US & World Daily Markets Financial Briefing 12-04-2007

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Stocks Slip Amid Economic Concerns

NEW YORK - Stocks slipped Thursday as investors adopted a more cautious tone following warnings of lackluster retail sales and a greater-than-expected increase in weekly jobless claims.
   
Retailers' reports on sales at stores open at least a year, an important measure known as same-stores sales, concerned some investors because of scattered warnings that sales would be light during April.
   
The number of Americans filing new claims for unemployment benefits rose last week to the highest level in two months. The Labor Department's weekly report, which Wall Street often regards as a volatile number, showed applications for jobless benefits totaled 342,000 last week.
   
In the first hour of trading, the Dow Jones industrial average fell 28.93, or 0.23 percent, to 12,455.69.
   
Broader stock indicators fell. The Standard & Poor's 500 index slipped 1.57, or 0.11 percent, to 1,437.30, and the Nasdaq composite index fell 3.56, or 0.14 percent, to 2,455.75.
   
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.72 percent from 4.74 percent late Wednesday.
   
The decline in stocks follows a pullback Wednesday prompted by minutes from the Federal Reserve's last meeting that showed the central bank remains concerned enough about inflation that it won't rule out an increase in interest rates.
   
Higher oil prices also weighed on stocks. On Wednesday, weekly government figures showed a larger-than-expected decline in gasoline stockpiles. Light, sweet crude rose 83 cents to $62.84 in premarket electronic trading on the New York Mercantile Exchange.
   
Corporate earnings reports, which began arriving in earnest this week, haven't offered a strong catalyst to push stocks higher.
   
Research in Motion Ltd., maker of the BlackBerry handheld device, fell $10.82, or 7.4 percent, to $135.20 after the company disclosed that the Securities and Exchange Commission has formalized an investigation into the company's practices for granting stock options. The company said its fiscal fourth-quarter sales jumped 66 percent.
   
Genentech Inc. fell $1.09 to $81.60 after the biotechnology company said first-quarter sales of its two key cancer treatments fell from the fourth quarter. The company's first-quarter profit surged 68 percent.    

Mortgage lender NovaStar Financial Inc., which has struggled with its portfolio of so-called subprime mortgages, those made to people with poor credit, said it is considering putting itself up for sale. The stock rose 49 cents, or 9.7 percent, to $5.52.
   
The Russell 2000 index of smaller companies fell 2.94, or 0.36 percent, to 805.30.
   
In afternoon trading, Britain's FTSE 100 fell 0.30 percent, Germany's DAX index fell 0.54 percent, and France's CAC-40 fell 0.75 percent.

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Euro edges back up after short-lived dip on Trichet comments

LONDON - The euro edged back up against the dollar after a small dip, in the wake of comments by European Central Bank president Jean-Claude Trichet suggesting that the next interest rate hike will come in June not May, proved short-lived.
   
The ECB left euro zone interest rates unchanged at 3.75 pct today as expected, with a further rate rise anticipated soon, most likely in June.
   
Ahead of today's meeting, however, there had been some speculation in the market that the ECB could move as early as next month. In his accompanying statement, Trichet said the ECB is monitoring inflation risks "very closely", but did not use the key word "vigilance" that he usually uses to signal a rate hike at the subsequent meeting, making a hike in May unlikely.
   
Nevertheless, Trichet highlighted that interest rates remain "accomodative" and continued to suggest that rates will rise to 4.0 pct soon.
   
"While the ECB failed to mention that "strong vigilance" is needed to ensure euro zone price stability over the medium term -- thereby effectively ruling out another move as early as May -- there were broad hints that interest rates will rise by a further 25 basis points to 4.0 pct in June," said Howard Archer at Global Insight.
   
"It is clear that the central bank believes that its work is not yet done," he added.
   
At 2.50 pm, the euro was trading at 1.3480 against the dollar, up from 1.1360 just before Trichet's press conference began. During the speech the euro dipped to a low of around 1.3447.

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Top Stories in Europe at 12.05 GMT

Zurich - Novartis AG confirmed it has agreed to sell its Gerber baby food business to Nestle SA for 5.5 bln usd in cash. The transaction is expected to be completed by the second half of 2007, subject to regulatory approval, the Swiss pharma group said.

Frankfurt - PPR SA will not make a minimum number of shares it acquires a condition of its 330 eur a share takeover bid for Puma AG, the French luxury goods retailer's chief executive Francois-Henri Pinault said. "I won't set a minimum acceptance level, and that's a firm decision," Pinault told journalists at a press conference.

Deutsche Telekom AG's CFO Karl-Gerhard Eick said he is optimistic about the crunch talks the company is holding today with trade union verdi regarding plans to outsource 50,000 jobs in a cost-cutting exercise. Following two rounds of failed negotiations, Eick added that he believed that the game was almost over and that he had received "positive signals" from verdi.

DaimlerChrysler AG management board member Ruediger Grube is to meet with former Chrysler head and current Cerberus advisor Wolfgang Bernhard this week as part of the company's talks with parties interested in its US unit, Handelsblatt reported citing industry sources. Grube is holding initial talks with several potential purchasers in New York this week, the report said.

Milan - Telecom Italia SpA's fixed telecommunications network needs more investment than the 6.5 bln eur planned by the telecoms group, economic development minister Pierluigi Bersani said, according to Il Sole 24 Ore.
 
Ministry officials said that the investment requirements could be 10 bln, the newspaper added, noting the government used the investment argument to obstruct the planned merger between Autostrade SpA and Abertis Infraestructuras SA of Spain earlier this year.

Helsinki - Nasdaq has made a 23 bln skr (2.5 bln eur) bid for Nordic and Baltic bourse operator OMX, according to the online edition of Swedish business paper Dagens Industri. OMX's board is to consider the offer today, however the company refused to comment on the matter when pressed, the paper said.

Paris - Valeo has received takeover approaches from a number of groups, including Cerberus and PAI Partners, with the latter offering between 40 and 44 eur per share for the French auto-parts maker, French business daily Les Echos reported citing anonymous sources.
 
The paper's sources said Valeo has received expressions of interest from several groups since the Apollo investment fund first made its approach in March, and named PAI Partners and Cerberus as potential candidates.

Madrid - Telefonica SA has selected six bidders for its Endemol Entertainment Holding NV unit and has given them until next month to make binding offers, the Wall Street Journal reported, citing a person familiar with the matter.
 
The Dutch television-production company is expected to fetch about 3 bln eur -- far less than the 5.5 bln that Telefonica paid for the company seven years ago in the middle of a dot-com-era, the Journal said.

Spanish utility Endesa SA said it will announce its position on the takeover offer submitted by Spanish builder Acciona SA and Italy Enel SpA "in due course and an appropriate manner". In a statement, Endesa also said its board has formally recognized the withdrawal of EON AG's takeover bid for the utility.

London - Aveva Group PLC said it expects its full-year results to be "somewhat" ahead of the market's expectations, after it continued to experience strong trading in the second half with growth in revenues across all regions.
 
The engineering software and services group said in a pre-close trading update that its major markets remained buoyant, adding it has achieved continued growth in existing products and further market penetration with Vantage Enterprise Net.

Inflation picked up in September in Europe as both areas show fragile economic growth. Just as in the U.S., rising energy prices are to blame. Read free, daily market reports available only at CMS Forex and open your free demo trading account today. Click here

Asian shares close mixed, Tokyo lower on Wall St

HONG KONG - Shares across the Asia-Pacific region closed mixed, with Tokyo and Hong Kong falling on a lower Wall Street but Australia and Seoul and some mainland China markets hitting record highs.
   
Tokyo shares closed lower on profit-taking, mirroring losses on Wall Street overnight sparked by minutes of the Federal Reserve's most recent meeting, which indicated that the central bank discussed the possibility of raising interest rates.
       
The Nikkei 225 Stock Average finished down 129.65 points or 0.73 pct at 17,540.42, off the day's low of 17,455.18. The TOPIX index of all first-section issues fell 12.83 points or 0.74 pct to 1,726.18, off the intraday low of 1,717.04.
   
The market opened weaker, with investors "discouraged after the FOMC minutes
emphasized (the Fed's) wariness over inflation, which put to rest earlier market speculation of a likely rate cut sometime soon," said Mitsushige Akino, chief fund manager at Ichiyoshi Management.
   
That, coupled with higher gasoline prices, rekindled speculation of potential US interest rate hikes which could cut into corporate profits, dampen consumer spending and further weaken the housing market by making mortgages more expensive.
   
Australian shares finished higher at fresh records, running against the grain from declines in US markets. Strong local fundamentals kept Australian equities in positive territory for most of the trading session, with particular buying in banking
stocks.
   
The S&P/ASX 200 closed up 6.8 points or 0.11 pct at 6,158.2, beating Tuesday's record close of 6,153.0. The All Ordinaries index rose 6.7 points to a record close of 6,142.8.
   
Hong Kong shares were weaker in afternoon trade following the losses on Wall Street and Tokyo and in reaction to the Federal Reserve minutes. At 3.20 pm the Hang Seng Index was down 51.16 points, or 0.25 pct, or 20,398.27.
   
In mainland China, A-shares in Shanghai and Shenzhen closed broadly higher
on strong follow-through buying with machinery and power companies in demand. The Shanghai A-share Index was up 37.86 points or 1.03 pct at 3,712.22 and the Shenzhen A-share Index was up 21.86 points or 2.25 pct at a record 993.26.
   
Seoul shares closed higher backed by strong futures-linked program buying, with the KOSPI hitting a new closing high. The market shrugged off early losses triggered by an overnight retreat on Wall Street.
   
Sentiment was also buoyed by the Bank of Korea's decision to keep its call rate target for April on hold at 4.5 pct, with signs of an economic recovery not yet clear and with inflation still tame.
   
The KOSPI index closed up 12.19 points or 0.81 pct at a new record finishing high of 1,525.61. The low for the day was 1,507.56. Gains were broad, with telecoms and shipbuilders recording strong increases.

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Platinum, palladium rise as positive sentiment towards commodities spreads

LONDON - Platinum rose to its highest point in nearly 5 months and palladium touched its strongest level in just under a year as fund buying interest in the wake of a strong run in metals prices bolstered both metals.
   
"There is a lot of fund interest in commodities and that is spilling over into the platinum group metals," said Numis Securities analyst Marc Elliott.
   
At 1.51 pm, spot platinum was trading at 1,270 usd per ounce, its highest level since Nov 21 last year.
   
Meanwhile palladium stood at 370 usd, having earlier hit an 11-month high of 373 usd.
   
Institutional investors looking to deepen their exposure to commodities have been drawn to the platinum group metals in the wake of sharp gains in both base and other precious metals, analysts said.
   
Gold has rallied in recent days as the dollar continues to languish near two-year lows against the euro, with inflation concerns in the US and ongoing strength in the oil price also helping underpin prices.
   
Meanwhile copper hit a fresh seven-month high for the third time this week on falling inventories and supply fears from Chile.
   
The upturn in interest in the PGMs has disproportionately bolstered prices in what is a relatively illiquid market, analysts said.
   
Speculative buying has pushed palladium higher, helped by technical factors after the metal cleared the 360 usd barrier.
   
Investors have also been attracted to platinum's positive longer-term fundamentals, with demand expected to continue to grow.
   
Both PGMs are used in the manufacture of catalytic converters, a major global growth area as emissions legislation continues to tighten, as well as in jewellery and the manufacture of medical equipment.

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