US & World Daily Markets Financial Briefing 11-10-2007

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Stocks open higher on Wal-Mart forecast

NEW YORK  -  Stocks rose in early trading and bond prices fell Thursday after Wal-Mart Stores Inc. raised its profit forecast and stock markets overseas put up sizable gains.
   
Stock futures, which had been higher all morning after strength in Asian and European markets, received a boost after investors began receiving upbeat corporate data as well as economic figures showing a rise in import prices and a decline in weekly unemployment claims.
   
In the first hour of trading, the Dow Jones industrial average rose 87.95, or 0.62 percent, to 14,166.64, moving past the record close of 14,164.53 set on Tuesday and reaching a new trading high of 14,168.03.
   
Broader stock indicators also rose. The Standard & Poor's 500 index rose 9.54, or 0.61 percent, to a new trading high of 1,572.01; it also surpassed the record close of 1,565.15 it had on Tuesday. The Nasdaq composite index rose 14.41, or 0.51 percent, to 2,826.02.
   
Bonds fell sharply following the economic data, with the yield on the benchmark 10-year Treasury note rising to 4.70 percent from 4.65 percent late Wednesday.
   
Light, sweet crude rose 92 cents to $82.22 in premarket electronic trading on the New York Mercantile Exchange.

In afternoon trading, Britain's FTSE 100 rose 1.10 percent, Germany's DAX index advanced 0.70 percent, and France's CAC-40 rose 0.49 percent.
   
In economic news, the U.S. trade deficit fell to its lowest level in seven months -- a much better reading than Wall Street expected -- amid record sales of American products. Several high-profile recalls dented imports from China.
   
The Commerce Department said the deficit declined to $57.6 billion in August, down 2.4 percent from the July imbalance. Exports rose 0.4 percent to a record $138.3 billion, while imports dropped by 0.4 percent to $195.9 billion. A weakening dollar makes U.S. exports more competitive abroad.
   
Meanwhile, the number of newly laid off workers seeking unemployment benefits dropped last week, a better showing than Wall Street had expected. Labor Department figures showed applications for jobless benefits fell by 12,000 to 308,000 last week, rather than staying flat as had been expected.
   
While overall retail sales reports were sluggish, Wall Street cheered Wal-Mart's announcement. The world's largest retailer raised its third-quarter profit forecast even after reporting its same-store sales, or sales at stores open at least a year, rose a weaker-than-expected 1.4 percent in September.
   
Wal-Mart, the biggest advancer among the 30 stocks that make up the Dow industrials, jumped $1.84, or 4 percent, to $47.41.
   
TJX Companies Inc. rose $2.23, or 7.5 percent, to $31.90 after the parent of the T.J. Maxx and Marshalls chains turned in a 2 percent increase in its September same-store sales.
   
PepsiCo, the world's second-largest soft drink maker, reported its third-quarter earnings rose 17 percent amid double-digit growth in international sales. The stock, which is up nearly 20 percent for the year, slipped 5 cents to $73.55.
   
Medtronic Inc. rose 44 cents to $57.29 after its drug-coated stent Endeavor moved past a big regulatory hurdle as a panel of government experts recommended the Food and Drug Administration approve the artery-opening device.

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Dollar strengthens after strong US jobless, trade data

LONDON - The dollar strengthened a touch following strong jobless and trade data in the world's largest economy.
   
The Labor Department said first time claims for unemployment insurance in the US last week fell to its lowest point in the third quarter, to 308,000 new claims, down 12,000 from the prior week and better than expectations for 315,000 new claims.
       
At the same time, the US trade deficit narrowed more than expected in August to 57.6 bln usd, its lowest level in seven months as record exports offset record oil import prices, below forecasts for a 59.0 bln usd deficit.
    
Marios Maratheftis, FX strategist at Standard Chartered, said both this and the jobless data were better than expected, but added that he did not see a lasting effect on the US currency from the stronger trade data.  
   
"If we see this trend in the deficit narrowing continuing, then the market will pay more attention," he said.  
   
Overall though, today's robust data will further diminish prospects that there will be another dramatic cut imminently in the Fed Fund rates.
   
Meanwhile, comments by European Central Bank president Jean-Claude Trichet on the strength of the euro weighed slightly on the single currency. Trichet reiterated that excessive volatility and disorderly movements in exchange rates are undesirable and warned investors against "one-way bets".
   
Some analysts viewed this as being verbal interference in currency markets, while others saw this as being nothing other than the usual 'hands off' approach that the ECB has taken recently towards volatility in currencies.
   
In any case, Trichet's comments were to some extent offset by earlier remarks by euro group president Jean-Claude Juncker, who said in an interview with Le Monde that the strength of the euro "reflects that of our economy" and that the ECB could not make concessions to euro zone members that object to its monetary policy.
      
Meanwhile, the pound continued to fall after a weak housing market report overnight supported speculation that the property market is putting the brakes on sharply, suffering from flagging confidence and higher interest rates.
   
The Royal Institution of Chartered Surveyors said 14.6 pct more of its members reported a fall than a rise in house prices in September. This reading marks the first decline in two years and is far worse than expected: economists had predicted a reading of around -3.0 pct.
    
Elsewhere, the yen remained on the back foot after the Bank of Japan kept interest rates unchanged at 0.5 pct, the lowest among developed nations.
   
This low rate, combined with a broad pickup in risk appetite as the US economic picture has brightened up, is once again encouraging investors to borrow yen and invest the funds in other high-yielding currencies elsewhere -- a strategy known as the carry trade, which has weakened the yen in recent years.

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Euroshares post early gains as Dow seen higher, telecoms, techs mostly higher

LONDON - Europe's leading exchanges were higher midday as the Dow is expected to post solid opening gains and as a flood of mostly positive news lifted telecoms and technology stocks.
   
At 12.12 am, the Dow Jones STOXX 50 Index was up 22.55 points, or 0.63 pct at 3,922.34, while the DJ Euro STOXX 50 Index rose 2.21 points, or 0.57 pct, to 390.43.
       
In Europe, Telefonica shares surged to their best level in nearly seven years after the Spanish telecom operator offered an upbeat earnings and revenue outlook for 2006-10, which it said will deliver a high organic growth rate.  The company also said it will bring forward its planned dividend payment of 1 eur per share to 2008 from 2009. The stock was last up 4.92 pct.
   
The good mood spread across the sector with KPN up 2.52 pct, France Telecom up 2.77 pct, and Deutsche Telekom up 1.17 pct.
   
Shares in Vodafone were up 3.63 pct. Early on, traders noted talk that the gains were down to the resignation of CEO Arun Sarin. But shares stayed in positive territory even after a company spokesman denied the rumours.
   
Among the tech stocks, Ericsson shares rose 2.59 pct as its Sony Ericsson Mobile Communications joint venture improved its profitability in the third quarter.
   
Broker Nomura International said the mobile handset unit's operating margin of 12.7 pct was slightly above its expectations, but "very far ahead" of consensus estimates. Separately, Merrill Lynch resumed coverage of shares in Nokia, up 3.36 pct, with a 'buy' stance.
   
Micronas surged 13.2 pct after the company's results for the first nine months of 2007 turned out to be not as bad as feared and as the group announced wide-ranging restructuring measures. The news prompted WestLB and Exane BNP Paribas to upgrade the stock to 'hold' from 'sell' and to 'outperform' from 'neutral' respectively.
   
CapGemini added a further 3.54 pct as strong numbers from India's Infosys bolstered the stock -- adding to the upbeat mood after bullish comment from Gartner.
   
Oberthur Card Systems moved up 2.37 pct after it was upgraded to 'buy' from 'neutral' at Goldman Sachs and added to the broker's conviction buy list.
   
Philips -- up 0.56 pct -- continued to gain ground after yesterday's announcement by the company that it has reduced its stake in its LG Philips LCD (LPL) joint venture, by 13 pct to 19.9 pct.
   
ASML shares were underperforming the sector -- up only 0.14 pct -- amid reports that Taiwan Semiconductor Manufacturing and United Microelectronics could cut their 2008 capex by 25-35 pct. The pair said they had not yet drawn up their spending plans for 2008.
   
Sage fell 6.75 pct after the software group's trading update, and as the group announced the departure of its US CEO and CFO.
   
SCi Entertainment fell 6.96 pct after Ubisoft Entertainment told Thomson Financial News it will not bid for the UK computer games maker.
   
Elsewhere, EADS rose 2.02 pct on expectations that its Airbus aircraft unit will benefit from news that rival Boeing is delaying the launch of its 787 Dreamliner plane. The first test flight of the 787 medium-sized jet, already pushed back once from the initial target of early this autumn, is now not anticipated until around the end of the first quarter of 2008.

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Asian stocks continue record rally, growth data boosts Singapore
 
SINGAPORE - Stock markets across Asia rose Thursday with Japan's benchmark Nikkei index reaching its best level in more than two months, while Singapore continued to rally on signs its economy is easily weathering the slowdown in the US.
   
The Nikkei 225 advanced 281.09 points or 1.6 pct to 17,458.98 while the broader Topix index rose 19.34 points or 1.2 pct to 1,677.52. The market shrugged off the widely expected decision by the Bank of Japan to keep its overnight call rate target unchanged at 0.5 pct for the ninth straight meeting. Also, concerns about the US economy eased and a softer yen lifted exporters.
   
The Singapore Straits Times Index rose another 61.32 points or 1.6 pct to a record 3,875.77, led by banks, in a continued positive response to GDP data showing the economy grew 9.4 pct in the third quarter.
       
Australian shares closed at record levels for the fourth straight day as overseas investors continued to buy leading resources stocks including BHP Billiton which settled near all-time highs.
       
The S&P/ASX 200 closed up 33.6 points or 0.5 pct at a record 6,771.9. The All Ordinaries index ended up 35 points or 0.5 pct at a record 6,779.6, after climbing as high as 6,789.5 during the session.
   
Hong Kong shares also closed higher as strong gains in China financials, coal stocks and oil firms helped the key index break the 29,000 points level for the first time. The Hang Seng index closed up 563.69 points or 1.97 pct at 29,133.02, just a tad off the new all-time-high of 29,133.76.  Liquidity inflows due to China's expanded qualified domestic institutional investor (QDII) program and a fresh high on the Shanghai bourse helped H-shares maintain their momentum, dealers said.
      
South Korean shares also closed higher with the key KOSPI index at a fresh record as investors took heart from the Bank of Korea's (BoK) widely expected decision to keep interest rates on hold and its confidence in the strength of the domestic economy. Investors were also relieved that the expiration of options contracts did not trigger a volatile session.
   
In Seoul, the KOSPI index closed up 17.73 points or 0.9 pct at a record 2,058.85. It was the third straight record finish for the KOSPI. Investors took heart from the Bank of Korea's widely expected decision to keep interest rates on hold and its confidence in the strength of the domestic economy.
   
Indian shares closed higher as foreign funds lapped up blue-chip shares towards the close of a choppy session. However, Infosys Technologies Ltd was hammered after the software bellwether reported earnings largely in line with estimates but failed to meet the high expectations of a section of the market, mainly due to a stronger rupee.
   
The Bombay Stock Exchange's benchmark Sensex rose 0.84 pct, or 155.82 points, to 18,814.07. It had also slipped to a low of 18,536.97 points, and hit an all-time high of 18,832.65 points late in the session. The National Stock Exchange's S&P CNX Nifty gained 1.53 pct to end at 5,524.85 points. In the BSE 30, 23 shares advanced and 7 declined. In the broader market, 1,359 shares rose, 1,375 fell and 69 were unchanged.

The Kuala Lumpur Composite closed up 6.68 points, or 0.5 pct at 1,383.61 while the Philippines Composite was down 10.51 points or 0.3 pct at 3,824.20
   
In Taiwan, the weighted index closed up 57.84 points or 0.60 pct at 9,697.67. Wall Street's mixed performance overnight kept a lid on the upside, with investors hesitant to push the local benchmark index beyond the year's high of 9,807 points attained on July 26, dealers said.
   
China A-shares closed mixed, with the Shanghai index ending at a record for the fourth straight day buoyed by banking and energy heavyweights. The benchmark Shanghai Composite index closed up 141.77 points or 2.46 pct at a record 5,913.23. The Shanghai A-share Index rose 2.46 pct to 6,207.84 while the Shenzhen A-share Index was down 0.57 pct at 1,612.55. The Shanghai B-share Index rose 1.40 pct to 378.92 and the Shenzhen B-share Index slid 0.08 pct to 779.68.

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Gold continues at elevated levels on dollar weakness, higher oil prices

LONDON - Gold continued at elevated levels after punching through another near 28-year high this morning, as dollar weakness and higher oil prices gave bullion a fresh boost.
   
However, the precious metal is still below the 750 usd level, having added only 5 cents to last Monday's high of 747.75 usd before running into resistance just below the psychologically important level.
   
Gold's push up today came as it moved as usual in the opposite direction to the dollar, and as market players looked to hedge against rising inflation led by firmer commodities.
   
"The dollar's continuing weakness, continuing high commodity prices and near record oil prices above 80 usd per barrel are inflationary and conducive to higher gold prices," said analysts at Gold Investments.
       
At 2.20 pm, gold was up at 744.50 usd per ounce against 741.10 usd in late New York trade yesterday. Earlier, it hit 747.80 usd, its highest level since January 1980.
   
Gold prices have rallied by over 100 usd since mid-August, with a combination of dollar weakness, higher fuel costs and fears emanating from the sub-prime mortgage debacle enticing investors into bullion.
    
Elsewhere, platinum, which is trading close to its record intraday high of 1,402 usd an ounce, also rose, bolstered by the threat of supply disruptions linked to power cuts in major producer South Africa.
   
Anglo Platinum, one of the world's largest producers of the metal, said power outages had affected both its smelters in the country.
   
Platinum prices had already been pushed higher by production cuts linked to strike action at Lonmin's operations in South Africa earlier this year. The company said the strike cut production at it Marikana mine by 25,000-30,000 ounces.
      
Platinum rose to 1,390 usd against 1,386 usd today, having earlier hit an intraday high of 1,397.50 usd.
   
Its sister metal, palladium, was trading at 371 usd against 374 usd yesterday, while silver climbed to 13.65 usd against 13.56 usd.

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