US & World Daily Markets Financial Briefing 15-02-2007

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Qualcomm Dow up, Nasdaq down in early trading

NEW YORK  - Wall Street was narrowly mixed in early trading Thursday, pausing ahead of more remarks from Federal Reserve Chairman Ben Bernanke, whose upbeat take on inflation and economic growth a day earlier catapulted the Dow Jones industrials to new highs.
   
Bernanke was expected begin a second day of congressional testimony at 10 a.m. On Wednesday, he said exactly what investors wanted to hear: that the economy will keep growing modestly and inflation will continue to ease, a forecast that alleviated worries that policy makers might start hiking interest rates again.
   
A rate boost also looked unlikely to investors after economic data released Thursday, which showed a big jump in unemployment claims last week, and a huge drop in industrial output in January due to large cutbacks and layoffs in the auto industry.
   
Profit-taking ahead of the Philadelphia Fed's report on manufacturing held the market back somewhat, but stocks got a small boost from an analyst upgrade of chip maker Qualcomm Inc.
   
In the first hour of trading, the Dow rose 5.44, or 0.04 percent, to 12,747.30. On Wednesday, the Dow rose 87.01, setting new closing and trading highs and bringing its two-day advance to 189.31.
   
Broader stock indicators were lower. The Standard & Poor's 500 index was down 1.39, or 0.10 percent, at 1,453.91, while the Nasdaq composite index fell 1.34, or 0.05 percent, at 2,487.04.

The Russell 2000 index of smaller companies was down 0.92, or 0.11 percent, at 813.07.
   
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.70 percent from 4.74 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices slipped.
   
Oil prices fell 20 cents to $57.80 a barrel on the New York Mercantile Exchange, extending a tumble sparked a day earlier by a smaller-than-expected decrease in U.S. heating oil inventories.

Stocks in focus
   
The drop in the energy markets, as well as an earnings report from oil services provider Baker Hughes Inc. that missed analysts' expectations, put a damper on  company stocks.
   
Baker Hughes fell $5.50, or 7.65 percent, to $66.44.
   
An analyst upgrade of Qualcomm Inc. cheered some investors but it wasn't enough to keep technology stocks buoyed after Internet phone company Vonage Holdings Corp. posted a fourth-quarter loss.
   
Qualcomm rose 99 cents, or 2.5 percent, to $40.65.
   
Vonage fell 5 cents to $5.84.

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Dollar still weak ahead of last day in Bernanke testimony, US data

LONDON - The dollar remained weaker ahead of the second part of Federal Reserve chairman Ben Bernanke's two-day testimony to the US Congress and before the release of US data in the afternoon.
   
The dollar weakened yesterday after Bernanke said that "inflation pressures are beginning to diminish while also cutting 2007 GDP forecasts for the US. He also repeated, as in other speeches, that the Fed remains prepared to hike rates if inflation looks set to rise.
   
The comments saw investors selling the dollar, particularly against the euro.
   
Any dips in the euro against the dollar "are now viewed as a buying opportunity with medium term gains likely to target the 1.3295 level," said analysts at BNP Paribas.
   
Meanwhile, US data this afternoon may help drive the dollar. Investors will eye the Empire State manufacturing survey, industrial production and the Philadelphia Fed survey.
   
In the UK, the pound remained weaker after a surprise fall in retail sales in January.
   
Sales fell 1.8 pct month-on-month, whereas analysts were expecting a 0.1 pct rise on the basis of other surveys suggesting strong Christmas sales had spilled over into the new year.
   
Also this morning, data from the Royal Institution of Chartered Surveyors said house price growth slowed in January. A net balance of 28 pct more surveyors reported a rise in prices than a fall, down from 37 pct in December and well below analysts' forecasts for a much smaller drop to 32 pct, the survey showed.
  
Meanwhile, the Swedish krona also weakened substantially today after the central bank there said it expects interest rates to rise only by another quarter point before pausing this year. Markets were expecting two more hikes.
   
The krona fell to three and a half month lows against the euro, which rose to about 9.22 skr from 9.14 skr earlier this morning.

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The European Markets at 11.00 GMT

London - The world's largest alcoholic drinks producer Diageo PLC has reported H1 organic operating profit growth of 8 pct to 1.306 bln stg, on net sales up 6 pct to 4.022 bln stg. On the back of the strong performance, especially in North America and International regions, it upgraded its full-year guidance to 8 pct organic operating profit growth.

Engineer Tomkins PLC said it is in talks to sell its Dearborn Midwest contract engineering and Trico windscreen wiper systems businesses as it posted a 3.4 pct fall in adjusted annual profit on total operations to 298 mln stg.
 
Tomkins said a number of parties had expressed interest in Detroit-based Dearborn, which designs and services conveyor systems, while negotiations to sell Trico are ongoing. Trico and Dearborn, with annual revenues of about 360 mln usd and 200 mln usd respectively, have been earmarked for disposal for some time and both would be sold through an auction process, the firm said.

Zurich - Swedish-Swiss engineering group ABB Ltd said full year net profit rose to 1.390 bln usd from 735 mln a year earlier, boosted by growing revenues, higher capacity utilization and further cost reductions, but was slightly lower than expectations that centred around 1.441 bln usd. Looking ahead, ABB said it expects order growth to moderate in 2007 in view of the extraordinarily high growth rates experienced last year.

Credit Suisse Group reported a forecast-beating fourth quarter net profit of 4.673 bln sfr, up from 1.103 bln a year earlier, reflecting high levels of client activity and the success of its 'One Bank' integrated banking model.
 
The bank's top line was significantly boosted by a net capital gain of 1.817 bln sfr from the sale of its Winterthur insurance business to France's AXA, with net profit from continuing operations reaching 2.599 bln sfr.

Paris - Christophe de Margerie, the new chief executive of Total, said the group's Upstream oil production activities are unlikely to maintain their current profitability, due to higher taxes in oil producing countries and cost increases. But although the Upstream division will not maintain the 35.5 pct return on capital employed in 2006, Margerie said the company will continue generating a return on capital of at least 20 pct.

Tyremaker Michelin said net profit dropped 35.7 pct last year to 572 mln eur, as the company grappled with surging costs for rubber and other raw material prices, and weak automobile sales in the key markets of Europe and the US.
 
Operating profits fell 29.0 pct to 1.118 bln eur, with margins falling 3.3 points to 6.8 pct. Analysts had expected operating profit of 1.30-1.35 bln eur, according to a consensus forecast from Thomson Financial.

BNP Paribas said fourth quarter net profit jumped 28.8 pct to 1.719 bln eur, surpassing analyst estimates, with higher-than-expected growth in corporate and investment banking revenues. Full year net profit was also ahead of forecasts at 7.308 bln eur, up 24.9 pct on 2005.

IT services company Capgemini said net profit reached 293 mln eur last year, more than double the 141 mln reported for 2005 and easily surpassing analyst expectations. Operating profit climbed to 334 mln eur from 214 mln, on sales that hit 7.70 bln compared with 6.954 bln, a like-for-like increase of 12.1 pct.

Stockholm - Saab AB said fourth-quarter pretax profit fell to 400 mln skr from 662 mln a year earlier primarily on the back of a more than doubling of restructuring costs. The results include 333 mln skr in restructuring costs up from 158 mln skr last year.

Skanska AB posted a fourth quarter profit after financials of 1.218 bln skr, down 14 pct from a year earlier, and slightly below analysts forecasts of 1.291 bln skr. The result was hit by a writedown of 68 mln skr at the company's Czech operation, and a 285 mln skr writedown in Denmark.

Zurich - Zurich Financial Services Group reported a better-than-forecast full year net profit of 4.527 bln usd, up from 3.214 bln a year earlier, citing continued strength in its General Insurance segment as well as growth in its Global Life and Farmers businesses. Analysts had forecast net profit to rise to 4.007-4.426 bln usd, or 4.230 bln on average.

Frankfurt - The European Central Bank reiterated that it is exercising "strong vigilance" on inflation risks. "Strong vigilance remains of the essence so as to ensure that risks to price stability over the medium term do not materialise," the ECB said in its February monthly bulletin.

Amsterdam - ING Group NV posted better-than-expected results for the fourth quarter, with both the banking and insurance operations beating forecasts. Pretax profit excluding divestments and special items rose to 2.496 bln eur from 2.14 bln, compared to analysts' estimates of 2.093-2.341 bln eur.

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Asian shares close higher, testing record levels

HONG KONG - Shares across the Asia-Pacific region closed higher, with markets testing record highs following Wall Street's overnight rise and on domestic news, dealers said.
   
Tokyo shares closed firmer after investors were heartened by data showing the economy expanded at its fastest pace in nearly three years in the three months to December, helping lift the benchmark Nikkei 225 Stock Average to its highest level in nearly seven years.
   
The Nikkei finished 144.59 points or 0.81 pct higher at 17,897.23, off a high of 17,911.58. It was the index's highest closing level since May 8, 2000, when it settled at 18,199.96. The TOPIX index of all first-section issues climbed 11.40 points or 0.65 pct to 1,776.71, just off its intra-day peak of 1,777.98.
      
Before the market opened, the government said GDP had been 1.2 pct bigger in real terms in the fourth quarter than in the third, growing at an annual rate of 4.8 pct. Ten economists polled by XFN-Asia had expected, on average, quarter-on-quarter expansion of 0.9 pct. But after the Nikkei surpassed 17,900 points, there was profit-taking, dealers said.
   
Australian shares closed at record highs for a third consecutive trading session, with investors buoyed by the overnight rise on Wall St following a 'dovish' outlook from Federal Reserve chairman Ben Bernanke, suggesting that inflationary pressures are easing.
   
Overnight gains in metal prices supported resource stocks, while solid buying of the major banks and other sectors on favorable earnings reports pushed the indices nearer to the 6,000-point barrier.
   
The S&P/ASX 200 ended up 32.3 points or 0.54 pct at a fresh record close of 5,992.8, beating yesterday's record close of 5,960.5. The key index did set a fresh intra-day record high of 6,000. The broader All Ordinaries index climbed 31.4 points to close at a record 5,969.1, also surpassing Wednesdays' record close of 5,937.7 while setting a new intra-day record of 5,976.1.
   
Hong Kong shares were sharply higher in afternoon trade, led by property stocks after Ben Bernanke's comments, boosting investors' hopes for an interest rate cut later this year. At 3.15 pm the Hang Seng Index was up 324.25 points or 1.60 pct at 20,534.16.
   
In mainland China, A-shares in Shanghai and Shenzhen also finished sharply higher on strong follow-through buying and easing interest rate fears, with financial and property stocks in favor. Nearly 80 companies closed up their daily limits of 10 pct.
   
The Shanghai A-share Index was up 92.54 points or 3.03 pct to 3,142.94 and the Shenzhen A-share Index was up 25.13 points or 3.33 pct at 780.10.
   
Seoul shares ended higher for a third day, with the index at its highest level in nine months at one point, lifted by Wall Street and the North Korean nuclear deal. The upside was capped, however, by the won's surge against the US greenback and Japanese yen.
   
The KOSPI index closed up 7.53 points or 0.52 pct at 1,443.63, off a low of 1,441.89 and a high of 1,450.84.
   
Manila shares closed stronger on broad-based buying that lifted the main index to its highest in a decade, with investors upbeat about the outlook for the Philippine economy. With no bad news in sight, traders pushed the key index higher after it finished above the 3,300 psychological barrier yesterday.
   
At the close, the 30-company composite index was up 78.43 points or 2.38 pct at the day's high of 3,379.37. It hit a low of 3,300.94. It was also the index's best finish since Feb 10, 1997 when it ended at 3,386.02.

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Tin hits fresh all-time high as exports from PT Koba Tin dwindle

LONDON - Tin hit a fresh all-time high above 13,000 usd a tonne in London on reports Indonesian authorities have shut down most of PT Koba Tin's operations.
   
The shut-down temporarily sidelines about 17,000 tonnes of tin production, equivalent to about 5 pct of world output.
   
At 2.45 pm, LME tin for 3 month delivery was up at 13,100 usd a tonne against 12,700 usd at the close yesterday. Earlier, the metal hit 13,200 usd -- its highest ever level.
   
LME copper was up at 5,900 usd a tonne against 5,725 usd a tonne at the close yesterday.
   
Aluminium was up, still underpinned by worries over the general strike in Guinea, which has disrupted bauxite exports.
   
Bauxite is a raw material used in the production of alumina, the raw material used to make aluminium.
   
Over 100 people have been killed in the west African country since January, when protest erupted against the rule of President Lansana Conte.
   
LME aluminium was up at 2,840 usd a tonne against 2,828 usd at the close yesterday.
   
Nickel was up after surging 4.4 pct yesterday after an unusually large amount of cancelled warrants removed nearly half the available metal on the LME.
   
LME lead up was at 1,728 usd a tonne against 1,695 usd at the close yesterday, while zinc was up at 3,420 usd a tonne against 3.310 usd.

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