US & World Daily Markets Financial Briefing 14-02-2007

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Dow, Nasdaq post gains in early trading
 
NEW YORK - Stocks opened moderately higher Wednesday as investors awaited comments on the U.S. economy from Federal Reserve Chairman Ben Bernanke before the Senate Banking Committee.
   
While Wall Street hopes to glean a sense of where Bernanke stands on inflation and interest rates, investors also had a mix of important economic and earnings news vying for attention.
   
The Commerce Department said retail sales were essentially flat in January amid slumping automobile sales; it was the weakest showing in three months and below what Wall Street had forecast.
   
But Coca Cola Co. turned in better-than-expected results and DaimlerChrysler AG pleased investors by saying about 13,000 Chrysler workers would lose their jobs under a plan to restore the U.S. operations' profitability by next year.
   
The flurry of news follows a day in which stocks showed a sharp climb -- the Dow Jones industrial average gained 102 points -- after news that two companies were vying for aluminum producer Alcoa Inc. helped drive a notion that Wall Street would see an uptick in acquisition activity.
   
In the first minutes of trading, the Dow Jones industrial average rose 14.82, or 0.12 percent, to 12,669.67.
   
Broader stock indicators were higher. The Standard & Poor's 500 index was up 2.75, or 0.19 percent, at 1,447.01 and the Nasdaq composite index rose 10.92, or 0.44 percent, to 2,470.80.

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Dollar falls as US retail sales figures disappoint
 
LONDON - The dollar weakened against the euro after softer-than-expected US retail sales figures, although losses were limited ahead of Federal Reserve chairman Ben Bernanke's key testimony in Congress.
   
US retail sales for the US were in January from the previous month, against analysts' expectations of a 0.3 pct rise. The news saw the euro climb to 1.3090 usd, were it settled as the market awaited Bernanke's testimony to begin at 1500 GMT.
   
"US retail sales were a bit weaker than the market consensus which saw the euro strengthen against the dollar," Niels From at Dresdner Kleinwort.
   
But From believes there will be no major movement until after Bernanke's speech.
   
"The market has already priced in positive comments from Bernanke on the US comment today, so if it is not up to expectations then we can expect to see the euro climb even higher against the dollar," he added.
   
Sterling remained relatively stable after the Bank Of England said it expects inflation to drop below the 2 pct CPI annual rate over the next 12 months before settling at that level over the medium term.
   
The estimate is based on market prediction of one more UK rate hike in the second quarter.
   
"Reading between the lines it would appear the Monetary Policy Committe could be split between holding rates or implementing another hike to 5.50 pct," said From.
   
He expects tomorrow's UK retail sales figures to support to the pound.

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Top Stories in Europe at 11.00 GMT

London - Vodafone is reserving the right to walk away from its planned purchase of a controlling stake in Hutchison Essar, India's fourth largest mobile operator, if litigation seeking to thwart the deal is launched, reports the UK's Financial Times.
 
InterContinental Hotels Group (IHG), in which the Barclay brothers have built a 5 pct stake, will next week announce its intention to return about 800 mln stg to investors as part of a 3 bln stg asset sell-off, according to a report in The Times newspaper.
 
Wolseley PLC, the building and plumbing materials supplier, is facing a 10 bln stg takeover offer from private equity firm Cinven, according to London freesheet City AM, citing sources. The paper said Cinven, advised by Goldman Sachs, has for three months been eyeing a bid to take the FTSE 100 company private.

Paris - Societe Generale reported a 6.3 pct rise in fourth quarter net profit to 1.179 bln eur, slightly below consensus estimates, with slower revenue growth in domestic retail banking and a rising cost-income ratio raising concerns over the outlook for 2007. Full-year net profit was in line with analyst forecasts at 5.221 bln eur, up 18.6 pct on 2005, while full-year EPS increased 15.2 pct to 12.33 eur.

SES Global said it has agreed to buy back the 19.5 pct stake held by General Electric Co for 1.238 bln eur in assets and cash. GE will swap its 103,149,900 shares in SES for shares in a new company, SES International Holdings Inc, comprising assets and 588 mln eur in cash, subject to certain closing adjustments.

EDF said sales rose 3.8 pct in the fourth quarter from last year's figures restated for accounting changes as limited growth in the core French market offset strong gains in the UK and Germany. EDF's full-year sales were 58.932 bln eur up 15.4 pct from 2005's restated 51.051 bln.

Air France-KLM said third quarter net profit tripled to 229 mln eur from 77 mln a year earlier as oil prices eased and passenger traffic stayed strong, but it expects to only break even in the fourth quarter. It cited traffic levels, unit revenues, forward bookings and fuel costs as factors that will drag down the fourth quarter results.

Gaz de France said it expects 2006 gross operating earnings to rise more than 20 pct year-on-year, to over 5 bln eur and net profit to exceed 2.2 bln eur.

Defense systems company Thales said full-year sales were 10.264 bln eur, up 1 mln from a year earlier, as business in the Land and Joint systems unit rose 10 pct to more than offset a 10 pct drop in sales from naval activities.
 
Stockholm - Swedish Match AB said fourth quarter pretax profits rose 33 pct to 853 mln skr, supported by 111 mln skr in capital gains and improving operating margins. Market expectations were for pretax profit of 762 mln skr, excluding the 111 mln skr capital gains, according to a survey by SME Direkt.

Electrolux AB said fourth quarter profit after financial items excluding items affecting comparability rose 21.3 pct to 1.935 bln skr on the back of improved profitability at its European appliance operations. Underlying operating profits rose 14.5 pct to 1.995 bln skr.

Oslo - Orkla ASA posted fourth quarter pretax profits ahead of market expectations, on the back of strong growth across all its divisions, and following a number of key acquisitions and investments.
 
For the fourth quarter, Orkla posted pretax profits of 2.97 bln nkr, up from the previous year's 1.54 bln, and ahead of the 2.58 bln consensus forecast of analysts polled by TDN Finans.

Frankfurt - Commerzbank AG said fourth quarter pretax profit rose to 592 mln eur from a year-earlier 454 mln, beating forecasts amid solid net commission income and a fall in risk provisions as the bank announced a 50 pct rise in its dividend and tweaked its 2007 return on equity target higher.
 
However net interest income missed targets and net profit, though rising to 352 mln eur from 338 mln eur a year earlier, missed expectations. Net profit was impacted by a higher than expected tax quota of more than 29 pct, said MerckFinck analyst Konrad Becker, adding that he had expected a quota of just 22.3 pct.

Milan - Fiat SpA said its commercial vehicle unit Iveco and India's Tata Motors Ltd have signed a memorandum of understanding to study the feasibility of cooperation in the commercial vehicle market.
 
Under the agreement, the two companies will study possible developments in the engineering, production, supply and distribution of products, and on components, the company said.

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Asian shares close higher on Wall St, NKorean nuclear disarmament

HONG KONG - Shares across the Asia-Pacific region closed higher after Wall Street rose overnight and with Korean shares boosted following a positive conclusion to the six-party talks on North Korea's nuclear disarmament, dealers said.
   
Tokyo shares finished higher for a fourth consecutive session after investors cheered gains in US stocks overnight and a weaker yen, with export-oriented technology shares rebounding from recent losses.
   
The Nikkei 225 Stock Average finished 131.19 points or 0.74 pct higher at 17,752.64, off a high of 17,789.92. The TOPIX index of all first-section issues added 9.41 points or 0.54 pct at 1,765.31, off a peak of 1,772.83.
     
Australian shares closed at new record highs as investors bought resource stocks after metal prices jumped in overnight trading. Continuing strong earnings reports also boosted the market during the day.
   
The S&P/ASX 200 ended up 23.9 points or 0.40 pct at a fresh record close of 5,960.5, beating yesterday's record close of 5,936.6. The key index also set a fresh intra-day record high of 5,975.9, edging closer to the psychological 6,000-point barrier.
   
The broader All Ordinaries index climbed 30.4 points to close at a record 5,937.7, also surpassing Tuesday's record close of 5,907.3 while setting a new intra-day record of 5,948.4.
   
Hong Kong shares were higher in afternoon trade on a blue-chip rebound after yesterday's steep drop, with Wall Street's strong gains helping sentiment.  At 3.20 pm the Hang Seng Index was up 141.60 points or 0.70 pct at 20,273.85.
   
In mainland China, A-shares in Shanghai and Shenzhen closed sharply higher on fresh fund inflows, with financial stocks and auto makers in favour. Nearly 50 companies closed up by their daily limits of 10 pct.
   
The Shanghai A-share Index was up 76.97 points or 2.59 pct to 3,050.40 and the Shenzhen A-share Index was up 16.61 points or 2.25 pct at 754.98.
   
Seoul shares ended sharply higher led by financials, with the KOSPI index hitting its best level this year.
   
Easing geopolitical concerns following a deal to begin dismantling North Korea's nuclear weapons program, combined with Wall Street's rally, promoted foreign investors to buy both stocks and futures.
   
The KOSPI index closed up 17.66 points or 1.25 pct at 1,436.10, off a high of 1,440.51 and a low of 1,430.01. North Korea agreed yesterday to begin closing its Yongbyon nuclear reactor and some other atomic facilities in return for fuel aid.

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Copper edges down as stocks rise but other metals climb

LONDON - Copper retraced yesterday's strong gains as LME stocks edged higher, although prices continued to be underpinned by strong demand levels.
   
Copper stocks were up by 1,650 tonnes to 214,900 tonnes, said daily LME inventory data. At 2.01 pm, LME copper for three-month delivery was down at 5,730 usd a tonne having risen 279 usd to settle at 5,749 yesterday.
    
While copper was moderately lower, all of the other base metals' prices were higher. "Given the strong tone in the rest of the group, we don't think (copper)prices will stay down for long," said Man Financial analyst Ed Meir.
   
Aluminium prices jumped again as market players mulled supply threats from Guinea, West Africa, where worker unions resumed strike action. The renewed strike disrupted bauxite mining, and bauxite and alumina shipments by Guinea, the world's leading exporter of the ore.
   
Aluminium was up at 2,845 usd a tonne against 2,820 usd at the close yesterday.
   
In other metals, tin extended gains from Monday after Indonesian tin producing company PT Koba Tin suspended shipments from Bangka, Indonesia, following an investigation into alleged illegal mining.
   
Tin was up at 12,770 usd a tonne against 12,595 usd at the close yesterday.
   
Lead was up at 1,700 usd a tonne against 1,675 usd at the close yesterday. Zinc was up at 3,225 usd against 3,220 usd while nickel rose to 37,350 usd against 36,000 usd.

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