US & World Daily Markets Financial Briefing 17-05-2007

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April leading indicators fall 0.5 pct

NEW YORK - A closely watched gauge of future U.S. economic activity fell in April, nearly reversing the previous month's gain and easing concerns about whether the Federal Reserve would raise interest rates.
   
The Conference Board said Thursday its index of leading economic indicators dropped 0.5 percent, higher than the 0.1 decline analysts were expecting. The drop follows a revised 0.6 percent climb in March, which came after two months of declines.
   
The reading is designed to forecast economic activity over the next three to six months. The reading tracks 10 economic indicators. Two of those readings were positive in April: stock prices and real money supply.
   
Wall Street was hesitant to drive stocks higher as Federal Reserve Chairman Ben Bernanke spoke at a Chicago conference on competition with the banking industry and subprime lending -- a speech that could provide clues to whether problems with subprime mortgage loans could affect the broader economy.
   
The pullback in stocks came despite a surprise drop in jobless claims, which suggested that the employment market is stronger than many economists anticipated. The Labor Department reported the number of U.S. workers filing new claims for jobless benefits fell for a fifth straight week to the lowest level
in four months.
   
In the first few minutes of trading, the Dow Jones industrial average was down about 32 points at the 13,455 level.

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Dollar firms as US jobless claims come in well below expectations

LONDON - The dollar strengthened against the euro and sterling, as US weekly jobless claims data came in well below expectations.
   
The number of people filing new claims for unemployment insurance fell by 5,000 to 293,000 in the week ended May 12, the lowest level of claims since the week ended Jan 13. This was well below analysts' expectations for a pick-up in the number of claims to 323,000 after last week's revised fall to 298,000.
   
The four-week average of first-time claims fell 12,000 to 305,500, the lowest level since April 2006.
  
"The fall suggests the US labour market remains tight and the long awaited real estate-led US slowdown is not happening as quickly as the dollar bears would like," said Jamie Coleman at Thomson's IFR Markets.
   
At 1.45 pm the euro was trading at 1.3489 usd, having been at 1.3510 shortly before the figures came out. The pound was also much lower against the greenback, trading at 1.9739 compared to 1.9764 before the data release. 

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Euroshares higher midday on tech sector gains, M&A; Dow seen lower

LONDON - Leading European exchanges remained higher in midday trade thanks to tech sector gains, M&A hopes but were off highs as the Dow is set to fall on profit-taking in opening trades.
   
At 12.24, the STOXX 50 was 7.73 points higher at 3875.5 and the STOXX 600 was up 0.85 points higher at 390.32. Ig Index, said the Dow looks set to fall 15 points in opening deals, having reached a new record close of 13,487.50 last night. 
   
A Repsol YPF SA spokesman declined to comment on a report in Negocio that the company will receive an offer for 5 pct of its Argentine unit YPF SA early next week from a group of four Argentine oil companies.
       
During a press conference ahead of last Wednesday's AGM, Brufau said the incorporation of local private business partners in its 99.5 pct-owned Argentine unit YPF would be a "win-win" situation, ahead of a future listing. Shares were up 2.05 pct.
   
Iberdrola was up throughout the morning, gaining on speculation ACS could be looking to sell its Union Fenosa SA stake and increase its 13 pct holding in the Basque utility, dealers said.  The stock added 1.22 pct to 40.66, also still benefiting from a bullish note by Goldman Sachs yesterday, which raised its target to 42 eur per share from 40 eur. The broker said M&A potential as well as superior long-term growth thanks to Iberdrola's strong position in renewables were the main reasons for the target raise.
   
Meanwhile, shares in Pipex jumped nearly 15 pct in morning deals after Tiscali confirmed that it is in talks with the UK internet services provider, dealers said.
   
Shares in Mediolanum were higher midday reawakened by reports of the possible link-up between Capitalia and Unicredito Italiano which is due to create changes also at investment bank Mediobanca SpA of which Mediolanum is a shareholder, dealers said. Mediolanum has its 1.711 pct stake in Mediobanca bound to the investment bank's shareholder syndicate and there has been speculation that it could increase this stake once Unicredito and Mediobanca reduce their interest.
   
According to press reports Unicredito and Capitalia have agreed merger terms and their boards will meet this weekend to discuss the plans. Unicredito added 0.08 pct. Capitalia was up 0.28 pct.
  
Alcatel-Lucent topped the Stoxx 50, adding 1.54 pct to 9.90 eur, followed by Nokia, which gained 1.40 pct to 19.62 an the Netherlands' Philips, rose 0.94 pct to 30.10. SAP added 0.12 pct to 34.18.
   
Iberdrola was up throughout the morning, gaining on speculation ACS could be looking to sell its Union Fenosa SA stake and increase its 13 pct holding in the Basque utility, dealers said. The stock added 1.22 pct to 40.66, also still benefiting from a bullish note by Goldman Sachs yesterday, which raised its target to 42 eur per share from 40 eur.
  
BT slipped 1.98 pct as the group reported an unexpected restructuring charge alongside a 2.5 bln share buyback. Nomura said that while BT is promising to payback the 450 mln stg charge over a couple of years, it is still negative.
    
EMAP was up 5.6 pct on speculation the firm may become a bid target after announcing CEO Tom Moloney will resign and leave the board "by mutual agreement".
   
British Airways added 2.35 pct on speculation of possible bid interest after the Airline Partners Australia consortium said it would not be making a fresh bid for Qantas Airways.

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Asian shares close mostly higher on Wall St record

HONG KONG - Shares across the Asia-Pacific region closed mixed, with most markets up after the Dow Jones Industrials Average set a record high overnight.
   
Tokyo shares closed slightly lower, however, after quick profit-taking erased early gains sparked by Wall Street and the impact of the softer yen. Japan's first-quarter GDP data came in largely within market expectations, giving investors no new trading leads.
   
The blue-chip Nikkei 225 Stock Average closed down 30.40 points or 0.17 pct at 17,498.60, off a high of 17,656.07 and a low of 17,482.44. The TOPIX index of all first-section issues was down 4.62 points or 0.27 pct at 1,707.27, off a high of 1,724.35 and a low of 1,704.02.
   
Fumiyuki Nakanishi, chief strategist at SMBC Friend Securities, said share prices were on an upward course earlier in the day given the upbeat mood on Wall Street and the softer yen. However, because of a lack of strong leads, the market was unable to sustain its gains and eventually succumbed to profit-taking, he said.
   
Just before the opening bell, the Cabinet Office said GDP was up 0.6 pct in real terms in the first quarter compared to the previous quarter, growing at an annualized rate of 2.4 pct.
   
Australian shares ended higher, with the major benchmarks at record levels, as local stocks found support from the overnight rally on US sharemarkets, which climbed after M&A activity and data showing the Federal Reserve is unlikely to raise interest rates ahead.
   
Local investors bought the major resource and banking stocks, while shares of leading investment bank Macquarie posted a fresh trading high on an analyst upgrade following a recent share placement and surge in full-year profit. The S&P/ASX 200 closed up 71.3 points or 1.13 pct at a record 6,365.9, beating the May 10 record finish of 6,355.5.
   
Hong Kong shares were higher in afternoon trade, but struggled to hold morning gains which had pushed the benchmark index through the 21,000-point level following the rise on Wall Street. At 3.20 pm the Hang Seng Index was up 31.78 points or 0.15 pct at 20,969.04.
   
In mainland China, A-shares in Shanghai and Shenzhen closed broadly higher on follow-through buying after yesterday's significant rebound, with telecom and property stocks gaining ground. The Shanghai A-share Index was up 62.55 points or 1.50 pct to 4,238.42 and the Shenzhen A-share Index was up 28.69 points or 2.45 pct at 1,200.05.
   
Seoul shares closed at a record high as investors were relieved by Wall Street's overnight rally despite renewed concerns over the US housing market.
   
The Dow Jones Industrials' new record provided a strong boost to the local market, with China's indication of further liquidity tightening doing little to dampen the upbeat mood. Hyundai Heavy and other shipbuilders surged on strong foreign investors' interest while IT stocks and financials lost ground on quick profit taking, they added.
   
The KOSPI index closed up 14.98 points or 0.94 pct at 1,615.58, off a high of 1,615.86 and a low of 1,610.07.

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Gold falls as better than forecast US jobless data boosts dollar

LONDON - Gold turned lower as the dollar rose sharply against the euro and sterling after much better-than-forecast weekly US jobless claims data.
   
The number of people filing new claims for unemployment insurance fell by 5,000 to 293,000 in the week ended May 12, the Labour Department said. Analysts were expecting a pick-up in claims to 323,000.
   
Gold typically moves in an inverse relationship to the dollar as it is seen as an alternative investment to the US currency.
   
At 2.24 pm, spot gold was down at 658.00 usd per ounce against 660.70 usd in late New York trades yesterday.
   
Kitco analyst John Nadler said the outlook for gold has turned shaky in recent weeks. "This market will now stay volatile and try for both directions at once. The 650 usd area remains as good a target as the 670 usd one. But the weights appear to be piling up on the sell side for the moment," he said.
   
Gold lost 10 usd yesterday after stronger-than-expected US industrial production and reasonably firm housing starts data gave the dollar a strong boost.
   
Also weighing on the metal yesterday were press reports of the imminent sale of up to 400 tonnes of the IMF's gold reserves, and falls in oil prices following a stronger-than-forecast rise in gasoline stocks.
   
Lower oil prices typically pressure gold as they reduce its appeal as a hedge against oil-induced inflation.
   
Scotia Mocatta analyst Robert Lockwood said gold "appears to be headed lower in the near future with the stronger US dollar, higher oil inventories and the easing of political tensions in oil producing Nigeria".
   
In other precious metals, silver fell to 12.71 usd against 12.87 usd, platinum was down at 1,297 usd against 1,318 usd, while palladium edged down to 353 usd against 357 usd.

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