pct to 1,745.01, off a high of 1,745.86.
   
Hiromichi Nishi, equity chief at Nikko Cordial Securities, said the relatively weaker yen against the dollar is helping sentiment.
   
Australian shares closed up at record highs with the market driven by takeover speculation in Rio Tinto, and with BHP Billiton also leaping to record levels. The market began in negative territory as investors took an impartial view of yesterday's federal budget, which delivered a large surplus and 31.5 bln aud in personal tax cuts over the next four years.
   
The S&P/ASX 200 closed up 36.6 points or 0.58 pct at a record 6,341.0, beating Monday's record finish of 6,335.7. The key index closed off an intra-day high of 6,382.7.
    
Bell Securities private client advisor Stuart Smith said he expects the market to remain strong, with evidence from the budget of the economy continuing to strengthen and inflation going nowhere over the short-term. "This is a beautiful economy, and what benefits will be first seen in equities of course," he said.
   
Hong Kong shares were slightly higher in afternoon trade on a technical bounce in select blue chips following sharp falls yesterday. The mood was cautious ahead of tonight's Federal Reserve meeting, which may provide clues on the prospects for US economy and interest rates.
   
At 3.20 pm the Hang Seng Index was up 85.65 points or 0.41 pct at 20,792.00.
   
In mainland China, A-shares in Shanghai and Shenzhen shrugged off early weakness and closed higher on record high turnover with banking and telecom stocks snapped up.
   
The Shanghai A-share Index was up 64.58 points or 1.56 pct to 4,212.04 and the Shenzhen A-share Index was up 1.47 points or 0.13 pct at 1,159.34, a fresh high.
   
Some analysts said the bullish momentum is likely to continue in coming days due partly to a strong yuan.
   
Seoul shares closed higher, with investors deciding that the US Federal Reserve will not surprise the market tonight with an unexpected rate decision or comments, pushing the index to another fresh record. The KOSPI index closed up 10.77 points or 0.68 pct at record 1,593.42. The low for the day was 1,578.58.

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Gold drifts lower in afternoon trade ahead of interest rate decision

LONDON - Gold drifted lower in afternoon trade as investors trod water ahead of the US interest rate decision due to be announced by the Federal Open Markets Committee later today.
   
The Bank of England and European Central Bank's rate decisions are also due tomorrow. "The Fed waiting game was making for sluggish dealings thus far and the market may not respond to a rate (in) decision until the after-hours electronic trading gets underway," said analyst Jon Nadler at Kitco Bullion Dealers.
   
Gold has traded in a close inverse relationship to the dollar this year, and any moves in the currency are likely to set the direction of bullion prices.
   
At 2.40 pm, spot gold was quoted at 684.15 usd per ounce against 685.40 usd seen in late New York trade yesterday.
   
While the Fed is widely expected to keep rates unchanged, the markets will be scanning the report for clues as to future changes of direction. "Our foreign exchange strategists note the Fed may acknowledge the more favourable recent monthly reading on core inflation, which could be slightly negative for the dollar," said analysts at Barclays Capital. "But concerns about inflation are likely to remain elevated."
   
Among the other precious metals, platinum eased after a strike among workers at Northam Platinum in South Africa was declared illegal and ended. Mining was due to resume last night, the company said.
   
A total of 5,500 employees began the strike at the start of the night shift on Sunday. Northam Platinum produced 3.7 tonnes of platinum in the second half of last year, and around 3 pct of global platinum output for the full year.
   
But the metal and its fellow metal palladium continued at relatively high levels, and concerns remain that further strikes in South Africa could be forthcoming.
   
Platinum also remains supported by ongoing expectations that higher car sales will increase demand from car manufacturers using the metal in catalytic converters, according to Peter Fertig at Dresdner Kleinwort.
   
The metal was trading at 1,324 usd against 1,333 usd in late New York trade yesterday, while palladium edged down to 365 usd from 370 usd. Silver meanwhile dipped to 13.35 usd per ounce against 13.48 usd yesterday.

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