US & World Daily Markets Financial Briefing 16-01-2007

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Stocks rise despite profit warnings

NEW YORK - Wall Street rose modestly in early trading Tuesday despite a weaker-than-expected manufacturing report for the New York region and a profit warning from software maker Symantec Corp.
   
Investors seemed to take in stride a report from the New York Federal Reserve that its Empire State Manufacturing index slipped to 9.1 in January, the lowest level reached since summer of 2005, from 22.2 in December. The report followed data last week that indicated the economy is growing.
   
Investors were focusing on the first wave of fourth-quarter earnings reports due in the next few days. Among the most watched stocks was chip maker Intel Corp., which was reporting its results after the closing bell.
   
Symantec, which makes Internet security software, slumped after it said 2007 profit will fall shy of Wall Street projections. In addition, home builder Centex Corp. also warned its third-quarter results would miss expectations.
   
In the first hour of trading, the Dow Jones industrial average rose 12.41, or 0.10 percent, to 12,568.49. Broader stock indicators also edged higher. The Standard & Poor's 500 index was up 0.55, or 0.04 percent, at 1,431.28, and the Nasdaq composite index rose 3.69, 0.15 percent, to 2,506.51.

Stocks in focus
   
The early stages of earnings season continues, with releases from Wells Fargo & Co. and Freeport McMoRan Copper & Gold Inc. on deck.
   
Intel Corp., the world's top chip maker, will report its quarterly results after the close of trade. Options traders have positioned themselves for an upside surprise out of Intel, according to a report in The Wall Street Journal. Separately, the Jerusalem Post reported that Intel will restructure its Israeli operations and create a joint venture with STMicroelectronics NV.
   
General Electric agreed to pay $4.8 billion to acquire the aerospace business of Britain's Smiths Group PLC, and also agreed to a joint venture with Smiths in the area of detection.
   
Pfizer Inc. may attract attention after the Journal reported that Chief Executive Jeffrey B. Kindler is close to announcing several thousand job cuts.
   
The AOL unit of Time Warner Inc. agreed to pay $900 million for Sweden's TradeDoubler, though a leading shareholder of the Swedish online advertising firm said the bid was too low. TradeDoubler is a rival of ValueClick Inc.
   
Elsewhere, Ventas Inc. agreed to buy Canada's Sunrise Senior Living Real Estate Investment Trust for C$1.14 billion.
   
Arris Group Inc. agreed to pay $1.2 billion for Norway's Tandberg Television, a maker of digital video hardware. 

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Euro buoyed by ZEW survey

LONDON - The euro remained relatively buoyed after a better than expected survey into the German economy, the euro zone's largest, reinforced expectations that the European Central Bank will deliver more rate hikes over the coming months.
   
The ZEW research institute said its economic expectations index for Germany rose 15.4 points from a month earlier to minus 3.6 points in January.
      
The ECB is expected to raise its benchmark refi rate another quarter point to 3.75 pct again in March.
       
Elsewhere, the pound recovered some earlier losses, which had been prompted by earlier UK inflation data failing to match some of the market's highest estimates.
   
Analysts said the rise in the BoE's target rate of inflation to its highest level since records began was well within market expectations following last week's surprise interest rate hike from the central bank.
   
Official figures showed CPI inflation up 3.0 pct in the year to December, up from 2.7 pct in November. Though that was the highest since the series began in January 1997, it had been priced in by the market following last week's BoE decision to raise its key repo rate to a five and a half year high of 5.25 pct.
   
The BoE is charged with targeting annual CPI inflation at 2.0 pct on a two-year horizon. If the rate were to deviate by more than 1 pct above or below this level, the governor Mervyn King would have to write a letter to the Chancellor of the Exchequer Gordon Brown, something that has never happened since the Bank was granted independence in 1997.
   
Analysts said King will have his letter poised and another hike, possibly as soon as next month, remains on the cards. Much will depend on the sales during January but also on what happens to wages in the current pay round.
   
Today's data, especially the sharp increase in the RPI rate, which is used in pension payments and often in pay deals, may well stoke those latter concerns at the BoE. RPI rose by an annual rate of 4.4 pct in December, its highest level since December 1991 and follows a 3.9 pct rise in November.

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The European markets at 13.00 GMT

London -  Leading shares were modestly weaker midday, holding off morning lows on hopes for an opening advance on Wall Street but with falls by retail issues a focus amid worries the highest annual UK CPI inflation rate for a decade could bring further Bank of England rate increases. At 12.07 pm, the FTSE 100 index was 2.3 points lower at 6,261.2, below the late morning peak of 6,266.4, but well off an earlier low of 6,229.9.

Frankfurt - German shares were flat in midday trade, after the main index finished at its highest level since Feb 2001, but lacking direction from Wall Street. At 12.01 pm, the DAX 30 index was down 1.39 points or 0.02 pct at 6,730.35, having moved in a range of 6,710.26-6,746.63.

Paris - Share prices were down slightly at midday in very light trade, with the publication of a stronger-than-expected rise in January's ZEW economic expectations index in Germany having little impact as investors wait for direction from Wall Street. At 12.57 pm, the CAC-40 index was down 8.55 points or 0.15 pct at 5,622.53 on volume of 1.7 bln eur.

Milan - Share prices were little changed in midday trade, as gains in BPU, on a broker upgrade, and in STMicro were pared by losses among Fastweb and other blue-chips. At 12.45 pm, the Mibtel index was down 0.02 pct at 32,488 points and the S&P/Mib was up 0.1 pct at 42,312, while volumes stood at 2.2 bln eur.
   
Madrid - Share prices were higher midday, rebounding from early profit-taking, with market newcomer Vueling up more than 8 pct. At 12.25 pm, the IBEX-35 index put on 43.4 points to 14,458.5, after trading in a range of 14,353-14,463, on turnover of 2.0 bln eur.

Amsterdam - Shares were up in early afternoon trade, with Buhrmann leading gainers after Goldman Sachs added the Dutch office-products group to its 'convictions buy' list. At 1.24 pm, the AEX was up 0.59 points or 0.12 pct at 505.96, after opening at 505.94.

Stockholm - Shares reversed minor early losses and edged into positive territory in midday trade before the US open, with Nokia leading the market higher after a broker upgrade. At 12.05 pm, the OMX Stockholm index was up 0.34 pct at 384.27 points, while the OMX Stockholm 30 index was up 0.33 pct at 1,177.69.
   
Zurich - Share prices were flat in thin afternoon trade, in line with Wall Street futures. At 12.30 pm, the Swiss Market Index was 2.25 points up at 9,103.9, and the Swiss Performance Index was 9.11 points up at 7,197.28.

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Asian shares close mostly lower in rangebound trade, Tokyo awaiting rate news

HONG KONG - Shares across the Asia-Pacific region closed mostly lower in rangebound trade, with Wall Street closed for a holiday and Japanese investors awaiting the rate decision by the Bank of Japan this week.
   
Tokyo shares closed flat in directionless trade as many investors moved to the sidelines ahead of the Bank of Japan's (BoJ) two-day policy board meeting which starts tomorrow.
   
Recent remarks by government officials that it may be too soon for a rate hike have added to uncertainty over what the BoJ's decision will be at the end of its meeting. The blue-chip Nikkei 225 Stock Average closed down 7.46 points or 0.04 pct at 17,202.46, after moving between 17,175.85 and 17,287.96.
   
The TOPIX index of all issues listed on the Tokyo Stock Exchange's first section ended the session down 1.04 points or 0.06 pct at 1,703.54, off a low of 1,699.29 and a high of 1,710.08.
   
Remarks from officials of the ruling Liberal Democratic Party have fueled uncertainty over prospects for a 25-percentage-point hike in the overnight call rate, as many market players were expecting an increase this week.
   
Australian shares closed mixed after hitting intra-day records with no leads from US markets and base metal prices mixed in London trading. Sentiment rose on companies such as Telstra, bringing the stock to its highest level since late 2005, with analysts speculating the leading telco could be the buy of the year.
   
The S&P/ASX 200 slipped 0.4 points or just 0.01 pct to close at 5,673.4, below yesterday's record close of 5,673.8. The key index fell off an intra-day record high of 5,705.4 and well above the low of 5,665.3.
   
Hong Kong shares were weaker in afternoon trade with mild profit-taking in some blue chips offset by continued interest in property stocks and select China plays. At 3.30 pm the Hang Seng Index had fallen 95.72 points or 0.48 pct at 19,972.84.
  
In mainland China, A-shares in Shanghai and Shenzhen shrugged off early weakness and closed higher on sustained follow-through buying, with financial issues and retailers gaining ground. Over 70 companies closed up their daily limits of 10 pct.
   
The Shanghai A-share Index gained 28.33 points or 0.96 pct to 2,963.86 and the Shenzhen A-share Index was up 21.83 points or 3.35 pct at 674.04 on turnover of 40.17 bln yuan.
   
Seoul shares closed slightly lower, ending three days of gains, with investors cautious ahead of Intel's earnings announcement and the rate decision by the Bank of Japan. After opening slightly higher, the market traded in a tight range, with the downside supported by Samsung Electronics' share buy back program.

The KOSPI index closed down 1.25 points or 0.09 pct at 1,389.71.

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Copper reverses earlier losses as LME stocks fall; oil steadies

LONDON - Copper prices reversed earlier losses to trade higher after LME inventories of the metal declined for the first day in three. At 1.11 pm, LME copper for three-month delivery, which earlier hit a low of 5,470 usd a tonne, was at 5,700 usd against 5,630 usd at close yesterday.
   
The LME said in a daily report earlier that stocks of the metal held in its warehouses declined by 2,550 tonnes to a total 196,900 tonnes. "A net 2,550 tonne fall in LME copper stocks has helped to lift prices away from the lows," said UBS Investment Bank analyst Robin Bhar.
   
LME copper traded down earlier this session as Shanghai copper contracts fell by their 4 pct daily limit amid concern over rising stocks in Asia. Copper lost some 12 pct of its value in the first week of this year amid a commodities-wide rout and rising stockpiles.
   
Although stocks on the LME declined today, they remain nearly double their levels at the start of the year. Many participants expect the copper will remain the laggard of the complex this year, as last year, as the market moves into a slight surplus.
     
In other metals, aluminium was up at 2,705 usd a tonne against 2,690 usd, zinc edged down to 3,775 usd against 3,780 usd, nickel surged to 34,300 usd against 33,200 while tin rose to 10,575 usd against 10,550 usd.

Oil edged up as the market found some support from reports the deadly ice storms that have killed some 41 people in the US, are moving into the Northeast of the country - the world's largest heating oil consumer.
   
Gains were limited, however, by renewed doubts OPEC has the resolve to stem this year's 13 pct price plunge by calling an emergency meeting to cut output further.
   
At 11.06 am in London, front-month Brent North Sea crude contracts for February delivery, which expire later today, were up 30 cents at 53.37 usd a barrel, after edging up 3 cents yesterday to close at 53.12 usd.
   
Crude oil futures were little moved in early trade, with the March contract up 8 cents at $53.95 a barrel. NYMEX floor trading was closed yesterday for Martin Luther King Jr Day.

Accuweather said earlier the deadly ice storms that pummelled the southern plains and the Midwest over the weekend have begun sending wintry weather into South Texas and the US Northeast.

Earlier in the session, oil prices fell after OPEC President Edmund Daukoru said cartel members should wait until February to see the effects of their output cuts before deciding on further reductions.

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