US & World Daily Markets Financial Briefing 14-09-2006

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Stocks fall in early trading

NEW YORK - Stocks fell in early trading Thursday as investors looked past an unexpected rise in retail sales and focused on an increase in import prices.
   
Investors feeling uncertain about next week's Federal Reserve meeting grew even more uneasy after the Labor Department reported import prices rose a larger than expected 0.8 percent in August. That gain, which raised concerns that the Fed might resume its string of interest rate hikes after pausing in August, canceled out any good feeling the market had about the retail sales report.
   
The Commerce Department said sales rose 0.2 percent last month, versus expectations of a decline.
   
A decline in stocks was expected after sharp rallies earlier this week, and because oil prices continue to rebound after seven days of losses. Oil prices continued their rebound Thursday after the United States reported a drop in crude inventories on Wednesday. Oil was up 13 cents at $64.10 a barrel in pre-opening trading on the New York Mercantile Exchange.
   
In the first hour of trading, the Dow Jones industrial average fell 34.98, or 0.30 percent, to 11,508.34.
   
Broader stock indicators were also down. The Standard & Poor's 500 index fell 3.01, or 0.23 percent, to 1,315.06 and the Nasdaq composite index slipped 6.26, or 0.28 percent, to 2,221.41.
   
Economic news also came from the Labor Department, which reported that the number of Americans filing claims for unemployment benefits fell to 308,000 last week, down by 5,000 from the previous week. The drop pushed claims to a seven-week low.

Stocks in focus

Among companies expected to see active trading, Xilinx after Wednesday's closing bell cut its quarterly sales forecast, blaming lower-than-expected revenue from its customers in Asia.
   
General Electric Co. was cut to neutral from buy at UBS, which said it believes earnings growth at the industrial conglomerate may be challenged by the shape of the yield curve, a bottoming out of reserves at GE Capital, higher tax rates, continued earnings softness at NBC and the eventual deceleration of aerospace aftermarket activity.
   
Stanley Furniture said it expects third-quarter sales to be below its prior view due to continued weakness in retail furniture. The company now sees a sales decline of 8 percent to 10 percent, with earnings per share of 27 cents to 29 cents, compared with its prior view of 38 cents to 41 cents.
   
Anadarko Petroleum Corp. agreed to sell its Anadarko Canada Corp. subsidiary to Canadian Natural Resources Ltd. for $4.08 billion.
   
Lattice Semiconductor Corp. said late Wednesday it now expects third-quarter revenue to grow 1 percent to 3 percent sequentially. The Hillsboro, Ore.-based company had previously forecast third-quarter revenue to be in a range of flat to up 4 percent sequentially.   

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Dollar little changed after US retail sales data, Swiss franc falters

LONDON - The dollar stayed little changed after news that US retail sales slowed only moderately, as markets remained cautious ahead of key US inflation figures tomorrow afternoon.
  
The Swiss franc fell back amid doubts whether the fourth quarter will bring another rate hike. It fell to all time lows against the euro and to its lowest since April 2004 against the pound. The pound, meanwhile, gained ground after some strong UK data.
   
US retail sales growth faltered during August, but not as much as anticipated, official figures showed today. The Commerce Department said retail sales slowed to just 0.2 pct after rising 1.4 pct in July. Still, the August performance topped predictions of a 0.2 pct decline.
   
"The dollar has seen some support from the data, but ahead of tomorrow's inflation data and upcoming G7 meeting reaction is likely to be limited," said said Mitul Kotecha at CALYON.
   
Jamie Coleman at Thomson IFR Markets said that while the retail sales data was no great shakes, "it does play into the notion of a soft landing for the US economy as opposed to an abrupt lurch into recession as some have forecast."
   
He said the dollar managed to rise briefly after the data partly because there had not been enough momentum to push the euro beyond recent trading ranges earlier.
   
The dollar faces a bigger test tomorrow when US CPI inflation is due. The headline figure is predicted to slow to 0.1 pct in August after rising 0.4 pct in July. The core CPI rate which excludes volatile food and energy prices, is predicted to be 0.2 pct for the second straight month.
   
Elsewhere, the Swiss franc eased back despite the Swiss National Bank's quarter point rate hike today which was much as expected. Investors are at odds whether the central bank will hike rates again in the final three months of the year. Each quarter so far has yielded a quarter point hike.
   
"Previously the fourth quarter meeting in December had been a shoe-in for a further 25 basis point hike but with the potential for further tightening now up in the air the market is scouring for signals that this bias will remain," said Matthew Foster-Smith at Thomson IFR Markets.
   
Henrik Gulberg at CALYON said the Swiss franc is weaker on the back of what must be seen as a very benign outlook for growth and inflation this and next year.
   
"The Bank is forecasting Swiss GDP growth at below 3 pct this year, which basically largely implies flat quarter-on-quarter growth in the third and fourth quarters," he added.

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The pound, meanwhile, got a boost from early signs that the Bank of England's unexpected rate hike early August has not dampened retail sales or house prices.
   
The data strengthened expectations that UK interest rates may well rise again in November, a factor not lost on the currency market especially seen in the light of higher inflation rates released earlier this week.
   
News out today revealed that retail sales held steady in August despite the rate hike and the fading effects of the World Cup the previous month.
   
The office for National Statistics said sales, on a seasonally-adjusted basis, rose by 0.3 pct in August from the previous month, against expectations of a 0.4 pct rise. Sales for July were revised up to show no change from the previous month against the initial estimate of a 0.3 pct fall.
   
Overnight UK data also helped underpin the pound's performance.
   
According to a survey from the Royal Institution of Chartered Surveyors home buyers in the UK ignored the unexpected rate hike in August to bid house prices higher by levels not seen since May 2004.
   
Separately, hawkish comments from the New Zealand central bank governor overnight have sparked a rally in the Kiwi dollar.

London

For a list of FTSE risers and fallers at 13.30 GMT, click here

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Asian markets close mostly higher as Wall St rebound boosts confidence

HONG KONG - Shares across the Asia-Pacific region closed mostly higher, with some strong rises, after Wall Street rebounded to a four-month high overnight.
   
Tokyo shares ended higher, with the market's mood lifted by US stocks having extended their gains overnight for the fourth consecutive session, dealers said.
   
A slight recovery in crude oil prices lent some support to oil-related shares, triggering buying of a range of stocks which are sensitive to commodity markets, such as trading houses, dealers said.
   
The blue-chip Nikkei 225 index closed 192.34 points or 1.2 pct higher at 15,942.39, off a high of 15,994.79.
   
The broader TOPIX index of all first-section issues closed 14.58 points or 0.9 pct higher at 1,598.13, after touching a high of 1,603.67.
   
"The rebound is a recovery from a sharp drop earlier this week and, also, the bullish tone today is partly supported by the appetite of overseas investors," said Toshihiko Matsuno, a senior strategist at SMBC Friend Securities.
      
Australian shares closed sharply higher on broad gains helped by renewed confidence in the resources sector, potential merger and acquisition activity and improving consumer confidence as fuel prices recede, dealers said.
   
They said the market was helped by share prices in New York bouncing to four-month highs and talk that Wal-Mart is looking at participating in the possible carve-up of leading retailer Coles Myer.
   
The S&P/ASX 200 ended up 53.2 points or 1.06 pct at 5,070.4, off a high of 5,071.9 and a low of 5,026.9.
   
Hong Kong shares, however, were weaker in afternoon trade due to profit taking in blue chips and with investors cautious ahead of the release of major company results late in the day. At 3.30 pm the Hang Seng Index was down 10.55 points or 0.06 pct at 17,199.49.
   
In mainland China, A-shares in Shanghai and Shenzhen closed mixed as selling due to liquidity fears was offset by bargain-hunting interest, with banks and metal stocks gaining ground, dealers said.
   
The Shanghai A-share Index rose 0.26 points or 0.01 pct to 1,777.12 and the Shenzhen A-share Index was down 0.47 points or 0.11 pct at 433.78.
   
Seoul shares finished sharply higher, rising nearly 2.0 pct, as foreign investors' interest in futures triggered program buying and as many options/futures contracts were rolled-over, dealers said.
   
The market moved in a very narrow range initially due to caution over triple witching today but soon gained momentum to close at its high for the day, they noted. Last-minute institutional investor support also contributed to the solid gains.
   
The KOSPI index closed up 25.62 points or 1.92 pct at the day's high of 1,358.75. The low for the day was 1,329.11.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Gold edges up as oil recovers, but downside risks remain; Copper gains

LONDON - Gold prices edged up, extending yesterday's recovery from a five-day losing streak, as oil prices fought back from near six-month lows while the dollar held firm ahead of key US retail sales data this afternoon.

At 11.55 am, spot gold, which earlier hit a high of 593.95 usd, was quoted at 593.15 usd, up from 589.30 usd at the time of the COMEX market close in New York yesterday. Other precious metals were also higher.
   
Spot silver was at 11.33 usd an ounce against 11.05 usd yesterday, platinum was at 1,189.50 usd against 1,181.00 usd, while palladium was at 329.50 usd against 314.00 usd.
   
Gold fell below 600 usd this week for the first time since June 30 in a sell-off that was triggered by steep falls in oil -- which sent the entire commodities complex lower -- and gains in the dollar.
   
It has continued to recover today, in line with gains in oil, and as "dealers seem prepared to wait for today's US data and the dollar's reaction to the figures", Standard Bank said in a note.
   
Copper prices rose as metals benefited from the recovery in gold and oil prices following very steep losses earlier this week, and as the sector took comfort from an IMF forecast for strong economic growth this year and next.
   
At 1.22 pm, LME copper for three-month delivery was at 7,470.00 usd a tonne against 7,460.00 usd at the close yesterday, lead was at 1,315.00 usd against 1,305.00 usd, zinc was at 3,310.00 usd against 3,200.00 usd and tin was at 9,045.00 usd against 8,900.00 usd.
   
Nickel and aluminium bucked the trend to trade down at 28,950.00 usd against 29,075.00 and 2,462.50 usd against 2,481.00, respectively.
   
Societe Generale analyst Stephen Briggs said metals were taking some comfort from the IMF report, but warned against exaggerating the importance of a report that was prepared some time ago.
   
"Although (the IMF report) is a bullish view of the world economy, it warns about the risks ahead," said Briggs.

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