US & World Daily Markets Financial Briefing 16-03-2006

U.S. stocks rise on tame inflation data, earnings

NEW YORK - U.S. stocks rose in early trading Thursday on strong earnings out of Bear Stearns, and on tame inflation data that boosted hopes the Federal Reserve may end its cycle of interest-rate increases sooner rather than later.
   
The Dow Jones Industrial Average was last up 27 points at 11,237. The S&P 500 rose 2.5 points to 1,305 while the Nasdaq Composite Index climbed nearly 6 points to 2,317.
   
Both the Dow industrials and the S&P 500 are at their best levels in nearly five years. 
    
Over the last two years, the Fed has raised its key short-term interest rate 14 times in a bid to slow the pace of economic growth and keep inflation at bay. Its Fed funds rate currently stands at 4.5%.
   
Fitzpatrick said strong quarterly results from Bear Stearns were also boosting sentiment.
   
On the broader market for equities, advancers outpaced decliners by nearly 2 to 1 on the New York Stock Exchange, and by 14 to 9 on the Nasdaq.
   
The consumer price index rose 0.1% in February, as falling prices for energy, food and clothing offset higher prices for medical care, shelter and air fares, the Labor Department reported. The increase matched Wall Street's expectations.
   
The core CPI, meanwhile, increased 0.1%, a tick lower than the 0.2% gain expected by economists polled by MarketWatch.
   
On a less positive note, the nation's pace of constructing new homes slowed in February after soaring to a 12-year high in January, the Commerce Department
estimated.
   
New applications for state unemployment benefits rose by 5,000 to 309,000 in the week ending March 11, the highest level since December, the Labor Department said.

Investment banking continues to shine
   
Shares in Bear Stearns rose 0.8% to $136.31 after the investment bank posted quarterly earnings that topped analyst estimates, driven by a 20% increase in capital markets revenue.
   
The company joins Goldman Sachs and Lehman Bros. in reporting results that came in well ahead of Wall Street expectations.

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Altria Group Inc. shares climbed 43 cents to $74.30 after the food and tobacco giant said it plans to record roughly $1 billion in tax benefits in the first quarter following the conclusion of an examination of its tax returns running from 1996 through 1999 by the Internal Revenue Service. The company lifted its 2006 earnings outlook as a result of the tax decision.
   
Shares in ConAgra Inc. fell 6.9% to $19 after the packaged-foods giant cut its dividend by 34% as part of a series of moves aimed at boosting its long-term operating performance.
   
Ford Motor Co. fell 8 cents to $7.77 after J.P. Morgan slashed its rating on the carmaker to underweight from overweight. The broker cited concern about sports utility vehicle sales and the launch of a General Motors Corp. pick-up truck to rival Ford's own product offering.
   
Not all broker notes were as critical. Merrill Lynch upgraded telecommunications technology company Qualcomm Inc. to buy from neutral. Merrill said investors should focus on Qualcomm's growth rather than a European Commission "abuse of dominance" investigation that could take years to complete. Qualcomm shares rose 1.8% to $50.72 in early action.

Forex

Dollar slides to six-week low vs. euro on benign CPI
 
NEW YORK - The dollar moved broadly lower Thursday after a Labor Department report showed U.S. core consumer price inflation remains benign, reducing expectations for further Federal Reserve interest rate hikes.
   
The euro was up 0.5% at $1.2122. Against the Japanese yen, the dollar was off 0.2% at 117.23.

Also Thursday, the Labor Department said new applications for state unemployment benefits rose by 5,000 to 309,000 in the week ending March 11, the highest level since December.
   
Initial claims have risen three weeks in a row and five of the past six weeks since hitting a six-year low of 273,000 in late January.
   
Economists polled by MarketWatch expected claims to fall to about 300,000.
   
Late Wednesday, two top officials of the Federal Reserve suggested that the central bank has to remain fast on its feet, ready to respond with rate moves in either direction as economic data unfolds. Both are voting members of the FOMC this year.
   
But remarks from San Francisco Fed president Janet Yellen added to the slightly bearish sentiment in the dollar.
   
"On the one hand, I will be alert to any incoming data suggesting that economic growth is less likely to slow to a sustainable pace or that inflation is less likely to remain contained; however, I will also be looking for signs of the delayed effects on output and inflation of our past policy actions and will be sensitive to the possibility that policy could overshoot," Yellen said.
   
In an earlier speech, Atlanta Fed president Jack Guynn said the risks between an unwanted spurt of inflation and a sharp drop in growth are in balance.
   
The greenback has suffered in recent days with heightened uncertainty over the Federal Reserve's future monetary policy. Investors are now wary about what the Fed will do after the March meeting after emerging reports suggested that the central bank may wrap up its rate-tightening campaign sooner than market thought.

Elsewhere, the British pound edged higher as February retail sales in the U.K. rose 0.5% from January, or up 2.1% for the year. The climb came after January's 1.6% monthly decline. The pound was at $1.7517, up 0.3% from late Wednesday.
   
The Swiss National Bank, as expected, raised its three-month Libor range to 1.25% from 1%. The dollar was last down 0.2% at 1.2925 Swiss francs.

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The European Markets at 12.00 GMT

London - Leading shares turned lower in volatile midday deals as profit-taking in heavyweight miners and expectations of a weaker start on Wall Street offset M&A-fuelled gains in Corus and Vodafone, dealers said.
   
At 11.48 am the FTSE 100 index was down 9.8 points at 5955.3, off an opening high of 5981.5, with the broader indices flat.

Frankfurt - Shares were lower in midday trade, as Altana and Allianz fell on profit-taking after full-year results, though BMW jumped on a broker upgrade and ThyssenKrupp gained on solid results from peer Corus, dealers said.
   
At 11.59 am, the DAX 30 index was 24.69 points or 0.42 pct lower at 5,873.79, having moved between 5,867.37-5,909.50 so far this session.

Paris - Shares were trading lower midday as investors consolidated their positions after a run of gains over the past five sessions, though dealers said investor sentiment remains optimistic amid continued developments on the M&A front.
  
At 12.41 pm the main CAC-40 index was down 15.78 points or 0.31 eur at 5,112.15, on volume of 1.365 bln eur. Among CAC-40 stocks, 24 were lower, 15 were higher and Vinci was unchanged.

Amsterdam - Share prices were slightly lower in early afternoon trade, with Corus a notable exception after the Anglo-Dutch steelmaker confirmed it is proposing to sell its aluminium operations for 826 mln eur to Alteris, dealers said.
   
At 1.02 pm, the AEX was down 1.29 point or 0.28 pct at 463.17

Madrid - Share prices turned lower in active midday trading, with blue chips under pressure and Moviles paring gains after news of a buyout by parent Telefonica, while Bankinter outperformed on rumours of a bid by Barclays, dealers said.
   
At 12.44 pm, the IBEX-35 index was down 31.6 points at 11,814.1, after trading in a range of 11,813-11,874, on turnover of 1.982 bln eur.

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Milan - Share prices were slightly lower at midday with gains in RCS
MediaGroup on talk the Benetton family could buy a stake, and in Fiat, on strong
car registration figures, were outweighed by Unicredito losses and weak energy
issues, dealers said.
   
At 12.45 pm, the Mibtel index was down 0.13 pct at 29,522 points and the
S&P/Mib off 0.29 pct at 38,380. Volumes were 1.80 bln eur.

Brussels - Shares crept higher in midday trading with Delhaize leading
on the back of yesterday's forecast-beating full-year results, while Bekaert SA
took a hammering after in-line full-year results this morning.
   
At 12.06 pm, the Bel 20 index was up 1.57 points or 0.04 pct at 3,946.96.

Stockholm - Share prices moved into positive territory in midday trade as Ericsson climbed, supported by continuing merger speculation after rumours of a possible bid for Juniper Networks, dealers said.
   
At 12.10 pm, the OMX Stockholm index was up 0.17 pct at 327.44, while the OMX Stockholm 30 index was up 0.25 pct at 1,026.97. Turnover was 12.04 bln skr.

Helsinki - Shares were a touch higher midday, underpinned by Fortum ahead of its AGM this afternoon, with UPM-Kymmene and Stora Enso dipping slightly on profit-taking, dealers said.
   
At 12.22 pm, the OMX Helsinki 25 index was 0.18 pct higher at 2,696.87. The OMX Helsinki index was up 0.06 pct at 9,345.49, while the Helsinki CAP portfolio index was 0.18 pct stronger at 5,025.82.

Asia at a Glance

Asian shares close mixed, Tokyo slips on profit taking

HONG KONG - Share prices across the Asia-Pacific region ended mixed with Tokyo stocks weaker led by domestic-demand-oriented shares, as investors took profits from recent gains, dealers said.
   
There have also been growing worries among investors that the Bank of Japan may scrap its zero-interest-rate policy sooner than expected, they added.
   
But they said said these concerns eased somewhat when the governor of the Bank of Japan, Toshihiko Fukui, told a parliamentary hearing that it is too early to discuss the timing of an end to its policy of keeping interest rates, in effect, at zero.
   
The Nikkei 225 Stock Average closed down 222.83 points or 1.4 pct at 16,096.21, after touching a low for the day of 16,032.55.
   
The broader-based TOPIX index of all first-section shares lost 21.72 points or 1.3 pct at 1,645.06, off a low of 1,641.31.
   
"Today and tomorrow, the market is, and will be, pressured by profit-taking," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

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Share prices in Australia finished at record highs propelled by gains in the resources sector as confidence was restored in commodity prices, dealers said.
   
They said investors were encouraged by a positive lead from Wall Street while firmer base metal prices also bolstered confidence.
   
Dealers said gains by BHP Billiton, the index leader, and Rio Tinto made up for a mixed performance from the financial services sector which is showing signs of consolidation after a solid run.
   
They added suggestions that China might be more accommodating in its attitude to the dynamics of the iron ore market helped the big miners.
   
The S&P/ASX 200 ended up 31.6 points or 0.64 pct, closing at 4,977.9, beating a record high of 4,956.7 set on Feb 1.
   
In Hong Kong, share prices were trading slightly weaker in the afternoon as investors locked in some profits after sharp gains yesterday, dealers said.
   
They said falls on the Japanese market and caution ahead of 2005 results from China Mobile drove the market into negative territory after a firmer open.
   
At 3:20 pm, the Hang Seng Index was down 17.83 points or 0.11 pct at 15,702.53.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower on a lack of fresh leads amid investor caution with telecom companies and steelmakers weighed down, dealers said.
   
The Shanghai A-share Index fell 0.72 point to 1,336.47 on turnover of 9.17 bln yuan and the Shenzhen A-share Index was down 0.26 point at 320.30 on turnover of 4.93 bln yuan.
   
Share prices in Seoul finished mixed and well off their intraday highs, losing most of the gains from an early Wall Street-driven rise, as retail investors took quick profits, dealers said.
   
Samsung Electronics and POSCO made some gains on foreign and institutional support but many blue chips lost ground in the absence of follow-through interest, they added.
   
The KOSPI index closed up 2.0 points or 0.15 pct at 1,335.98.

Asian Bourse Round-Up

For a full list of closing prices, click here

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Gold futures dipped after a three-session run of gains. The benchmark April contract was last down $1.40 at 553 an ounce.
   
On the bond market, long-term Treasurys traded little changed in the wake of the tame inflation data.
   
The 10-year benchmark note was last down 2/32 at 98 10/32, with its yield at 4.71%.
   
Also on the data front, the Federal Reserve Bank of Philadelphia releases its latest survey on manufacturing activity in its region at around noon Eastern.
   
Oil futures were lower as traders continued to weigh supply data showing the U.S. well-stocked with crude, although caution about Iran's nuclear program kept losses in check.
   
Crude for April delivery was last down 27 cents at $61.90 a barrel.

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