US & World Daily Markets Financial Briefing 12-04-2006

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U.S. stocks open higher, buoyed by earnings, trade data

NEW YORK - U.S. stocks rose in early trading Wednesday as a narrower-than-expected trade deficit and solid earnings from Circuit City Stores Inc. helped the market rebound from a prior that saw the S&P 500 index fall to a one-month low.
   
The Dow Jones Industrial Average was up 34 points at 11,123. On Tuesday, the blue-chip index, like the S&P 500, also ended at a one-month low.
   
The Nasdaq Composite Index was up 2 points at 2,312 while the S&P 500 Index added nearly 3 points to 1,289.
   
Stocks on the move
   
Shares in Genentech Inc. fell 1.7% to $80.34. The biotech company posted a 48% rise in its first-quarter profit, due largely to better-than-expected sales of its cancer drugs, Herceptin and Avastin.
   
There was some disappointment, however, over sales of Rituxan, a drug originally approved to treat non-Hodgkin's lymphoma, but which has also been given the green light for the treatment of rheumatoid arthritis.
   
Also on the earnings front, shares in Circuit City Stores Inc. rose 2.4% to $25.20 after the consumer electronics retailer posted forecast-beating results, helped by solid sales of flat-panel televisions, notebook computers and portable music devices.
   
DaimlerChrysler Ag shares fell 45 cents to $57.06 after the car maker said its 2006 profit should rise on a combination of job cuts and new models at both its Chrysler and Mercedes divisions. The company also said it may trim its stake in majority Airbus owner EADS to 15% from 22.5%.
   
Broker action
   
Motorola shares rose 1% to $23.80 after Bear Stearns upgraded the company to outperform from peer perform, saying the company's handset market share gains should extend through 2006, boosted by demand for its thin handset products.
   
Shares in Boeing Co. rose 1.6% to $81.88 after Morgan Stanley raised its price target on the company to $110 from $80. The broker said the stock even has the potential to reach $140 in 3 years if investors begin viewing the company as an Asian infrastructure play and if the aerospace mid-cycle persists.

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Dollar rises after narrower-than-expected trade data

NEW YORK - The dollar rallied against the euro early Wednesday after a Commerce Department report showed a narrower-than-expected February trade deficit.
   
After surging to a record level in January, the U.S. trade gap narrowed 4.1% to $65.7 billion in February. This is the biggest improvement since last November.
   
Economists had expected the trade gap to narrow, but the improvement was more than expected. The consensus forecast of Wall Street economists was for the deficit to narrow to $67.3 billion.
   
"Trade data is a little better...but I think the dollar rally should be limited as the prospects for the trade deficit still aren't very good," said Kathy Lien, chief currency strategist at Forex Capital Markets. "Oil prices spiked in March not February, so odds are the March number can be much worse."
   
In early New York trading, the euro weakened 0.5% to $1.2092. The dollar was flat at 118.19 yen, up 0.03%. The British pound changed hands at $1.7497, up 0.02%. The dollar rose 0.4% to 1.3014 Swiss francs.
   
Having rallied on favorable interest-rate expectations in the past year, the dollar is expected to come under pressure in the coming months as the market's focus has shifted to focus on U.S. long-term structural concerns, analysts said.
   
The British pound was stronger following data showing that average earnings in the three months to February rose 4.2%, up 0.6 percentage points.
   
The earnings rise -- which was driven by bonuses in the financial sector -- came alongside data that showed unemployment in the three months to February up 0.1 points to 5.1%, with March jobless claims up 12,600 to 937,600.
   
Elsewhere, the Bank of Japan Governor Fukui said he was concerned about the recent rise in long-term yields. He noted that the bank "must closely monitor their movements" and that he had no plans about when short-term interest rates would move from zero percent.
   
On Tuesday, the BOJ policy board voted unanimously to keep benchmark interest rates virtually at zero. Fukui said that future monetary policy would depend on economic conditions and that the Bank of Japan can keep rates at very low levels as long as inflation remains contained.
   
The yen found some support after a Nikkei newspaper story said many economists now predict that the BOJ will end its zero interest rate policy in the July-September period, according to research firm Action Economics.

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The European Markets at 12.00 BST

London - Leading shares remained under pressure at midday, with profit taking across the mining sector and a disappointing trading statement from GUS pulling the FTSE back below the 6,000 level. By 12.10 pm, the FTSE 100 index was down 35.3 points at 5,981.2.
  
Frankfurt - Shares were lower in midday trade, extending yesterday's sharp losses, as oil prices reached all-time highs in London amid heightened tensions over Iran and following losses on Wall Street overnight and in Tokyo this morning. At 12.10 pm, the DAX 30 index was 34.51 points or 0.58 pct lower at 5,873.96.

Paris - Shares were lower at midday in line with other markets, as the profit-taking seen yesterday, provoked by concerns over oil and raw material price rises, continued. At 12.48 pm, the CAC-40 was trading 49.53 points or 0.97 pct lower at 5,063.07.
       
Amsterdam - Shares were broadly down at midday in continuance of yesterday's losses, in-line with most European bourses while local issue Euronext rose. At 12.17 pm, the AEX was 2.09 points or 0.45 pct lower to 462.05

Milan - Share prices were lower at midday, hit -- as other European markets -- by record high crude oil prices, as well as being depressed by delays in forming a new Italian government after the weekend's general election. At 12.34 pm, the Mibtel index fell 0.76 pct to 29,014 points.

Madrid - Share prices were lower in moderate midday trade with Telefonica and Moviles weak, while media stocks outperformed, extending recent gains. At 11.42 am, the IBEX-35 index was down 94.2 points at 11,580.4.

Stockholm - Shares were slightly lower in midday trade pressured by high oil prices and indications of a weak start on Wall Street later today. At 12.20 pm, the OMX Stockholm index was down 0.52 pct at 335.81 and the OMX Stockholm 30 down 0.36 pct at 1,042.40.

Helsinki - Helsinki shares were slightly lower midday echoing sentiment on other key European bourses, with Nokia falling back a touch after yesterday's solid gains, and other key stocks dipping on profit-taking. At 12.34 pm, the OMX Helsinki 25 index was 0.59 pct lower at 2,672.98. The OMX Helsinki index was 0.53 pct lower at 9,393.21.

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Asian shares close lower tracking Wall St losses, oil price spike

HONG KONG - Share prices across the Asia-Pacific region ended lower with sentiment hurt by losses on Wall Street and a further spike in oil prices, dealers said.
   
In Tokyo shares slipped with investors pocketing gains, dealers said, adding the market was ripe for some profit-taking, having recently traded at its highest levels in 10 years.
   
Increasing international tension over Iran's nuclear program also weighed on sentiment, they said.
   
The Nikkei 225 Stock Average finished down 255.58 points or 1.5 pct at 17,162.55, after touching a low of 17,162.00.
   
The broader-based TOPIX index of all first-section issues shed 27.29 points or 1.5 pct at 1,742.89, off a low of 1,742.38.
   
"Share prices lost sharply today as investors opted to cash-in recent gains actively on a pullback in US markets and higher crude oil prices," said Koichi Ogawa, chief fund manager at Daiwa SB Investments.
   
In Australia, share prices also closed down as investor sentiment turned negative on Wall Street and oil price concerns, dealers said.
   
They said a measure of profit taking occurred in the resources sector after recent strong gains and ahead of the Easter holiday, with global miners BHP Billiton and Rio Tinto easing, weighing on the overall market.
   
The S&P/ASX 200 lost 49.8 points or 0.95 pct to close at 5,183.7, falling further from Thursday's record closing high of 5,238.9.
   
Share prices in Hong Kong were trading lower in the afternoon on Wall Street's falls and amid concerns over rising interest rates, high oil prices and US-Iran political tensions, dealers said.
   
MTR Corp bucked the trend, posting sharp gains after the government announced that it has approved a merger of the listed railway operator with the unlisted Kowloon-Canton Railway Corp.
   
CNPC (Hong Kong) also surged after reporting strong 2005 earnings.
   
At 3:26 pm, the Hang Seng Index was down 209.90 points or 1.27 pct at 16,265.91.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower as investors took profits in the absence of fresh leads with metal firms and real estate developers under pressure, dealers said.
   
The Shanghai A-share Index lost 1.92 points to 1,426.31 on turnover of 18.45 bln yuan and the Shenzhen A-share Index was down 1.71 points at 356.64 on turnover of 12.65 bln yuan.
   
Share prices in Seoul ended slightly lower, extending their decline for a third trading session, as Samsung Electronics, KEPCO and banks turned lower, dealers said.
   
Investors took a cautious stance ahead of options expiries tomorrow and the upcoming earnings results by Samsung Electronics Friday.
   
But the market recovered much of its early losses to close near its strongest level for the day, buoyed by intensified retail and institutional investor support in late trade.
   
The KOSPI index closed down 2.49 points or 0.18 pct at 1,383.59

Asian Bourse Round-Up

For a full list of closing figures, click here

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Gold futures climb, trade above $600 in morning dealings

SAN FRANCISCO - June gold climbed $1.30 to $600.70 an ounce in morning dealings after touching a high of $602.40. Prices reached $605.60 in intraday trading Tuesday, a more than 25-year high for the front-month contract in gold futures.

"The tensions between Iran and the U.S. have triggered a rally...and the heightened geo-political situation seems set to keep gold underpinned in the coming sessions," James Moore, an analyst at TheBullionDesk.com said in a note to clients.

May silver added 8 cents to stand at $12.68 an ounce and May copper tacked on 2.35 cents to $2.745 a pound.

On the bond market, long-term Treasury prices were up, sending yields lower. The benchmark 10-year note was up 2/32 at 96 24/32, with its yield at 4.92%.
   
Oil futures were little changed as the market looked forward to weekly supply data expected to show a build in crude inventories, but declines in gasoline and distillates, which include heating oil and jet fuel.
   
Concern persisted over Iran's determination to expand its nuclear program in defiance of the U.S. and its allies. Traders fear supplies out of the world's fourth largest oil exporter could be under threat.

The benchmark May contract was up 4 cents at $69.02 a barrel.

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