US & World Daily Markets Financial Briefing 16-11-2006

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Stocks rise on CPI, buyout news

NEW YORK - Stocks rose for a fifth straight session Thursday after the Labor Department said falling gas prices helped push inflation lower last month, bolstering the notion on Wall Street that the economy can slow sufficiently to allow the Federal Reserve to eventually lower interest rates.
   
The market advanced as investors took their cues from the inflation news and word that a flurry of private equity buyouts would continue, this time with offers for radio station owner Clear Channel Communications Inc. and Reader's Digest Association Inc., the magazine publisher.
   
In the first hour of trading, the Dow Jones industrial average was up 23.05, up 0.19 percent, at 12,274.76. The Dow has recorded record closes in the past two sessions and set a new trading high of 12,291.73 Wednesday.
   
Broader stock indicators were moderately higher. The Standard & Poor's 500 index was up 4.41, up 0.32 percent, at 1,400.98, and the Nasdaq composite index was up 0.76, or 0.03 percent, at 2,443.51. The Russell 2000 index of smaller companies was up 1.20, or 0.15 percent, at 793.16.
   
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.60 percent from 4.62 percent late Wednesday.    

Light, sweet crude rose 32 cents to $59.08 in premarket electronic trading on the New York Mercantile Exchange.
   
The 0.5 percent drop in the Consumer Price Index, the key measure of inflation, matched the decline in September and marked the first two-month drop since late last year. The core inflation figure, which strips out volatility-prone prices for food and energy, rose 0.1 percent, the smallest increase in eight months.
   
Also, the number of Americans seeking unemployment benefits fell by 2,000 to 308,000 last week, the smallest reading in a month.
   
Stocks in focus

In corporate news, Clear Channel, the country's No. 1 owner of radio stations, agreed to be taken private for about $18.7 billion by an investment group led by Thomas H. Lee Partners LP and Bain Capital Partners LLC. The deal includes about $8 billion in debt. Clear Channel was up $1.65, or 4.8 percent, at $35.77.
   
Reader's Digest rose $1.25, or 8 percent, to $16.76 after agreeing to be acquired for about $1.61 billion by an investment consortium led by private equity group Ripplewood Holdings LLC.

Shares of Dell Inc. fell Thursday after the company delayed its third-quarter earnings report and said federal regulators had begun a formal investigation into the computer company.
   
Shares of Dell fell 91 cents, or 3.5 percent, to $24.84 in early trading on the Nasdaq Stock Market.
    
Dell said late Wednesday its third quarter earnings report that had been scheduled for Thursday after markets close would be delayed until sometime later in the month.

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Dollar holds up well as investors shrug off soft US data

LONDON - The dollar held up well as investors shrugged off a raft of soft US economic numbers ranging from a drop in inflation, lower portfolio flows and slowing industrial production.
   
The US currency suffered a minor wobble after it was revealed that CPI inflation in the country fell 0.5 in October while the core rate, which excludes energy and food, rose just 0.1 pct. Both figures were below expectations and helped renew speculation of rate cuts in the new year.
   
More pessimism followed when it was revealed that net long-term portfolio flows into the US slowed sharply in September, to to 65.1 bln usd from a downwardly 114.4 bln usd the previous month.
   
Industrial production in the world's biggest economy also disappointed, rising by just 0.2 pct in October when analysts had been predicting a 0.3 pct increase.
   
The Philadelphia Fed survey which measures manufacturing activity in the area is seen jumping almost six points to 5 from -0.7 the previous month.
   
Elsewhere, the pound was dented by a rise in UK retail sales, which served to strengthen expectations of another Bank of England rate hike next year. February is being touted as the likely month for a hike to 5.25 pct.
   
In data out this morning, it was revealed that retail sales rose 0.9 pct in October from the previous month. The increase was the biggest since November last year and in addition the Christmas season is predicted to come in strong.
      
Yesterday, the Bank of England lowered its outlook for inflation but left the door open for another rate hike when it also stressed that its forecast assumes that the base rate reaches 5.20 pct from 5.00 pct at present.

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The European Markets at 12.30

London - UK blue chips remained firm at midday ahead of an expected flat start on Wall Street, with a jump in National Grid on the back of well-received numbers offsetting a Vedanta Resources's slump after its disappointing update. At 12.00 pm, the FTSE 100 index was 8.7 points firmer at 6,238.5, albeit off an earlier high of 6,245.5, while the broader indices also gained.

Frankfurt - Shares were slightly lower in midday trade as Deutsche Boerse continued to fall following the withdrawal of its Euronext merger bid yesterday and Infineon slipped after posting below-consensus quarterly EBIT, while auto stocks were in demand amid fresh M&A talk.
   
At 12.03 pm, the DAX 30 index was 4.63 points or 0.07 pct lower at 6,426.26, having moved between a low of 6,419.89 and a high of 6,436.41.

Paris - Shares were down from yesterday's record highs at midday as profit taking and BNP Paribas's results, perceived as disappointing, took their toll. At 12.07 pm, the CAC-40 index was down 10.68 points or 0.19 pct at 5,500.85. Volume was 1.6 bln euro.

Milan - Share prices were flat at midday in cautious trade ahead of the release of US data, while BPU rose after recent losses. At 12.31 pm, the Mibtel index was down 0.05 pct at 31,317 points and the S&P/Mib fell 0.09 pct to 40,777.

Madrid - Share prices were flat in quiet midday trade amid light profit taking as investors digested the recent slew of third quarter reports, with Indra and Abengoa outperforming. At 12.25 pm, the IBEX-35 index was down 2.0 points at 14,171.9, after trading in a range of 14,153-14,189, on turnover of 1.0 bln eur.

Stockholm - Share prices were little changed in midday trading, with a rise in the Ericsson stock outweighed by falls in Scania and Securitas. At 12.10 pm, the OMX Stockholm 30 index was 0.02 pct lower at 1,117.75.

Zurich - Share prices were slightly lower in thin midday trade on profit-taking with a weakness in heavyweight Nestle weighing, while Zurich Financial's consensus beating nine-months results failed to inspire the wider market. At 12.23 pm, the Swiss Market Index was 12.67 points lower at 8,778.5, and the Swiss Performance Index fell 12.43 points to 6,868.73.

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Asian shares close mostly lower with markets lacking buying momentum

HONG KONG - Shares across the Asia-Pacific region closed mostly lower, with markets lacking buying factors and with caution about the economic outlook in Japan, dealers said.
   
Tokyo shares closed lower, having lost morning gains when investors became cautious while they waited to hear what Bank of Japan governor Toshihiko Fukui would say at his press conference later in the day.
   
The press conference followed the central bank's announcement that its policy board had voted unanimously to keep the overnight call rate target at 0.25 pct, as widely expected by the market.
   
The blue-chip Nikkei 225 Stock Average closed 79.60 points or 0.49 pct lower at 16,163.87, after moving between 16,143.70 and 16,367.10. The broader TOPIX index of all first-section issues dropped 9.96 points or 0.63 pct to settle at 1,582.04, after touching a low of 1,580.79 and a high of 1,604.86.
   
Australian shares closed lower as investor selling once again weighed on banking and resource stocks. The market continued the minor correction underway since it reached record highs earlier this month as investors await fresh drivers to encourage buying.

The S&P/ASX 200 lost 37.3 points or 0.69 pct at 5,392.6, falling again from the record close of 5,491.6 set on Nov 7. The benchmark index closed above the day's low of 5,375.6 and below the day's high of 5,436.4.
   
Hong Kong shares were stronger in afternoon trade, with follow-through momentum from yesterday's rally hampered by caution toward Chinese financial stocks.
   
The market's undertone remained supported however, by Wall Street's optimism that the US economy could slow without cooling too quickly. At 3.30 pm the Hang Seng Index was up 49.18 points or 0.26 pct at 19,142.18.
   
In mainland China, A-shares in Shanghai and Shenzhen closed mixed, with the Shanghai market supported by strong follow-through interest in banks while the Shenzhen market was hit by profit-taking.
   
The Shanghai A-share Index climbed 19.99 points or 0.99 pct to 2,041.08 while the Shenzhen A-share Index fell 2.60 points or 0.56 pct to 461.65.
   
Seoul shares finished mixed as blue chips retreated on institutional profit taking after a solid and prolonged rally. Due to the nationwide college entrance test, the stock market operated one hour later than usual. The KOSPI index closed down 1.79 points or 0.13 pct at 1,410.75, off a low of 1,409.22 and a high of 1,417.68.

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Gold little changed; copper falls

LONDON - Gold was little changed ahead of the release later today of key data on US inflation.    

At 12.16 pm, spot gold, which earlier touched an intra-day high of 626.60 usd, was quoted at 622.90 usd, little changed from 622.60 usd at the time of the COMEX market close in New York yesterday.
  
Other precious metals were up. Spot silver was up at 13.00 usd an ounce against 12.91 usd, platinum climbed to 1,181.50 usd against 1,167.00 usd, while palladium edged up to 320.00 usd against 318.00 usd.

Copper prices edged lower, reversing yesterday's rally, as market participants continued to fret over rising LME stocks and weak imports from China, the world's top copper consumer.
   
At 2.53 pm, LME copper for three-month delivery fell to 6,860.00 usd a tonne against 6,910.00 usd at the close yesterday, aluminium edged down to 2,692.50 usd against 2,699.00.
   
Other base metals were flat to higher. Nickel was flat at 29,900.00 usd, lead rose to 1,555.00 usd against 1,520.00 usd, zinc was up at 4,278.00 usd against 4,190.00 usd, while tin leapt to 9,850.00 usd against 9,650.00 usd yesterday.
   
Copper prices closed higher yesterday as relatively over-sold conditions of the past week lead to a technical bounce. The metal was also boosted by a much greater than expected rise in the New York Federal Reserve's manufacturing index.
   
However, it has trimmed back gains today amid data showing a smaller than expected rise in US industrial production in October, and in spite of a modest 125 tonnes decline in LME copper stocks to 151,950 tonnes.

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