US & World Daily Markets Financial Briefing 17-02-2006

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U.S. Stocks at a glance

U.S. stocks edge lower on higher oil, inflation data

       
NEW YORK - U.S. stocks fell Friday on weak consumer-sentiment data and a producer-price report that sparked inflation worries, with higher oil prices and a disappointing outlook from Dell Inc. also acting as a drag.
   
The Dow Jones Industrial Average was last off 21 points at 11,100 after ending the prior session at a 4 1/2-year high.
   
The Nasdaq Composite Index fell 10 points to 2,284 while the S&P 500 Index dropped 2 to 1,287. 
   
Also on the data front, U.S. consumer sentiment eased in early February as gasoline prices rose, according to media reports Friday of proprietary research from the University of Michigan. The UMich sentiment index fell to 87.4 in February from 91.2 in January, reports said. Economists were expecting a flat reading of around 91.1.
   
On the broader market for equities, decliners had a 15 to 13 edge over advancers on the New York Stock Exchange and a wider 5 to 3 score on the Nasdaq.

Dell outlook disappoints
   
Shares in Dell Inc. fell 4.6% to $30.50 after the world's No. 1 maker of personal computers offered a first-quarter profit and sales forecast shy of analyst expectations. The news prompted a downgrade from broker Bank of America.
   
Dell's outlook overshadowed a solid fourth-quarter as the company's profit topped Wall Street estimates, buoyed in part by strong sales in Europe and Asia.
   
Dell's CEO also said the company has no plans to begin using chips from Advanced Micro Devices Inc. The market has speculated about the prospect of Dell using AMD's microprocessors. AMD's shares recently were down 4.4% at $39.90.
   
On Thursday, Dell rival Hewlett-Packard Co. saw its shares surge on a strong quarterly earnings report and solid outlook.

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Stocks in focus
   
General Motors Corp. was the biggest percentage gainer on the Dow, up 2.1% at $22.74 as the carmaker expressed optimism that continuing cost-cutting talks with Delphi Corp. should lead to a comprehensive agreement that will allow the parts maker to continue as an important GM supplier.
   
GM's optimism comes after Delphi postponed a court petition to reject certain collective-bargaining agreements, giving the company and the United Auto Workers more time to thrash out a new deal.
   
Shares of Intel Corp. fell nearly 2% to $20.93 after RBC Capital Markets lowered its price target on the stock to $21 from $29. The research house said it expects "the stock to go noticeably below our new price target in the near-term." RBC said it turned negative on Intel and the semiconductor sector on Jan. 17.
   
Time Warner Inc. eased 15 cents to $17.82 on media reports indicating that financier Carl Icahn has shelved his plan to break up the media giant after failing to win shareholder backing.
   
Separately, Time Warner Chief Executive Richard Parsons, in an interview with The Wall Street Journal, said the company "would have to" take a look at buying Spanish-language broadcaster Univision Communications Inc. Univision shares rose 1% to $34.18.
   
Home-electronics retailer RadioShack Corp. fell 20 cents to $20.55 after it posted a drop in fourth-quarter net income, hurt by weakness in wireless sales and lower sales in its high-margin categories. The company also said it would restructure.
   
Shares of Sirius Satellite Radio Inc. fell 3% to $5.48 as the company joined rival XM Satellite Radio in posting a disappointing quarter.
   
New-York-based Sirius posted a wider-than-expected loss, on increased marketing costs and expenses, even as subscriptions soared.
   
On Thursday, XM Satellite shares fell 5% after its quarterly loss also widened on increased costs to acquire subscribers.

Forex

Dollar climbs after bigger-than-expected PPI rise

NEW YORK - The dollar firmed against its major counterparts early Friday after a bigger-than-expected rise in U.S. producer prices added to pressure for the Fed to continue lifting interest rates in the coming months.
   
The euro was off 0.3% at $1.1872. Against the Japanese yen, the greenback rallied 0.6% to 118.60.
   
The U.S. Labor Department said the producer price index increased 0.3% in January, while core prices, which exclude food and energy, rose 0.4%, the biggest gain in a year.
   
Economists were expecting 0.2% gains in both the headline PPI and in the core PPI, according to a survey conducted by MarketWatch.
   
Rising inflationary pressures will prompt the Fed to continue its series of interest rates hikes. New Federal Reserve Chairman Ben Bernanke has said future monetary policy changes will become "increasingly dependent" on incoming data.
   
But PPI is not the main inflation gauge Fed officials watch; they prefer to monitor consumer prices index for personal consumption expenditures. The consumer price index will be released next Wednesday.
   
Overnight, the dollar strengthened against the yen, setting a fresh one-week high above 118.40, as traders locked in profits following better-than-forecast economic growth data from Japan.
   
Japan's Cabinet Office said the Japanese economy grew at a higher-than-expected 1.4% in the fourth quarter, or an annualized rate of 5.5%, fueled by robust corporate spending and housing investment. But the gross domestic product deflator, a key gauge of the level of deflation, declined 1.6%, the 31st consecutive quarterly decline.

London

For a list of today's FTSE risers and fallers at 15.00 GMT, click here

Frankfurt

German shares off highs midafternoon as Wall Street falls; VW, Hypo sparkle
 
At 3.54 pm, the DAX 30 index was 4.64 points or 0.08 pct higher at 5,793.89, having moved between 5,773.52-5,814.79 so far this session. The MDAX was at 8,219.10, up 54.23 points or 0.66 pct, while the TecDAX was at 711.71, down 2.32 points or 0.32 pct. The DAX futures contract was at 5,808.00, down 2.00 points or 0.03 pct, while bund futures were at 120.50, up 0.27.

Auto stocks were a bright feature, with Volkswagen in the vanguard of rising stocks, gaining 2.21 eur or 3.83 pct to 59.93, with one analyst arguing that market hopes of successful restructuring measures supported the share price today.
   
DaimlerChrysler recovered from its sharp losses yesterday, shrugging off downgrades to 'hold' at both WestLB and DKW to gain 0.42 to 48.75, as Merrill Lynch and ING raised their price targets on the stock to 58 eur from 50 and to 57 eur from 51 respectively, reiterating their 'buy' ratings. Peer BMW was up 0.23 at 39.82.

Altana was in positive territory too, adding 0.23 to 45.73, after its Alvesco drug received an additional EU approval for treatment of severe persistent asthma in adolescents aged 12 years and older.

At the other end of the market, TUI fell 0.33 eur or 1.86 pct to 17.39 while Lufthansa dropped 0.20 to 13.72, as oil prices rose.
   
Deutsche Post lost 0.17 to 21.91, after Deutsche Bank, Nomura and WestLB yesterday all downgraded their stances on the stock following the release of the company's full-year results on Wednesday.

Paris

Paris shares remain up midafternoon, but off highs.

At 4.39 pm, the CAC-40 index was up 17.97 points or 0.4 pct at 4,991.06, having briefly surpassed the 5,000 level earlier in the afternoon. Volume was modest at 3.5 bln eur. On the Matif, March CAC-40 futures were trading 16.5 points firmer at 4,999.

Arcelor, whose strong 2005 results posted yesterday have sparked speculation that Mittal may have to sweeten its 18.6 bln eur offer, was last up 0.34 eur at
30.24.
   
Financial stocks were strong again in light of yesterday's earnings from Societe Generale, which far exceeded forecasts. Societe Generale was up 0.20 at 118.20, building on yesterday's 4 pct surge, while BNP Paribas was up 0.75 at 75.70. Both stocks are trading near all-time highs.

On the downside, Lagardere fell 0.70 to 66.70 and Vivendi Universal was off 0.04 at 25.60 after the companies reached a deal to merge their pay-TV operations, with Lagardere paying 525 mln eur and transferring its 34 pct stake in the CanalSatellite joint venture to a new company, Canal Plus France, that will also house the pay-TV businesses of TF1 and M6.

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Asia at a Glance

The broader TOPIX index of all first-section shares fell 26.06 points or 1.6 pct to 1,605.33, off a low of 1,601.97.
   
For the week, the Nikkei 225 index lost 3.3 pct, while the TOPIX also shed 3.3 pct.
   
Ahead of the opening bell, the government announced fourth quarter GDP rose 1.4 pct sequentially and was up 5.5 pct on an annual basis. The numbers were above market expectations for quarter-on-quarter growth of 1.2 pct and an annualized rise of 5.0 pct.
   
"The GDP data was above market forecast but investors opted to pocket (recent) gains on concerns that overseas investors are now cutting back on purchases of Japanese equities," said Yutaka Miura, senior strategist at Shinko Securities.
   
In Australia, share prices finished down after resources stocks continued to be sold off because of rising uncertainty as to the direction of metal prices, dealers said.
   
They said the market reacted little to the semi-annual testimony by Reserve Bank of Australia Governor Ian Macfarlane before a parliamentary economic committee hearing today, reaffirming the central bank's tightening monetary stance.
   
Dealers said index-leading resources companies BHP Billiton and Rio Tinto fell despite some metals regaining some ground overnight. BHP Billiton shares dropped 0.41 aud to end at 23.88 aud and Rio Tinto fell 0.24 to 71.65.
   
They said US-focused companies such as the Westfield Group, James Hardie and Rinker all fell after Federal Reserve chairman Ben Bernanke hinted at further rate rises in a second day of congressional testimony overnight.
   
The S&P/ASX 200 fell 20.7 points or 0.43 pct to close at 4,799.9, retreating further from the record close of 4,956.7 set on Feb 1.
   
Share prices in Hong Kong were virtually flat in the afternoon as trading momentum weakened in line with losses on the Tokyo bourse and amid expectations of increases in interest rates, dealers said.
   
At 3:31 pm, the Hang Seng Index was up 16.62 points at 15,467.50.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower amid a sustained correction with automakers and metal counters under pressure from profit-taking, dealers said.
   
The Shanghai A-share Index fell 3.48 points to 1,329.38 on turnover of 12.44 bln yuan and the Shenzhen A-share Index was down 1.84 points at 318.89 on turnover of 7.13 bln yuan.
   
Share prices in Seoul closed higher, rising for a second trading session, with KEPCO, large cap ITs and bank stocks leading the advance, dealers said.
   
The market at one stage gave away much of its early gains arising from Wall Street's solid gains, due to a sharp downturn in Tokyo shares and intensified program selling.
   
But strong foreign and institutional support successfully offset profit-taking by retail investors ahead of the weekend, leading the index to firm at 1,330 points.
   
Large cap IT stocks extended their gains after a recent steep decline triggered by falling NAND flash chip prices, with Samsung Electronics and Hynix both rising more than two pct.
   
The KOSPI index closed up 18.41 points or 1.40 pct at 1,332.73.

Asian Bourse Round-Up

For a full list of closing prices, click here

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Commodities and Bonds

Gold futures were trading higher, building on a prior-session gain. Gold for
April delivery was last up $3.40 at $552.20 an ounce.
   
On the bond market, long-term Treasury prices rose, sending yields lower.
The benchmark 10-year note was last up 8/32 at 99 18/32, with its yield at
4.56%.
   
Crude futures rallied in morning trading amid talk of renewed violence
against foreign oil interests in Nigeria. The benchmark March contract was last
up $1.19 at $59.65 in New York trading.

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