US & World Daily Markets Financial Briefing 10-03-2006

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Wall Street - U.S. stocks mixed as jobs report sends rates higher

NEW YORK - U.S. stocks traded mixed Friday as the latest employment
report showed better-than-expected job creation in February, but also an
increase in average hourly earnings that left little doubt interest rates will
continue rising to keep inflation at bay.
 
The Dow Jones Industrial Average rose 30 points to 11,003.

The Nasdaq Composite Index fell 6 points to 2,244 while the S&P 500 Index
was up 1 point at 1,273.

The Labor Department reported that U.S. nonfarm payrolls increased by a
better-than-expected 243,000 in February.

Average hourly earnings, a component closely monitored by the Federal
Reserve in making rates decisions increased by 5 cents or 0.3% in February to
$16.47.

Other markets

Crude futures were trending lower, after recent data showed heavy U.S.
inventory levels and after major oil producers left their output limits
unchanged this week. The front-month contract last was down 41 cents at $60.06 a
barrel.

Gold futures also were under pressure, after having sold off during much of
the early part of the week.

The futures contract hit a two-month low, down $10.20 at $536.80 an ounce.

The dollar was mixed after the latest payroll numbers reinforced the view
that the Fed will have to continue lifting interest rates. The dollar last was
up 0.7% at 119.03 yen, as the euro rose 0.3% to $1.1862.

Treasurys turned lower after moving higher immediately release of the job
data.

According to Action Economics, said that although the report indicates the
Fed's tightening trajectory is intact, the numbers were not inflationary per se.

The benchmark 10-year note last was down 7/32 at 98-2/32 with a yield of
4.78%.

Stocks on the move

Nortel Networks dropped 6.2% to $2.90. The Canadian telecom equipment
supplier reported a preliminary $2.2 billion loss in the fourth quarter and said
it would delay filing its annual 2005 report amid yet another revision of
financial results going back at least three years.

Legg Mason Inc. was 46 cents lower at $125.30 after the brokerage priced 9
million new shares of its own stock at $125 apiece in a follow-on stock

Citigroup Inc. was up 16 cents at $46.65 in early trading. The French
magazine Le Nouvel Observateur reported that a large U.S. bank has contacted the
French government about the possibility of making an offer for a bank in that
country. The magazine believes it to be Citigroup. Shares of Societe Generale
rose 2.2% in Paris trade.

The unemployment rate ticked back to 4.8% in February from a five-year low
of 4.7% in January.

"The impact of the report is pretty much neutral for the stock and bond
markets because the numbers were pretty much in line with expectations," said
Jeff Kleintop, chief investment strategist at PNC Advisers.

"There had been very high 'whisper numbers' that projected as many as
275,000 or 300,000 new jobs and that blunted the reaction," he said.

In all the report confirms market expectations that the Fed will need to
keep lifting rates about two more times, but it does not point to further
increases beyond that, Kleintop said.

At 10 a.m. investors will view wholesale inventories data for January. The
MarketWatch forecast, based on a poll of economists, is for a gain of 0.6%, down
from 1% in December.

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Forex - Dollar rises after jobs report; yen hits two-week low

NEW YORK -- The U.S. dollar strengthened against most of its major
foreign-exchange counterparts after a better-than-expected February nonfarm
payrolls report early Friday.

Meanwhile, the yen extended losses from the prior session, touching a
two-week low against the dollar on bearish Japanese economic data and on
continued fallout from the Bank of Japan's end of ultra-easing.

Observers said they see no reason for the Federal Reserve to halt its string
of monetary-policy tightenings.

"The obvious implication [of the data] is the Fed is still going to raise
interest rates, so if you are going to trade off the yield differential, it
probably favours the dollar a little bit," said Mike Malpede, senior currency
analyst at Refco in Chicago.

But, he said, "the upside of the dollar would be limited somewhat" because
the "data came in so close to expectations."

"I wouldn't be surprised to see the dollar come off later in the day,"
Malpede added.

In early New York trading, the dollar was last quoted at 118.64 yen, up
0.4%, after having touched as high as 118.74 yen. The euro was unchanged at
$1.1899.

The dollar also edged up 0.2% to 1.3177 Swiss francs, while the British
pound was last down 0.3% at $1.7298.

The euro was fetching 141.22 yen, up 0.4%.

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As for the economic data that's held financial markets' attention for much
of this week, U.S. nonfarm payrolls increased by a better-than-expected 243,000
in February despite unfavorable weather, the Labor Department said.

The nation's jobless rate ticked back to 4.8% from a five-year low of 4.7%
in January. Payroll growth in December and January was revised lower by a total
of 18,000. January's gain was cut from 193,000 to 170,000.

The 243,000 increase in payrolls was above the 206,000 expected by
economists surveyed by MarketWatch.

Overnight, Bank of Japan governor Toshihiko Fukui testified before the
Japanese parliament that the central bank is likely to keep interest rates near
zero or at very low levels for "some period of time," wire services reported.

On Thursday, the BoJ said it would end its five-year-old quantitative
easing, but retain its 0% interest-rate policy with an eye to tolerating
inflation in the 0% to 2% range. The concrete guidelines took the market by
surprise, and added to reassurance the easy credit that has sustained the
Japanese economy will remain for a while.

Analysts said the latest policy change should have little impact on
financial markets in the short-term as the Bank of Japan has pledged to maintain
an environmental of very low interest rates. But the move is viewed as
yen-positive in the long-run as it represents the first step to the end of
Japan's super-accommodative monetary policy.

Japanese economic data released Friday also impacted currencies, as
household spending declined by 3.5% in January and machine orders dropped 6.2%.

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Asian shares close mixed, Tokyo higher on BoJ monetary policy shift

HONG KONG -  Share prices across the Asia-Pacific region closed mixed,
with Japan higher for the second straight day after the Bank of Japan said it
will keep short-term interest rates near zero for now despite ending its
super-loose monetary policy, dealers said.

However, caution ahead of the release of US nonfarm payroll data tonight
capped gains, they said.

The Nikkei 225 Stock Average ended the day up 78.72 points or 0.5 pct at
16,115.63, after peaking at 16,264.89 intraday.

The broader TOPIX index of all first-section issues rose 6.26 points or 0.4
pct to 1,647.27, off a high of 1,659.77.

In Australia, share prices closed marginally lower as investor sentiment
remained flat and trading was largely sideways, continuing the trend for much of
the week, dealers said.

They said mixed signals from commodity markets and a fall on Wall Street
overnight saw investors hold back from taking large positions, preferring
instead to trade specific stocks and maintain current portfolio weightings.

The S&P/ASX 200 slipped 6.3 points or 0.13 pct to close at 4,888.1.

The key indicator closed above the day's low of 4,886.0 and below the high
of 4,900.8. Over the trading week the index lost 10.4 points or 0.2 pct.

Share prices in Hong Kong were trading lower in late afternoon as investors
remained cautious due to interest-rate worries and ahead of key employment data
in the US tonight, dealers said.

They said concern over growing bird flu cases in the region is also weighing
on sentiment, with China reporting its tenth human fatality from the virus.

At 3:39 pm, the Hang Seng Index was down 53.01 points or 0.34 pct at
15457.12.

In mainland China, A-shares in Shanghai and Shenzhen closed higher, rallying
from a four-day losing streak with metals companies and automakers in favor,
dealers said.

The Shanghai A-share Index rose 0.38 point to 1,306.76 on turnover of 6.95
bln yuan and the Shenzhen A-share Index was up 1.26 points at 313.98 on turnover
of 3.88 bln yuan.

In Seoul, share prices closed higher on foreign investor support, ending a
three-day decline, with large cap IT stocks and Posco leading the rise, dealers
said.

The main index almost breached 1,330 points at one stage as investors felt
relieved that the market had crossed over a series of events this week,
including the Bank of Korea's rate decision, the triple witching effect and the
Bank of Japan's comment on the direction of its monetary policy yesterday.

The KOSPI index closed up 8.86 points or 0.68 pct at 1,320.07.

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