US & World Daily Markets Financial Briefing 16-07-2007

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Stocks open flat following buyout talk

NEW YORK - Stocks opened largely flat Monday as investors digested the market's gains of last week and received news of a potential big telecom deal.    

Wall Street's move sideways was not surprising after last week's record-setting rally. But investor sentiment got a modest boost from renewed talk of acquisition activity, which has been a big driver of the stock market's gains in the past year.

Vodafone Group PLC denied a report by the Financial Times that it is weighing whether to make a huge $160 billion bid for Verizon Communications Inc. The newspaper cautioned that Vodafone has yet to approach Verizon. Vodafone, the report said, would pursue the deal to obtain full ownership of Verizon Wireless, which Vodafone and Verizon now own jointly.
   
In a much more modest but confirmed deal, restaurant chain operator IHOP Corp. said it would acquire Applebee's International Inc. for about $1.9 billion.
   
In morning trading, the Dow Jones industrial average rose 17.07, or 0.12 percent, to 13,924.32.
   
Broader stock indicators were little changed. The Standard & Poor's 500 index slipped 0.83, or 0.05 percent, to 1,551.67, and the Nasdaq composite index slipped 2.73, or 0.10 percent, to 2,704.27.
   
On Monday, light, sweet crude futures rose 8 cents to $74.01 in premarket electronic trading on the New York Mercantile Exchange.
   
Some stocks moved on Monday, with Verizon increasing $1.28, or 3.1 percent, to $43.04. Vodafone fell 28 cents to $33.24. Meanwhile, Applebee's rose 39 cent to $24.77, while IHOP rose $4, or 7.1 percent, to $60.25.
   
Stocks showed little reaction to the New York Federal Reserve's Empire State Manufacturing Survey that found regional manufacturing activity continued to improve in July.
   
Last week's run-up came ahead of a flurry of quarterly results -- 11 of the 30 companies that make up the Dow Jones industrials are due to report this week -- and in advance of key readings on inflation.
   
Forecasts from companies should help indicate whether they can continue to put up solid profit growth as pricing pressures fluctuate, in part because of forces such as rising oil prices.
   
In other corporate news, McDonald's Corp. rose 26 cents to $52.12 after predicting its second-quarter earnings before charges will top Wall Street's forecasts.
   
Mattel Inc. rose 64 cents, or 2.4 percent, to $27.17 after reporting its second-quarter earnings rose 15 percent as increased sales global of its Barbie dolls and Hot Wheels toy cars made up for soft U.S. sales.
   
Ford Motor Co. rose 2 cents to $8.99 after denying various reports that it is in talks to sell its Volvo division.
   
Royal Philips Electronics NV, the maker of medical and lighting equipment, fell 51 cents to $44.07 after reporting its second-quarter net profit rose following the sale of its stake in a Taiwanese semiconductor company. The company also said, however, that currency exchange rates hurt sales.
   
In Asia, Japan's Nikkei stock average finished flat. Hong Kong's Hang Seng Index fell 0.63 percent, while the often-volatile Shanghai Composite Index fell 2.36 percent.
   
In afternoon trading, Britain's FTSE 100 fell 0.47 percent, Germany's DAX index fell 0.17 percent, and France's CAC-40 fell 0.14 percent.

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LONDON - The dollar was broadly unchanged after a manufacturing survey of the New York area came in much stronger than expected.
   
The New York Fed's Empire manufacturing index rose to 26.5 in July after last month's surprising jump to 25.8, confounding expectations for a pullback to the still relatively solid 18.0.
   
The new orders index was up 9 points at 26.5, its highest level in more than a year. The index has relatively high month-to-month volatility.
   
The dollar gained a brief fillip from the data, before settling back to previous levels. The currency has come under increased pressure in recent days amid concerns over the US economic outlook, hitting multi-year lows against the pound and an all-time low against the euro.
   
Ashraf Laidi at CMC Markets said the Empire survey is having a stabilising influence on the dollar but "the risks of further negative US data remain amidst the barrage of key reports later this week."
   
"Dollar weakness is becoming increasingly pervasive as the yen further drags the US currency despite a return to risk appetite in global equities, which underlines the broadening weakness in the greenback," he added.
   
At 1345 BST the dollar was trading at 1.3780 to the euro, from 1.3784 just before, while the pound was at 2.0372 usd, from 2.0373 usd before.

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Euroshares higher midday, Philips down, ING rumoured to enter battle for ABN

LONDON - European exchanges advanced midday with Philips losing ground as second quarter results came in below expectations, and ABN Amro jumping ahead following a revised bid from RBS and with ING rumoured to be another bidder.    
   
At 12.11 pm, the Dow Jones STOXX 50 added 6.79 points or 0.17 pct to 3,998.70, as the STOXX 600 advanced 0.55 points or 0.14 pct to 399.57.
     
Net profit at Philips, including a 1.22 bln eur gain from the sale of TSMC shares, was 1.57 bln eur, up from 301 mln last year and at the low end of the 1.56-1.61 bln eur range expected by analysts. Shares were down 0.86 pct, up off intra-day lows.  Sales were 6.10 bln eur, down from 6.38 bln last year and below an anticipated 6.2-6.3 bln, while EBITA rose to 389 mln eur, up from 290 mln and within the expected 368-400 mln eur range seen by analysts.
   
Meanwhile, the battle over ABN Amro continues as the consortium led by the Royal Bank of Scotland unveiled a fresh bid for the Dutch bank, which would be paid almost entirely in cash.
   
The consortium said it is still offering 38.4 eur per share for ABN, unchanged from its previous offer, though with the cash component raised to 93 pct from 79 pct under the earlier offer.
   
In addition, ING Groep NV is reportedly mulling a counterbid for ABN Amro in syndicate with BBVA and possibly Citigroup, according to German financial newsletter Platow Brief, reported without naming sources.
   
Merger speculation linking the two Dutch rivals has surfaced periodically, and any ING moves will have been deliberately timed to coincide with Friday's Dutch Supreme Court decision on ABN's sale of US unit LaSalle, the newslettter said.
   
A trader agreed such a bid was possible, noting that ING's Dutch operations might provide a better fit with ABN than would RBS consortium member Fortis. "I can understand why ING wouldn't want to miss out out on the Benelux spoils, so why not?" said one. ING declined to comment. BBVA was not immediately available for comment.   
   
Shares in ABN Amro jumped 4.06 pct, as Barclays gained 1.45 pct. Fortis shed 0.80 pct, while Royal Bank of Scotland advanced 0.32 pct. Meanwhile, ING Groep added 0.91 pct and BBVA added 0.63 pct.     

Staying with M&A news, BMW climbed some 1.68 pct higher in midday trade as rumours emerged that Arabian or Chinese investors are in talks with the Quandt/Klatten family on a possible takeover of the German luxury carmaker.
   
The Quandt family is the company's largest shareholder. Traders suggested the family has been too involved for too long to be selling its stake at this stage.
   
Over in Scandinavia, Nordic and Baltic bourse owner OMX AB gained 3.81 pct after a report in the Daily Telegraph said the owner of the Dubai stock exchange is poised to table a bid of up to 250 skr per OMX share, beating the proposed 208.1 skr bid by Nasdaq.
   
The Dubai International Financial Centre, which owns the Dubai International Financial Exchange, is believed to have funding in place to bid up to that figure, though an offer of around 230 skr is more likely, the newspaper added.
     
On the earnings front, H&M added 0.12 pct, off earlier highs, after the fashion retailer reported a bigger-than-expected increase in its June sales, reassuring the market after its soft May sales. H&M June sales increased 17 pct year-on year, versus market expectations of a 15.7 pct rise as recorded by SME Direkt. Same-store sales rose 5 pct year-on-year versus market expectations of 3.8 pct.
   
Also in Sweden, Atlas Copco AB added 1.25 pct, after the compressor and mining equipment manufacturer reported better-than-expected second quarter profits and sales.
   
Atlas Copco said second-quarter pretax profits amounted to 3.215 bln skr, with sales at 15.985 bln skr, while market expectations were for 2.912 bln skr and 15.123 bln skr respectively, according to SME Direkt.
   
Spanish Bankinter SA presented a disappointing set of first half results, which missed analysts' estimates at the bottom line and shares dropped 0.98 pct. The company said net profit rose to 251 mln eur in the first half to June, up from 117 mln a year earlier, but missing analyst estimates for 266-338 mln.
   
Rolls-Royce Group retreated, down 1.84 pct, after ABN Amro cut its rating to 'hold' from 'buy' and raised its price target to 615 pence from 550 amid increasing headwind created by US dollar weakness.

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Asian money markets summary

BEIJING  - Asian late money market rates (vs previous close):

Hong Kong: 3-month HIBOR rate 4.37 pct (4.38 ) overnight rate 3.7 pct (3.8)
       
Jakarta: overnight rate  3.83814 (4.45269)
       
Kuala Lumpur: 3-mth KLIBOR bid/ask 3.55/60 pct ( 3.55/58)  overnight rate 3.48/50 pct (3.48/50 )
       
Manila: overnight rate 6.3125 pct (8)
       
Seoul: 3-yr corporate bond yield 5.75 pct (5.74)   3-yr state bond yield 5.42 pct (5.41 )
       
Singapore: avg overnight rate 2.0625 pct (2.0625)    3-month SIBOR 2.1875 pct (2.1875)
       
Sydney: 90-day bank bill rate  6.433 pct (6.453)
       
Taipei: overnight rate 2.007 pct ( 2.013 )
       
Tokyo: closed

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Coffee prices fall to lowest since early June

LONDON - Coffee prices extended recent falls in London, dropping to their lowest since early June, as selling continued from funds with long positions or bets that prices will rise.
   
"We are seeing continued fund long liquidation today", said a trader at Sucden. He added, however, that while he expects to see further falls through today's session, scaled up industry buying at these reduced price levels should likely limit the downside in coffee.
   
At 1.30 pm, Robusta coffee for September delivery fell to 1,782 usd per tonne on the Euronext Liffe against 1,804 usd at the close yesterday, having dropped to 1,773 usd earlier, its lowest since June 1.
   
The contracts are now some way off last month's 9 year high of 1,945 usd, reached due to worries over rising demand and supply problems, particularly in Vietnam.
   
Vietnam, the world's largest producer of the Robusta coffee beans traded in London, has seen many of its exports rejected in recent months due to poor quality.
   
On Friday, the International Coffee Organisation said in a June monthly report while problems with Vietnamese exports continue, the government there has recently introduced measures to control export quality.
   
All the same, concerns remain that supply will continue tightening in producing countries through to the end of this year. "There's tightness before the next crop," said a Sucden trader, adding that these concerns are what tempted the funds to bet the market up to record levels in the first place.
   
Although prices are now falling because the fund buying was overdone, the coffee market remains underpinned, on a longer term view, by strong supply demand fundamentals.
   
According to the ICO, world coffee production in the 2007-08 coffee year is expected to fall to 112 mln bags from around 121.6 mln bags in the 2006-07 coffee year. Meanwhile demand remains firm. Overall coffee consumption could hit 120 mln bags in 2007, compared to 118.76 mln bags last year, said the ICO.
   
In other softs traded on the Euronext Liffe, sugar for October delivery was up slightly at 312.00 usd a tonne against 311.40 usd at the close Friday, while cocoa for September delivery was down at 1,083 stg a tonne against 1,102 stg.

Gold continues at high levels on weak dollar, high oil prices

LONDON - At 2:50 pm, spot gold was trading at 666.50 usd an ounce, compared with 666.20 usd in late New York trades on Friday.
   
Gold hit a five-week high of 669.05 usd last Thursday after the dollar slipped to its lowest ever level against the euro. Oil prices are within a dollar of their record highs, with benchmark Brent crude hovering around the 78 usd mark.
   
"Gold prices (are) still chasing oil due to its correlation with global inflation," said Numis analyst John Meyer.
   
Gold's gains have been limited by a lack of interest from jewellers at higher prices, and profit taking by investors. With the dollar now close to record lows against the euro, some analysts  recommend market players watch gold's performance in relation to other currencies.
       
Gold is trading around 482 euros an ounce currently.
   
Looking to the week ahead, gold traders will be waiting for Federal Reserve Chairman Ben Bernanke's testimony to the US Congress on Wednesday and Thursday, and the release of the latest Fed meeting minutes on Thursday, to help gauge the outlook for the US economy.
      
Some analysts predict that gold will climb higher in the second half of the year based on historical trends.
   
"We are soon to enter gold and silver's seasonally strong months," said analysts at Gold Investments. "In the last 35 years, June and July are traditionally weaker months and August, September, November and December the stronger months when gold has performed best.
      
Among other precious metals, platinum edged higher in early trade on news that Lonmin, the world's third-biggest platinum company, is to defer 70,000- 90,000 ounces of sales until September, due to refining bottlenecks.
   
Platinum hit an intraday high of 1,315 usd before easing back to Friday's close of 1,311 usd per ounce. Its sister metal palladium was down slightly at 366 versus 367 usd, while silver slipped to 12.97 usd per ounce against 13.01 usd.

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