US & World Daily Markets Financial Briefing 11-09-2006

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Investors on sidelines as stocks open

NEW YORK - Wall Street dipped in quiet early trading Monday while investors weighed Dell Inc.'s delay of its second-quarter report and a downgrade of Bank of America Corp.
  
With Monday the fifth anniversary of the Sept. 11, 2001, terror attacks, the New York Stock Exchange, which was shut for several days after the destruction of the nearby World Trade Center, observed a moment of silence for one minute before the opening bell. The Nasdaq Stock Market was asking traders to suspend transactions for one minute later in the morning.
   
Wall Street was coming off a week of losses, and trading remained light in the absence of signficant economic data early in the week. Investors have been trading cautiously in the run up to the Federal Reserve's meeting on Sept. 20.
   
Bank of America took early losses after securities firm UBS downgraded the nation's largest retail bank on signs of weakening credit and eroding deposit trends. Dell Inc. also declined in early trading after the computer maker delayed filing its fiscal second-quarter report and suspended its share repurchase program due to accounting probes.
   
In the first hour of trading, the Dow Jones industrial average lost 21.77, or 0.19 percent, to 11,370.34. The Dow slipped 0.63 percent last week.
   
Broader stock indicators lost ground. The Standard & Poor's 500 index shed 3.82, or 0.29 percent, to 1,295.10, and the Nasdaq composite index fell 13.33, or 0.62 percent, to 2,152.46.

Stocks in focus
   
Hewlett-Packard will again be in focus as the board of directors is set to reconvene to discuss the future of Chairwoman Dunn and the fallout over the company's investigation into board leaks to the press.
   
In M&A, the Nasdaq Stock Market Inc. is in preliminary takeover talks with Scandinavian stock exchange operator OMX, though the U.S. exchange is still keen on pursuing the London Stock Exchange, according to a report.
   
In broker news, Bank of America could fall after UBS cut the firm to neutral from buy, citing a further deteriorating in deposit trends, a more meaningful inversion of the yield curve and signs that credit is weakening.
   
UBS also downgraded home builder Lennar Corp. to neutral from buy, saying the company's focus on volume over profit is likely to generate more severe margin declines and that the shift toward "everything's included" model will result in slower absorption pace.
   
Canadian steelmaker Ipsco Inc. will also be in focus after it definitively agreed to pay $66 a share cash for steel-tube producer NS Group Inc. The buyout price equates to a 43 percent premium over Friday's closing price of $46.15 a share for NS Group.
   
Life reinsurer Scottish Re could rise after it said it's received a number of potential bid proposals and has provided a number of parties with due diligence information.
   
Among other broker moves, PiperJaffray upgraded Quest Software to outperform from market perform, saying fundamentals are stable to improving and that the options investigation and pending restatement don't appear to be having a negative impact on business.
   
Prudential Equity Group upgraded Cessna aircraft maker Textron Inc. to overweight from neutral, citing the recent share weakness.

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Major currencies in tight ranges a key week gets underway

LONDON - Major currencies traded within tight ranges as a key week for the currency market got underway.
   
A raft of US data and speeches from rate setters are scheduled for the week and looming in the back ground is the IMF, World Bank and G7 meetings this weekend.
   
There is growing speculation that the meetings will call for greater flexibility in the currency market -- a cue that the yuan should be allowed to appreciate to better reflect Chinese fundamentals.
   
The last time this happened, the dollar lost ground and Asian currencies, especially the yen edged higher.
   
Ahead of the G7/IMF meetings, the yen had found good support but a lot of the buying has faded since. It gave back some of its recent gains after weak Japanese machinery orders figures offset an upgrade in the country's GDP growth.
   
Japanese second quarter GDP was revised pushing up the annualised rate slightly to 1.0 pct from the preliminary reading of 0.8 pct. But Japanese core machinery orders slumped 16.7 pct in July from a month earlier.
   
Elsewhere, the pound edged lower amid indications that inflationary pressures in the UK may be easing, in turn weighing on rate hike expectations.
   
In data out this morning, it was revealed that producer prices have eased substantially in August.
   
The office for National Statistics said input prices on a seasonally adjusted basis fell by 1.2 pct in August from the previous month. The monthly decline was the first since May and the largest since December 2004. Producers were unable to pass on cost increases. On a non-seasonally adjusted basis, output prices were unchanged in August from July for an annual gain of 2.6 pct.
   
Also out today, there was no change in the UK's trade in goods position with the rest of the world, staying at a deficit of 6.3 bln stg for the second month in a row in July.
   
The dollar, meanwhile, managed to hold its own although it faces several key tests this week. US data due out this week include the July trade balance Tuesday, August retail sales Thursday and August CPI on Friday.
  

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The European Markets at 11.30 GMT

London - By 12.20 BST, the FTSE 100 index was down 39.3 points at 5,839.7, while the broader indices were also weaker. Volume remained below par, with 820.5 mln shares changing hands in 127,502 deals.
   
Miners were uniformly weak. Vedanta had lost 53 pence to 1,274, Kazakhmys was down 58 pence to 1,228, Xstrata off 66 pence to 2,268, Rio Tinto off 113 pence to 2559 and BHP Billiton dropping 45 pence to 937.

Frankfurt - At 11.34 am, the DAX 30 index was 37.92 points or 0.65 pct lower at 5,757.34, having moved between 5,737.20 and 5,778.93 so far this session.
   
The MDAX was at 8,075.38, down 51.56 points or 0.63 pct, while the TecDAX was at 633.74, down 4.44 points or 0.70 pct. The DAX futures contract was at 5,760.00, down 48.00 points or 0.83 pct, while bund futures were at 117.34, up 0.02 point.

Paris - At 12.36 pm the CAC-40 index was down 37.84 points or 0.8 pct at 5,035.73, on volume of 1.4 bln eur. On the Matif, September CAC-40 futures were trading off 37.5 points at 5,038, while the euro rose to 1.2724 usd from 1.2671 usd late on Friday.
   
An unexpected drop in French industrial production for July, when nearly every economist expected a recovery from weakness in previous months, was also weighing on sentiment, dealers said.

Amsterdam - At 12.36 pm, the AEX was down 3.20 points or 0.69 pct at 461.27, after opening at 462.09 and trading in a range of 460.17-462.67.
   
Falling oil prices hit heavyweight oil stocks on the AEX, after OPEC ministers indicated they will maintain the cartel's official output ceiling. SBM Offshore and Royal Dutch Shell went down 2.31 pct to 20.70 and 1.93 pct lower to 25.95 respectively. Fugro was off 2.89 pct to 33.55.

Milan - At 12.14 pm, the Mibtel was down 0.59 pct at 28,847 points and the S&P/Mib rose 0.61 pct to 37,583.
   
Trading in Telecom Italia shares was suspended pending a board meeting this afternoon to discuss a reorganisation of its fixed and mobile assets. Industry sources said that the company is expected to spin off its mobile telephony and fixed line network into separate companies.

Madrid - At 12.34 pm, the IBEX-35 index had dropped 61.4 points to 12,020.4, after trading in a range of 11,969-12,051, on thin turnover of 878 mln eur.
   
Repsol YPF was down 0.32 eur at 21.72 eur amid easing oil prices and concerns the oil major could see further restrictions in Algeria.
   
Helsinki - At 1.07 pm, the OMX Helsinki 25 was 0.79 pct lower at 2,496.16 and the OMX Helsinki was down 0.67 pct at 8,534.32, on 245 mln eur of turnover.
   
Nokia was down 0.46 pct to 15.08 eur after it said it will cooperate with Motorola, the second biggest mobile maker, to achieve interoperability among their DVB-H (Digital Video Broadcast - Handheld) enabled mobile devices and network services.
   
Neste Oil was 1.53 pct weaker at 22.60 eur, not benefiting from an upgrade to 'neutral' from 'reduce' by UBS on valuation grounds.

Stockholm - At 12.30 pm, the OMX Stockholm index was down 0.66 pct at 319.99 points, while the OMX Stockholm 30 index was down 0.71 pct at 991.97.
   
The main sub-indices moving at midday were industrials, down 0.88 pct; retailing, 0.78 pct higher; and materials, down 1.92 pct.

Brussels - At 11.25 am, the Bel 20 was off 6.65 points or 0.17 pct at 3,875.08. InBev was up 0.03 eur or 0.07 pct at 41.43 eur. Broker DLS raised its estimates on the company following its strong second-quarter results and upped its target to 40.50 eur from 39.00.
   
"Following the stronger than expected results we have raised our estimates for the years to come", said DLS, giving earnings-per-share estimates of 2.24 eur, 2.62 eur and 2.93 eur for 2006, 2007 and 2008 respectively.

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Asian shares close mostly lower on oil, Japanese economic data

HONG KONG - Shares across the Asia-Pacific region closed mostly lower on a fall in oil and metal prices and weak economic data out of Japan.
   
Tokyo share prices closed broadly lower as a bigger-than-expected drop in July private sector machinery orders and unexciting revised GDP data for the June quarter weighed on sentiment.
   
They said the weak machinery orders data for July spooked investors, igniting wariness about the sustainability of corporate capital investments, while the revised GDP growth for the June quarter failed to perk up the market.
   
The blue-chip Nikkei 225 index closed down 286.08 points or 1.78 pct at 15,794.38, while the broader TOPIX index of all first-section issues was down 23.42 points or 1.45 pct at 1,596.50.
   
"The market showed a typical knee-jerk reaction to the unexpectedly large decline in July machinery orders," Shinko Securities strategist Tsuyoshi Segawa said.
   
"But I believe that the initial selling in reaction to the July machinery orders will wane over the course of this week, as I believe that today's results do not suggest any change to the underlying strength of corporate capital investment," he added.
   
Australian shares closed lower, dragged down by the resources sector following sharp falls in gold and copper prices during Asian trading, dealers said.
   
The S&P/ASX 200 ended down 72.3 points or 1.42 pct at 5,026.0, off a low of 5,023.4 and a high of 5,099.5.
   
Hong Kong shares were weaker in afternoon trade after easing metal and crude oil prices triggered sharp falls in related stocks, dealers said.
   
They said losses on the Tokyo market weighed on sentiment, with many investors also cautious due to the fifth anniversary of the Sept 11 terrorist attacks in the US.
   
At 3.32 pm the Hang Seng Index was down 198.10 points or 1.16 pct at 16,947.66.
   
In mainland China, A-shares in Shanghai and Shenzhen shrugged off early weakness and closed higher on some bargain hunting interest, with banks and real estate developers in demand.
   
The Shanghai A-share Index rose 7.45 points or 0.42 pct to 1,761.20 and the Shenzhen A-share Index was up 2.59 points or 0.60 pct at 437.16.
   
Seoul shares finished sharply lower, falling below 1,340 points, with investors remaining cautious ahead of the triple witching on Thursday, dealers said.
   
A sharp decline in Tokyo shares also pressured sentiment. The KOSPI index closed down 20.81 points or 1.54 pct at 1,334.08, after moving between 1,333.84 and 1,357.29.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Oil prices slide to near six-month lows; Gold falls below 600 usd, Copper down

LONDON - World oil prices fell to the lowest points since late March today owing to easing concerns over Iran, while markets awaited a likely output-freeze by the OPEC oil-producing cartel.
   
At 12.45 pm, Brent North Sea crude for October delivery shed 94 cents to 64.39 usd. It had struck an intra-day low of 64.33 usd - the lowest point since March 28 and more than 14 usd below an all-time high 78.64 usd struck on Aug 7.
   
Meanwhile, New York's main contract, light sweet crude for delivery in October, dropped 51 cents to 65.74 usd, after striking at intra-day low of 65.22 usd earlier - the lowest point since March 28.
   
Traders remained heavily focused on Iran, the world's fourth biggest producer of crude. Top Iranian nuclear negotiator Ali Larijani has offered a two-month suspension of uranium enrichment but did not say if this would be done in time to start talks to resolve the Iranian nuclear crisis, an EU diplomat has said.
   
Larijani made the offer during talks in Vienna Sunday with European Union foreign policy chief Javier Solana, the diplomat said.
   
Six world powers have offered Iran talks on a package of trade and other benefits if it suspends uranium enrichment, which makes nuclear reactor fuel but also atom bomb material, and threatened UN sanctions if Tehran did not comply.
     
Prices were also easier in view of a mild US hurricane season and a recent announcement by British energy giant BP that production at the Alaskan Prudhoe Bay facility could be fully restored by the end of October, dealers said.
   
Meanwhile, ministers of the 11-member Organisation of Petroleum Exporting Countries, which provides about a third of global oil supplies, were going into a Monday meeting in Vienna signalling they would maintain the cartel's official output ceiling 28 mln bpd against the backdrop of falling oil prices.

Gold fell below 600 usd an ounce as safe haven buying ebbed following reports of progress in last-ditch talks between EU and Iranian officials aimed at averting UN sanctions over Tehran's uranium enrichment.
 
At 11.49 BST, spot gold, which earlier hit a low of 592.40 usd, was quoted at 596.15 usd, down from 610.15 usd at the time of the COMEX market close in New York Friday. Other precious metals were lower.
   
Spot silver was at 11.85 usd an ounce against 12.14 usd Friday, platinum was at 1,211.50 usd against 1,221.00 usd, while palladium was at 317.50 usd against 328.00 usd.
   
"The improvement of geopolitical tensions between the EU and Iran as well as the ongoing correction in the oil market seem likely to keep gold under pressure for the time being," said TheBullionDesk.com analyst James Moore.
   
Moore said gold prices could potentially head as low as 585 usd if support fails to hold around the 200-day moving average of 594.20 usd. Gold futures traded limit down on Asia's TOCOM exchange earlier.
   
Copper prices fell as the market consolidated following a strong performance last week and as heavy selling on oil and gold weighed. Prices were also pressured by news of a steep fall in Japan's machinery orders in July.
   
At 2.37 pm, LME copper for three-month delivery was at 7,520.00 usd a tonne, down from 7,820.00 usd at the close on Friday, while aluminium was down at 2,535.00 usd a tonne against 2,637.00.
   
Other metals were also lower. Zinc was at 3,412.50 usd against 3,500.00 usd, lead was at 1,315.00 usd against 1,335.00 usd, nickel was at 27,800.00 usd against 28,000.00 usd and tin was at 9,030.00 usd against 9,150.00 usd.

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