US & World Daily Markets Financial Briefing 10-02-2006

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U.S. stocks fall on Pfizer outlook, trade data

NEW YORK - U.S. stocks fell Friday after a disappointing profit outlook from Pfizer Inc. and a wider-than-expected December trade deficit, with some investors concerned trends in the bond market are pointing to a slowdown in the economy.
   
The Dow Jones Industrial Average was down 18 points at 10,866.
   
The Nasdaq Composite Index fell 12 points to 2,244 while the S&P 500 Index dipped 4 points to 1,260.
   
"The market's a little listless," said Jay Suskind, director of trading at Ryan Beck & Co. "People are watching the bond market, with the 30-year rallying and the fact we're seeing some inversion."
   
Inversion occurs when longer-term Treasury yields fall below short-term yields. Banks typically run long-term loans with short-term borrowings. With yields inverted, it makes it difficult for banks to lend money and thus less inclined to lend. Investors fear such a scenario could lead to a slowdown in economic growth.
   
At the same time, Suskind said investors are still not clear on when the Federal Reserve will end its cycle of interest-rate increases. On Thursday, one Fed governor hinted inflation remains a worry for the central bank and that further rate "tweaking" of rates may be necessary.
   
On the broader market for equities, advancers and decliners were evenly balanced on the New York Stock Exchange, while losers outpaced winners by 2 to 1 on the Nasdaq.
   
There was only muted reaction to news from the Commerce Department that the
U.S. trade deficit grew in December by 1.5% to $65.7 billion, wider than the $64.6 billion total expected by economists. The gap soared to a record $725.8 billion for 2005.
   
On the bond market, long-term Treasury prices were higher, sending yields lower after Thursday's successful auction of 30-year bonds that attracted unexpectedly strong foreign demand.
   
The benchmark 10-year note last was up 9/32 at 99 29/32, with its yield at 4.51% contrasting with the 4.63% yield on the 2-year note. The 30-year yield stood at 4.469%.

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Shares of Pfizer Inc. were down 2.5% at $25.68 after the pharmaceutical giant said its expects 2006 adjusted earnings of about $2 a share, slightly shy of current analyst estimates.
   
The company said it also anticipates revenue for 2006 will be comparable to its 2005 total of $51.3 billion with growth from current and new products offsetting declines related to the loss of exclusivity on certain products and adverse foreign currency exchange comparisons.
   
Visteon Corp. rose 4.4% to $5.06 after the auto parts maker posted a quarterly profit of $1.34 billion, or $10.25 a share, after recording a $1.8 billion gain on the sale of plants. It also increased its 2006 earnings outlook.
   
In other news for the car sector, Pep Boys was down 25 cents at $15.99 after the auto parts retailer said it is exploring "strategic alternatives" for the company in a bid to increase shareholder value. Companies often use this phrase to signal they may be putting themselves up for sale.
   
Oracle Corp was up 3 cents to $12.72 after the company late Thursday said it
will lay off 2,000 employees - and offered a profit forecast for this quarter and next in line with estimates.

Forex

The dollar was sharply lower against the yen, last trading at 117.64 yen, down from $118.79 in late trade Thursday. New data from Japan showed that December machinery orders were well above expectations.
   
The news was seen as a sign that the Bank of Japan could end its easy monetary policy soon, a possibility that has troubled dollar proponents all week.
   
The euro was up 0.2% to $1.2006 against the dollar.

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Frankfurt

German shares lower midafternoon led by Siemens; VW jumps on upbeat FY results

       
At 3.12 pm, the DAX 30 index was 27.34 points or 0.48 pct lower at 5,716.34,
having moved between 5,708.63-5,745.49 so far this session. The MDAX was at 8,138.94, up 1.93 points or 0.02 pct, while the TecDAX was at 703.39, up 1.40 points or 0.20 pct. The DAX futures contract was at 5,736.00, down 16.50 points or 0.29 pct, while bund futures were at 120.73, up 0.34.
       
Siemens was down 1.45 eur or 1.91 pct at 74.50, leading the way among decliners, while Deutsche Boerse eased 1.75 to 98.18.
   
TUI was off 0.14 at 17.47, with some dealers saying sentiment against the stock has been affected after the closing of the deal to acquire CP Ships.
   
Lufthansa was also lower, down 0.18 at 13.44, partly as a result of the disappointing traffic figures published yesterday, which showed that the flag carrier's overall load factor dipped 0.5 percentage points year-on-year to 68.6 pct in January, dealers noted.
   
Bucking the trend, VW was the main gainer, soaring 3.78 eur or 7.47 pct to 54.40 after it released consensus-beating full-year results and indicated that up to 20,000 jobs at the firm may be axed.
   
Europe's largest carmaker said sales in the full year rose 7.1 pct to 95.268 bln eur, clearly above the consensus forecast of 94.21 bln. Operating profit after special items in 2005 jumped 70.0 pct to 2.792 bln eur, from 1.642 bln - also well ahead of the market's forecast of 2.46 bln.
    

London

For a list of FTSE risers and fallers at 14.30 GMT, click here

Paris

Paris shares extend losses midafternoon, led by STMicro after downgrade

At 4.10pm, the CAC-40 index was trading down 0.64 pct or 31.81 points at 4,923.93, on volume of 2.65 bln eur. On the Matif, February CAC-40 futures were 40.0 points weaker at 4,918.0.
   
Earlier today the French statistics office Insee announced that French GDP rose a provisional 0.2 pct in the fourth quarter after a third-quarter increase of 0.7 pct. Growth for the year was 1.4 pct, revised down from a previous estimate of 1.5 pct. GDP growth in 2004 was 2.1 pct.

The figure came in below most analysts' expectations, and was played down by
Finance Minister Thierry Breton as an early figure that is likely to face revisions.

Earlier today, Renault announced its ambition to launch 5 new car models in Brazil between now and 2009 in order to bring its market share in that country up to 6-7 pct from the current 2-3 pct. Shares were up 2.90 to 79.30.
   
Meanwhile, automobile parts supplier Valeo said it is prepared to cut prices to help Renault pursue its cost-cutting drive. Valeo was up 0.73 eur or 2.17 pct at 34.43.

Among the losers, STMicroelectrics fell by a further 0.37 eur or 2.35 pct to 14.97 after being downgraded to 'hold' from 'buy' by ABN AMRO.

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Asian shares close mixed, Tokyo slips on worries over foreign investment

       
HONG KONG - Shares in the Asia-Pacific region ended mixed with Japan lower on worries that foreign investors are pulling out of equities there, while the latest machinery orders data failed to provide upward momentum, dealers said.
   
They said that while the machinery orders data for December were better than
expected, the outlook for the current quarter prompted investors to lock-in profits.
   
The Nikkei 225 Stock Average closed the day down 181.84 points or 1.1 pct at
16,257.83, after touching a low of 16,090.93.
   
The broader TOPIX index of all first-section shares lost 22.04 points or 1.3 pct to 1,660.22, off a low of 1,643.55.
   
For the week, the Nikkei 225 index shed 2.4 pct, while the TOPIX was down 2.8 pct.
   
"Share prices ended weaker... (on) lingering concerns over a lack of active inflows of funds from offshore investors," said Hideo Mizutani, chief strategist at Sieg Securities.
   
In Australia, share prices closed slightly lower after strong early gains, with investor sentiment for the broader market turning subdued despite positive
leads from a rise on Wall Street, dealers said.
   
They said the key S&P/ASX 200 index rose as much as 33.9 points in the morning session before slipping away due to investor selling in most sectors.
   
Dealers said index-leading resources stocks BHP Billiton and Rio Tinto were the highlight after base metal prices recovered further overnight following heavy selling earlier in the week.
   
The S&P/ASX 200 fell 6.1 points or 0.13 pct to close at 4,871.5, further retreating from the record close of 4,956.7 set on Feb 1.
   
Share prices in Hong Kong were trading flat in the afternoon as comments by a US Federal Reserve official last night triggered fresh concerns that interest rates are set to rise further, dealers said.
   
Investors were also cautious ahead of annual results from local companies.
   
At 3:29 pm, the Hang Seng Index was down 3.66 points at 15,409.77.
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on a technical rebound after yesterday's sharp falls, with airlines and power generators gaining ground, dealers said.
   
The Shanghai A-share Index fell 14.08 points to 1,345.26 on turnover of 12.86 bln yuan and the Shenzhen A-share Index was up 4.05 points at 326.99 on turnover of 7.62 bln yuan.
   
Share prices in Seoul ended higher, rising for a second trading session, with Kookmin Bank, Hyundai Motor and KT&G leading the advance, dealers said.
   
The market started strong as investors felt relieved that the market had got past a rate decision and options expiry.
   
After changing courses several times during the session amid a lack of major players, the index finished near its strongest level for the day on strong institutional investor support toward the close.
   
The KOSPI index closed up 13.57 points or 1.03 pct at 1,335.23.

Asian Bourse Round-up

For a full list of closing figures, click here

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Crude futures were higher, as the front-month contract gained 8 cents to $62.70 a barrel even as the International Energy Agency trimmed its 2006 oil demand forecast.
   
"Support levels on crude...should hold at least through today, as participants will be reluctant to go home short heading into the weekend," said Edward Meir, an analyst at Man Financial, in a note to clients.
   
Gold futures last were down $7.50 at $560.60 an ounce, backing away a bit from the sharp rise registered on Thursday.

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