US & World Daily Markets Financial Briefing 09-07-2007

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Stocks rise ahead of Alcoa earnings

NEW YORK - Wall Street edged higher Monday as investors, reassured by a drop in Treasury bond yields, awaited results from Aloca Inc. at the start of second-quarter earnings season.
   
Investors were looking to corporate earnings to help give the market some direction in the coming weeks. Alcoa, the world's largest aluminum producer, is scheduled to report its results after the closing bell. The company, one of the Dow Jones industrial average's 30 components, is expected to report a profit of 83 cents per share.
   
In the meantime, Wall Street found some solace as the yield on the benchmark 10-year Treasury note dipped to 5.15 percent from 5.18 percent on Friday. There had been some concern that the steady rise in bond yields since June would crimp dealmaking.
   
Buyout activity continued on Monday after Apollo Management LP's Hexion Specialty Chemicals Inc. raised its takeover bid for chemical company Huntsman Corp.; Barrons said FedEx Corp. might be the target of a buyout; and Coventry Health Care Inc. agreed to acquire Florida Health Plan Administrators, LLC, owner of Vista Healthplans, for $685 million.
   
A continuum of takeovers has given the stock market support in recent months. One of the major ones could be sealed Monday, when CBOT Holdings Inc. shareholders vote on the Chicago Mercantile Exchange Holdings Inc.'s offer to buy the rival exchange.
   
In the first hour of trading, the Dow Jones industrials rose 38.05, or 0.28 percent, to 13,649.73. Broader market indexes also advanced. The Standard & Poor's 500 index added 2.11, or 0.14 percent, to 1,532.55, and the Nasdaq composite index rose 3.45, or 0.13 percent, to 2,669.96.
   
Last week, Wall Street began the third quarter with positive data on the job market and the manufacturing and service sectors, and managed to finish Friday with a respectable gain. For the week, the Dow rose 203.06 points, or 1.51 percent; the S&P 500 rose 27.09 points, or 1.80 percent; and the Nasdaq advanced 63.28, or 2.43 percent.
   
Monday will be a light day for economic data. The Federal Reserve reports on May consumer credit, which the market expects to rise $5.0 billion compared to April's increase of $2.6 billion, but the report is not typically a market mover.
   
Investors will be watching crude oil prices, which have been trading at their highest levels since last August. So far, high energy prices haven't yet dampened U.S. consumer spending, but any sign that inflationary pressures are worsening could raise worries on Wall Street about an interest rate hike.
   
Oil futures rose 13 cents to $72.94 a barrel on the New York Mercantile Exchange. The dollar was mixed against other major currencies. Gold prices climbed.
   
The Russell 2000 index of smaller companies rose 0.84, or 0.10 percent, at 853.15.
   
Advancing issues outpaced decliners by 3 to 2 on the New York Stock Exchange, where volume came to 123.8 million.
   
In European trading, Britain's FTSE 100 was up 0.28 percent, Germany's DAX index was up 0.43 percent, and France's CAC-40 was up 0.21 percent.

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Pound underpinned as markets see inflationary pressures in PPI data

LONDON - The pound was supported by mixed UK PPI data, which investors chose to interpret as inflationary for the future despite soft headline PPI rates.
   
Both output and input producer prices came in below expectations, with output prices up 0.2 pct in June against a 0.3 pct consensus and input prices up 0.6 pct, below the 0.8 pct prediction by analysts.
   
However, these lower headline numbers were somewhat offset by past-month revisions and investor fears about a jump in the yearly rate in input price inflation to 2.1 pct from May's 1.3 pct.
       
Elsewhere, the dollar was steady at weak levels against most currencies as some robust US data last week was not enough to convince markets interest rates may go up this year.
   
"Markets hold little fear of either a precipitous US economic slowdown or a resumption of the Fed's tightening cycle," said Steve Pearson at HBOS.
   
This will support risk-seeking trades, leaving the dollar at its current weak levels against most other currencies except the Japanese yen. Used as a funding currency in riskier investments, the yen is expected to remain under pressure as long as global growth prospects look good.
   
Meanwhile, the euro barely reacted to a jump in German industrial production, up 1.9 pct in May, mainly because it followed a 2.1 pct drop in April.
   
"The headline May data appear impressive, but still imply that production in the first two months of the second quarter is 0.9 pct down from the first quarter, which partly helps to explain why the market shrugged off the release," said Stuart Bennett at Calyon.

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Euroshares higher midday on late Wall St rally, M&A talk

LONDON - Leading European exchanges remained higher midday with M&A talk in the spotlight in morning trade and upbeat drug development news boosting Bayer and Novartis.
   
At 13.02 am, the STOXX 50 was up 17.27 points at 3,996.74 and the STOXX 600 was up 1.58 points at 398.85.
      
In Asia, the Nikkei 225 Index closed 121.04 points higher at 18,261.98 while the Hang Seng Index was 221.88 points stronger at 22,753.17, having lagged last week's rally by global markets.
   
In Europe, M&A was in the spotlight again with Numico suspended ahead of an announcement. Shares in Numico have risen nearly 17 pct over the last week amid talk that it would be bought as Danone fights to fend off possible predators after it sold most of its biscuits and cereals business to Kraft last week.
   
But others doubt Danone is the bidder, pointing out Danone's shares are up and saying Danone would have to make a knock out bid of 50 eur per share or more to guarantee no-one else would make an offer.
   
Shares in MDAX-listed Depfa Bank stormed 3.08 pct amid vague talk Franco belgian group Dexia is preparing a bid for the group, with some traders noting talk of a 20.10 eur per share offer -- significantly higher than the current 13.93 eur price.
   
Air Berlin added another 4.84 pct on persistent talk it will be bid for by either Ryanair or Air France-KLM.     
   
Air France-KLM was also in focus as investors welcomed the airline's solid growth in traffic last month. Traders also noted renewed rumours that the group is interested in Alitalia.
   
And British Airways added 2.13 pct as Panmure Gordon lifted its recommendation to 'buy 'from 'hold'.
   
Over the weekend there were reports Iberia's board said it will not respond before September to a takeover approach by US private equity firm Texas Pacific Group and British Airways PLC, El Pais newspaper reported yesterday.
   
The news comes after a report in La Vanguardia, which said TPG has given the airline three weeks to reply to its 3.4 bln eur takeover bid.
   
Elsewhere, shares in France Telecom were upgraded to 'neutral' from 'underperform' at Exane BNP Paribas after meetings with the telecom giant's management. In a note landing this morning, the broker lifted its target to 22 eur from 21 eur and said this offers 8 pct upside.
   
It said downside risk is now limited as prospects for the group's French mobile business look to be less downbeat than some had feared and as French landline business looks set to stabilise at current levels. Shares climbed 1.18 pct higher.
      
In the defence sector, shares in EADS were amongst the top gainers -- up 0.82 pct -- after International Herald Tribune reported the company's main private-sector shareholders have agreed in principle to a simpler management structure.
   
The chief executive will be named by DaimlerChrysler, and the chairman will be chosen by Lagardere SCA and the French state, the newspaper reported in its weekend edition.
   
Seperately, SG Secs lifted its target to 82 eur from 74 eur on DaimlerChryser -- up 1.36 pct -- and reiterated its 'buy' receommendation on the German car group.
     
Suez was 0.5 pct lower as investors continue to wait for news about its planned merger with Gaz de France -- up 0.43 pct.
   
And shares in TUI were down 1.28 pct after Handelsblatt reported the tourism giant's airline unit, TUIfly, has missed internal targets since it was formed at the beginning of the year. TUI's supervisory board will hold a meeting on Wednesday, earlier than planned, at which the board may discuss dismissing TUIfly head Christoph Mueller, the newspaper claimed.

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Thai shares close sharply higher on continued fund inflows

BANGKOK - Thai share prices closed sharply higher Monday as foreign funds continued flowing into the region, pushing the market to a fresh 10-year high. Sentiment was upbeat on encouraging US economic data, while investors bought local big-cap energy stocks as global oil prices rose.
   
The Stock Exchange of Thailand (SET) composite index added 11.81 points or 1.42 percent to 844.19 points and the blue chip SET 50 gained 9.23 points to 604.82. Gainers led losers 246 to 122, with 100 stocks unchanged on volume of 6.9 billion shares worth 40 billion baht.
   
The Thai baht rose further against the dollar to close at 33.82-84 compared to Friday's 34.01-02. It was at 46.10-30 to the euro after 46.22-27.
   
Stocks continued firmer following a jump of more than 7 percent last week, when the Thai index reached its highest level since the 1997 Asian financial crisis.
       
Thailand's top energy firm PTT added 2.00 baht to 296.00 and unit PTT Exploration and Production jumped 6.00 to 125.00.
   
The top lender Bangkok Bank rose 2.00 to 130.00. Thai Airways International closed flat at 44.00.  The largest mobile phone operator Advanced Info Service rose 1.50 to 91.00.

Malaysian shares close slightly higher led by oil & gas, builders 

KUALA LUMPUR - Share prices closed slightly higher Monday, supported by gains in select blue-chips in the oil and gas and construction sectors, while lower liners saw increased retail buying interest.
   
The Kuala Lumpur Composite Index (KLCI) closed up 4.85 points or 0.35 percent at 1,378.69.
   
The FTSE Bursa Malaysia 30-large cap index gained 27.43 points or 0.32 percent to 8,711.79 and the second board index added 1.54 points or 1.36 percent to 114.99.
   
Gainers led losers 584 to 345, with 280 stocks unchanged and 144 counters untraded. Trading volume was 1.366 billion shares valued at 2.13 billion ringgit.
     
Index heavyweights closed mixed as Maybank, the country's largest lender by assets, gained 10 sen or 0.8 percent to 12.30 ringgit, national power company Tenaga was unchanged at 11.20 ringgit and Telekom Malaysia fell 10 sen or 0.9 percent to 10.50.
   
Construction and building material companies were higher on continued optimism that the government will pump in more money on infrastructure spending to boost the economy.
   
Muhibbah Engineering led the gainers list, surging 1.15 ringgit or 16.4 percent to 8.15 ringgit after the company won a 1.1 billion ringgit contract for construction work on the South Klang Valley Expressway.
   
Construction company WCT gained 45 sen or 7.0 percent to 6.90 ringgit, Cement Industries of Malaysia rose 20 sen or 2.9 percent to 7.20 ringgit and steel products maker Kinsteel advanced 50 sen or 8.6 percent to 6.30 ringgit.
   

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Gold hits one-month high on dollar weakness, strong oil prices

LONDON - Gold hit a one-month high as the dollar remained near weaker levels, making the precious metal cheaper for those trading in other currencies.
   
Further, strong oil prices, with Brent around 3 usd below its all-time high, generated some investment into the metal which is sometimes used as a hedge against inflation.
   
"The combination of dollar weakness and stronger oil prices is generating some support for gold," said TheBullionDesk.Com analyst, James Moore. He noted, however, "the yellow metal is still struggling to find traction, particularly with the market entering the summer months."
   
Third-quarter trading is usually quiet as European investors take long summer holidays. Some analysts expect prices to pick up again in the final three months of the year when players return to their desks.
   
At 2.00 pm, spot gold was up at 661.70 usd per ounce against 653.10 usd in late New York trade Friday. Earlier in the session, the precious metal hit 662.95 usd, its highest level since June 7.
   
Gold has gained just 0.22 pct in a month, since June 8 when the metal hit an intraday high of 661.30 usd, despite continued dollar weakness and as oil prices rose aggressively.
   
Prices touched 693 usd in April but have since fallen steadily, disappointing several industry players who called for gold to strike 700 usd by the end of this year.
   
"Speculators have been very reluctant to fight the shorter term movements in gold and the recent price decline has brought with it a relatively significant reduction in investor interest in the market," noted analysts at JP Morgan.
   
"We see the rest of this year as being muted for the gold market. We see spot gold averaging around 660 usd in the third quarter and 675 usd in the fourth quarter," they added.
   
In other precious metals, silver was up at 12.80 usd per ounce from 12.48 usd, platinum was up at 1,302 usd per ounce from 1,294 usd while palladium was lower at 362 usd per ounce from 365 usd.

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