US & World Daily Markets Financial Briefing 15-08-2006

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Stocks are higher in the opening minutes, with traders turning their focus to second-quarter earnings results from top retailers including Wal-Mart Stores and Home Depot and to wholesale level inflation.

After the opening bell, the Dow Jones industrials gained 44.75 points to 11,142.62, the S&P 500 rose 5.29 points to 1,273.50, and the Nasdaq added  3.67 points to 2,092.71.

On Monday, an early rally couldn't hold up, with the Dow industrials ending the session up less than 10 points, and the S&P 500 and Nasdaq Composite also sporting tepid gains.

Concerns about whether two inflation reports due out this week will cause the Federal Reserve to resume its rate-hike campaign hurt stocks.

Inflation at the wholesale level edged up by the smallest amount in five months in July as falling food prices helped offset another rise in energy costs. The Labor Department reported that wholesale prices increased a slight 0.1 percent in July, far below the 0.5 percent jump in June.

The August Empire State manufacturing poll is forecast declining to 13.9 from 15.6, according to economists polled by MarketWatch.

The dollar was steady against rivals ahead of that data. Crude-oil futures weakened 65 cents to $72.88 a barrel.

On the earnings front, investors will focus on Wal-Mart Stores, Home Depot and Staples Inc. figures.

Wal-Mart Stores said second-quarter net income dropped 26 percent to $2.08 billion, or 50 cents a share, after taking a $863 million loss on the agreed sale of its German operation to Metro AG. From continuing operations, Wal-Mart net income rose 6 percent to $2.98 billion, or 72 cents a share, with revenue up 11 percent to $85.43 billion, driven by international acquisitions. Analysts polled by Thomson First Call were looking for earnings of 72 cents a share on revenue of $86.24 billion.

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Home Depot said second-quarter net income rose 5.3 percent to $1.86 billion, or 90 cents a share, and said that it now expects its 2006 sales and earnings to be at the low end of guidance due to the current economic environment and its reinvestment program. On an adjusted basis, earnings were 93 cents a share in the latest period, stripping out a charge for retroactive tax and related interest. Analysts polled by Thomson First Call expected the company to post earnings of 92 cents a share.

Agilent may climb after the technology testing company posted better fiscal results than forecast.

A plan to cut 1,700 jobs by CA Inc. may be well received. The company also reported a 64 percent profit decline.

Medical imaging company Tripath Imaging should jump after receiving a $350 million, or $9.25 a share, takeover offer from Beckton, Dickinson and Co.

Dell Computer declined over 1 percent in Frankfurt after recalling 4.1 million batteries in laptops. Dell said it's not expecting the recall to have a material effect on operations or financial position.

Shire rallied in London after reaching a deal with Barr on when a copycat version of its attention-deficit disorder drug can be rolled out.

International markets saw some below-average volumes, with markets in South Korea and Italy closed all together for holidays. The Nikkei 225 in Tokyo and the FTSE 100 in London both saw modest losses.

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German shares rose sharply in response to US PPI data which suggested that US inflation remains under control, while positive guidance from EON and a weaker tone to crude oil prices also lifted sentiment, dealers said.

At 2.50 pm, the DAX 30 index was 67.63 points or 1.22 pct higher at 5,762.20, having moved between a low of 5,664.89 and a high of 5,763.89 in today's session.

The MDAX was at 7,978.40, up 79.4 points or 1.00 pct, while the TecDAX was at 638.89, up 4.38 points or 1.05 pct.

The DAX futures contract was at 5,776.00, up 105.50 points, while bund futures were at 116.28, up 0.26 points.

The euro last traded at 1,2771 usd up from 1.2735 in London midafternoon trade.

The DAX jumped over a percent after data showed that US inflation at the wholesale level slowed in July as prices outside of energy and food fell for the first time since October.

UK blue chips remained weak but held off session lows at midday, with Wall Street seen pushing higher in early deals, lifted by an easier oil price, although the mood could turn cautious if the first of this week's key US inflation reports, July PPI numbers, disappoint, dealers said.

At 11.53 am, the FTSE 100 index was 16.8 points lower at 5,854.1, above the session low of 5,845.0 but below the opening peak of 5,866.4.

All the broader FTSE indices were lower, aside from the techMARK 100 index.

Volume remained thin, however, with just 611 mln shares changing hands in 86,404 deals.

Looking ahead to Wall Street, spread bettors IG Index expect the DJIA to open around 16 points higher at 11,113 after finishing 9.90 points firmer at yesterday 11,097.90.

Crude prices slipped back slightly again today as the fragile truce between Israel and Lebanon entered its second day. 

In London, Brent North Sea crude for September delivery fell 22 cents to 74.08 usd per barrel in electronic trading.

New York's main contract, light sweet crude for delivery in September, slid 18 cents to 73.35 usd per barrel.

However much will depend on the reaction to today's US wholesale inflation numbers, which come ahead of tomorrow's key consumer inflation report with its implications for US interest rates.

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Shares across the Asia-Pacific region closed mixed with investors on the sidelines ahead of the release of the US producer price index (PPI) later today and of the US consumer price index (CPI) tomorrow, dealers said.

Tokyo shares ended mixed ahead of the data releases and with many market participants away on their summer holiday, dealers said.

The blue-chip Nikkei 225 Stock Average closed 40.92 points or 0.3 pct lower at 15,816.19, after trading between 15,807.72 and 15,913.34.

The broader TOPIX index of all first-section issues gained 4.10 points or 0.3 pct at 1,605.12. The index moved between 1,599.13 and 1,611.44.

After opening weaker as investors opted to pocket profits from the Nikkei's 290-point surge yesterday, stock prices moved back and forth over the gain line with investors unwilling to push equities decisively in one direction. 

Analysts project that the year-on-year increase in the US headline PPI will have declined to 4.6 pct last month from 4.9 pct in June -- which was the fastest rate of increase since January.

Investors are looking for new clues about if and when the US Federal Reserve will raise interest rates again, the US central bank having warned that inflation remains a concern.

Australian shares closed lower as weaker-than-expected earnings reports from some of Australia's leading companies led to selling on the broader market, dealers said.

Wesfarmers, Cochlear and Boral all released results which disappointed investors and resource stocks also fell on weaker commodity prices.

The S&P/ASX 200 lost 35.3 points or 0.71 pct to close at 4,936.0.

The benchmark indicator closed off the day's low of 4,929.7 and below a high of 4,977.0.

Hong Kong shares were flat in afternoon trade with volume thin ahead of the US economic data and a lack of fresh leads.

At 3.29 pm the Hang Seng Index was down by 22.24 points, or 0.13 pct, at 17,267.47.

In China, A-shares in Shanghai and Shenzhen closed higher on hopes for new  und inflows after a report that domestic insurers will be allowed to double their  tock investment to 10 pct of their assets, dealers said.

The Shanghai A-share Index rose 26.38 points, or 1.60 pct, to 1,677.41 and the  henzhen A-share Index was up 6.95 points at 410.76.

The Korean market was closed for a national holiday.

In Taiwan, share prices closed little changed, with gains by the electronics sector  in the back of liquidity-driven interest offsetting weakness in financial and construction stocks, dealers said.

The weighted index closed up 3.23 points or 0.05 pct at 6,615.13, off a high of 6,628.50 and a low of 6,595.35, on turnover of 68.60 bln twd. 

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Oil prices were higher as Iranian president Mahmoud Ahmadinejad rejected a UN Security Council resolution demanding Tehran halt sensitive nuclear work.

Tehran's stance added a fresh element of uncertainty to a market already on edge about about supply conditions in the Middle-east.

Oil prices jumped higher in knee-jerk reaction to the news but the initial buying has since faded somewhat as investors predict months of wrangling ahead.

In London, at 3.08 pm BST, Brent North Sea crude for September delivery was up 9 cents to 74.39 usd per barrel.

New York's main contract, light sweet crude for delivery in September, was up 17 cents at 73.70.

Bema Gold Corporation said high grade mineralisation has been discovered in two new zones at its 75 pct owned Kupol project in Chukotka, Russia.

Fifty-two holes totaling 18,484 metres have been completed to date of the
original 20,000 metre 2006 drilling programme.

Bema said drilling is ongoing with two drills exploring the new discoveries and a third drill continuing to test other targets on the property.

Antofagasta PLC has launched a 527 mln aud bid to acquire Australia's quatorial Mining Ltd, rivaling the 462 mln aud offer made by Canada's Quadra Mining Ltd in July.

Antofagasta said it has entered into an agreement with AMP Life Ltd, which owns a majority stake in Equatorial, to acquire a 19.99 pct stake in Equatorial for 8 aud per share. It also made a cash offer of 11.20 aud per share for the rest.

The group said its bid represents a premium of 21 pct to Quadra's offer of 9.26 aud per share and 60 pct to Equatorial's share price at the close of trade on July 19 before Quadra's offer was announced.

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