US & World Daily Markets Financial Briefing 13-07-2007

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NEW YORK (AP) - Wall Street tried to hold onto its gains Friday as stocks opened flat a day after the Standard & Poor's 500 index and the Dow Jones industrials soared to new records.

Investors appeared to remain upbeat about earnings and takeover activity and appeared only slightly disappointed by the Commerce Department's report that retail sales dropped 0.9 percent last month, following a revised 1.5 percent jump in May. The June figure was weaker than anticipated.

On Thursday, the stock market surged after strong sales reports from a few U.S. retailers gave investors a reason to be optimistic about consumer spending and the upcoming deluge of second-quarter earnings results. The Dow made its biggest one-day percentage gain since October 2003 and the biggest single-session point gain since October 2002.

In the first minutes of trading, the Dow Jones industrial average rose 3.58, or 0.03 percent, to 13,864.31.

Broader stock indicators moved showed little movement. The Standard & Poor's 500 index fell 1.58, or 0.10 percent, to 1,546.12, and the Nasdaq composite index fell 3.71, or 0.14 percent, to 2,698.02.

Earlier Friday in European trading, Germany's DAX index of blue chip stocks hit a new all-time high, breaking through a seven-year-old record. The DAX recently rose 0.61 percent. Elsewhere, Britain's FTSE 100 rose 0.29 percent and France's CAC-40 rose 0.19 percent.

In Asian trading, Japan's Nikkei stock average rose 1.42 percent; Hong Kong's Hang Seng Index rose 1.3 percent to a new record; and China's Shanghai Composite Index fell 0.04 percent.

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The euro remains close to breaking through the 1.38 usd barrier for the first time ever ahead of key US retail sales news.

Analysts polled by Thomson Financial News expect monthly sales to have risen by a modest 0.1 pct following May's very strong 1.4 pct increase.

In addition to the retail sales number, the University of Michigan publishes its preliminary estimate for consumer sentiment in July.

Tuesday's decision by Standard & Poor's to place 12 bln usd worth of US sub-prime bonds on review for a possible downgrade prompted frenzied selling of the dollar as it reignited concerns about the outlook for the world's largest economy. Last night, S&P put the total value of those bonds at only 7.35 bln.

S&P gave no explanation for this miscalculation, which proved the main catalyst to the euro's break above 1.37 usd. Since then the single currency has pushed up to an all-time high of 1.3797 usd, while the pound has moved to a 26-year high of 2.0365 usd.

Yield differentials between the US and others have worked against the dollar and any impact on the economy from housing will likely exacerbate that negative for the US currency.

While the Fed is likely to keep its benchmark Fed funds rate unchanged at 5.25 pct over the coming months, the European Central Bank is poised to lift its refi rate to 4.25 pct in September while the Bank of England is set to raise its key repo rate once again to 6.00 pct in early autumn.

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

Europe's leading exchanges remained higher in early afternoon trade but were off highs as Wall Street is expected to pull back from last night's all-time highs.

At 12.41 am, the Dow Jones STOXX 50 was up 24.23 points at 3998.66 and the STOXX 600 gained 2.34 points at 399.66.

Spread bettors IG Index said the Dow may slip 4 points in opening deals after reaching all-time highs overnight after weaker-than-expected June retail sales.

L'Oreal -- down 3.68 pct -- fell back after its disappointing second quarter sales update overnight. Analysts said the numbers were in-line at best, which came as a disappointment.

UBS reiterated its 'buy' stance but said it expects some short-term weakness in the French beauty and haircare group as the slower than hoped-for US recovery and a challenging first half margin outlook continue to weigh.

Technology shares got a boots after Samsung's numbers.

Nokia -- up 1.9 pct -- put in yet another strong performance after Samsung raised its mobile handset forecasts overnight.

Deutsche Bank and SG Secs were among the brokers to reiterated their 'buy' recommendations on the stock. The Finnish handset giant was also buoyed by Motorola's profit morning Wednesday as many analysts believe it has been winning market share.

ASML added 2.1 pct as Credit Suisse said Samsung's upbeat comments on the memory market is good news for the Dutch chip stock ahead of its trading update.

SAP -- up 1.82 pct -- gained amid ongoing speculation it could soon its FY lift guidance and amid ongoing speculation it could be taken over.

Vodafone added 0.74 pct. UBS reiterated its 'buy' rating ahead of the mobile group's numbers next week. But Philips was down 0.67 pct ahead of its second quarter results on Monday.

Financials were leading the gainers as global indices -- including the Dow, the FTSE and the DAX -- touched all time highs.

Intesa added 2.15 pct, Axa added 2 pct and Deutsche Bank was up 2.08 pct.

Shares in ABN Amro and Fortis were up 0.74 pct and 0.81 pct respectively after the Dutch Supreme Court ruled that ABN Amro may proceed with the sale of its US unit LaSalle to Bank of America, according to trading sources.

The ruling, which overturned a lower court's decision to block the LaSalle sale, is expected to have an impact on the bidding war for ABN Amro between Barclays -- up 0.77 pct -- and a consortium that includes Fortis and Royal Bank of Scotland.

Lloyds-TSB added 1.43 pct on ongoing speculation amid ongoing talk Temasek -- which has a stake in Standard Chartered -- could build stake in the UK banking group and merge the pair. Standard Chartered was up 2.68 pct.

Banco Comercial Portugues shares were 0.76 pct higher amid talk that shareholder Banco Privado Portugues is planning to reinforce its stake in the larger bank, with proceeds from the reported sale of its Jeronimo Martins SGPS stake --

Shares in Paris Re fell 2.33 pct as trading began in the French reinsurer. The final listing prices of 19.35 eur per share was at the lower end of market expectations.

Elsewhere in the sector, though, broker recommendations added to the upbeat mood among financials. Old Mutual added 1.89 pct after a bullish note from Morgan Stanley which said it and Aviva -- up 0.93 pct -- are being under-valued by the market. JP Morgan reiterated its outperform stance on Allianz -- up 1.85 pct.

A target lift by UBS was enough to push BASF shares amongst top gainers on the DAX.

Shares added 1.22 pct as the broker lifted its target to 105 eur from 92 eur and said the main reason behind the move is the improved forecasts for the oil price and industrial production.

The broker reiterated its 'neutral' stance.

France's Schneider Electric climbed to the top of the CAC this morning, up 2.5 pct, after Citigroup upgraded to 'buy' from 'hold' and hiked its price target to 120 eur per share from 100 eur, saying the group's fundamentals remain strong and it is a leader in the energy efficiency area.

Saint-Gobain -- down 0.45 pct -- was cut to 'equal-weight' from 'overweight' by Morgan Stanley.

Meanwhile, Italian Tenaris retreated 2.43 pct after Credit Suisse downgraded to 'underperform' from 'neutral' and advises investors to switch from Tenaris to SSAB which added 1.9 pct ahead of its update next Tuesday.

And Goldman Sachs downgraded shares in Arpida -- down 0.42 pct -- and Intercell -- down 2.55 pct -- to 'sell' from 'neutral' on valuation grounds.

The broker upgraded MediGene -- up 3.58 pct -- to 'neutral' from 'sell' and said there are several companies in the sector which will likely have product approvals, launches or significant late stage clinical data over the coming months, which could affect share prices.

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Asian money markets summary

BEIJING (XFN-ASIA) - Asian late money market rates (vs previous close):

Hong Kong: 3-month HIBOR rate 4.38 pct (4.38 )
overnight rate 3.8 pct (3.8)

Jakarta: overnight rate 4.45269 (4.01301)

Kuala Lumpur: 3-mth KLIBOR bid/ask 3.55/58 pct (3.56/58)
overnight rate 3.48/50 pct (3.48/51 )

Manila: overnight rate 8 pct (8)

Seoul: 3-yr corporate bond yield 5.74 pct (5.71)
3-yr state bond yield 5.41 pct (5.37)

Singapore: avg overnight rate 2.0625 pct (2.0625)
3-month SIBOR 2.1875 pct (2.1875)

Sydney: 90-day bank bill rate 6.453 pct (6.442)

Taipei: overnight rate 2.013 pct ( 2.011)

Tokyo: unsecured overnight rate 0.529 pct (0.509)
3-month TIBOR 0.75083 pct (0.75000)

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Gold prices rose in London as the dollar fell to a new record low against the euro in the wake of a dismal US retail sales report that showed consumer spending plunged in June amid the ongoing housing crunch.

The Commerce Department said retail sales in June recorded their biggest fall since a August 2005. The data disappointed analysts, who were expecting a rise in sales as a result of falling auto purchases.

At 2.27 pm, spot gold was quoted as 667.30 usd an ounce, compared with 655.40 before the data's release. The metal was quoted at 666.90 usd in late New York trades yesterday.

The dollar hit a new record low against the euro of 1.3801 usd, from 1.3775 usd just before the data release. Against the pound the greenback sank to 2.034 usd, from 2.032.

Weakness in the US currency typically supports gold, which is seen as an alternative investment to the currency.

Yesterday, gold rose to a 5 week high of 669.05 usd amid record dollar weakness and as a rally in oil to fresh 11-month peaks increased the metal's appeal as a hedge against inflation.

Oil prices have extended yesterday's 11 month peaks today, further underpinning gold as they creep ever closer to their all time record of 78.65 usd a barrel struck last August.

Among other precious metals, platinum was little changed at 1,312 usd per ounce against 1,313 usd in late New York trades yesterday.

Its sister metal palladium eased to 365 usd against 368 usd yesterday, while silver was largely flat at 13.07 usd per ounce against 13.08 usd.

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