US & World Daily Markets Financial Briefing 16-10-2006

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Wall Street edges lower

NEW YORK - Stocks edged lower Monday before a deluge of earnings reports that could give Wall Street some clarity about how corporate profits have fared in a slowing economy.
   
Investors are waiting for signals that earnings held up during the third quarter, and that top executives are confident about the remainder of the year. This could help determine whether stocks continue a run-up that has seen the Dow Jones industrial average come within striking distance of the psychological 12,000 mark.

In the first hour of trading, the Dow Jones industrial average fell 9.53, or 0.08 percent, to 11,950.98. Broader stock indicators were mixed. The Standard & Poor's 500 index declined 0.45, or 0.03 percent, to 1,365.17, and the Nasdaq composite index rose 2.23, or 0.09 percent, to 2,359.52.

Crude-oil futures rose 51 cents to $59.08 a barrel.
   
In the first batch of earnings reports to come in, Wachovia Corp. reported quarterly profit rose 13 percent. Shares moved lower after the nation's fourth-largest bank posted lower-than-expected revenue.
   
UnitedHealth Group Inc. weakened after the health insurer reported Sunday that Chief Executive William McGuire will leave the company by Dec. 1 under scrutiny over backdated stock options.
   
Stocks in focus
   
Overseas, Korea's Samsung Electronics topped forecasts with a 16 percent profit rise, while a virtual tripling of Philips Electronics profit wasn't enough to meet estimates.
    
On the executive front, Liz Claiborne surprisingly chose William McComb as its next chief executive, The Wall Street Journal reported. McComb, a Johnson & Johnson executive, beat out internal candidate Trudy Sullivan for the post, the report said.
   
The telecommunications industry will draw focus as the Federal Communications Commission postponed a decision until Nov. 3 on whether to approve AT&T Inc's $80 billion purchase of BellSouth.
   
Verizon Communications is close to spinning off rather than selling its directories division, The New York Times reported Monday, citing a person brief on the company's discussions. The report said a spinoff would cost less in taxes.
   
Barron's magazine over the weekend speculated that shares of AT&T and Verizon could be hurt if Democrats take control of the House of Representatives next month. The Democrats are seen as interested in preventing big telecommunications companies from charging fees to Web sites such as Google's YouTube unit with high-bandwidth traffic, the report said.
   
Shares of both AT&T and Verizon edged lower in German trading.

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Dollar lower as Empire survey reveals drop in raw materials prices

LONDON - The dollar fell across the board as the latest Empire survey of manufacturing activity in the New York region showed that raw materials prices fell to their lowest level in more than a year.
   
Though the headline index rose above expectations to 22.9 in October from 13.84 in September, the prices paid component dropped 10 points to 30.8, suggesting that inflationary pressures are easing in the wake of the recent fall in energy prices. This could pave the way for the US Federal Reserve to cut interest rates next year if the economy continues to show signs of slowing.
   
After initially dropping slightly on the strong headline figure, the euro rose to a day high of 1.2534 usd in the wake of the news.
   
The dollar is also paring some of last week's strong gains, with market players looking ahead to key inflation indicators later in the week -- producer prices data tomorrow and CPI inflation numbers on Wednesday. Today's Empire survey, however, suggests that these figures could come in on the weak side.
   
"The 10-point drop in the prices paid index in October reflected the decline in energy prices, which will also depress the October CPI and PPI measures to be reported Tuesday and Wednesday," said Mike Carey at CALYON.
   
Meanwhile, the yen continued to gain after the Russian central bank announced plans to diversify its reserves, including adding the yen to its portfolio.
   
First Deputy chairman Alexei Ulyukayev told a conference that Russia is planning to broaden the number of currencies in its reserve portfolio and that it has recently included the yen. He added that the amount currently invested in yen assets is close to zero, but the central bank wants to increase this to several percent.
   
The euro fell to an 11-day low of 149.04 against the Japanese currency, while the pound touched a 10-day low of 221.45 yen. The dollar meanwhile came close to falling below the 119 yen mark with a six-day low of 119.04.

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The European Markets at 13.30 BST

London - UK blue chips extended gains at midday, breaching fresh 5-1/2 year highs thanks in part to renewed M&A talk and strength in the oil and mining sectors, while Wall Street is seen opening flat after Friday's record highs. At 11.50 am, the FTSE 100 index was 23.5 points stronger at 6,180.8, while the broader indices were mixed.

Frankfurt - Leading German shares remained in positive territory midafternoon, although they were off from opening highs as investors locked in some profits following recent gains that have seen the DAX rise to 5-year highs.  At 2.00 pm the DAX was up 7.45 points, or 0.12 pct to 6,181.13.

Paris - Share prices were little changed in subdued midday trading, with many investors sticking to the sidelines after the steady gains for equities over the past month, which pushed the French benchmark to fresh five-year highs last week. At 11.57 am, the CAC-40 index was up 4.32 points at 5,357.55, on volume of 1.1 bln eur.

Amsterdam - Share prices were up midday, still boosted by Wall Street's record high close on Friday, and with US futures indicating a positive Wall Street open later today. At 1.07 pm, the AEX index was up 0.26 pct or 1.25 point at 493.93 after opening at 492.75 and trading in the 491.32-494.11 range.

Milan - Share prices were slightly higher at midday, with investors' focus on second-tier banks as the sector consolidates. At 12.09 pm, the Mibtel was up 0.38 pct at 30,317 points and the S&P/Mib rose 0.39 pct to 39,733.

Madrid - Madrid shares were lower in midday trade, with Repsol YPF outperforming on rumours that Sacyr Vallehermoso is planning to take a stake in the company. At 1.32 pm, the IBEX-35 index fell 34.9 points to 13,421.1 after trading in a range of 13,402-13,476, on turnover of 2.4 bln eur.

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Brussels - Shares were slightly lower in late morning trade, as press reports said supermarket group Delhaize was no longer in talks with Dutch peer Ahold. At 11.19 am, the Bel 20 was down 9.50 eur or 0.23 pct at 4,165.40.

Zurich - Swiss shares were slightly lower in thin afternoon trade on profit-taking, with investors cautious ahead of some key earnings news and trading updates due this week, starting with Roche tomorrow. At 2.15 pm, the Swiss Market Index was 7.53 points lower at 8,643.61, and the Swiss Performance Index was down 6.06 at 6,732.70 points.

Stockholm - Shares were slightly higher in midday trade, with the mining firms leading the market higher, supported by higher metal prices and renewed merger speculation. At 12.10 pm, the OMX Stockholm index was up 0.20 pct at 350.49 and the OMX Stockholm 30 was up 0.20 pct at 1,094.26.

Helsinki - Helsinki shares were higher in midday trade, with energy and industrial stocks lending support, and Nokia underperforming after an upbeat third quarter from rival Samsung led to speculation that it has grabbed market share from Nokia and other handset makers. At 12.52 pm, the OMX Helsinki 25 was 0.67 pct higher at 2,712.21 and the OMX Helsinki was up 0.53 pct at 9,198.43 on volume of 261 mln eur.

Asia at a Glance

Asian shares close mostly higher on Wall St record high Friday

HONG KONG - Shares across the Asia-Pacific region closed mostly higher, following the lead of Wall Street which hit a new record on Friday and with a weak yen also boosting Japanese shares.
   
Tokyo shares closed broadly higher with investor sentiment buoyed by another record-breaking performance by the Dow Jones Industrial Average while a weak yen continued to support buying of exporters.
  
The Nikkei 225 Stock Average closed up 156.22 points or 0.94 pct at 16,692.76, off a high of 16,732.44. The broader TOPIX index of all first-section issues rose 18.05 points or 1.11 pct to 1,646.05, a tad off the intraday peak of 1,649.17.
   
Hideo Mizutani, chief strategist at Sieg Securities, said the market was supported by Wall Street's strong performance and expectations of solid earnings among Japanese firms as well as the dollar's gains against the yen.
   
"Japanese shares had lagged the recent rally in US shares and they are catching up at last," he said. "The market pattern has increasingly improved given rising US shares and the stronger dollar. Given the strength of the dollar, there are expectations that Japanese companies may further raise their earnings forecasts" for the full year, Mizutani added.
   
Dealers believe share prices could have gone even higher had caution not prevailed among investors who preferred to be less aggressive ahead of the release of quarterly results by major US firms such as Intel and Google.
   

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Australian shares finished higher on Wall Street and with local miners rising in response to higher commodity prices.
   
They said banking and insurance stocks were lackluster but media stocks rose after changes to government legislation which have fuelled speculation of takeovers. The S&P/ASX 200 rose 21.0 points or 0.40 pct to close at 5,311, below the day's high of 5,320.2 and above a low of 5,296.6.
   
Hong Kong shares were stronger in afternoon trade, managing to break through the 18,000-point level despite weakness in the morning on concerns that Industrial and Commercial Bank of China's initial public offering will drain market liquidity.
   
The H-share portion of ICBC's huge IPO opened for retail investor subscription today. At 3.25 pm the Hang Seng Index was up 20.12 points or 0.11 pct at 18,008.98.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower on liquidity concerns due to the ICBC share offer, with property stocks and power generating firms under pressure.
   
The Shanghai A-share Index fell 14.29 points or 0.76 pct to 1,860.68 and the Shenzhen A-share Index was down 1.93 points or 0.42 pct at 461.99.
   
Seoul shares ended higher in line with Wall Street, with broad sentiment boosted by positive third quarter earnings and guidance by Samsung Electronics. The KOSPI index closed up 8.12 points or 0.60 pct at 1,356.72, after moving between 1,350.80 and 1,358.88.

Asian Bourse Round-Up

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