US & World Daily Markets Financial Briefing 11-08-2006

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Stocks a bit lower on economic data

NEW YORK - Stocks fell somewhat lower as optimism over the previous session's strong showing was tempered by uncertainty over the need for financial restatements at Apple Computer and the outlook for inflation following stronger-than-anticipated economic data.

In the opening minutes, the S&P 500 dropped 1.20 points to 1,270.61, while the Nasdaq 100 fell 5.51 points to 2,066.23. The Dow industrials slipped 12.57 points to 11,111.80.

U.S. stocks closed higher in light volume Thursday, as investors cheered that U.K. authorities apparently thwarted a terror plot to blow up U.S.-bound flights, with an accompanying decline in oil prices underpinning gains.

The Dow industrials rose 48 points, and other stock market indexes also rose on Thursday.

Crude-oil futures were back on the rebound Friday, rising 47 cents at $74.47 a barrel. The International Energy Agency said the market could cope with BP's production problems in Alaska but added there wasn't much of a supply cushion.

On the data front, U.S. retail sales increased at the fastest pace in six months in July, rising 1.4 percent on higher auto and gasoline sales, the Commerce Department reported Friday. Excluding autos, retail sales increased 1 percent.

The figures were higher than expected on Wall Street, where economists surveyed by MarketWatch were reckoning on a gain of 0.8 percent for retail sales and a 0.5 percent increase in sales excluding autos.

Also, U.S. import prices rose 0.9 percent in July, the Labor Department said Friday. Economists were expecting import prices to rise 0.8 percent.

The dollar rose against the Japanese yen after weaker than forecast Japanese growth data. Better-than-forecast French economic data limited the euro's decline.

Of companies in focus, Brazilian mining company Companhia Vale Do Rio Doce said it was going to launch an all-cash C$17 billion ($15.1 billion) bid for nickel miner Inco. A CVRD bid would create a three-way battle for Inco, which has also received offers from Teck Cominco and Phelps Dodge.

Inco shares gained 2.4 percent to $78.38 in pre-open trading on Inet.

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Apple Computer shed 1.3 percent to $63.26 after saying it was unable to files its quarterly report for the quarter ended July 1 on time as a result of an ongoing internal investigation into the accounting of past stock option grants.

The company said it was likely that it would have to restate past financial statements and that it expects "significant" changes in results, including increases in revenue and expenses.

Graphics chip maker Nvidia slumped 7.9 percent to $22.25 after saying late Thursday that it delayed its quarterly report after the company found problems with the accounting for some past stock-option grants. The news overshadowed strong revenue results.

Juniper Networks, which also said late Thursday that it missed the filing deadline for its quarterly report and said it would need to restate past results, lost 2.4 percent to $12.59.
   
Fragrances fell 34 percent to $5.40 after saying late Thursday that it would need extra time to file its quarterly report.

Business Week's "Inside Wall Street" column says there's renewed market buzz going around that UAL Corp. and Continental Airlines might make for a good merger, particularly from the strategic standpoint of international travel. UAL added 1.2 percent to $23.80.

Pacific Sunwear of California shares slid 5.9% to $14.25 after the casual apparel retailer said its net profit fell by more than half in the second quarter on a drop in sales at its stores open at least a year.

Deutsche Bank cut graphics chip maker ATI Technologies, which has agreed to be acquired by Advanced Micro Devices, to hold from buy, saying it doesn't expect rival Intel to make a competing bid. The broker told clients it believes Intel is more in an asset-sale mode than an acquisition mode and that ATI is less of a strategic fit for it than it is for AMD.

Overseas, the FTSE 100 in London edged 0.2 percent higher, with British
Airways recovering some lost ground.

The Nikkei 225 ended 0.4 percent lower after the Japanese GDP figures.

London 0904 GMT        Singapore 3.08 pm (0708 GMT) 
   
US dollar
yen          115.85 up from         115.75 
sfr          1.2347 down from       1.2356  

Euro
usd          1.2793 up from         1.2779 
stg          0.6740 down from       0.6750  
yen          148.22 up from         147.91 
sfr          1.5793 up from         1.5792  

Sterling
usd          1.8983 up from         1.8931
yen          219.94 up from         219.05 
sfr          2.3444 up from         2.3387

Australian dollar
usd          0.7675 down from       0.7678 
stg          0.4044 down from       0.4055
yen          89.03 up from          88.870

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AFX European summary - midday

LONDON - Leading shares remained higher midmorning as a rebound in travel and tourism stocks following yesterday's thwarted terror attacks added to strength in oil heavyweights and renewed M&A hopes in miners, dealers said.

By 10.00 am, the FTSE 100 was 13.4 firmer at 5,836.8, with the wider market all positive.

Volume though was light with 307.6 mln shares changing hands in 45,649 deals.

PARIS - Share prices were higher in late morning trade, bouncing back from yesterday's sharp losses after the UK airline bombs terrorist scare, after US stocks rose overnight and as Wall Street futures pointed to a positive open, dealers said.

At 11.10 am the CAC-40 index was up 33.31 or 0.67 pct at 5,009.95. Volume was 770 mln eur.

On the Matif, August CAC-40 futures were trading up 32.5 at 5,013.5.
   

FRANKFURT - Shares were higher midday, reflecting the recovery in equity markets across the continent following yesterday's losses, with autostocks, airlines, chemicals and financials pacing the market higher, while ThyssenKrupp lagged despite posting an 84 pct rise in Q3 profit, dealers said.

At 11.30 am, the DAX 30 index was 21.67 points, or 0.38 pct better at 5,653.15, having moved between a low of 5,645.43 and a high of 5,673.2 so far this session.

AMSTERDAM - Share prices were higher in midday trade positively affected by higher US futures pointing to a positive Wall Street open, as well as lower oil prices, dealers said.

At 12.57 pm, the AEX index was up 0.36 pct to 453.18.

MADRID - Share prices were higher in light midday trade, rebounding from yesterday's losses though well off the morning's highs, with Iberia recovering, while Ferrovial extended losses, dealers said.

At 12.28 pm, the IBEX-35 index was up 15.4 points at 11,825.8, after trading in a range of 11,820-11,863, on turnover of about 604 mln eur.

STOCKHOLM - Shares remained in slightly positive territory in midday trade, off just a touch from morning highs as bargain hunting eased, dealers said.

At 1.00 pm, the OMX Stockholm index was up 0.31 pct at 302.37, while the OMX Stockholm 30 index was up 0.34 pct at 936.15. Turnover was 6.48 bln skr.

MILAN - Share prices were broadly flat at midday in thin volumes, supported by Wall Street's firm performance yesterday, brokers said.

At 12.05 pm, the Mibtel was up 0.08 pct to 28,044 points and the S&P/Mib was up 0.16 pct to 36,709.

Volume was an estimated 859 mln eur.

ZURICH - Share prices were higher in early afternoon trade, led by Swisscom, SGS and financials with Adecco higher after its second results beat consensus and it confirmed its full-year and long-term outlook, dealers said.

At 13.17 am, the Swiss Market Index was 32.42  points higher at 7,876.65, and the Swiss Performance Index up 23.78 points at 6,129.69.

BRUSSELS - Shares traded marginally up mid-morning, with two of the most volatile stocks, Bekaert and Umicore leading the index higher as they recovered from pressure in recent weeks, alongside a recovery in investor confidence after yesterday's failed terror attacks, traders said.

At 10.27 am, the Bel 20 was up 13.02 points or 0.34 pct at 3817.48.

COPENHAGEN - Share prices were lower in midmorning trade, with Danske Bank falling after a broker downgrade, dealers said.

At 10.47 am, the OMXC20 index was down 0.66 points at 372.37 and the OMXCB Benchmark index was 0.37 points lower at 354.63.

HELSINKI - Shares were slightly higher at midday boosted by gains on Wall Street overnight and as shares are seen recovering from yesterday's falls in the wake of the terror alert in the UK, brokers said.

At 11.39 pm, the OMX Helsinki 25 was 0.50 pct higher at 2,479.62 and the OMX Helsinki was up 029 pct at 8,617.12 on turnover of 110 mln eur.

ATHENS - Greek shares were higher in late morning trade, recovering from yesterday's sell-off on the foiling of an alleged terrorist plot and lifted by overnight gains on Wall Street as crude prices pulled back, brokers said.

At 11.50 am the ASE general index was 0.3 pct higher at 3,820 points, and blue chips were also 0.3 pct higher to 2,073.3 points. Mid caps were up 0.7 pct at 4,122.5 points, and small caps were rising 1.7 pct at 773.2 points.

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Oil prices rebound in Asia after UK foils alleged terror plot
   
SINGAPORE - Oil prices rebounded in Asian trading hours as investors recovered from fears an alleged terror plot to blow up US-bound planes from the UK would wreak havoc on international carriers and the tourism industry, dealers said.

They said the market was sobering up to the fact that the plot has been scuttled and this should be good news for travel and airlines.

Aviation analysts said the impact on the industry should be limited to the trans-Atlantic route between the UK and the United States.

At 2.25 pm (0625 GMT), New York's main contract, light sweet crude for delivery in September, was at 74.53 usd a barrel, up 53 cents from its close of 74.00 usd in New York on Thursday.

Brent North Sea crude for September delivery was up 52 cents to 75.80 usd.

"The market dropped quite a bit yesterday, reacting in a big way to this foiled terrorist attempt due to fear it would impact consumer confidence in travel and jet fuel demand," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.

"I think that was a knee-jerk reaction of the market. Most likely the reaction (today) is going to be more muted and therefore we do not see a continuing downward trend."

Markets worldwide were stunned after Britain announced the foiling of the alleged plot to wreak "mass murder" by simultaneous mid-air bombings of passenger aircraft, and imposed heightened security measures.

Some 24 people were arrested on Thursday, most of them in London and surrounding areas, over the alleged plan to smuggle seemingly innocuous liquids in hand baggage onto planes bound for the United States that would be assembled
into bombs.

Britain immediately raised its security alert to "critical" -- the highest of five levels -- and imposed severe restrictions on what passengers are allowed to bring into plane cabins.

The new security measures caused widespread delays in boarding aircraft, forcing many airlines to cancel flights.

Shum said only time will tell if consumer confidence in air travel will be dampened.

"But my view is that it's unlikely. Afterall, this was an attempt that was stopped, meaning that the anti-terror measures put in place by the various governments have worked," he said.

Peter Harbison, executive chairman of the consultancy Centre for Asia Pacific Aviation, said the plot's impact on travel would be limited, although there will be a reduction in flight bookings and some cancellations.

"Passengers today are very resilient and less ready to over-react to what, at this stage, appears to be particularly a UK-US issue," Harbison said in a statement.

"For the Asia-Pacific region, there is immediately a much more limited impact," he said, adding this will involve delays in flights to the UK and the United States.

"We can expect authorities in the Asia Pacific region to also be much more vigilant in security checks, which will also lead to some delays on flights within the region."

Shum of Purvin and Gertz said there are other factors driving oil prices higher, citing the Israeli offensive in Lebanon, Iran's defiance of Western powers' efforts to curb its uranium enrichment program, potential hurricanes and the disruption of UK energy giant BP's operations in Alaska.

"In this oil market today, there are many moving parts and the markets will remain very volatile reacting to short-term world events. The market still has more upside than downside," Shum said.

Phil Flynn, a trader with US-based Alaron Trading Corp, agreed the thwarting of the plot should assure air travellers in the longer term.

"The sad truth is the world has become accustomed to these threats," he said on his company's website. "If the market senses the attack has been thwarted, then they'll assume the risk of an attack has been diminished."

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Metals - Gold edges up as dollar dips after Fed pauses from hiking rates

LONDON - Gold came off day lows to trade higher on the day as the dollar came under renewed pressure after the run of 17 consecutive rate hikes in the US came to a halt last night.

At 1.37 pm, spot gold, which earlier hit a low of 635.20 usd an ounce, was quoted at 649.25 usd, up from 645.80 usd at the time of the Comex market close in New York yesterday.

Other precious metals edged up. Spot silver was at 12.51 usd against 12.24 usd at yesterday's close, platinum was at 1,243.50 usd against 1,239.00 usd while palladium was at 320.50 usd against 318.00 usd.

The US Federal Reserve left its fed funds target rate at 5.25 pct yesterday, but left the door open to future rate hikes, saying there remains a risk of rising inflationary pressures.

The news sent the dollar lower while triggering a brief rally in gold, although profit taking and concerns over future rate hikes took gold lower in Asian trade.

The precious metal has since recovered, however, as the dollar edges lower following a brief rebound earlier in Asia and as the longer term outlook for the US currency remains weak overall, further Fed rate hikes notwithstanding.

"The prospect of further rate hikes by the European Central Bank and Bank of Japan will continue to drive investors away from the dollar," said the BullionDesk.com analyst James Moore.

Gold often trades counter to the dollar as it is seen as an alternative investment or hedge against inflation. Further, geopolitical tensions support the metal by sparking safe haven buying.

"Unrest in the Middle East, Iran and North Korea's nuclear programmes and the rising cost of fuel will suit gold's anti-inflationary qualities, supporting our view that gold will finish the year above 700 usd," said Moore.

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