US & World Daily Markets Financial Briefing 17-08-2006

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Stocks are down after 2 days of gains

NEW YORK - Stocks are down slightly after two days of gains. In the opening minutes, the Dow Jones industrials fell 13.69 points to 11,313.43, the S&P 500 eased 1.52 points to 1,293.91, and Nasdaq dropped 5.24 points to 2,144.30.
   
The second-straight day of data suggesting modest core inflation led to the second rally in a row in markets on Wednesday. The Dow industrials finished the day up nearly 97 points, with the key benchmark reaching a three-month high.
   
Thursday's data isn't likely to be as closely scrutinized. Weekly jobless claims, July leading indicators and the August Philly Fed survey data is due.
   
The U.S. dollar gave back some recent gains against the Japanese yen, though it was basically steady against European rivals.

Stocks in focus
   
German-listed Hewlett-Packard rallied nearly 6 percent on Thursday, after the computer and printer maker announced a better-than-forecast third-quarter profit and said it would buy back up to $6 billion in shares. Shares of rival Dell edged higher in Germany. Dell puts out its quarterly results after the close on Thursday.
   
European technology shares, including STMicroelectronics, advanced as well.
   
Salesforce.com also may rally after better-than-expected quarterly revenue figures. Sears Holdings, the retailer, also will report results on Thursday.
   
A report by Cable Labs, a trade group funded and run by all the major operators, suggested the industry may need to spend billions of dollars in further upgrades to keep up with broadband Internet rivals, The Wall Street Journal reported Thursday, citing a copy of the report. The Journal story noted that some of its member firms disagree with the conclusion, notably Time Warner and Comcast.
   
Meanwhile, Carl Icahn plans to lift his holding in Time Warner through a new fund, The New York Times reported.
   
A well-received restructuring plan from Ciba Specialty Chemicals sent Swiss-listed shares of the company higher.
   
China Mobile, the world's largest mobile operator by market capitalization after Vodafone Group's recent share price weakness, reported a 26 percent first-half profit rise that was roughly in line with market expectations.

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Pound falls to 2-week lows against euro after weak UK retail sales data

LONDON - The pound continued to falter, falling to two-week lows against the euro, following this morning's weak UK retail sales data, while the dollar edged higher after solid US weekly jobless claims numbers.
   
Official figures out of the UK showed that retail sales fell for the first time in six months during July, confounding expectations of a 0.2 pct increase, while to make matters worse, sales for June were revised downwards.
   
Following yesterday's Monetary Policy Committee minutes showing one dissenting vote against the August rate rise and Tuesday's weaker-than-expected inflation data, the figures will further reduce the chances of another Bank of England rate rise in the coming months.
   
Meanwhile, the dollar recovered some ground after this afternoon's data showed US jobless claims fell by 10,000 last week to 312,000, well below analysts' forecasts for a much smaller drop to 318,000.
   
Today's numbers will help offset weaker-than-expected CPI and PPI inflation figures earlier this week, though market players are likely to continue to err on the side of not forecasting any further US interest rate rises for the time being.
   
Later this afternoon, the market will be looking out for the latest Philly Fed survey on manufacturing activity in the Philadelphia region.
   
Meanwhile, the euro reacted little to news of soft euro zone inflation and industrial production data this morning, which were considered nowhere near weak enough to prevent the European Central Bank raising interest rates again in October.
   
With the annual HICP rate at 2.4 pct, inflation remains above the ECB's definition of price stability -- of at or just below 2 pct -- while euro zone growth looks "increasingly healthy and broad-based", he noted.

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German shares flat midafternoon
 
At 3.50 pm, the DAX 30 index was 1.24 points or 0.03 pct lower at 5,806.20, having drifted off a high of 5,829.12. The MDAX was at 8,136.40, up 38.34 points or 0.47 pct, while the TecDAX was at 655.19, up 5.8 points or 0.89 pct.
   
The DAX futures contract was at 5,828.00, down 18.50 points, while bund futures were at 116.87, up 0.17 points.

In an absence of any major newsflow today the weaker tone to crude oil prices provided a boost to shares with BASF, up 0.5 at 63.33, Lufthansa up 0.1 to 14.86 and MAN ticking up 1.78 at 60.28.
   
MAN was also given a boost following a report that a US-based hedge fund is trying to drum up support for a bid for AB Volvo.
   
This morning Dagens Industri, citing unnamed sources, said the hedge fund Castlerigg, run by Swedish investor Thomas Sandell, is trying to convince other institutional investors to support it in a bid.
   
Volvo's vote-rich A-shares have been in heavy demand in recent months, sparking various rumours that some unidentified entity is building a stake ahead of a bid.
   
Elsewhere, technology stocks were back in favour after a 1.6 pct rise in the tech-heavy Nasdaq last night, with SAP up 1.78 to 149.4, as investors switched out of defensive stocks and into the sector.
   
In other news, Deutsche Post rose 0.45 to 19.19 after rumours circulated in the market that Deutsche Bank may be interested in acquiring Deutsche Post's 50.1 pct controlling stake in Deutsche Postbank leading to a complete takeover of the group at some future date. Deutsche Postbank also rose, up 0.89 to 61.07.

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Asian shares close mostly higher on Wall St and lower oil prices

HONG KONG - Shares across the Asia-Pacific region closed mostly higher after a rise on Wall Street overnight and lower oil prices.
   
Tokyo shares ended mixed after investors pocketed profits from yesterday's rally, countering gains in the morning that had been spurred by Wall Street's rally, dealers said.
   
The Nikkei 225 Stock Average ended 50.52 points or 0.3 pct lower at 16,020.84, after trading between 16,008.44 and 16,204.60.
   
The broader TOPIX index of all first-section issues gained 1.73 points or 0.1 pct at 1,631.46, just off the day's low of 1,630.08. It hit a high of 1,644.52.
   
"Some investors turned cautious and chose to cash-in their gains as the blue-chip Nikkei index had gained over 10 pct over the past month," said Hiroichi Nishi, equity chief at Nikko Cordial Securities Inc.
   
SMBC Friend Securities senior strategist Toshihiko Matsuno said the slip in the Nikkei index would probably be short-lived.
   
"Overseas players poured money into stocks here," he said. "If their buying interest continues, investors may try to push the Nikkei index up to the 16,500 mark."
   
Australian shares finished sharply higher as investor sentiment jumped on takeover rumours, while a further rise in US stocks overnight and lower oil prices also initiated buying, dealers said.
   
They said takeover speculation supported the indexes above 5,000 points after leading retailer Coles Myer confirmed it had been approached by unnamed parties interested in a form of ownership.
   
Dealers said local earnings reports also supported the market, and firmer base metal prices led to strong purchasing of resource stocks.
   
The S&P/ASX 200 jumped 94.0 points or 1.89 pct to close at 5,055.9.
   
The benchmark indicator closed at the day's high and above a low of 4,981.1.   
Hong Kong shares were lower in afternoon trade as mild profit-taking in blue chips reversed early gains driven by tame US inflation data, dealers said.
   
At 3.27 pm the Hang Seng Index was down 78.66 points or 0.45 pct at 17,372.37.
   
In mainland China, A-shares in Shanghai and Shenzhen closed lower on liquidity pressure after the regulator said it will review three IPO applications on Monday, dealers said.
   
The Shanghai A-share Index fell 13.79 points, or 0.81 pct, to 1,685.54 and the Shenzhen A-share Index was down 2.79 points at 414.32.
   
Seoul shares closed higher, with broad sentiment boosted by continued gains on Wall Street and a decline in oil prices, dealers said.
   
The market remained strong throughout the session as institutional investor support, coupled with foreign investor interest in both spots and futures, provided momentum, they added. Large cap IT firms and brokerages remained in the spotlight.
   
The KOSPI index closed up 12.17 points or 0.93 pct at 1,327.78, after moving between 1,335.41 and 1,325.74.

Asian Bourse Round-Up

For a full list of closing figures, click here

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Oil prices continue to fall on above-average US oil stockpiles

LONDON - Crude-oil prices dropped more than a dollar a barrel as traders responded to a report of above-average US oil stockpiles and a lack of bad news to drive prices higher.
   
Crude-oil futures dropped to nearly a two-month low in electronic trade, falling below $71 a barrel.
   
Options for the September crude contract expire today.
   
Oil prices had dropped more than 1 usd yesterday after the US Energy Department reported that commercial crude oil inventories fell 1.6 mln barrels in the week ending Aug 11. However, inventories remain well above the average range for this time of year at 331 mln barrels.
   
In other Nymex trading, gasoline futures dropped 3.31 cents to 1.9450 usd a gallon. Heating oil futures fell 2.86 cent to 1.9883 usd a gallon, while natural gas futures were down 0.6 cent to 6.760 usd per 1,000 cubic feet.
   
Oil prices have steadily fallen this week when supply fears abated after a ceasefire held in Lebanon and BP PLC resumed partial production at its Prudhoe Bay oil field in the US state of Alaska.
   
Concerns about supply disruptions in Nigeria due to civil unrest are lingering in the market, as are worries over the standoff between the United Nations and Iran over its nuclear program. Iran has said it will respond by Aug 22 to an offer of incentives in exchange for a pledge to suspend uranium enrichment.
   
Oil traders are also watching weather patterns for potential hurricanes that could strike Gulf of Mexico coast refineries, as well as signals for where fuel demand is headed.

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