US & World Daily Markets Financial Briefing 09-06-2006

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Stocks drift in wake of recent plunge

NEW YORK - Stocks were little changed in early trading Friday as Texas Instruments Inc.'s improved outlook and a broker's upgrade of Coca-Cola Co. helped Wall Street steady itself following this week's plunge.
   
Investors showed a mild reaction to the nation's widening trade deficit and an upswing in prices for imported goods, which stirred inflation concerns as Americans increased their demand for foreign-made products. High oil prices drove up May import prices by 1.6 percent, or 0.6 percent excluding petroleum.
   
In the first hour of trading, the Dow lost 13.68, or 0.13 percent, to 10,925.14.
   
Broader stock indicators were mixed. The Standard & Poor's 500 index was down 1.44, or 0.11 percent, at 1,256.49, while the Nasdaq composite index gained 4.72, or 0.22 percent, to 2,150.04.
   
Stocks in focus

Texas Instruments shares rose to $31.62 in Frankfurt after saying late Thursday that it was boosting its financial targets for the second quarter, helped by increased demand for cell-phone chips, a tax benefit and a legal settlement.
   
Shares of TI's rival STMicroelectronics and the world's top mobile phone maker, Nokia, both advanced in European trade.
   
Prudential Equity Group gave further good news to the tech sector with an upgrade to favorable from unfavorable.
   
Prudential said inventories are at all-time March quarter lows in a number of places in the supply chain. "We view lean inventories at these critical areas as a positive for the semiconductor sector," the brokerage said.
   
Prudential also upgraded the shares of STMicro and Maxim Integrated Products to neutral weight.
   
Also on the brokerage front, Merrill Lynch upgraded Newmont Mining Corp to buy from neutral, citing increases in its 2006-2010 gold price forecasts and the recent share price decline. The broker told clients it believes there will be a 200-400 tonne gap between demand and supply in 2006, leading to a higher gold price.
   
Mittal Steel said it wasn't planning to raise its offer for Arcelor as talks between the world's top two steelmakers started. The reiteration that Mittal intends to stick with its current offer came after the Financial Times on Friday published an article suggesting the steel giant may raise its existing bid of about 37.74 euros a share to 44 euros a share.

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Dollar firms further after better than expected US trade news

LONDON - The dollar firmed after better than expected data from the Commerce Department showed that the US trade deficit rose 2.5 pct in April to 63.4 bln usd.
   
The figure was up from 61.9 bln usd in March and was lower than the 65 bln usd predicted by Wall Street.
   
The US currency has been on the backfoot for much of this year, partly because of structural considerations surrounding the US current account deficit, which accounts for about 6 pct of the country's GDP.
   
Analysts noted that these considerations will probably not resurface at the G8 meeting of finance ministers in St Petersburg, Russia, over the weekend. Energy issues will likely top the agenda and currency markets are expected to take a backseat.
   
Longer term, the market expects these structural considerations to become more of a concern to currency markets, especially because the US Federal Reserve is expected to call a halt to its rate increase cycle.
   
However, Mike Carey, senior currency strategist at Calyon, said he hoped the US trade deficit may improve slightly as slower consumer spending trims import growth and a projected decline in the dollar helps exports.
   
Until evidence of a sustained improvement emerges, the global interest rate outlook will probably dominate in currency markets.
   
ECU Group's Mackinnon said next week's US CPI data will be crucial in determining whether the Fed will raise its key Fed funds rate from the current 5.00 pct at its next meeting on June 29.
   
Expectations of an imminent Fed pause contrast with predictions of tighter monetary policy from the European Central Bank and the Bank of Japan, and prompted a sharp pullback in the value of the US currency.
   
Hawkish comments from US rate-setters this week, including Bernanke, have driven expectations of a quarter-point rate rise from the Fed.
   
The pound continued to drift lower as falling UK rate increase expectations combined with the dollar's broad-based strength.
   
Data this morning showing that the UK's trade gap with the rest of the world widened in April had little impact on the market.
   
The office for National Statistics said that the trade in goods deficit in April was 5.8 bln stg, slightly up on the 5.7 bln stg shortfall predicted by analysts polled by AFX News.

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The European Markets at 12.00 BST

London - Shares remained sharply higher at midday, paced by firm miners and banks as investors snapped up shares in the beaten-down sectors after recent weakness, dealers said.
   
Traders noted however that the rally lacked any real conviction, with key US trade data and another speech by Fed chairman Ben Bernanke due this afternoon. Below-par volume backed up this view, with 922 mln shares changing hands in 122,115 deals.
   
By 12.10 pm, the FTSE 100 index was up 70.2 points at 5,633.1, while the FTSE 250 was ahead by 194.9 points at 9,008.6.

Frankfurt - Shares were sharply higher in midday trade, regaining some of the ground lost in yesterday's near 3 pct slide, on bargain-hunting, after gains on Wall Street overnight and across Asia this morning, and as US stock futures pointed to a positive opening on Wall Street this afternoon, dealers said.
   
At 11.58 am, the DAX 30 index was 67.47 points or 1.25 pct higher at 5,450.75, having moved between 5,434.80 and 5,469.13 so far this session.  The MDAX was at 7,695.08, up 124.09 points or 1.64 pct, while the TecDAX was at 624.01, up 9.31 points or 1.51 pct.

Paris - Shares were sharply higher in midday trade, rebounding from yesterday's sharp drop as investors returned to the market in search of bargains after Wall Street turned upwards overnight, dealers said.
   
At 12.36 pm, the main CAC 40 index was 62.06 points or 1.32 pct higher at 4,746.40, on trading volume of 1.96 bln eur.

Amsterdam - Share prices were higher in early afternoon trade, rebounding from yesterday's losses ahead of an expected higher opening on Wall Street, dealers said.
   
At 1.34 pm, the AEX index was up 5.54 points or 1.32 pct at 425.18, after opening at a high of 426.06 and off a low of 423.17.
   
Brussels - Shares were higher, with every stock in the black, in morning trading after Wall Street closed up last night, traders said.
   
At 10.58 am, the Bel 20 was up 35.89 points or 1.02 pct at 3,545.99.
      
Milan - Share prices were higher midday rebounding from yesterday's sharp losses, dealers said.
   
At 12.01 pm, the Mibtel index was up 0.94 pct at 27,205 points and the S&P/Mib added 0.88 pct at 35,618.
   
Madrid - Share prices were sharply higher in late morning trade in a broad market rebound led by Arcelor and constructors like Ferrovial, while media issues Antena 3 and Telecinco suffered from downgrades by Lehman Brothers, dealers said.
   
At 11.15 am, the IBEX-35 index was up 112.1 points or 1.02 pct at 11,064.7, after trading in a range of 11,053-11,083, on moderate turnover of 1.459 bln eur.

Stockholm - Shares were sharply higher in midday trade, although slightly off opening highs, with the market focusing on Wall Street's open later today amid indications of a sharp rebound, brokers said.
   
At 12.10 pm, the OMX Stockholm index was up 2.16 pct at 295.42 and the OMX Stockholm 30 up 2.40 pct at 913.72. Turnover was 7.002 bln skr. 

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Asian shares close mostly higher as bargain hunters return

HONG KONG - Shares across the Asia-Pacific region ended mostly higher as bargain hunters emerged to take advantage of recent heavy falls, dealers said.
   
Tokyo share prices finished the session higher for the first time in five days after private-sector machinery orders for April turned out to be much bigger than expected, helping ease worries about the state of the Japanese economy, dealers said.
   
The blue-chip Nikkei 225 Stock Average closed up 117.81 points or 0.8 pct at 14,750.84. For the week, it lost 6.6 pct.
   
The TOPIX index of all first-section issues closed up 16.46 points or 1.1 pct at 1,498.68. For the week, it lost 6.7 pct.
   
The Nikkei got major support from the machinery orders data, a leading indicator of corporate capital investment, and then extended its gains until the close.
   
The Cabinet Office said core private-sector machinery orders increased a seasonally adjusted 10.8 pct in April from March, more than the consensus forecast of a rise of 3.7 pct.
   
"The outcome clearly shows that corporate capital investment has maintained a firm trend against all the odds, and we believe there is even the chance that the rise here may gain further momentum in the near term," said Mitsubishi Research & Consulting senior economist Tatsushi Shikano.
   
"Despite worries, I do not think that the recent pull-back of share prices has started to have any tangible effect on the fundamentals of the Japanese economy," said NLI Research Institute economist Taro Saito.
   
Australian shares closed higher on bargain hunting, despite a fall in metal prices hitting resource stocks, dealers said.
   
They said major banking stocks recovered Thursday's losses, which were sparked by interest rate fears following the release of data showing Australia's unemployment rate fell to a 30-year low of 4.9 pct in May.
   
The labor data raised expectations that the Reserve Bank of Australia may hike its official rate again after last month's 25 basis points rise to 5.75 pct.
   
The S&P/ASX 200 rose 58.8 points or 1.20 pct to close at 4,966.0.
   
The benchmark indicator closed at the day's high and above the low of 4,903.9. Over the trading week the index lost 111.2 points or 2.19 pct.
   
Hong Kong shares were higher in the afternoon on volatile trade as most investors remained sidelined on concerns about a possible interest rate hike by the US Federal Reserve later this month, dealers said.
   
At 3:28 pm the Hang Seng Index was at 15,581.15, up 131.04 points or 0.85 pct.
   
In mainland China, A-shares in Shanghai and Shenzhen closed sharply lower on follow-through selling in the absence of new leads, with metal and financial counters losing ground, dealers said.
   
The Shanghai A-share Index lost 41.70 points or 2.49 pct to 1,630.78 on turnover of 25.81 bln yuan and the Shenzhen A-share Index was down 8.22 points or 1.95 pct at 413.63 on turnover of 15.57 bln yuan.
   
Seoul share prices closed higher, ending a three-day steep decline as bargain hunters picked up oversold stocks, dealers said.
   
After a firm start the market soon lost direction, falling below the 1,220 point-level at one stage due to a massive sell-off by foreign investors.
   
But the index managed to close near its high for the day after program selling eased in late trade, triggered by foreign investor interest in futures.
   
Gains in major Asian markets also boosted sentiment.
   
The KOSPI index closed up 12.52 points or 1.02 pct at 1,235.65.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Gold recovers some ground on bargain hunting

LONDON - Gold prices recovered some of the ground lost yesterday as bargain hunters and physical buyers came into the market. But sentiment remained subdued in early afternoon London trading as the dollar held on to recent gains.
   
Spot gold was quoted at 611.80-612.50 an ounce, while spot silver was quoted at 11.19-11.29 usd. Platinum was down at 1,193-1,199 usd, while palladium fell to 315.50-321-50 usd.
   
Gold prices had fallen yesterday to around 603 usd an ounce, their lowest level since mid-April, as the dollar gained on what were judged rather dovish comments from the European Central Bank rates meeting, and oil prices tumbled on news of Zarqawi's death.

The narrower-than-expected US trade deficit announced today seems set to nudge the dollar higher, according to analysts, which is likely to further dampen sentiment on gold. The dollar has been bolstered by a combination of factors ranging from expectations of higher interest rates in the US to falling risk appetites for emerging markets.
   
Spot gold is currently more than 100 usd below its 26-year-high of 730 usd an ounce hit on May 12 this year.
   
And base metals continued yesterday's weakness, with LME copper for three month delivery down 1.46 pct to 7,350 usd a tonne while three-month zinc fell 2.15 pct at 3,410 usd.
   
LME three month lead and nickel fell 1.66 pct at 1,010 usd a tonne and 4.31 pct at 20,000 usd, respectively.

Crude futures gained as traders monitored political unrest in Iraq following the death of the country's main terrorist leader, sending a barrel of light crude up 52 cents to $70.87 on the New York Mercantile Exchange.

Bonds prices drifted, with the yield on the 10-year Treasury note edging up to 5.01 percent from 5 percent late Thursday. Short-term yields also lingered above long term rates, signaling a lack of confidence in long-term debt holdings.

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