US & World Daily Markets Financial Briefing 13-02-2006

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U.S. stocks open lower; Google falls on Barron's report

       
NEW YORK - U.S. stocks edged lower in opening trade Monday as Google Inc. shares fell after a negative article in financial weekly Barron's, with Merrill Lynch also in focus on reports it is close to buying a significant stake in fund manager BlackRock Inc.
   
The Dow Jones Industrial Average was off 15 points at 10,904. The Nasdaq Composite Index fell 12 points to 2,250 while the S&P 500 Index dropped 3 points to 1,264.
    
"Without any economic news and just a few stock stories out there, the current path of least resistance is down," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
   
Pado also said the stock market will have trouble moving higher as long as the inversion in bond yields is not reversed: "Since that is unlikely, we remain cautious in the consolidation period."
   
Inversion occurs when longer-term Treasury yields fall below short-term yields. Banks typically fund long-term loans with short-term borrowings.
   
With yields inverted, it makes it difficult for banks to make money and thus less inclined to lend. Investors fear such a scenario could lead to a slowdown in economic growth.
   
On the broader market for equities, decliners outpaced advancers by 17 to 6 on the New York Stock Exchange, and by nearly 2 to 1 on the Nasdaq. 
    
On the bond market, long-term Treasury prices were lower, pushing up yields.
The benchmark 10-year note was off 1/32 at 99 9/32, with its yield at 4.59%.

Barron's tears into Google
   
Google Inc. shares fell nearly $16, or more than 4% to $348 after Barron's weekend article on the Internet search engine. Barron's is published by Dow
Jones & Co., parent of MarketWatch.
   
In the article, Barron's warns the company's shares could be cut in half over the next year on competition from Microsoft and Yahoo Inc. , pricing pressures for online ad sales and mounting concern over "click fraud."
   
Yahoo shares were off 39 cents at $32.12, while Microsoft's stock dipped a penny at $26.68.

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Merrill Lynch & Co. Inc. is in advanced talks to acquire a large stake in money manager BlackRock for $8 billion, according to media reports Sunday night. A deal between Merrill and BlackRock would create a $1 trillion fund-management colossus, with Merrill focused on stock mutual funds and BlackRock a leading seller of funds that offer bonds and fixed-income investments.
   
Merrill shares rose 43 cents to $73.22, while BlackRock surged nearly 12% to $147.
   
Elsewhere in the sector, J.P. Morgan Chase's Worldwide Securities Services unit bought the middle and back-office operations of Paloma Partners Management Co. for an undisclosed sum. J.P. Morgan was off 2 cents at $39.90.
   
Also on the deal front, Home Depot Inc. is in talks to buy a 49% stake in China's Orient Home, one of the mainland's leading do-it-yourself chains, for more than $200 million, the Financial Times reported Monday,citing people close to the situation. Home Depot was off 21 cents at $39.43.
   
Shares of Genentech Inc. dropped 1.2% to $82.50 after the biotech bellwether
and joint-developer Roche Holdings halted recruitment for a Phase III trial of its colorectal cancer drug Avastin, due to safety concerns.
   
Broker action
   
Shares of Starbuck Corp. fell 3.3% to $34.31 after UBS downgraded the coffee-chain operator to neutral from buy.
   
The broker said there is less upside to the company's share price after its recent 20% runup, and also cited a potential for slower growth in same-store sales and specialty income.
   
Nortel Networks Corp. was up 1.7% in early dealings after Prudential upgraded the company to overweight from neutral weight. The broker said the settlement of shareholder lawsuits will allow the telecom-equipment supplier to focus on generating sales and cash-flow growth.

Forex

Dollar higher as market awaits Bernanke testimony

NEW YORK - The dollar got a lift against the euro and Japan's yen early Monday, as investors looked ahead to new Federal Reserve chief Ben Bernanke's first testimony to Congress at midweek.
   
The dollar last was 0.2% higher at 118.08 yen, as the euro fell 0.2% to $1.1882,
   
Financial markets are widely expecting the Fed to put in place yet another quarter-point increase in the federal funds target at its March monetary-policy
meeting.
   
But Bernanke's remarks this week will be carefully parsed for clues as to his thinking on whether further rates hikes are needed beyond that point.
   
"It will be interesting to see how Mr. Bernanke handles himself in the wake of the maestro's departure," said Forex Capital Markets' Boris Schlossberg, employing a term often used to describe Bernanke's precessor, Alan Greenspan.
   
Greenspan "was notorious for clever obfuscation in front of a generally reverential congressional audience," said Schlossberg, Forex Capital's senior currency analyst.
   
Bernanke, on the other hand, is "a strong believer in transparency, so perhaps his rhetoric will be more direct," he said.
   
The dollar also appeared to be getting support from last week's highly successful auction of the revived 30-year Treasury bond, which attracted a record 65.4% indirect bid, a category that includes foreign central banks.
   
The auction was viewed as an indication that foreign demand for dollar-denominated assets remains strong and soothed worries that foreign central banks are backing away from dollar assets.
   
Overnight, the yen came under pressure as a result of remarks from Sadakazu
Tanigaki, Japan's minister of finance. The official's remarks were seen as undercutting recent speculation that Japan's quantitative easing monetary policy will end any time soon.

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London

London shares extend gains midafternoon as financials rally; oil prices weak

At 2.55 pm, the FTSE 100 was 16.9 points higher at 5,781.0, with the broader indices mixed.Volume was below average, with 1.331 bln shares changing hands in 170,258 deals.

Barclays rose 10 pence to 652 on the back of a bullish article in the influential investment magazine Barrons.
   
Barrons noted investors have given Barclays "a bit of the cold shoulder", over concerns of a housing slowdown and declining consumer spending, yet the magazine argues there appear to be reasons for them to give the company a warmer reception.
   
While the FTSE 100 index has risen 18 pct in the past 13 months and the UK
bank sector has increased 8 pct, Barclays' stock is up just 4 pct, noted Barrons.

Peer Lloyds TSB gained 5-1/4 pence to 554-1/4 as Deutsche Bank raised its target price on the UK banking stock to 580 pence from 550 due to an improving outlook for the Scottish Widows insurance unit.

Yell was the top performing blue chip today amid ongoing speculation of a bid from Google. Yell rose 18 pence to 567-3/4.
   
On the downside, a decline in metal prices hurt mining stocks, with BHP Billiton down 9-1/2 pence at 946-1/2, Xstrata off 12 pence at 1,604 and Rio Tinto 10 pence lower at 2,740.

Frankfurt

German shares higher midafternoon; auto stocks sparkle; Thyssen, TUI weigh

At 2.32 pm the DAX 30 index was 28.17 points or 0.49 pct higher at 5,729.64,
having moving between 5,683.88-5,736.51 so far this session. The MDAX was at 8,118.15, down 22.14 points or 0.27 pct, while the TecDAX was at 706.74, up 3.38 points or 0.48 pct.The DAX futures contract was at 5,7342.50, up 22.00 points or 0.38 pct, while bund futures were at 120.17, down 0.39.

Auto stocks were topping the blue chip index, with Volkswagen racing ahead
by 2.64 eur or 4.77 pct to 58.04, after it presented consensus-beating full year
results on Friday afternoon.

At the other end of the DAX, ThyssenKrupp was down 0.11 eur or 0.56 pct to
19.67, after posting first quarter results that were lower than the year earlier, but largely in line with expectations.

Amsterdam

Amsterdam shares mainly flat in low volume early afternoon trade

At 1.25 pm, the AEX was up 1.33 point or 0.29 pct at 457.59, after opening at 456.65, and trading in the narrow range of 455.45-457.79.

Hagemeyer was up 3.47 pct to 3.28, a continuation of positive sentiment seen
in the last few weeks, the trader said.
   
Heineken added 2.07 pct at 29.14 after Merrill Lynch upgraded the issue to 'buy' from 'neutral'.   
   
Other food and drink related issues also fared well, with Laurus rising 1.62 pct to 3.13, and CSM adding 1.86 pct at 24.60 after Dutch broker Theodoor Gilissen upgraded the issue to 'buy' from 'sell' and raised the target price to 28.50.

Royal Dutch Shell was flat at 26.20 while Fugro fell 1.18 pct to 30.04. Versatel was off 1.08 pct to 0.92. VNU lost 0.62 pct to 27.08.

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HONG KONG - Shares across the Asia-Pacific region finished lower, with Tokyo sharply lower on investor fears that the Bank of Japan (BoJ) may soon scrap its ultra-loose monetary policy resulting in a spike in interest rates, dealers said.
   
The blue-chip Nikkei 225 index ended below the 16,000 points level for the first time since Jan 26.
   
Last Thursday the BoJ governor Toshihiko Fukui, in guarded comments, suggested the bank will be looking very closely at its next meeting to see if conditions that would allow a lifting of the policy are close to being met.
   
An end to the five year super-loose policy is expected to see an uptick in interest rates, which some politicians fear could have a detrimental affect on the nation's nascent economic recovery.
   
The Nikkei 225 Stock Average index closed the day down 380.17 points or 2.3
pct at 15,877.66, its low for the day. It was the first time it has slipped below 16,000 points since Jan 26 when the index finished at 15,891.02.
   
The broader TOPIX index of all first-section shares lost 42.21 points or 2.5 pct at 1,618.01, off a low of 1,617.90.
   
This morning, sell orders, placed before the market opening by foreign brokerages, topped buy orders for the fourth straight trading day, dealers said.
   
"Investors now believe that the interest rate gap between the US and Japan will shrink, with the Fed likely to end its rate hike cycle at its next meeting or the one after, and the Bank of Japan lifting its ultra-loose monetary policy soon," said Hideo Mizutani, a chief strategist at Sieg Securities.
   

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Share prices in Australia closed lower as investors sold resource stocks after large declines in metal prices in offshore trading on Friday, which in turn weighed on the broader Australian share market, dealers said.
   
They said investor sentiment failed to perk up following the release of the
Reserve Bank of Australia's statement on monetary policy, with the central bank
reaffirming its tightening bias but lowering the inflation outlook.
   
Dealers said index-leading resources stocks BHP Billiton and Rio Tinto fell with metal prices turning lower. BHP is due to release its half-year earnings report on Wednesday with analysts expecting a record 4.5 bln usd net profit.
   
The S&P/ASX 200 dropped 54.4 points or 1.12 pct to close at 4,817.1, dropping away from the record close of 4,956.7 set on Feb 1.
   
In Hong Kong, share prices were trading lower in the afternoon led by Hutchison Whampoa after it indefinitely postponed the spin-off of its unit, 3
Italia, dealers said.
   
Losses on the Tokyo bourse today also dampened market sentiment, they added.
   
At 3:35 pm, the Hang Seng Index was down 106.18 points or 0.69 pct at
15,319.77.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower on profit-taking after recent strong gains with metal companies and automakers losing ground, dealers said.
   
The Shanghai A-share Index fell 3.09 points to 1,342.18 on turnover of 12.68 bln yuan and the Shenzhen A-share Index was down 0.31 point at 326.68 on turnover of 7.61 bln yuan.
   
Share prices in Seoul closed lower on institutional investor selling, ending
the market's two-day advance, with large cap IT and bank stocks leading the
decline, dealers said.
   
Wall Street's weekend advance, and easing oil prices, brought on a firm start but intensified program selling amid a lack of major players led the index into negative territory.
   
Samsung Electronics lost more than one pct, falling for a second trading session, on investor worries that a recent decline in flash memory chip prices and an unstable foreign exchange rate will erode its earnings in the first half of this year.
   
The KOSPI index closed down 14.44 points or 1.08 pct at 1,320.79.

Asian Bourse Round-up

For a full list of closing figures, click here 

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Gold futures fell, pulling most other metals with them, as traders looked
ready to continue consolidating some of the market's recent gains. Gold for
April delivery was last down $1 at $552.50 an ounce.

Crude prices held steady in early trading as severe weather in the Northeast
failed to worry traders after last week's ample inventories data and a lower
oil-demand growth outlook in 2006.
   
The benchmark March contract was off a penny at $61.83 a barrel in
electronic trading.