US & World Daily Markets Financial Briefing 13-09-2007

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Stocks rise after jobs report

NEW YORK - Stocks opened higher Thursday after fewer-than-expected workers sought unemployment benefits last week and on a possible agreement between automakers and workers over health care costs. The Dow Jones industrial average rose more than 100 points.
   
The Labor Department reported claims for unemployment benefits rose by 4,000 last week to 319,000 -- the sixth increase in seven weeks -- but the number was less than the 325,000 claims analysts expected. Low unemployment, at 4.6 percent, has been one of the economy's strengths.
   
Shares of General Motors Corp. jumped sharply after The Wall Street Journal reported that UAW President Ron Gettelfinger has said he might agree to establishing a trust fund for employee health care costs that would be run by the union. Ford rose as well.
   
Meanwhile, McDonald's Corp., which like GM is a component of the Dow industrials, rose after boosting its dividend.
   
In early trading, the Dow rose 107.79, or 0.81 percent, to 13,399.44.
   
Broader stock indicators rose. The Standard & Poor's 500 index rose 8.59, or 0.58 percent, to 1,480.15, and the Nasdaq composite index rose 5.53, or 0.21 percent, to 2,597.60.
   
Government bond prices fell. The yield on the 10-year Treasury note, which moves opposite its price, rose to 4.44 percent from 4.41 percent late Wednesday.
   
In the commodities market, crude oil prices backed off the all-time high of more than $80 a barrel marked on Wednesday. Light, sweet crude fell 37 cents to $79.54 on the New York Mercantile Exchange.
       
The rise in jobless claims follows last week's reading on August payrolls, which declined for the first time in four years and sent stocks plummeting amid worries that credit tightness and market turmoil had hit the labor market. But Thursday's report was temperate enough to assuage investors.
   
With little other economic news expected on Thursday, trading is likely to remain muted, as it was on Wednesday. Many investors are refraining from any major moves before Tuesday's meeting of the Federal Reserve; Wall Street has grown more confident the Fed will cut its benchmark federal funds rate by a quarter percentage point.
   
Advancing issues outnumbered decliners by about 4 to 3 on the New York Stock Exchange, where volume came to 129.7 million shares.
   
The Russell 2000 index of smaller companies fell 1.33, or 0.17 percent, to 776.69.
   
European equity markets also turned higher, recovering from earlier declines. Britain's FTSE 100 added 0.93 percent, Germany's DAX index rose 0.60 percent and France's CAC-40 rose 0.92 percent.

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Dollar in corrective rebound after hitting new all time lows vs euro

LONDON - The dollar edged back up in a corrective rebound after earlier hitting a new record low against the euro, though sentiment towards the currency remains negative amid expectations that US interest rates will be cut next week.
   
The euro this morning hit a new all-time high of 1.3927 usd but has since fallen back.
  
"We are seeing a small corrective rebound in the dollar after it hit all-time lows against the euro," said Ian Stannard at BNP Paribas.
   
He stressed, however, that the rebound is "purely corrective" and not sustainable given the degree of negative sentiment towards the dollar at the moment. Stannard believes the dollar will resume its downtrend, allowing the euro to rise back up towards the 1.40 usd mark.
   
Speculation is growing that the US economy is slowing more rapidly than previously thought and in this regard tomorrow's US retail sales data will be key, he said.
   
The euro has also gained on the back of recent hawkish comments by European Central Bank governing council members, who have continued to suggest that euro zone monetary policy remains accommodative despite the recent financial market turmoil.
   
The European Central Bank said in its September monthly bulletin this morning that euro zone economic fundamentals remain strong despite the recent turmoil in credit markets.
   
"Incoming macroeconomic data  confirm the strong fundamentals of the euro area economy and support a favourable medium-term outlook for real GDP growth," the ECB said.
   
This contrasts with growing expectations for a sizeable degree of Fed monetary policy easing by the end of the year, starting with a 50 basis point rate cut next week.
   
However, some analysts have noted the danger that the market may be overestimating the number of rate cuts the Fed will deliver.

The Swiss franc was higher following news that the Swiss National Bank raised interest rates by 25 basis points, saying it aims to calm the Swiss franc money market.
   
The SNB raised the three-month Libor rate range by 0.25 percentage points to 2.25-3.25 pct, with the central bank intending to keep the middle of the target range at 2.75 pct.
   
At 12.19 pm GMT, the dollar was trading at 1.1828 against the Swiss currency, down from 1.1857 sfr just before the decision, while the euro was at 1.6436 sfr, down from 1.6464 previously.

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Euroshares lower midday, banks and tech sector weigh

LONDON - Europe's leading exchanges were lower midday with banks and the tech sector dragging down sentiment, with an expected flat start ahead on Wall Street also weighing.
   
At 12.18 am, the Dow Jones STOXX 50 fell 13.29 points or 0.36 pct to 3,715.02 as the STOXX 600 shed 1.74 points or 0.47 pct to 367.49.      
   
Northern Rock fell 3.72 pct as the heaviest faller in the sector, Deutsche Bank lost 1.25 pct, Societe Generale shed 1.15 pct. In addition, the technology sector was shedding weight with Alcatel-Lucent issuing yet another profit warning and losing 11.45 pct as a result. 
   
In what one dealer described as "a catastrophe", the group lowered its full-year sales growth target, to "flat to slightly up" on a constant euro-dollar rate compared to previous guidance for growth in the mid single-digits.
   
Tech peer STMicro lost 3.62 pct after a downgrade from Lehman Brothers to 'underweight' from 'overweight' as part of a European semiconductor sector review this morning.
   
Utilities on the other hand, were supported today, especially in France and Germany, following a report in Financial Times Deutschland, which said the EU Commission has abandoned its plan to force Europe's utilities to break up their production and distribution operations.    
   
RWE gained 1.34 pct, as EON added 0.76 pct. In France, EDF rose 0.29 pct, while Suez 0.34 pct lower and Gaz de France was up 0.27 pct.
   
In luxury goods, Tod's also surprised analysts, as it said it cut its EBITA margin forecasts after a disappointing set of interim results, prompting Societe Generale Securities to cut its rating to 'sell' from 'hold'. Shares fell 4.37 pct.
   
Finmeccanica shed 2.86 pct as its first-half sales failed to impress. Analysts also noted a weakness in its helicopter division, but the group's overall performance was described as roughly in line with expectations.
   
Staying with earnings news, Lagardere gained 3.12 pct after the French media and defence conglomerate reported better-than-expected first-half earnings in its press and radio division.
   
Lagardere, which is one of the world's largest book and magazine publishers and also owns a 12.5 pct stake in Airbus parent company EADS, yesterday reported recurring operating profit of 251 mln eur for the first half, up from 196 mln a year earlier. It also said, in an interview with Les Echo, that it will hold on to its stake in EADS until 2010 at least.
   
Elsewhere, Porsche AG charged 3.08 pct ahead following a bullish presentation at the IAA car show and supported by a hefty price target rise to 1,500 eur from 1,400 eur at WestLB.
      
In the world of M&A, Vallourec grabbed the spotlight on the back of rumours that it is close to accepting a takeover offer from Gazprom, combined with reports that Lukoil is seeking European acquisitions. Shares surged 4.63 pct.
   
Meanwhile, Deutsche Boerse added 1.38 pct after the German stock exchange operator confirmed that it is not interested in acquiring a stake in the London Stock Exchange. A third of LSE is currently up for grabs to help fund Nasdaq's bid for Nordic bourse operatic OMX.

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Asian shares end mixed on US rate cut hopes; oil stocks outperform

SINGAPORE - Stock markets across Asia closed mixed on Thursday as investors continued to bet on a US interest rate cut next week and focus on the region's strong fundamentals, with a spike in crude oil to record levels propping up stocks in that sector.
   
In Japan, the Nikkei 225 index ended up 0.2 pct at 15,821.19, while the broader Topix fell 0.4 pct to 1,522.87.
   
"Although Japanese politics are mired in uncertainty, the market appears to be reacting more to overseas factors. And investors are relieved the yen has found some stability," said Hideo Mitzutani, chief strategist at Sieg Securities.
   
In Sydney, the S&P/ASX 200 ended up 0.2 pct at 6,230.6 and the All Ordinaries index closed up 0.1 pct at 6,244.6.
   
Austock Securities senior private client advisor Michael Heffernan said investors are expecting oil prices to remain high because of potential production problems in the Gulf of Mexico due to the hurricane season.
   
Singapore shares closed little changed, with the Straits Times Index down 1.69 points at 3,504.40.   Singapore's economic growth will eventually be negatively affected if crude continues to climb, but for now fundamentals appear intact, CIMB-GK Research regional economist Song Seng Wun said. "The growth momentum has yet to be adversely affected by high oil prices," Song said. "People are a bit more cautious, but not pessimistic."
   
In Seoul, the Kospi closed up 1.9 pct at 1,848.02, with oil refineries gaining.
   
Elsewhere, the Hang Seng climbed to a new record on US rate cut hopes and talk that Chinese investors will start trading in Hong Kong by October. Deutsche Bank is expecting mainland investors to pour 40 bln usd into the Hong Kong exchange once the scheme is implemented. The Hang Seng closed up 0.9 pct at 24,537.02, after hitting an intraday record of 24,552.18.
   
Malaysia's Kuala Lumpur Composite closed down 0.2 pct at 1,284.02, while Indonesia's Jakarta index rose 0.6 pct to 2,222.75.
   
In the Philippines, the composite index fell 0.6 pct to 3,289.22 as investors continued to gauge public reaction to the guilty verdict handed down by an anti-graft court on deposed president Joseph Estrada.
   
The Taiwanese Taiex closed down 1 pct at 8,927.42. Chip giant Taiwan Semiconductor Manufacturing Co Ltd lost 1.5 pct to 60.60 twd, failing to benefit from news that it has not set a timetable for building 18-inch-wafer plants, although it considers it possible for the global chip industry to enter the 18-inch-wafer era five years from now.
       
China A-shares closed higher with investor confidence restored by a stronger yuan and positive signs of continuing ample liquidity. The benchmark Shanghai Composite Index ended the day up 2 pct at 5,273.59.  The Shanghai A-share Index rose 2 pct to 5,536.99 and the Shenzhen A-share Index was up 2.7 pct at 1,532.54. The Shanghai B-share Index rose 0.7 pct to 327.97 and the Shenzhen B-share Index was up 1.2 pct at 728.35.

Indian shares closed higher on buying in rate-sensitive shares ahead of inflation data due tomorrow, but a subdued trend around the globe prevented a runaway rally.
   
The Bombay Stock Exchange's benchmark Sensex rose 0.70 pct or 109.08 points to close at 15,614.44, while the National Stock Exchange's S&P CNX Nifty gained 0.71 pct to 4,528.95 points. Among the BSE 30, 21 shares gained and 9 lost. In the broader market, 1,576 shares advanced, 1,115 retreated and 60 were unchanged.

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Gold softens on profit-taking, weaker equities but dollar lends support

LONDON - Gold softened as investors took profits after the precious metal's sharp gains earlier this week, with sentiment dented by weakness in the European equity markets and an expected lower opening on Wall Street.
   
The metal remains supported above 700 usd, however, by continued weakness in the US dollar and healthy physical demand, analysts said.
    
The move downward chiefly represents a correction from the price rise seen in the market earlier this week, according to Standard Bank analyst Walter de Wet.
   
But "gold has been following equities quite closely over the last few days, and I can definitely see that affecting prices today," he added.
   
At 12.34 pm, spot gold was trading at 706.00 usd an ounce, against 711.70 usd at the close.
   
Gold hit a new 16-month high of 714.00 usd yesterday, buoyed by weakness in the US dollar, amid expectations of the Fed rate cut later in the year and by safe-haven buying.
   
Among other precious metals, platinum slipped to 1,292 usd from 1,301 usd, although the continued threat of strike action in South Africa continued to lend some support to prices. Its sister metal palladium eased to 328 usd against 333 usd. Silver was trading at 12.46 usd versus 12.66 usd.

Copper prices trod water in early afternoon trade, continuing yesterday's period of consolidation, as investors eyed ongoing volatility in the wider financial markets.
   
Prices were pressured lower yesterday after a strike among workers at Southern Copper Corp's operations in Peru, which had pushed copper higher, was averted, and as LME-monitored stockpiles of the red metal grew.
   
They have traded in a narrow range this morning, with sentiment dampened by a lacklustre performance by the European equity markets this morning and ahead of an expected lower opening on Wall Street.
       
At 2.02 pm, copper for three-month delivery was trading flat at 7,475 usd, the level at which it closed yesterday.
   
Elsewhere Chinese base metals production continued to grow in August, with aluminium production rising 52 pct to 12.7 mln tonnes and copper production up 15.6 pct to 2.17 mln tonnes.
   
Lead was the only exception to the rule, analysts said. "Tightness in both domestic and global lead mine supply continues to constrain refined output, which together with a 10 pct tax on lead exports, is underpinning a tight global lead market," noted Robin Bhar, an analyst at UBS.
   
Lead rose to 3,114 usd against 3,085 usd at the close last night.
   
Among other base metals, aluminium was steady at 2,450 usd against 2,440 usd yesterday, tin fell to 15,100 usd from 15,200 usd, and nickel rose to 27,700 usd against 27,150 usd. Zinc also rose slightly to 2,825 usd against 2,760 usd.

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