US & World Daily Markets Financial Briefing 15-02-2006

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U.S. Stocks at a Glance

U.S. stocks turn higher on Bernanke testimony

       
NEW YORK - U.S. stocks turned higher Wednesday as investors breathed a sigh of relief that Fed chief Ben Bernanke's congressional testimony was not more hawkish on inflation and interest rates.
   
The Dow Jones Industrial Average was last up 38 points at 11,066. The Nasdaq Composite Index rose 15 points at 2,276 while the S&P 500 Index rose 5 points to 1,280.
   
Bernanke told Congress more rate hikes "may" be needed as the threat of higher inflation persists.
   
"Bernanke really hasn't said anything that has come as a surprise to anybody thus far," said Michael Malone, trading analyst at SG Cowen.
   
Bernanke said higher energy prices could still spill over into wider price inflation while the risk remains that "output could overshoot," putting further upward pressure on prices.
   
In these circumstances, the FOMC judged that some further firming of monetary policy may be necessary, an assessment with which I concur," Bernanke said in remarks prepared for delivery to the House Financial Services panel.
   
The Federal Open Market Committee, the Fed's interest-rate setting body, has raised its short term-rate 14 times in a row to 4.5% in a bid to slow economic growth and choke off inflation.
   
On the broader market for equities, advancers outpaced decliners by more than 2 to 1 on the New York Stock Exchange, and led by a similar margin on the Nasdaq.
   
On the data front, the latest report on the health of the nation's manufacturing sector was something of a double-edged sword for investors.
   
Manufacturing activity in the New York area held steady in February, the New York Federal Reserve Bank said. The bank's Empire State Manufacturing index inched higher to 20.3 in February from 20.1 in January. The increase was unexpected.

However, the prices paid index, a key measure of inflation, rose to 52.8 in February from 46.6 in the previous month.
   
Also, U.S. industrial output fell 0.2% in January while capacity utilization soared to 80.9%, the Federal Reserve said. 

The January decline was led by a record 10.1% drop in utilities' output, reflecting unseasonably warm winter weather.

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Forex
   
The dollar fell further as the Fed chief made clear more rate hikes may be
in the offing.
   
Earlier the greenback was under pressure after the Treasury Department reported a decline in capital flows into the United States in December. The drop was led by a drop in private investors' purchases of Treasury bonds and notes.
   
The euro rose 0.3% to $1.1948. Against the Japanese yen, the greenback fell 0.7% to 116.81.
   
Reaction on the bond market to the capital flows data was muted as fixed-income traders remained on hold ahead of Bernanke's speech.
   
The benchmark 10-year note was up 4/32 at 99 8/32, with its yield at 4.59%.
   

Merrill seals BlackRock deal
   
Merrill Lynch said Wednesday it has agreed to merge its investment management business with BlackRock Inc. in a deal that will create a firm with nearly $1 trillion in assets under management.
   
Merrill will hold a 49.8% stake and a 45% voting interest in the company that will operate under the BlackRock name. Merrill shares rose 22 cents to $75.38 while BlackRock's stock surged 8% to $157.70.
   
Stocks on the move
   
Shares in Blue Coat Systems Inc. tumbled more than 18% to $19.89 after the maker of network-security products forecast results for the current quarter that
are well below analysts' estimates.
   
Abercrombie & Fitch Co. fell 86 cents to $67.96 after the fashion retailer told investors that earnings expectations for the year were overblown. The warning came as the New Albany, Ohio-based company posted a 58% rise in fourth-quarter profit.

London

For a list of FTSE risers and fallers at 14.30 GMT, please click here

Paris

Paris shares extend losses late afternoon as Total, BNP slide

At 3.31 pm the CAC-40 index was down 29.47 or 0.59 pct at 4,931.87. Volume was 3 bln eur. On the Matif, February CAC-40 futures were trading down 29.5 points at 4,933.

BNP Paribas was the sharpest single decliner on the market, off 2.30 or 3.02 pct at 73.80 after fourth quarter operating profit fell short of market expectations.
   
Net profit of 1.335 bln eur came in midway through the consensus range of 1.277-1.351 bln but gross operating profit fell short, coming in at 1.953 bln compared to estimates of 2.048-2.115 bln.

Among gainers, Danone added 1.60 or 1.76 pct at 92.40 after full-year results arrived in line with forecasts and as investors welcomed news of an increased dividend and share buybacks.
   
Danone reported full-year operating profit from ongoing activities of 1.738 bln eur, with sales of 13.024 bln and EPS of 4.14 eur.
   
The company said it plans a 26 pct increase in its full-year dividend to 1.7 eur.

Frankfurt

German shares flat midafternoon as US seen uninspiring ahead of Bernanke
speech

At 2.44 pm, the DAX 30 index was 2.12 points or 0.04 pct lower at 5,761.28, having moved between 5,745.83-5,775.14 so far this session.
   
The MDAX was at 8,116.59, up 4.48 points or 0.06 pct, while the TecDAX was at 713.30, up 2.48 points or 0.35 pct.
   
The DAX futures contract was at 5,775.00, down 0.50 point or 0.01 pct, while bund futures were at 120.45, up 0.28.

Auto stocks remained among the worst performers in today's session, with Volkswagen falling 0.91 eur or 1.57 pct to 56.98 to the bottom of the DAX following solid gains in the last few days.
   
Peer BMW lost 0.52 to 39.53 while DaimlerChrysler slipped 0.21 to 49.69.
   
Deutsche Post slid 0.31 to 23.12, as investors mulled the company's full-year 2005 results, which included a weak performance by the Express unit due to an impairment charge.

At the other end of the market, Henkel gained 1.49 eur or 1.68 pct to 90.17.
   
Commerzbank was up 0.29 at 29.42, after the bank reported fourth quarter results that prompted WestLB to raise its price target to 35 eur from 33 and to reiterate its 'buy' rating.

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Asia at a Glance

Asian shares close mostly down, Tokyo slips as investors await Bernanke speech

       
HONG KONG - Share prices across the Asia-Pacific region ended mostly lower, with Tokyo weaker as investors opted to pocket profits in cautious trading ahead of the first congressional testimony of new US Federal Reserve chairman Ben Bernanke later today, dealers said.
   
The Nikkei 225 Stock Average index ended down 252.04 points or 1.6 pct at 15,932.83, its session low.
   
The broader TOPIX index of all First-Section shares lost 10.96 points or 0.7 pct to 1,624.28, above a low of 1,621.80.
   
Shares got off to a firmer start on the back of overnight gains in New York as a pullback in oil prices and robust retail sales data helped ease concerns about a US economic slowdown.
   
However, once the round of purchases waned, investors eventually chose to take profits before they gauge the new Fed chief's thoughts on the outlook for interest rates.
   
"Market participants turned bearish as caution ahead of Bernanke's speech eventually prevailed in the market. The market was short of upward momentum owing to a dearth of strong fund inflows from overseas investors," said Nikko Cordial Corp equity chief Hiroichi Nishi.
   
He noted that foreign investors were net sellers in pre-opening orders for the sixth trading day in a row.
   
Share prices in Australia finished lower with investor sentiment mixed after major stocks reported strong profits, dealers said.
   
They said banking stocks were mixed ahead of Bernanke's testimony, while
Commonwealth Bank rose after announcing a 16.8 pct increase in net profit for
the half-year.
   
Dealers said leading resources company BHP Billiton gained after reporting a 48 pct jump in first half net profit in addition to plans to return two bln usd to shareholders over the next 18 months, while Rio Tinto slipped on the day.
   
The S&P/ASX 200 fell 29.2 points or 0.60 pct to close at 4,835.0, well off the record close of 4,956.7 set on Feb 1.
   
In Hong Kong, shares were trading lower as investors locked in profits in selected banking and property stocks following early gains, with caution renewed ahead of Bernanke's testimony, dealers said.
   
At 3:36 pm, the Hang Seng Index was down 36.59 points or 0.24 pct at 15,388.73.
   
In mainland China, A-shares in Shanghai and Shenzhen closed firmer on follow-through interest with banks and airlines in demand, dealers said.
   
The Shanghai A-share Index rose 13.44 points to 1,362.66 on turnover of 14.60 bln yuan and the Shenzhen A-share Index was up 0.18 point at 329.55 on turnover of 7.70 bln yuan.
   
Share prices in Seoul ended sharply lower in volatile trade, reversing the previous session's advance, with large cap IT stocks leading the decline, dealers said.
   
Wall Street's overnight rise and easing oil prices brought on a firm start, with the index at one stage rising through 1,340 points.
   
But intensified program selling along with foreign investor sell-offs sent the index to a nearly two pct loss, with a downturn in Tokyo shares weighing on investor sentiment.
   
The KOSPI index closed down 24.37 points or 1.83 pct at 1,303.84.

Asian Bourse Round-Up

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Commodities

Gold futures dropped as investors continued to lock in gains after a sharp run-up in the price of the precious metal over the last six months. Gold for April delivery was last down $3.70 at $545.20 an ounce.
   
Crude futures edged higher, but remained under $60 a barrel as traders await weekly supply data that are expected to show the nation amply supplied with oil and its products.
   
The benchmark March contract was last up 28 cents at $59.90 in New York
trading.

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